EXHIBIT 10.12
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated October 21, 1998, by and among LogiMetrics,
Inc., a Delaware corporation (the "Company"), and the purchasers listed on the
signature pages hereto (collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, on the terms and subject to the conditions set forth herein,
the Company desires to sell to the Purchasers, and the Purchasers desire to
purchase from the Company, $2,666,667 in aggregate principal amount of the
Company's Class C 13% Convertible Senior Subordinated Debentures due September
30, 1999 (the "Debentures") convertible into an aggregate of up to 8,602,151
shares of Common Stock, par value $.01 per share (the "Common Stock" and,
together with the Debentures, the "Securities"), of the Company, subject to
adjustment in certain circumstances (the Debentures to be in substantially the
form of Exhibit A hereto);
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and intending to be legally bound, the parties hereto agree as follow:
Article I
Purchase and Sale of Securities
Section 1.1. Purchase and Sale of Securities. Upon the terms and
subject to the conditions of this Agreement, on the date hereof the Company
shall issue and sell to the Purchasers, and such Purchasers shall purchase from
the Company, $2,666,667 in aggregate principal amount of the Debentures at an
aggregate purchase price of $2,000,000 (the "Purchase Price"). The amount of
Debentures to be purchased by each Purchaser pursuant to this Section 1.1 and
the aggregate Purchase Price allocable to each Purchaser is set forth on Exhibit
B attached hereto.
Section 1.2. Closing. The closing of the transactions contemplated by
Section 1.1 above (the "Closing") shall take place at the offices of the Company
at 10:00 a.m. on the date hereof, or at such other time and place as the parties
hereto may mutually agree. The time and date of the Closing is hereinafter
referred to as the "Closing Date." At the Closing, the Purchasers shall pay the
Purchase Price in immediately available funds by wire transfer to an account
previously designated by the Company. In exchange for the payment of the
Purchase Price, the Company shall execute, issue and deliver to the Purchasers
the Debentures registered in the name of the respective Purchasers as specified
in Exhibit B attached hereto.
Article II
Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as follows:
Section 2.1. Organization and Qualification. Each of the Company and
mmTech, Inc. ("mmTech") is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to own or lease its property and assets and to
carry on its business as presently conducted, and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the failure to be so qualified and in good standing would result in a
material adverse change in the business, financial condition, results of
operations or prospects (financial and other) of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Change"). The Company has
previously provided to the Purchasers true and complete copies of (i) its
Certificate of Incorporation of and all amendments thereto and (ii) its by-laws
as currently in effect. Other than mmTech and LogiMetrics FSB, Inc., the Company
does not own any material amount of any shares of stock of any corporation or
any equity interest in a partnership, joint venture or other business entity,
and the Company does not control or have the right (whether or not presently
exercisable) to control any other corporation, partnership, joint venture or
other business entity by means of ownership, management contract or otherwise.
Section 2.2. Authorization. (a) The Company has the corporate power
and authority to execute and deliver this Agreement, the Registration Rights
Agreement, dated of even date herewith (the "Registration Rights Agreement"),
among the Company and the Purchasers and the Debentures (collectively, the
"Transaction Documents") and to perform its obligations hereunder and
thereunder, all of which have been duly authorized by all requisite corporate
action. Each of this Agreement and the Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(b) The Debentures have been duly authorized and, when issued in
accordance with the terms hereof, will have been duly executed, issued and
delivered and will constitute valid and legally binding obligations of the
Company, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. The Company has sufficient authorized and unissued shares of
Common Stock reserved for issuance upon the conversion of the Debentures in
accordance with their terms. The shares of Common Stock issuable upon the
conversion of the Debentures will, when issued in accordance with the terms of
the Debentures, be duly authorized, validly issued, fully paid and
non-assessable.
(c) Except as described in Schedule 2.2, the issuance or conversion of
the Debentures will not (i) require the Company to issue any shares of its
capital stock or any security exercisable for or convertible or exchangeable
into shares of its capital stock to any person, or (ii) require any adjustment
in the exercise price or number of shares of the Company's capital stock
issuable upon the exercise of the Company's outstanding securities.
Section 2.3. Non-contravention. Except as set forth in Schedule 2.3,
neither the execution and delivery of this Agreement and the other Transaction
Documents by the Company nor the performance by the Company of its obligations
hereunder and thereunder will (i) contravene any provision contained in the
Company's Certificate of Incorporation or by-laws, (ii) violate or result in a
breach (with or without the lapse of time, the giving of notice or both) of or
constitute a default under (A) any contract, agreement, commitment, indenture,
mortgage, lease, pledge, note, license, permit or other instrument or obligation
or (B) any judgment, order, decree, law, rule or regulation or other restriction
of any governmental authority, in each case to which the Company is a party or
by which it is bound or to which any of its assets or properties are subject,
(iii) result in the creation or imposition of any lien, claim, charge, mortgage,
pledge, security interest, equity, restriction or other encumbrance
(collectively, "Encumbrances") on any of the Company's assets or properties, or
(iv) result in the acceleration of, or permit any person to accelerate or
declare due and payable prior to its stated maturity, any material obligation of
the Company.
Section 2.4. No Consents. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other person
is necessary for the execution, delivery or performance of this Agreement or the
other Transaction Documents by the Company or the consummation of the
transactions contemplated hereby or thereby by the Company, except (i) for such
consents and approvals as have previously been obtained and are in full force
and effect, and (ii) for such filings and registrations as may be required under
applicable securities laws. Assuming that the representations and warranties
contained in Article III hereof are true and correct in all respects, the offer
and sale of the Securities as contemplated hereby does not require registration
under the provisions of the Securities Act of 1933, as amended (the "Securities
Act"), or any applicable state securities or "blue sky" laws.
