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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
May 7, 1999
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Date of Report (Date of earliest event reported)
DATAMETRICS CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-8567 95-3545701
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(Commission File Number) (I.R.S. Employer
Identification No.)
25B HANOVER ROAD, FLORHAM PARK, NJ 07932
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(Address of principal executive offices) (Zip Code)
(973) 377-3900
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Registrant's telephone number, including area code
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
1. On May 7, 1999 ("Closing Date"), several purchasers (the
"Purchasers") purchased an aggregate 1,500,000 shares of the Common Stock (the
"Shares") of Datametrics Corporation (the "Registrant") at a purchase price of
$1.00 per share, pursuant to a Common Stock Purchase Agreement (the "Purchase
Agreement"). In connection with the sale of the Shares, the Purchasers received
warrants ("Warrants") to purchase up to an aggregate 1,500,000 shares of the
Registrant's Common Stock for a per share exercise price of the lesser of (i)
$1.35; or (ii) the volume-weighted average price of the Common Stock for the 20
trading days immediately preceding the notice of exercise. Under a related
Registration Rights Agreement, the Registrant has agreed to file a Registration
Statement on Form SB-2 by June 1999 with respect to the Shares purchased and the
shares of Common Stock which may be acquired upon exercise of the Warrants
("Warrant Shares"). The Registrant expects to file a Registration Statement on
Form SB-2 registering its Common Stock for resale by the Purchasers and other
selling shareholders.
The aggregate cash consideration paid by the Purchasers was
$1,500,000, of which $250,000 was previously advanced to the Registrant pursuant
to a promissory note executed by the Registrant, dated April 27, 1999. The
promissory note was canceled upon consummation of the Purchase Agreement.
The Purchase Agreement prohibits the Registrant, without prior
consent, from issuing any Common Stock or any financial instruments convertible
into shares of Common Stock for a period of 120 days following the Closing Date,
and 30 days following the effective date of a registration statement with
respect to the Shares and Warrant Shares. In addition, the Purchasers are
prohibited from disposing of the Shares, Warrants or Warrant Shares for a period
of 60 days following the Closing Date.
The Warrants are exercisable immediately and at any time
during the 5-year period commencing with the Closing Date. Twenty-Five percent
of the Warrants are callable by the Registrant if its Common Stock has traded at
a price equal to or greater than $3.00 per share for the 20 consecutive days
prior to the date of any call notice, provided that the Warrant Shares are
registered at the time of the call. The Warrants are subject to adjustment in
certain circumstances to protect against antidilution.
The Registrant also paid a fee representing 5% of the
aggregate purchase price in the form of Common Stock and Warrants to an
investment bank for brokerage and finding services rendered in connection with
the transaction.
Proceeds of the sale of the Shares and Warrants are to be used
for working capital and payment of other obligations (including payment of
$850,000 to The Manufacturer's Life Insurance Company (U.S.A.) pursuant to a
Mutual Release and Settlement Agreement dated as of March 9, 1999). It is
anticipated that any proceeds received by the Registrant upon the exercise of
the Warrants will be used for working capital.
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2. Based on the Company's recent financial performance,
certain continued listing guidelines of the American Stock Exchange (the "AMEX")
are not currently met. Accordingly, there can be no assurance that the listing
of the Company's Common Stock on the AMEX will be continued. However, the
Company believes that the foregoing sale of additional equity will favorably
influence the AMEX's evaluation of continued listing.
The above discussion is qualified in its entirety by reference
to the Common Stock Purchase Agreement, the Registration Rights Agreement and
the Form of Warrant, which are substantially the same as Exhibits 4.1, 4.2 and
4.3 respectively, and are incorporated herein by this reference.
Item 7. Financial Statements and Exhibits.
a. Financial statements of business acquired.
Not Applicable.
b. Pro forma financial information.
Not Applicable.
c. Exhibits.
The following exhibits are filed with this report:
Exhibit No. Title.
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4.1 Common Stock Purchase Agreement, dated May 7,
1999, by and among the Registrant and the
Purchasers listed therein.
4.2 Registration Rights Agreement, dated May 7, 1999,
by and among the Registrant and the Purchasers
listed therein.
4.3 Form of Warrant.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATAMETRICS CORPORATION
By: /s/ Daniel P. Ginns
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Daniel P. Ginns
Chairman and Chief Executive Officer
Dated: May 14, 1999
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EXHIBIT INDEX
Exhibit No. Title.
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4.1 Common Stock Purchase Agreement,
4.2 Registration Rights Agreement.
4.3 Form of Warrant.
COMMON STOCK PURCHASE AGREEMENT
Dated as of May 7, 1999
by and among
DATAMETRICS CORP.