Section 2.5. Capitalization of the Company. The Company's authorized
capital stock consists solely of 100,000,000 authorized shares of Common Stock,
of which 28,470,430 shares were issued and outstanding as of the date hereof;
and 200 shares of Preferred Stock, par value $.01 per share, of which, 28
shares, designated as Series A 12% Cumulative Convertible Redeemable Preferred
Stock, stated value $50,000 per share, were issued and outstanding as of the
date hereof. No shares of the Company's capital stock are held as treasury
shares. In addition, as of the date hereof 39,428,429 shares of Common Stock
were reserved for issuance upon the exercise or conversion of outstanding
securities of the Company. Except as set forth on Schedule 2.5, the Company does
not have (i) any shares of Common Stock or Preferred Stock reserved for
issuance, or (ii) any outstanding option, warrant, right, call or commitment
relating to its capital stock or any outstanding securities or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire from it, any shares of its capital stock (collectively,
"Company Securities"). There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities. There are no
pre-emptive or other subscription rights with respect to any shares of the
Company's capital stock or any securities convertible into or exchangeable for
shares of the Company's capital stock and all of the issued and outstanding
shares of capital stock of the Company have been duly authorized, validly
issued, are fully paid and are nonassessable. All of the Company's outstanding
securities were offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal securities laws. None of such securities
were issued in violation of any pre-emptive or subscription rights of any
person.
Section 2.6. SEC Reports. (a) The Company has made available to the
Purchasers true and complete copies of each report, schedule and registration
statement, including the exhibits thereto (but excluding exhibits incorporated
therein by reference), filed by the Company with the Securities and Exchange
Commission (the "Commission") since January 1, 1997, which, except for the
filing of an Annual Report on Form 10-KSB for the fiscal year ended June 30,
1998, are all the documents that the Company was required to file with the
Commission since that date and through the date hereof (all of such documents as
amended as of the date hereof collectively, the "SEC Documents"). Schedule 2.6
sets forth a true and complete list of the SEC Documents as of the date hereof.
As of their respective dates, the SEC Documents (as amended as of the date
hereof) complied as to form in all material respects with the requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the
Commission thereunder. As of their respective dates, except to the extent that
information contained therein has been revised or superseded by a later filed
SEC Document, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the financial position of the Company as of the dates thereof and
the results of its operations and cash flows for the periods then ended.
Section 2.7. [reserved]
Section 2.8. Absence of Certain Developments. Except as disclosed in
Amendment No. 1 to the Company's Registration Statement on Form SB-2 (File No.
333-51459) filed with the SEC on July 10, 1998 or as disclosed in Schedule 2.8,
since March 31, 1998, there has not been any Material Adverse Change. Except for
this Agreement and the transactions contemplated hereby, since March 31, 1998
the Company has conducted its business in the ordinary and usual course
consistent with past practices.
Section 2.9. Governmental Authorizations; Licenses; Etc. Except as
disclosed in Schedule 2.9, the business of each of the Company and mmTech has
been operated in compliance with applicable laws, rules, regulations, codes,
ordinances, orders, policies and guidelines of all governmental authorities
(excluding Environmental Laws which are specifically covered in Section 2.13
hereof), except for violations which, individually or in the aggregate, would
not result in a Material Adverse Change. Except as disclosed in Schedule 2.9,
each of the Company and mmTech has all permits, licenses, approvals,
certificates and other authorizations, and has made all notifications,
registrations, certifications and filings with all governmental authorities,
necessary or advisable for the operation of their respective businesses as
currently conducted. Except as disclosed in Schedule 2.9, to the Company's best
knowledge there is no action, case or proceeding pending or overtly threatened
by any governmental authority with respect to (i) any alleged violation by the
Company, mmTech or their respective affiliates of any law, rule, regulation,
code, ordinance, order, policy or guideline of any governmental authority, or
(ii) any alleged failure by the Company, mmTech or their respective affiliates
to have any permit, license, approval, certification or other authorization
required in connection with the operation of its business.
Section 2.10. Litigation. Except as disclosed in Schedule 2.10, there
are no lawsuits, actions, proceedings, claims, orders or investigations pending
or, to the Company's best knowledge, overtly threatened against the Company or
mmTech (i) relating to the Company, mmTech, their respective businesses or any
product alleged to have been manufactured or sold by either of them, (ii)
seeking to enjoin the transactions contemplated hereby, or (iii) which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Change.
Section 2.11. Undisclosed Liabilities. Other than those reflected in
the financial statements included in (i) the Company's Annual Report on Form
10-KSB (as amended as of the date hereof), and (ii) the Company's Quarterly
Reports on Form 10-QSB for the fiscal quarters ended September 30, 1997,
December 31, 1997 and March 31, 1998 (each as amended as of the date hereof),
there are no material liabilities of the Company or mmTech of any kind or nature
whatsoever, whether known or unknown, absolute, accrued, contingent or
otherwise, or whether due or to become due, which are required to be disclosed
on financial statements prepared in accordance with generally accepted
accounting principles, other than liabilities incurred in the ordinary course of
business consistent with past practices since March 31, 1998.
Section 2.12. Taxes. Except as disclosed in Schedule 2.12, all
federal, state, county, local and foreign tax returns and reports of the Company
and mmTech required to be filed have been duly filed. Except as disclosed in
Schedule 2.12, all federal, state, county, local, foreign and any other taxes
(including all income, withholding and employment taxes), assessments (including
interest and penalties), fees and other governmental charges with respect to the
employees, properties, assets, income or franchises of the Company and mmTech
have been paid or duly provided for, or are being contested in good faith by
appropriate proceedings as previously disclosed to the Purchaser in writing and
adequate reserves therefor have been established pursuant to generally accepted
accounting principles, or have arisen after the date hereof in the ordinary
course of business.
Section 2.13. Environmental Matters. Except as disclosed in Schedule
2.13, to the Company's best knowledge (i) the business of each of the Company
and mmTech is being conducted in compliance with all applicable Environmental
Laws, (ii) the real property currently owned or operated by the Company or
mmTech (including, without limitation, soil, groundwater or surface water on or
under the properties and buildings thereon) (the "Affected Property") does not
contain any Regulated Substance other than as permitted under applicable
Environmental Laws, (iii) neither the Company nor mmTech has received any notice
from any governmental authority that the Company or mmTech may be a "potentially
responsible party" (as such term is defined under the Comprehensive
Environmental Response, Compensation and Control Act, 42 U.S.C. Section 9601, et
seq.) in connection with any waste disposal site or facility used by the Company
or mmTech, and (iv) the Company, mmTech and the Affected Property are not
presently subject to a suit or judgment arising under any Environmental Law.
As used herein, "Environmental Laws" means any federal, state and
local law, statute, ordinance, rule, regulation, license, permit, authorization,
approval, consent, court order, judgment, decree, injunction, code, requirement
or agreement with any governmental authority, (x) relating to pollution (or the
cleanup thereof or the filing of information with respect thereto), human health
or the protection of air, surface water, ground water, drinking water supply,
land (including land surface or subsurface), plant and animal life or any other
natural resource, or (y) concerning exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production or disposal of Regulated Substances, in each case as amended and as
now or hereafter in effect. The term Environmental Law includes, without
limitation, (i) the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Water Pollution Control Act, the Clean Air Act, the
Clean Water Act, the Solid Waste Disposal Act (including the Resource
Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984), the Toxic Substances Control Act, the Insecticide,
Fungicide and Rodenticide Act, the Occupational Safety and Health Act of 1970,
each as amended and as now or hereafter in effect, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to or threatened as
a result of the presence of, exposure to, or ingestion of, any Regulated
Substance.
As used herein, "Regulated Substances" means pollutants, contaminants,
hazardous or toxic substances, compounds or related materials or chemicals,
hazardous materials, hazardous waste, flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products (including, but not limited to,
waste petroleum and petroleum products) as regulated under applicable
Environmental Laws.
Section 2.14. Proprietary Rights. Except as disclosed in Schedule
2.14, each of the Company and mmTech owns and possesses all right, title and
interest in the patents, patent registrations, patent applications, trademarks,
service marks, trademark and service xxxx registrations and applications
therefor, copyrights, copyright registrations, copyrights applications, trade
names, corporate names, technology, inventions, computer software, data and
documentation (including electronic media), product drawings, trade secrets,
know-how, customer lists, processes, other intellectual property and proprietary
information or rights used in their respective businesses as presently
conducted; or owns or possesses permits, licenses or other agreements to or from
third parties regarding the foregoing (collectively, the "Proprietary Rights").
Except as disclosed in Schedule 2.14, to the Company's best knowledge, there is
not pending or overtly threatened against the Company or mmTech any claim by any
third party contesting the validity, enforceability, use or ownership of any
Proprietary Right. Except as disclosed in Schedule 2.14, to the Company's best
knowledge, neither the Company nor mmTech has received any notice of any
infringement or misappropriation by, or conflict with, any third party with
respect to any of the Proprietary Rights.
Section 2.15. Books and Records. The stock records of the Company
fairly and accurately reflect in all material respects the record ownership of
all of the outstanding shares of the Company's capital stock. The other books
and records of the Company and mmTech, including financial records and books of
account, are complete and accurate in all material respects and have been
maintained in accordance with sound business practices.
Section 2.16. Brokers. No person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from the
Company in connection with this Agreement or any of the transactions
contemplated hereby.
Section 2.17. Use of Proceeds. The Company will use the net proceeds
of the sale of the Securities for working capital and general corporate
purposes.
Section 2.18. Absence of Questionable Payments. Neither the Company,
mmTech nor any affiliate, director, officer, employee, agent, representative or
other person acting on behalf of the Company or mmTech has: (i) used any
corporate or other funds for unlawful contributions, payments, gifts or
entertainment, or made any unlawful expenditures relating to political
activities to government officials or others, or (ii) accepted or received any
unlawful contributions, payments, gifts or expenditures.
Section 2.19. Accuracy of Representations. No representation or
warranty made by the Company in this Agreement or any document delivered, or to
be delivered, by or on behalf of the Company pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading. Except as disclosed
in the SEC Documents or in the Schedules to this Agreement, there is no fact or
circumstance that the Company has not disclosed to the Purchasers in writing
that the Company presently believes has resulted, or could reasonably be
expected to result, in a Material Adverse Change or could reasonably be expected
to have a material adverse effect on the ability of the Company to perform its
obligations under this Agreement.
Article III
Representations and Warranties of the Purchasers
The Purchasers hereby, severally and not jointly, represent and
warrant to the Company as follows:
Section 3.1. Organization. Each Purchaser that is not an individual is
either a corporation, limited liability company, general partnership or limited
partnership, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Schedule 3.1 hereto sets forth the
type of entity and the jurisdiction of organization for each Purchaser that is
not an individual.
Except as set forth in Schedule 3.1, each of the Purchasers is a "U.S.
person" as such term is defined in Section 7701(a)(30) of the Code. Each
Purchaser that is a U.S. person has previously provided the Company with a
completed Form W-9 certifying that such Purchaser is not subject to back-up
withholding with respect to amounts payable to such Purchaser by the Company.
Each Purchaser that is not a U.S. person has previously provided the Company
with a completed Form W-8 certifying that such Purchaser is not subject to
certain U.S. information return reporting or back-up withholding with respect to
amounts payable to such Purchaser by the Company.