and
THE PURCHASERS LISTED ON EXHIBIT A HERETO
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS............................................................................................1
ARTICLE II PURCHASE AND SALE OF COMMON STOCK............................................................1
Section 2.1 PURCHASE AND SALE OF STOCK....................................................1
Section 2.2 THE UNITS ....................................................................2
Section 2.3 PURCHASE PRICE AND CLOSING ...................................................2
ARTICLE III REPRESENTATIONS AND WARRANTIES..............................................................2
Section 3.1 Representation and Warranties of the Company .................................2
(a) Organization, Good Standing and Power ........................................2
(b) Authorization; Enforcement ...................................................3
(c) Capitalization ...............................................................3
(d) Issuance of Units ............................................................4
(e) No Conflicts .................................................................4
(f) Commission Documents, Financial Statements ...................................4
(g) Subsidiaries .................................................................5
(h) No Material Adverse Change ...................................................5
(i) No Undisclosed Liabilities ...................................................6
(j) No Undisclosed Events or Circumstances .......................................6
(k) Indebtedness .................................................................6
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(l) TITLE TO ASSETS ..............................................................6
(m) ACTIONS PENDING ..............................................................6
(n) COMPLIANCE WITH LAW ..........................................................7
(o) TAXES ........................................................................7
(p) CERTAIN FEES .................................................................7
(q) DISCLOSURE ...................................................................7
(r) OPERATION OF BUSINESS ........................................................8
(s) ENVIRONMENTAL COMPLIANCE .....................................................8
(t) BOOKS AND RECORD INTERNAL ACCOUNTING CONTROLS ................................8
(u) MATERIAL AGREEMENTS ..........................................................9
(v) TRANSACTIONS WITH AFFILIATES .................................................9
(w) SECURITIES ACT OF 1933 .......................................................9
(x) EMPLOYEES ....................................................................9
(y) ABSENCE OF CERTAIN DEVELOPMENTS .............................................10
(z) USE OF PROCEEDS .............................................................11
Section 3.2 Representations and Warranties of the Purchasers ............................12
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(a) ORGANIZATION AND STANDING OF THE PURCHASERS .................................12
(b) AUTHORIZATION AND POWER .....................................................12
(c) NO CONFLICTS ................................................................12
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(d) ACQUISITION FOR INVESTMENT ..................................................13
(e) ACCREDITED PURCHASERS .......................................................13
(f) INFORMATION .................................................................13
(g) GENERAL .....................................................................13
ARTICLE IV Covenants ..................................................................................14
Section 4.1 Securities Compliance .......................................................14
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Section 4.2 Registration and Listing ....................................................14
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Section 4.3 Registration Statement ......................................................14
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Section 4.4 Delivery of the Units........................................................15
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Section 4.5 Compliance with Laws ........................................................15
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Section 4.6 Keeping of Records and Books of Account .....................................15
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Section 4.7 Reporting Requirements ......................................................15
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Section 4.8 Amendments ..................................................................15
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Section 4.9 Other Agreements ............................................................15
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Section 4.10 Reservation of Shares .......................................................15
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ARTICLE V CONDITIONS TO CLOSING........................................................................16
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell the
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Units .......................................................................16
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(a) Accuracy of Each of the Purchaser's Representations and Warranties...........16
(b) Performance by the Purchasers ...............................................16
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(c) NO INJUNCTION ...............................................................16
(d) CANCELLATION OF PROMISSORY NOTE .............................................16
Section 5.2 Conditions Precedent to the Obligation of the Purchasers to Close............16
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(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.....................16
(b) PERFORMANCE BY THE COMPANY...................................................16
(c) NO SUSPENSION, ETC...........................................................17
(d) NO INJUNCTION................................................................17
(e) NO PROCEEDINGS OR LITIGATION ................................................17
(f) OPINION OF COUNSEL, ETC......................................................17
(g) REGISTRATION RIGHTS AGREEMENT................................................17
(h) RESOLUTIONS..................................................................17
(i) RESERVATION OF SHARES........................................................17
(j) SECRETARY'S CERTIFICATE......................................................18
(k) STOCK CERTIFICATES...........................................................18
ARTICLE VI TERMINATION.................................................................................18
Section 6.1 Termination by Mutual Consent................................................18
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Section 6.2 Other Termination............................................................18
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Section 6.3 Effect of Termination........................................................18
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ARTICLE VII Indemnification............................................................................18
Section 7.1 General Indemnity............................................................18
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Section 7.2 Indemnification Procedure....................................................19
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ARTICLE VIII Miscellaneous.............................................................................20
Section 8.1 Fees and Expenses............................................................20
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Section 8.2 Specific Enforcement, Consent to Jurisdiction................................20
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Section 8.3 Entire Agreement; Amendment..................................................21
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Section 8.4 Notices......................................................................21
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Section 8.5 Waivers......................................................................21
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Section 8.6 Headings.....................................................................22
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Section 8.7 Successors and Assigns.......................................................22
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Section 8.8 No Third Party Beneficiaries.................................................22
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Section 8.9 Governing Law................................................................22
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Section 8.10 Survival.....................................................................22
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Section 8.11 Counterparts.................................................................22
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Section 8.12 Publicity....................................................................22
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Section 8.13 Severability.................................................................23
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Section 8.14 Further Assurances...........................................................23
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Schedules
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Schedule 3.1(c) Capitalization
Schedule 3.1(k) Indebtedness
Schedule 3.1(o) Taxes
Schedule 3.1(p) Certain Fees
Schedule 3.1(y) Absence of Certain Developments
Exhibits
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Exhibit A List of Purchasers
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Opinion of Counsel
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COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
May 7, 1999 by and among Datametrics Corporation, a Delaware corporation (the
"Company"), and the entities listed on Exhibit A attached hereto (each a
"Purchaser" and collectively referred to herein as the "Purchasers").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS.
(a) "MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties or financial condition or prospects of the Company that
is material and adverse to the Company and its subsidiaries, taken as a whole
and/or any condition circumstance, or situation that would prohibit or otherwise
interfere with the ability of the Company to enter into and perform any of its
obligations under this Agreement or the Registration Rights Agreement in any
material respect.
(b) "REGISTRATION STATEMENT" shall mean the registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), to be filed
with the Securities and Exchange Commission for the registration of the Shares.
(c) "PROSPECTUS" shall mean the draft prospectus in the form attached
hereto as Exhibit B.
(d) "UNITS" shall have the meaning assigned to such term in Section 2.1
hereof.