Section 3.2. Authorization. Each Purchaser that is not an individual
has the power and authority (corporate, limited liability company, partnership
and other) to execute and deliver this Agreement and to perform its obligations
hereunder, all of which have been duly authorized by all requisite corporate,
limited liability company or partnership action. Each Purchaser that is an
individual has the capacity to execute and deliver this Agreement and to perform
his or her obligations hereunder. Each such individual Purchaser is under no
impairment or other disability, legal, physical, mental or otherwise, that would
preclude or limit the ability of such Purchaser to perform his or her
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by each Purchaser and constitutes a valid and binding
agreement of such Purchaser, enforceable against such Purchaser in accordance
with its terms.
Section 3.3. Access to Information. The Purchasers have received
copies of the SEC Documents or have otherwise examined copies of such SEC
Documents to the extent they deemed necessary or advisable to evaluate the risks
and merits of an investment in the Company. Any Purchaser formed for the purpose
of investing in the Securities or the Additional Securities (a "New Purchaser")
has provided access to such SEC Documents to each investor in such Purchaser
(the "Investors"). In addition, the Purchasers and their respective purchaser
representatives, if any, have had an opportunity to ask questions of and receive
answers from representatives of the Company concerning the business of the
Company, its condition and prospects (financial and other) and the terms and
conditions of the offering of the Securities.
Section 3.4. Accredited Investor. Each Purchaser is an "Accredited
Investor" as such term is defined in Rule 501 of the rules and regulations of
the Commission promulgated under the Securities Act. No offering or sale of
interests in any Purchaser or any other security of such Purchaser was made to
any person, other than such "Accredited Investors." Schedule 3.4 hereto sets
forth a list of the New Purchasers. Other than such New Purchasers, no Purchaser
was formed for the purpose of investing in the Securities.
Section 3.5. Investment Intent. (a) Each Purchaser is acquiring the
Securities for its own account for investment only and not for or with a view to
resale or distribution. No Purchaser has entered into any contract, undertaking,
agreement or arrangement with any person to sell, transfer or pledge to such
person or anyone else the Securities and no Purchaser has any present plans or
intentions to enter into any such contract, undertaking, agreement or
arrangement.
(b) Each Purchaser has the financial ability to bear the economic risk
of losing its entire investment in the Securities, is prepared to bear the
economic risk of its investment therein for an indefinite time and can afford to
sustain a complete loss of its investment therein.
(c) The overall commitment of each Purchaser to investments which are
not readily marketable is not disproportionate to its net worth, and an
investment in the Securities will not cause such overall commitment to become
excessive. Each Purchaser's need for diversification in its investment portfolio
will not be impaired by an investment in the Company.
(d) Each Purchaser has adequate means of satisfying its short term
needs for cash and has no present need for liquidity which would require it to
sell its Securities or any interest therein.
(e) Each Purchaser has substantial experience in making investment
decisions of this type and/or is relying on its own advisors in making this
investment decision and, therefore, either alone or together with its advisors,
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Company.
(f) Each Purchaser understands that the Securities constitute
restricted securities within the meaning of Rule 144 promulgated under the
Securities Act, and that none of the Securities, or any interest therein, may be
sold except pursuant to an effective registration statement under the Securities
Act or in a transaction exempt from registration under the Securities Act, and
understands the meaning and effect of such restriction.
(g) Each Purchaser has considered and, to the extent such Purchaser
believed such discussion was necessary, discussed with its professional legal,
tax and financial advisers the suitability of an investment in the Company for
such Purchaser's particular tax and financial situation and each Purchaser has
determined that the Securities are a suitable investment for it.
(H) EACH PURCHASER UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES
BEING PURCHASED BY IT INVOLVES A HIGH DEGREE OF RISK, INCLUDING WITHOUT
LIMITATION, RISKS RELATING TO THE COMPANY'S HISTORY OF LOSSES, RISKS RELATING TO
THE RECENT CHANGE IN THE COMPANY'S BUSINESS FOCUS, RISKS RELATING TO THE
COMPANY'S DEPENDENCE UPON THE DEVELOPMENT OF NEW MARKETS OF UNCERTAIN SIZE AND
GROWTH PROSPECTS, THE COMPANY'S DEFAULTS UNDER SUBSTANTIALLY ALL OF ITS
INDEBTEDNESS AND OUTSTANDING PREFERRED STOCK, THE COMPANY'S CONTINUING NEED FOR
ADDITIONAL CAPITAL, THE COMPANY'S NEED FOR LIQUIDITY, THE EFFECTS OF
COMPETITION, THE COMPANY'S RELIANCE ON KEY PERSONNEL, THE COMPANY'S DEPENDENCE
ON TECHNOLOGY AND TECHNOLOGICAL INNOVATION, THE EFFECTS OF GOVERNMENT REGULATION
OF THE TELECOMMUNICATIONS INDUSTRY, THE RESTRICTIONS ON TRANSFER OF THE
SECURITIES, THE SUBORDINATION PROVISIONS OF THE DEBENTURES, POTENTIAL CONFLICTS
OF INTEREST AND RELATED PARTY TRANSACTIONS INVOLVING THE COMPANY AND THE
DIRECTORS AND OFFICERS OF THE COMPANY, AND RISKS RELATING TO THE SUCCESSFUL
EXECUTION OF THE COMPANY'S BUSINESS AND OPERATING STRATEGY.
(i) Each New Purchaser has received representations and warranties
from each Investor in such New Purchaser similar to those contained in this
Section 3.5, and such representations and warranties specifically authorize the
Company to rely thereon.
(j) The offer and sale of interests in each New Purchaser to the
Investors therein did not require registration under the provisions of the
Securities Act or any applicable state securities or "blue sky" laws. Each New
Purchaser complied in all material respects with the requirements of applicable
state securities or "blue sky" laws with respect to such offer and sale.