(e) "VWAP" shall mean the daily volume weighted average price (based on
a trading day from 9:00 a.m. to 4:00 p.m. eastern standard time) of the Common
Stock on the relevant exchange as reported by Bloomberg Financial using the AQR
function.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 PURCHASE AND SALE OF UNITS. Subject to the terms and
conditions of this Agreement, the Company hereby issues and sells to the
Purchasers and each Purchaser hereby severally purchases from the Company the
number of Units (the "Units"), each Unit consisting of one share of the
Company's common stock, par value $.01 per share (the "Common Stock"), and one
warrant to purchase one share of Common Stock (the "Warrants"), set forth with
respect to such Purchaser on Exhibit A hereto for the aggregate purchase price
set forth opposite each Purchaser's name on Schedule A hereto. The Company
acknowledges that the purchase price of Settondown Capital International, Ltd.'s
("Settondown") pro rata portion of Units was advanced and evidenced by a
promissory note issued by the Company in favor of Settondown for the principal
amount of $250,000 (the "Promissory Note"). At the Closing the Company shall
deliver to Settondown stock certificates (in such denominations as Settondown
shall request) representing the shares of Common Stock equal to the total amount
of principal and interest accrued and outstanding under the Promissory Note on
the Closing Date. Notwithstanding anything to the contrary set forth in this
Agreement, the aggregate number of Units to be sold hereunder shall not exceed
One Million Five Hundred Thousand.
Section 2.2 The UNITS . The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock, to effect the exercise of the Warrants. Any
shares of Common Stock issuable upon exercise of the Warrants (and such shares
when issued) are herein referred to as the "Warrant Shares".
Section 2.3 PURCHASE PRICE AND CLOSING . The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase that
number of the Units to be issued under this Agreement for a purchase price per
Unit equal to $1.00. The closing under this Agreement shall take place at the
offices of Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New
York, New York 10036 (the "Closing") at 10:00 a.m. E.S.T. on (i) May 7, 1999 or
(ii) such other time and place or on such date as the Purchasers and the Company
may agree upon (the "Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Closing.
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ARTICLE III
Representations and Warranties
Section 3.1 REPRESENTATION AND WARRANTIES OF THE COMPANY . The Company
hereby makes the following representations and warranties to the Purchasers:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted. The Company does not have any subsidiaries (as defined in Section
3.1(g)). The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary
except for any jurisdiction in which the failure to be so qualified will not
have a material adverse effect on the Company's financial condition.
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") and to issue and sell the Units in accordance
with the terms hereof. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required. Each of this Agreement and the Registration Rights Agreement has been
duly executed and delivered by the Company. Each of this Agreement and the
Registration Rights Agreement constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 3.1(c) hereto. All of the outstanding shares of the Company's Common
Stock have been duly and validly authorized. Except as set forth on Schedule
3.1(c), in this Agreement and the Registration Rights Agreement and as set forth
in the Prospectus ("Description of Securities"), no shares of Common Stock are
entitled to preemptive rights or registration rights and there are no
outstanding options,
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warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this Agreement
and the Registration Rights Agreement and as set forth on SCHEDULE 3.1(C) and in
the Prospectus ("Management"), there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities, as provided on SCHEDULE
3.1(C) or disclosed in the Prospectus ("Risk Factors"), the Company is not a
party to any agreement granting registration or anti-dilution rights to any
person with respect to any of its equity or debt securities other than the
Selling Shareholders in the Prospectus. The Company is not a party to, and it
has no knowledge of, any agreement restricting the voting or transfer of any
shares of the capital stock of the Company. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Closing complied with all applicable Federal and state
securities laws, and no stockholder has a right of rescission or damages with
respect thereto which would have a Material Adverse Effect. The Company has
furnished or made available to the Purchasers true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof (the
"Articles"), and the Company's Bylaws as in effect on the date hereof (the
"Bylaws").
(d) ISSUANCE OF UNITS. The Units to be issued under this Agreement
have been duly authorized by all necessary corporate action and, when issued and
paid for in accordance with the terms hereof, the Units shall be validly issued
and outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances, and rights of first refusal of any kind. When the Warrant Shares
are issued in accordance with the terms of the Warrants, such shares will be
duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the Purchasers shall be entitled
to all rights accorded to a holder of Common Stock. At least 1,875,000 shares of
Common Stock have been duly authorized and reserved for issuance upon exercise
of the Warrants.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company and the
consummation by the Company of the transactions contemplated herein and therein
do not (i) violate any provision of the Company's Articles or Bylaws, (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party, (iii) create or impose
a lien, charge or encumbrance on any property of the Company under any agreement
or any commitment to which the Company is a party or by which
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the Company is bound or by which any of its respective properties or assets are
bound, or (iv) result in a violation of any federal, state, local or foreign
statute, rule, regulation, order, judgment or decree (including Federal and
state securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except for (in the case of subsections (ii),
(iii) and (iv), above), such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement and the Registration Rights Agreement, or issue
and sell the Units, Common Stock, Warrants and the Warrant Shares in accordance
with the terms hereof (other than any filings which may be required to be made
by the Company with the Securities and Exchange Commission (the "Commission"),
the American Stock Exchange, or state securities administrators subsequent to
the Closing, and, any registration statement which may be filed pursuant
hereto); provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of each of the Purchasers herein.