(k) The placement materials used by each New Purchaser or its agents
in connection with the offer and sale of interests in such New Purchaser did not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that no representation or warranty is made with respect to information regarding
the Company and mmTech provided to any such New Purchaser by the Company
expressly for use in such placement materials.
Section 3.6. Financial Resources. Each Purchaser has cash or credit
facilities presently available to meet all of its payment obligations hereunder.
Section 3.7. Brokers. No person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from any
Purchaser in connection with this Agreement or any of the transactions
contemplated hereby.
Section 3.8. Accuracy of Representations. No representation or
warranty made by the Purchaser in this Agreement or any document delivered, or
to be delivered, by it or on its behalf pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
Article IV
Restrictions on Transfer; Other Covenants
Section 4.1. Limited Transferability. The Securities, including,
without limitation, the shares of Common Stock issuable upon the conversion of
the Debentures (the "Issuable Shares") shall not be transferable except in
accordance with the provisions of this Article IV, which provisions are intended
to insure compliance with the provisions of the Securities Act in respect of the
transfer of any of such securities.
Section 4.2. Restrictive Legend. The Debentures and any certificates
representing the Issuable Shares shall (unless otherwise permitted by the
provisions of Section 4.4 below) be stamped or otherwise imprinted with the
following legend:
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
OCTOBER 21, 1998 AMONG THE COMPANY AND THE PURCHASERS
NAMED THEREIN.
For purposes of this Article IV, any references to "Debentures" or
"Issuable Shares" shall include any other securities issued in respect of any of
such securities.
Section 4.3. Restrictions on Transfer. (a) Subject to the provisions
of Section 4.4, the Debentures and the Issuable Shares shall not be transferred,
and the Company shall not be required to register any transfer thereof on the
books of the Company, unless such transfer is made pursuant to an effective
registration statement, in compliance with Rule 144, or pursuant to another
exemption under the Securities Act; provided, however, that the Company shall
not be required to register any transfer in the event any securities are offered
or sold otherwise than pursuant to an effective registration statement or
pursuant to Rule 144 unless the Company shall have received an opinion of
counsel to the Purchaser wishing to effect such transfer, reasonably
satisfactory to the Company, that such transfer does not require registration
under the Securities Act or applicable state securities laws. Notwithstanding
the foregoing, any Purchaser may freely transfer at any time or from time to
time the Debentures and/or the Issuable Shares, or any interest therein, to any
other Purchaser or any general partner of such Purchaser, any limited partner of
such Purchaser, any other fund, account or other entity managed, directly or
indirectly, by any general partner of such Purchaser and the respective
subsidiaries and affiliates of any of the foregoing (each, a "Permitted
Transferee") without complying with the provisions of this Article IV (a
"Permitted Transfer") and the Company shall, or shall cause any registrar or
transfer agent to, promptly register any such Permitted Transfer on the books of
the Company; provided, however, that in connection with any such Permitted
Transfer, the Permitted Transferees shall acknowledge the restrictions on
transferability under applicable law and agree in writing to be bound by the
provisions of this Article IV.
(b) In addition to the restrictions set forth in paragraph (a) above,
for a period of 90 days after purchase (the "Restrictive Period"), no Purchaser
shall sell, assign, transfer or otherwise dispose of the Securities, or any
interest therein (a "Transfer") (other than a Permitted Transfer), without the
prior written consent of the Company which may be withheld by the Company in its
sole discretion; provided, however, that nothing contained herein shall prohibit
any Purchaser from converting a Debenture in accordance with the terms thereof.
Subject to the restrictions set forth in paragraph (a) above, from and after the
end of the Restrictive Period, a Purchaser may Transfer all or a portion of its
Securities, or any interest therein, without the consent of the Company.
Section 4.4. Registration Rights. The Purchasers shall be entitled to
registration rights with respect to the Debenture Shares as set forth in the
Registration Rights Agreement.
Article V
Right of First Refusal
Section 5.1. Right of First Refusal. (a) If the Company proposes to
obtain additional financing (a "Financing") prior to September 30, 1999 from a
third party, the Company shall first give to the Purchasers a notice (an "Offer
Notice") setting forth in reasonable detail the amount, structure and other
terms of the proposed Financing. The Purchasers shall thereafter have the
exclusive right (the "Refusal Right"), upon written notice given to the Company
by the holders of a majority of the outstanding principal amount of the
Debentures (the "Majority Holders") no later than ten business days after
receipt of the Offer Notice, to provide the Financing to the Company on the
terms set forth in the Offer Notice (an "Acceptance Notice"). An Acceptance
Notice shall constitute an irrevocable joint and several commitment by the
Purchasers executing such Acceptance Notice (the "Accepting Purchasers") to
provide the Company with the Financing on the terms specified in the Offer
Notice. The obligation to provide the Financing may be allocated among the
Accepting Purchasers, or any one or more of them, as the Accepting Purchasers
may determine in their sole discretion. The closing of the Financing shall take
place on such date, no less than ten and no more than thirty days after the date
of the Acceptance Notice, as the Company and the Accepting Holders may agree.
(b) If the Purchasers do not provide an Acceptance Notice within the
ten business-day period set forth in clause (a) above, the Company shall have
the right for up to 90 days thereafter to obtain a Financing on the terms
specified in the Offer Notice from one or more third parties (including on or
more of the Purchasers).