(f) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act,
and, the Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a), 14 or 15(d) of the Exchange Act (all of the foregoing including
filings incorporated by reference therein being referred to herein as the
"Commission Documents"). The Company has delivered to the Purchasers true and
complete copies of the Commission Documents filed with the Commission since
December 31, 1998 and prior to the Closing Date. The Company has not provided to
the Purchasers any material non-public information relating to the Company or
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement or as
set forth in the Prospectus. As of their respective dates, the Form 10-K for the
year ended October 25, 1998 and the Form 10-Q for the fiscal quarter ended
January 24, 1999 complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and regulations
applicable to such documents, and, as of their respective dates, none of the
Form 10-K and the Form 10-Q referred to above 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
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statements of the Company included in the Commission Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(g) SUBSIDIARIES. The Company has no subsidiaries. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interest having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries.
(h) NO MATERIAL ADVERSE CHANGE. Since January 24, 1999, the date
through which the most recent quarterly report of the Company on Form 10-Q has
been prepared and filed with the Commission, a copy of which is included in the
Commission Documents, and except as disclosed in the Prospectus ("Risk
Factors"), the Company has not experienced or suffered any Material Adverse
Effect.
(i) NO UNDISCLOSED LIABILITIES. Except as disclosed in the Prospectus
("Risk Factors"), the Company has no liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise), other than those incurred in the ordinary course of
the Company's business since January 24, 1999 and which, individually or in the
aggregate, do not or could not be reasonably expected to have a Material Adverse
Effect.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or circumstance
has occurred or exists with respect to the Company or its business, properties,
prospects, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(k) INDEBTEDNESS. SCHEDULE 3.1(K) hereto sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company, or for
which the Company has commitments. For the purposes of this Agreement,
"Indebtedness" shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $25,000 (other than trade accounts payable
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incurred in the ordinary course of business consistent with past practices), (b)
all guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of
any lease payments in excess of $25,000 due under leases required to be
capitalized in accordance with GAAP. The Company is not in default with respect
to any Indebtedness.
(l) TITLE TO ASSETS. The Company has good and marketable title to all
of its real and personal property reflected in the Commission Documents, free of
any mortgages, pledges, charges, liens, security interests or other
encumbrances, except for liens securing indebtedness listed in Note 7 to the
Financial Statements contained in the Prospectus or such that could not
reasonably be expected to cause a Material Adverse Effect. All said leases of
the Company are valid and subsisting and in full force and effect.
(m) ACTIONS PENDING. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Prospectus ("Risk Factors"), there
is no action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company or any of
its properties or assets. There are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company or any officers or directors of the Company
in their capacities as such.
(n) COMPLIANCE WITH LAW. The business of the Company has been and is
presently being conducted in accordance with all applicable federal, state and
local governmental laws, rules, regulations and ordinances or such that,
individually or in the aggregate, could not reasonably be expected to cause a
Material Adverse Effect. The Company has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it unless
the failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) TAXES . Except as set forth on SCHEDULE 3.1(O) hereto, the Company
has accurately prepared and filed all federal, state and other tax returns
required by law to be filed by it, has paid or made provisions for the payment
of all taxes shown to be due and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of
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the Company for all current taxes and other charges to which the Company is
subject and which are not currently due and payable. Except as disclosed on
Schedule 3.1(o) hereto, none of the federal income tax returns of the Company
for the years subsequent to October 21, 1995 have been audited by the Internal
Revenue Service. The Company has no knowledge of any additional assessments,
adjustments or contingent tax liability (whether federal or state) pending or
threatened against the Company for any period, nor of any basis for any such
assessment, adjustment or contingency.
(p) CERTAIN FEES. Except as set forth on Schedule 3.1(p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any Purchaser with respect to the transactions contemplated by
this Agreement.
(q) DISCLOSURE. To the best of the Company's knowledge, neither this
Agreement (including the Schedules hereto) nor any other documents, certificates
or instruments furnished to the Purchasers by or on behalf of the Company in
connection with the transactions contemplated by this Agreement contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.
(r) OPERATION OF BUSINESS. The Company owns or possesses all patents,
trademarks, service marks, trade names, copyrights, licenses and authorizations
as set forth in the Prospectus ("Intellectual Property"), and all rights with
respect to the foregoing, which are necessary for the conduct of its business as
now conducted without any conflict with the rights of others, except to the
extent that a Material Adverse Effect could not reasonably be expected to result
from such conflict.
(s) ENVIRONMENTAL COMPLIANCE. The Company has obtained all material
approvals, authorization, certificates, consents, licenses, orders and permits
or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws. "Environmental
Laws" shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. The Company has
all necessary governmental approvals required under all Environmental Laws and
used in its business. The Company is also in
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compliance with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental Laws. Except for such instances as would not individually or in
the aggregate have a Material Adverse Effect, there are no past or present
events, conditions, circumstances, incidents, actions or omissions relating to
or in any way affecting the Company that violate or could reasonably be expected
to violate any Environmental Law after the Closing or that could reasonably be
expected to give rise to any environmental liability, or otherwise form the
basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the presence, manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal, transport or
handling, or the emission, discharge, release or threatened release of any
hazardous substance.
(T) BOOKS AND RECORD: INTERNAL ACCOUNTING CONTROLS. The records and
documents of the Company, accurately reflect in all material respects the
information relating to the business of the Company the location and collection
of its assets and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company. The Company maintains a system of
internal accounting controls sufficient, in the judgment of the Company's board
of directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate actions is taken with respect to any
differences.
(u) MATERIAL AGREEMENTS. The Company is not a party to any written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form SB-2 or applicable form
(collectively, "Material Agreements") if the Company were registering securities
under the Securities Act. The Company has in all material respects performed all
the obligations required to be performed by it to date under the foregoing
agreements, has received no notice of default and, to the best of the Company's
knowledge is not in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse Effect.