Section 5.2. Exceptions. The Refusal Right granted to the Purchasers
in Section 5.1 hereof shall not apply to (i) a Qualifying Offering, (ii) any
replacement, renewal, extension, modification or amendment of the Company's
current lending facility with North Fork Bank provided, however, that the
principal amount of such facility after giving effect thereto shall not exceed
$2.8 million, (iii) any trade credit (whether or not evidenced by a note or
other instruments), (iv) any receivables financing arrangements, (v) the
issuance of securities in connection with the acquisition of the assets or stock
of any other business, (vi) the exercise or conversion of any security
outstanding on the issuance date of the Debentures, (vii) the issuance and
exercise of awards made from and after the date hereof pursuant to the Company's
1997 Stock Compensation Program (the "Plan"), or (viii) pursuant to any other
plan or arrangement approved by the Company's Board of Directors or the
Compensation Committee thereof subject to an aggregate limit of 2,000,000 shares
of Common Stock for issuances pursuant to clauses (vii) and (viii) (subject to
adjustment in the circumstances set forth in the Plan or such arrangements).
Article VI
Deliveries at Closing
Section 6.1. Deliveries by the Company. At the Closing, the Company
shall deliver to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers' counsel:
(a) a certificate of the President or a Vice President of the Company,
dated the Closing Date, to the effect that (i) the person signing such
certificate is familiar with this Agreement, (ii) all representations and
warranties made by the Company in this Agreement are true, correct and complete
in all material respects as of the Closing, (iii) the Company has duly performed
or complied with, in all material respects, all of the covenants, obligations
and agreements to be performed or complied with by it under the terms of this
Agreement on or prior to or at the Closing, and (iv) except as disclosed
pursuant to this Agreement, there has been no Material Adverse Change or
prospective change which could reasonably be expected to result in a Material
Adverse Change since March 31, 1998;
(b) a certificate of the Secretary or Assistant Secretary of the
Company, dated the Closing Date, as to the incumbency of any officer of the
Company executing this Agreement or any document related thereto and covering
such other matters as the Purchasers may reasonably request;
(c) a certified copy of the resolutions of the Company's Board of
Directors authorizing the execution, delivery and consummation of this Agreement
and the transactions contemplated hereby;
(d) an executed counterpart of the Registration Rights Agreement;
(e) the Debentures, duly executed, issued and delivered by the Company
and registered in the names of the Purchasers as they may specify;
(f) an executed counterpart of the Stock Purchase Agreement, dated of
even date herewith (the "Stock Purchase Agreement") among Xxxxxxx X. Brand and
the Purchaser;
(g) executed undertaking letters from each of Francisco X. Xxxxxx,
Xxxxxx X. Xxxxxx and Xxxxxxx X. Xxxxxxxx; and
(h) such other documents or instruments as the Purchasers reasonably
request to effect the transactions contemplated hereby.
Section 6.2. Deliveries by the Purchasers. At the Closing, the
Purchasers shall deliver to the Company the following in form and substance
reasonably satisfactory to the Company's counsel:
(a) evidence that the Purchase Price has been paid in full;
(b) an executed counterpart of the Registration Rights Agreement;
(c) an executed counterpart of the Stock Purchase Agreement; and
(d) such other documents or instruments as the Company reasonably
requests to effect the transactions contemplated hereby.
ARTICLE VII
Survival, Amendment and Waiver
Section 7.1. Survival of Representations and Warranties. The
representations and warranties contained in this Agreement or any certificate
delivered in connection herewith shall survive the Closing, and shall apply with
respect to claims asserted in writing within one year thereof. The provisions of
this Section 7.1 shall not limit any covenant or agreement of the parties hereto
which, by its terms, contemplates performance after the applicable Closing.
Section 7.2. Amendments. This Agreement (including the provisions of
this Section 7.2) may not be amended or modified except by an instrument in
writing signed on behalf of all of the parties affected by such amendment or
modification.
Section 7.3. Extension; Waiver. The parties hereto may (i) extend the
time for performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or in any document
delivered pursuant hereto, and (iii) waive compliance with any of the agreements
of the other parties hereto or satisfaction of any of the conditions to such
party's obligations contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of a party
hereto to assert any of its rights hereunder shall not constitute a waiver of
such rights.
ARTICLE VIII
Miscellaneous
Section 8.1. Notices. All notices, requests, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand, when delivered by courier, three
days after being deposited in the mail (registered or certified mail, postage
prepaid, return receipt requested), or when received by facsimile transmission
upon receipt of a confirmed transmission report, as follows:
If to the Company: 00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Chief Executive Officer
and if to the other parties at the address or facsimile transmission number
specified below its name on the signature pages hereto (or, in the case of
Persons who become parties hereto subsequently, at their last addresses or
facsimile transmission numbers shown on the record books of the Company). Any
party hereto, by notice given to the other parties hereto in accordance with
this Section 8.1 may change the address or facsimile transmission number to
which such notice or other communications are to be sent to such party.
Section 8.2. Expenses. The Company shall pay its own expenses incident
to this Agreement and the transactions contemplated herein. The Company shall be
responsible for and shall pay at the Closing the fees and disbursements of
counsel to the Purchasers incurred in connection with the negotiation, execution
and delivery of this Agreement and the other Transaction Documents and the
closing of the transactions contemplated hereby and thereby.
Section 8.3. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of New York, without reference to the choice of law principles thereof.
Each of the parties hereto irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York and the United States District Court for the
Southern District of New York for the purpose of any suit, action, proceeding or
judgment relating to or arising out of this Agreement and the transactions
contemplated hereby. Service of process in connection with any such suit, action
or proceeding may be served on each party hereto anywhere in the world by the
same methods as are specified for the giving of notices under this Agreement.
Each of the parties hereto irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the laying of venue
of any such suit, action or proceeding brought in such courts and irrevocably
waives any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum.