(v) TRANSACTIONS WITH AFFILIATES. Except for the purchase by Daniel P.
Ginns of $150,000 of bridge notes, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (a) the Company or any of its
respective customers or suppliers on the one hand, and (b)
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on the other hand, any officer, employee, consultant or director of the Company
or any person who would be covered by Item 404(a) of Regulation S-K or any
corporation or other entity controlled by such officer, employee, consultant,
director or person.
(w) SECURITIES ACT OF 1933. The Company has complied and will comply
with all applicable Federal and state securities laws in connection with the
offer, issuance and sale of the Units and other securities hereunder. Neither
the Company nor anyone acting on its behalf, directly or indirectly, has or will
sell, offer to sell or solicit offers to buy the Units or similar securities to,
or solicit offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person, so as to bring
the issuance and sale of the Units under the registration provisions of the
Securities Act and applicable state securities laws. Neither the Company nor any
of its affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Units and other securities hereunder.
(x) EMPLOYEES. The Company has no collective bargaining arrangements
or agreements covering any of its employees. Except as set forth in the
Prospectus ("Employment Contract") or as otherwise disclosed in writing by the
Company to the Purchasers, the Company has no employment contract, agreement
regarding proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or obtain any rights in any
assets of the Company. Since October 24, 1998, no officer, consultant or key
employee of the Company whose termination, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, has
terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company.
(y) ABSENCE OF CERTAIN DEVELOPMENTS. Except as provided on Schedule
3.1(y) hereto or disclosed in the Prospectus ("Risk Factors"), since October 24,
1998, the Company has not:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's business;
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(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks, trade
names, copyrights, trade secrets or other intangible assets or intellectual
property rights, or disclosed any proprietary confidential information to any
person except to customers in the ordinary course of business or to the
Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of material
value, whether or not in the ordinary course of business, or suffered the loss
of any material amount of prospective business;
(viii) made any changes in employee compensation except in the ordinary
course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that aggregate
in excess of $100,000;
(x) entered into any other transaction other than in the ordinary
course of business, or entered into any other material transaction, whether or
not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of $25,000;
(xii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xiii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind which in
the aggregate would be material to the Company; or
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(xv) entered into an agreement, written or otherwise, to take any of
the foregoing actions.
(z) USE OF PROCEEDS. The proceeds from the sale of the Units will be
used by the Company for general corporate purposes, settlement of litigation and
repayment of certain indebtedness of the Company, including the Promissory Note.
(aa) PUBLIC UTILITY HOLDING COMPANY ACT AND INVESTMENT COMPANY ACT
STATUS. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(bb) ERISA. No liability to the Pension Benefit Guaranty Corporation
has been incurred with respect to any Plan by the Company which has had or could
reasonably be expected to have a Material Adverse Effect on the Company. The
execution and delivery of this Agreement and the issue and sale of the Units
will not involve any transaction which is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed pursuant to
Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if
any of the Purchasers, or any person or entity that owns a beneficial interest
in any of the Purchasers, is an "employee pension benefit plan" (within the
meaning of Section 3(2) of ERISA) with respect to which the Company is a "party
in interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(ac), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
by any trade or business, whether or not incorporated, which, together with the
Company, is under common control, as described in Section 414(b) or (c) of the
Code.
(cc) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF UNITS. The
Company acknowledges and agrees that each of the Purchasers is acting
individually and solely in the capacity of arm's length purchaser with respect
to this Agreement, the Registration Rights Agreement and the transactions
contemplated hereunder and thereunder. The Company further acknowledges that
each of the Purchasers is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement, the
Registration Rights Agreement and the transactions contemplated hereunder and
thereunder and any advice given by any of the Purchasers or any of their
representatives or agents in connection with this Agreement, the Registration
Rights Agreement and the transactions
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contemplated hereunder and thereunder is merely incidental to such Purchaser's
purchase of the Units.
(dd) DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Warrant Shares issuable upon exercise of the Warrants will increase in
certain circumstances. The Company further acknowledges that its obligation to
issue the Warrant Shares upon the exercise of the Warrants in accordance with
this Agreement and the Warrants, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The
Purchasers hereby severally and not jointly make the following representations
and warranties to the Company:
(a) ORGANIZATION AND STANDING OF THE PURCHASERS. Such Purchaser is a
corporation duly incorporated (in the case of a corporate Purchaser), validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) AUTHORIZATION AND POWER. Such Purchaser has the requisite power
and authority to enter into and perform this Agreement and to purchase the Units
being sold to it hereunder. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by such Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action. Each of this Agreement and the Registration
Rights Agreement constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of such Purchaser enforceable against such
Purchaser in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or relating hereto
do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Purchaser
is a party, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties, except for such conflicts, defaults and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of such Purchaser
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to enter into and perform its obligations under this Agreement in any material
respect. Such Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Registration Rights Agreement or to purchase the
Units in accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) ACQUISITION FOR INVESTMENT. Such Purchaser is purchasing the Units
solely for its own account for the purpose of investment. Such Purchaser does
not have a present arrangement or intention to effect any organized distribution
of the Units or the Common Stock to or through any person or entity and agrees
not to sell, assign or otherwise transfer any of its shares of Common Stock,
Warrants or Warrant Shares for a period of sixty (60) days commencing on the
Closing Date (the "Lock-Up Period"); provided, however, that by making the
representations herein, such Purchaser reserves the right to dispose of the
Common Stock, the Warrants or the Warrant Shares at any time following the
Lock-Up Period in accordance with Federal and state securities laws applicable
to such disposition. Such Purchaser acknowledges that it is able to bear the
financial risks associated with an investment in the Units and that it has been
given full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. Such Purchaser is
capable of evaluating the risks and merits of an investment in the Units by
virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and such Purchaser is capable
of bearing the entire loss of its investment in the Units.
(e) ACCREDITED PURCHASERS. Such Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
(f) INFORMATION. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Units which
have been requested by such Purchaser . Such Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Such
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Units. Such Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
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(g) General . Such Purchaser understands that the Units are being
offered and sold in reliance on a transactional exemption from the registration
requirement of Federal and state securities laws and the Company is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth herein in order
to determine the applicability of such exemptions and the suitability of such
Purchaser to acquire the Units.
ARTICLE IV
COVENANTS
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section 4.1 SECURITIES COMPLIANCE.
(a) The Company shall notify the Commission and American Stock
Exchange, if applicable, in accordance with their rules and regulations, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Units to the Purchasers
or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
each of the Purchasers set forth herein in order to determine the applicability
of Federal and state securities laws exemptions and the suitability of each of
the Purchasers to acquire the Units.
Section 4.2 REGISTRATION AND LISTING. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the American Stock Exchange or any
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relevant market or system, if applicable, and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of American Stock Exchange or any relevant market or system.
Section 4.3 REGISTRATION STATEMENT. The Company shall cause to be
filed the Registration Statement, which Registration Statement shall provide for
the resale of the shares of Common Stock and Warrant Shares underlying the Units
purchased by and issued to the Purchasers in accordance of this Agreement and
the Registration Rights Agreement. The Company shall take all action necessary
to cause such Registration Statement to be declared effective by the Commission
in accordance with the Registration Rights Agreement.
Section 4.4 COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, rules, regulations and orders, noncompliance with which could
have a Material Adverse Effect.
Section 4.5 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied, reflecting all financial
transactions of the Company, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
Section 4.6 REPORTING REQUIREMENTS. Upon request, the Company shall
furnish the following to each Purchaser so long as such Purchaser is the
beneficial owner of Common Stock or Warrants:
(a) Quarterly Reports filed with the Commission on Form 10-Q as soon as
available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as soon as
available, and in any event within 90 days after the end of each fiscal year of
the Company.
Section 4.7 AMENDMENTS. The Company shall not amend or waive any
provision of the Articles of Incorporation or Bylaws of the Company in any way
that would adversely affect the dividend rights or voting rights of the holders
of the Units.
Section 4.8 OTHER AGREEMENTS. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair in any
material respects the right or ability to perform of the Company under this
Agreement or the Articles of Incorporation of the
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Company. So long as any of the Purchasers are the beneficial owners of shares of
Common Stock, Warrants or Warrant Shares, the Company is restricted from
issuing, without the prior consent of the Purchasers, any Common Stock or any
financial instruments convertible into Shares of Common Stock for the greater of
(i) a period of 120 days following the Closing Date and (ii) 30 days after the
effective date of the Registration Statement.
Section 4.9 RESERVATION OF SHARES. So long as any of the Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than 125% of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Warrant Shares.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE UNITS. The obligation hereunder of the Company to issue and sell the
Units to the Purchasers is subject to the satisfaction or waiver, at or before
the Closing, of each of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(a) ACCURACY OF EACH OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of each Purchaser shall be true and correct
in all material respects as of the date when made and as of the Closing as
though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all
material respects as of such date.
(b) PERFORMANCE BY THE PURCHASERS. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
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(d) CANCELLATION OF PROMISSORY NOTE. At the Closing the Purchasers
shall deliver or cause the delivery to the Company of the original Promissory
Note marked "canceled" and "paid in full".
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO CLOSE.
The obligation hereunder of the Purchasers to enter this Agreement is subject to
the satisfaction or waiver, at or before the Closing, of each of the conditions
set forth below. These conditions are for each Purchaser's sole benefit and may
be waived by such Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing as though
made at that time except for representations and warranties that speak as of a
particular date, which shall be true and correct in all material respects as of
such date.
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) NO SUSPENSION, ETC. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission or the American Stock Exchange (except for any suspension of trading
of limited duration agreed to by the Company, which suspension shall be
terminated prior to Closing), and, at any time prior to the Closing, trading in
securities generally as reported by the American Stock Exchange shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by the American Stock Exchange, or on the
New York Stock Exchange, nor shall a banking moratorium have been declared
either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of a Purchaser, makes it impracticable or inadvisable to purchase the
Units.
(d) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
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(e) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(f) OPINION OF COUNSEL, ETC. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of Closing, in the
form of Exhibit C hereto, and such other certificates and documents as the
Purchasers or their counsel shall reasonably require incident to the Closing.
(g) REGISTRATION RIGHTS AGREEMENT. At the Closing the Company shall
have executed and delivered the Registration Rights Agreement to each Purchaser.
(h) RESOLUTIONS. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 3.1(b) above in a form reasonably
acceptable to each Purchaser (the "Resolutions").
(i) RESERVATION OF SHARES. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, a number of shares of Common
Stock equal to at least 125% of the aggregate number of Warrant Shares issuable
upon exercise of the number of Warrants assuming such Warrants were exercised on
the Closing Date (and assuming all such Warrants were fully exercisable on such
date regardless of any limitation on the timing or amount of such exercises).
(j) SECRETARY'S CERTIFICATE. The Company shall have delivered to each
Purchaser a secretary's certificate, dated as of the Closing Date, as to (i) the
Resolutions, (ii) the Articles, (iii) the Bylaws, each as in effect at the
Closing, and (iv) the authority and incumbency of the officers of the Company
executing this Agreement, the Registration Rights Agreement and the Warrants and
any other documents required to be executed or delivered in connection
therewith.