Section 8.4. Assignment; Successors and Assigns; No Third Party
Rights. This Agreement may not be assigned by operation of law or otherwise, and
any attempted assignment shall be null and void; provided, however, that any
Purchaser may assign this Agreement (or any interest herein) to one or more
Permitted Transferees so long as such Purchaser also assigns to such Permitted
Transferees its rights and obligations under the other Transaction Documents to
which it is a party. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, permitted
assigns and legal representatives. This Agreement shall be for the sole benefit
of the parties to this Agreement and their respective heirs, successors,
permitted assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 8.5. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
Section 8.6. Titles and Headings. The titles and headings in this
Agreement are for reference purposes only, and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 8.7. Entire Agreement. This Agreement and the other
Transaction Documents constitute the entire agreement among the parties with
respect to the matters covered hereby and thereby and supersede all previous
written, oral or implied understandings among them with respect to such matters,
including, without limitation, the term sheet, dated October 16, 1998.
Section 8.8. Severability. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 8.9. No Strict Construction. Each of the parties hereto
acknowledge that this Agreement has been prepared jointly by the parties hereto,
and shall not be strictly construed against either party.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
LOGIMETRICS, INC.
By: /s/Xxxxxx X. Xxxxxx
__________________________
Name: Xxxxxx X. Xxxxxx
Title: President and Chief
Operating Officer
/s/Xxxxxx Xxxxxx
_______________________
Xxxxxx Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxxxx X. Xxxxxx
_______________________
Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxxxx X. Xxxxxxxxx
__________________________
Xxxxxx X. Xxxxxxxxx, Xxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
CRM 1998 ENTERPRISE FUND, LLC
By: Xxxxxx Xxxxxxxxx XxXxxxx, Inc.,
Its Managing Member
By: /s/Xxxxxx X. Xxxxxxx, III
______________________________
Name: Xxxxxx X. Xxxxxxx, III
Title: Chief Financial Officer
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
A.C. ISRAEL ENTERPRISES, INC.
By: /s/Xxx Xxxxxx
______________________
Name: Xxx Xxxxxx
Title:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
CRM-EFO PARTNERS, L.P.
By: CRM-EFO Investments, LLC,
Its General Partner
By: CRM Management, Inc.,
Its Managing Member
By: /s/Xxxxxx X. Xxxxxxx, III
______________________________
Name: Xxxxxx X. Xxxxxxx, III
Title:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxxxxx X. Xxxx, Xx.
_______________________________
Xxxxxxx X. Xxxx, Xx.
By: Xxxxxx Xxxxxxxxx XxXxxxx, Inc.,
Attorney-in-Fact
By: /s/Xxxxxx X. Xxxxxxx, III
______________________________
Name: Xxxxxx X. Xxxxxxx, III
Title: Chief Financial Officer
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
XXXXXX EQUITIES CORP.
By: /s/Xxxxxxx Xxxxxxxxxxx
________________________
Name: Xxxxxxx Xxxxxxxxxxx
Title:
0 Xxx Xxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
WHITEHALL PROPERTIES, LLC
By: /s/Xxxxxxx Xxxxxxxxxxx
________________________
Name: Xxxxxxx Xxxxxxxxxxx
Title:
0 Xxx Xxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
KABUKI PARTNERS ADP, GP
By: /s/Xxxxxxx Xxxxxxxxxxx
________________________
Name: Xxxxxxx Xxxxxxxxxxx
Title:
0 Xxx Xxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
XxXXXXX FAMILY PARTNERSHIP
By: /s/Xxxxxx X. XxXxxxx
______________________________
Name: Xxxxxx X. XxXxxxx
Title: General Partner
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxx X. Xxxxxx
___________________________
Xxxx X. Xxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxxxx X. Xxxxxxx, III
____________________________
Xxxxxx X. Xxxxxxx, III
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
/s/Xxxxxxx X. Brand
_____________________________
Xxxxxxx X. Brand
00 Xxxxxxxx Xxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Exhibit A
Form of Debenture
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 OCTOBER 21, 1998 AMONG THE
COMPANY AND THE PURCHASERS NAMED THEREIN.
CLASS C 13% CONVERTIBLE SENIOR
SUBORDINATED DEBENTURE DUE 1999
October 21, 1998
LOGIMETRICS, INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of ____________ (together with its, his or her
successors and assigns, the "Holder") the principal amount of ____________
(______________) 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 shall be limited to $2,666,667, and (iii) no
Debenture shall be issued in a principal amount of less than $5,000 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. 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
January 15, 1999 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.
2. Payment of Principal on Debenture.
(a) Scheduled Payments. The Company will repay the principal
amount of this Debenture on September 30, 1999 ("Due Date").
(b) Optional Prepayment. The Company may at any time hereafter
prepay, without premium or penalty, all (but not less than all) of the
outstanding principal amount of the Debentures, together with interest accrued
on such prepaid amount to the date of payment.
(c) Mandatory Prepayment. The Company shall prepay, without
premium or penalty, all (but not less than all) of the outstanding principal
amount of the Debentures, together with interest accrued on such prepaid amount
to the date of prepayment within forty (40) days after the consummation of a
Qualifying Offering. As used herein, "Qualifying Offering" means the public or
private sale by the Company of debt or equity securities resulting in net
proceeds to the Company (after the deduction for all necessary and customary
expenses payable by the Company in connection therewith) of at least $15
million.
(d) Notice of Prepayment. The Company will give written notice of
its election to prepay this Debenture to the Holder in person or by registered
or certified mail, return receipt requested, at least thirty (30) and not more
than forty-five (45) days prior to the date of prepayment. On the date of
prepayment specified in the Company's notice, the Company will deliver to the
Holder of this Debenture in person or by registered or certified mail, return
receipt requested, a cashier's or certified check for the entire outstanding
principal amount being prepaid, together with all accrued interest thereon
through the date of prepayment.