(k) STOCK CERTIFICATES. At the Closing the Company shall have executed
and delivered to the Purchasers the Warrants and stock certificates (in such
denominations as the Purchasers shall request) representing the shares of Common
Stock being purchased by such Purchaser hereunder.
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ARTICLE VI
TERMINATION
Section 6.1 TERMINATION BY MUTUAL CONSENT. This Agreement shall
terminate on May 10, 1999 if the Units have not been issued and sold by the
Company and purchased by the Purchasers. This Agreement may be terminated by
mutual consent of the parties.
Section 6.2 OTHER TERMINATION. The Purchasers may terminate this
Agreement if (x) an event resulting in a Material Adverse Effect has occurred,
or, (y) the Company is insolvent or has commenced or is the subject of a
bankruptcy proceeding.
Section 6.3 EFFECT OF TERMINATION. In the event of termination by the
Company or the Purchasers, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1 and 8.2, and
Article VII herein. Nothing in this Section 6.3 shall be deemed to release the
Company or the Purchasers from any liability for any breach under this
Agreement, or to impair the rights of the Company and the Purchasers to compel
specific performance by the other party of its obligations under this Agreement.
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ARTICLE VII
INDEMNIFICATION
Section 7.1 GENERAL INDEMNITY. The Company agrees to indemnify and
hold harmless each Purchaser (and its directors, officers, affiliates, agents,
successors and assigns but excluding consequential damages) from and against any
and all actual losses, liabilities, deficiencies, costs, damages and reasonable
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by such Purchaser as a result of any breach of the
covenants made by the Company herein. Each Purchaser severally agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all actual losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys fees, charges and disbursements but excluding
consequential damages) incurred by the Company as result of any breach of the
covenants made by such Purchaser herein.
Section 7.2 INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party
21
<PAGE>
all information reasonably available to the indemnified party which relates to
such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent (which
consent shall not be unreasonable withheld), settle or compromise any claim or
consent to entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VII shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
22
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. The Company shall pay all reasonable
fees and expenses related to the transactions contemplated by this Agreement;
provided, that the Company shall pay, at the Closing, all reasonable attorneys
fees and expenses (exclusive of disbursements and out-of-pocket expenses)
incurred by the Purchasers in an amount not to exceed $10,000 in connection with
the preparation, negotiation, execution and delivery of this Agreement. In
addition, the Company shall pay all reasonable fees and expenses incurred by the
Purchasers in connection with any amendments, modifications or waivers of this
Agreement or the Registration Rights Agreement or incurred in connection with
the enforcement of this Agreement and the Registration Rights Agreement,
including, without limitation, all reasonable attorneys fees and expenses. The
Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Units pursuant hereto.
Section 8.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION .
(a) The Company and each Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Registration Rights Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the Registration Rights
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and each Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the Southern District of New York for the
purposes of any suit, action or proceeding arising out of or relating to this
Agreement or the Registration Rights Agreement and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and each
Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
23
<PAGE>
Section 8.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby,
supersedes all prior agreements with respect to subject matter hereof and,
except as specifically set forth herein or in the Registration Rights Agreement,
neither the Company nor any Purchaser makes any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
Section8.4 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy or facsimile at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to the Company: Datametrics Corporation
25B Hanover Rd.
Florham Park, New Jersey 07932
Attn: Daniel P. Ginns
Fax No.: (973) 377-5736
with copies to:
Lane Altman & Owens LLP
101 Federal Street
Boston, MA 02110
Attn: Joseph F. Mazzella, Esq.
Fax No.: (617) 345-0400
If to the Purchasers: at the address set forth on Exhibit A attached hereto
with copies to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Telephone Number: (212) 704-6000
Fax: (212) 704-6288
Attention: Christopher S. Auguste, Esq.
24
<PAGE>
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 8.5 WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 8.6 HEADINGS. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7 SUCCESSORS AND ASSIGNS. The Purchasers may not assign this
Agreement to any person (other than to an affiliate of such Purchaser) without
the prior consent of the Company, which consent will not be unreasonably
withheld. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The parties hereto may not amend this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company and each Purchaser to be affected by the amendment. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 8.8 NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 8.10 SURVIVAL. The representations and warranties of the
Company and the Purchasers contained in Article III shall survive the execution
and delivery hereof and the Closing until the date three years from the Closing
Date, and the agreements and covenants set forth in Articles II, IV, VI, VII and
VIII of this Agreement shall survive the execution and delivery hereof and the
Closing hereunder.
Section 8.11 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall
25
<PAGE>
become effective when counterparts have been signed by each party and delivered
to the other parties hereto, it being understood that all parties need not sign
the same counterpart. In the event any signature is delivered by facsimile
transmission, the party using such means of delivery shall cause four additional
executed signature pages to be physically delivered to the other parties within
five days of the execution and delivery hereof.
Section 8.12 PUBLICITY. Prior to the Closing, neither the Company nor
the Purchasers shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, that the
Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
will use its best efforts to consult with the Purchasers on the form and
substance of such press release. After the Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, that prior to issuing any such press release, making
any such public statement or announcement, the Company obtains the prior consent
of the Purchasers, which consent shall not be unreasonably withheld or delayed.
Section 8.13 SEVERABILITY. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 8.14 FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, each of the
Company and the Purchasers shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement, the
Common Stock, the Warrants, the Warrant Shares and the Registration Rights
Agreement.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
DATAMETRICS CORPORATION
By: /s/ Daniel P. Ginns
------------------------------------
Name: Daniel P. Ginns
Title: CEO
SETTONDOWN CAPITAL INTERNATIONAL, LTD.