3. Intentionally Omitted.
4. Subordination. The Company's payment, whether voluntary or
involuntary, whether in cash, property, securities or otherwise and whether by
application of offset or otherwise (hereinafter "Payment") of any of its
obligations under this Debenture shall be subject to the following restrictions:
(a) Subordination to Senior Debt. Anything in this Debenture to
the contrary notwithstanding, the obligations of the Company in respect of the
principal of and interest (including any premium or penalty) on this Debenture
and any other amounts due under this Debenture (the "Subordinated Debt") shall
be subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to the Senior Debt. "Senior Debt", when used with respect
to the Company, means only the following (and no other indebtedness of any kind
or nature whatsoever): (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 Modified Revolving Credit
Note, dated April 30, 1998, 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;
provided, however, that the principal amount of the Senior Debt shall not exceed
$2.8 million.
(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.
(k) Right to Convert Unaffected. Nothing contained in this
Section 4 shall be construed so as to limit or restrict the ability of the
Holder to convert this Debenture in accordance with the terms hereof.
5. Intentionally Omitted.
6. Conversion Rights.
(a) From and after the earliest of (i) January 31, 1999, (ii) the
consummation of a Qualifying Offering, or (iii) the date of any repayment notice
given by the Company pursuant to Section 2(d) hereof, the Holder of this
Debenture shall have 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 a number of
fully paid and non-assessable shares equal to (i) the result obtained by
dividing the stated principal amount of this Debenture by the conversion rate
established for any equity security issued in a Qualifying Offering, if this
Debenture is converted on or after the consummation of a Qualifying Offering, or
(ii) if no Qualifying Offering has occurred on or prior to such conversion, the
result obtained by dividing the stated principal amount of this Debenture by (X)
$0.52 per share if this Debenture is converted on or prior to January 31, 1999,
(Y) $0.45 per share if this Debenture is converted on or after February 1, 1999
and on or prior to April 30, 1999, or (Z) $0.31 per share if this Debenture is
converted on or after May 1, 1999. The respective conversion prices set forth
above shall be subject to adjustment in certain circumstances as provided
herein. The conversion price in effect at the time of the conversion of this
Debenture is hereinafter referred to as the "Conversion Price." No fractional
shares shall be issuable upon the conversion of this Debenture. In lieu of any
such fractional share interest, upon conversion the Holder shall be entitled to
a cash payment equal to such fractional interest multiplied by the Conversion
Price in effect at the time of such conversion.
(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.
(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) the
Company's Class A 13% Convertible Senior Subordinated Pay-in-Kind Debentures due
1999 (the "Class A Debentures") (and any replacement Class A Debenture or Class
A Debentures issued upon transfer or exchange of the Class A Debentures), (iii)
any additional securities issued in lieu of cash interest otherwise payable on
the Class A Debentures (the "Class A Accrued Interest Debentures") (and any
replacement Class A Accrued Interest Debenture or Class A Accrued Interest
Debentures issued upon transfer or exchange of the Class A Accrued Interest
Debentures), (iv) 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), (v) 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), (vi) securities
outstanding on the date hereof, (vii) awards made from and after the Issuance
Date pursuant to the Company's Stock Compensation Program (the "Plan"), or
(viii) awards made from and after the Issuance Date 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 subject to an
aggregate limit of 2,000,000 shares of Common Stock for issuances pursuant to
clauses (vii) and (viii) (subject to adjustment in the circumstances set forth
in the Plan or such arrangements) (such securities, collectively, the "Subject
Securities") for a consideration per share less than the Conversion Price (the
"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.
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;
(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; provided, however, that the Company shall have until January
31, 1999 to deliver the financial statements for the fiscal year ended
June 30, 1998;
(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;
provided, however, that the Company shall have until January 31, 1999
to deliver the financial statements for the fiscal quarter ended
September 30, 1998;
(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 Covenant: 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.
(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
Debentures (and any replacement Debenture or Debentures issued upon
transfer or exchange of the Debentures); (D) indebtedness represented by
the Class A Accrued Interest Debentures (and any replacement Class A
Accrued Interest Debenture or Class A Accrued Interest Debentures issued
upon transfer or exchange of the Class A Accrued Interest Debentures); (E)
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 (F) 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), and (D) loans outstanding 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 (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 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;
(vii) 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; or
(viii) any representation or warranty made by the Company in
the Purchase Agreement, dated October 21, 1998 between the Company and
the original Holder of this Debenture or any other certificate or
instrument delivered in connection therewith shall have been untrue in
any material respect when made.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described
in subparagraph 8(a)(vi) 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)(vi) 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 a mended 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
C 13% Convertible Senior Subordinated Debenture this 21st day of October, 1998.
LOGIMETRICS, INC.
By:
____________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Operating Officer
Exhibit B
List of Purchasers and Allocation of Purchase
Name of Purchaser Purchase Price Principal Amount of Debentures
Xxxxxx X. Xxxxxx $181,976.00 $242,634.66
A.C. Israel Enterprises, Inc. 181,976.00 242,634.66
CRM 1998 Enterprise Fund, LLC 494,975.00 659,966.66
Xxxxxx Xxxxxx 54,591.00 72,788.00
CRM-EFO Partners, L.P. 45,494.00 60,658.67
Xxxxxxx X. Xxxx, Xx. 27,297.00 36,396.00
XxXxxxx Family Partnership 18,197.00 24,262.67
Xxxxxx X. Xxxxxxxxx, Xxxxx 18,197.00 24,262.67
Xxxx X. Xxxxxx 18,197.00 24,262.67
Xxxxxx X. Xxxxxxx, III 9,100.00 12,133.34
Kabuki Partners ADP, GP 112,500.00 150,000.00
Xxxxxx Equities Corp. 198,750.00 265,000.00
Whitehall Properties, LLC 138,750.00 185,000.00
Xxxxxxx X. Brand 500,000.00 666,667.00
Total $2,000,000.00 $2,666,667.00