By: /s/ Dawn E. Davies
------------------------------------
Name: Dawn E. Davies
Title: Vice President
HEADWATERS CAPITAL
By: /s/ Jonathan Ungar
------------------------------------
Name: Jonathan Ungar
Title: General Partner
MANCHESTER ASSET MANAGEMENT
By: /s/ Dawn E. Davies
------------------------------------
Name: Dawn E. Davies
Title: Vice President
27
<PAGE>
EXHIBIT A to the
COMMON STOCK PURCHASE AGREEMENT
<TABLE>
<CAPTION>
Investor Address
Investor Name and Facsimile Number Number of Units
- ------------- -------------------- ---------------
<S> <C> <C>
Settondown Capital International, Ltd. Charlotte House 250,000
Charlotte Street
Nassau, Bahamas
(242) 325-7918
Attn: Anthony L. M. Inder Rieden
Headwaters Capital 220 Montgomery Street 1,000,000
Suite 500
San Francisco, California 94104
Attn: Timothy Keating
Fax No.: 415-398-8204
Manchester Asset Management Charlotte House 250,000
Charlotte Street
Nassau, Bahamas
(242) 325-7918
Attn: Anthony L. M. Inder Rieden
</TABLE>
28
<PAGE>
DATAMETRICS CORPORATION
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS OF MAY 7 , 1999
AMONG DATAMETRICS CORPORATION AND
THE PURCHASERS NAMED HEREIN
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT (THE
"AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED IN
THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN THESE
DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE DISCLOSURES
SHALL BE READ TOGETHER; PROVIDED, HOWEVER, THAT DISCLOSURE OF THE INFORMATION IN
ONE SECTION OF THE DISCLOSURE SCHEDULE SHALL NOT BE DEEMED TO RELATE TO OR
QUALIFY ANY OTHER SECTION UNLESS THE RELEVANCE OF SUCH MATTER TO ANOTHER SECTION
IS READILY APPARENT.
29
<PAGE>
SCHEDULE 3.1(c)
Common Stock Purchase Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
- ------------------------------------------------------------------------------
CAPITALIZATION.
AUTHORIZED SHARES.
40,000,000 shares of Common Stock, $.01 par value per share. 5,000,000
shares of Preferred Stock, $.01 par value per share.
ISSUED AND OUTSTANDING.
17,322,879 shares of Common Stock, $.01 par value per share.
No shares of Preferred Stock.
EMPLOYEE STOCK OPTIONS.
226,250 stock options have been issued from time to time to employees
under the Company's employee stock option plan.
REGISTRATION RIGHTS.
All shareholders listed in the section of the Prospectus entitled
"Principal and Selling Shareholders" have registration rights.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 3.1(k)
Common Stock Purchase Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
- ------------------------------------------------------------------------------
INDEBTEDNESS.
Payable To Original Original Balance Interest Maturity Date
Amount Date Rate
<S> <C> <C> <C> <C> <C>
Provident Mutual 565,000 6/1/96 746,000 Variable 5/01/98
Subordinated Debt 1,850,000 11/1/96 1,350,000 10% 5/1/98
South Trust Bank 975,000 12/1/97 966,907 8.02% 12/01/12
QuilCap Corp. 2,250,000 12/23/98 2,250,000 10% 12/23/00
Cannell Capital 1,000,000 12/23/98 1,000,000 10% 12/23/00
Management
Michael Rich 100,000 12/23/98 100,000 10% 12/23/00
M. Omar Ashraf 100,000 12/23/98 100,000 10% 12/23/00
Bridge Notes 400,000 4/10/99 400,000 10% 5/9/99
Settondown Capital 250,000 4/27/99 250,000 12% 90 days from
International, Ltd. issuance
</TABLE>
<PAGE>
SCHEDULE 3.1(o)
Common Stock Purchase Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
------------------------------------------------------------------------------
TAXES.
(a) FILING TAXES.
The Company's 1997 and 1998 tax returns have not yet been
filed.
(b) INTERNAL REVENUE SERVICE AUDITS.
None.
<PAGE>
SCHEDULE 3.1(p)
Common Stock Purchase Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
------------------------------------------------------------------------------
BROKER'S FEES.
NAME AMOUNT
Gilston Corporation, Ltd. 5% of the aggregate purchase price under
the Purchase Agreement paid in the form
of shares of Common Stock and Warrants.
<PAGE>
SCHEDULE 3.1(y)
Common Stock Purchase Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
- ------------------------------------------------------------------------------
ABSENCE OF CERTAIN DEVELOPMENTS SINCE OCTOBER 25, 1998.
See, generally, the following periodic reports of the Company as filed
with the Securities and Exchange Commission ("SEC") pursuant to the Securities
Exchange Act of 1934, as well as the Prospectus contained in the Company's
Registration Statement on Form SB-2:
(a) Quarterly Report on Form 10-QSB for the fiscal period ended
January 24, 1999 as filed with the SEC on March 11, 1999;
(b) Annual Report on Form 10-K for the fiscal year ended October
25, 1999 as filed with the SEC on January 25, 1999; and
(c) Current Report on Form 8-K, dated December 24, 1998, as filed
with the SEC on January 7, 1999.
(i) ISSUANCE OF SECURITIES.
(a) In December 1998, the Company sold approximately $3.45 million
of 10% Subordinated Notes Due 2000 and Warrant to purchase up
to 2,075,560 shares of Common Stock. Also in December, 1998
the Company sold approximately $1.55 Million shares of its
Common Stock.
In March 1999, the Company sold approximately $400,000 of 10%
Bridge Notes Due May, 1999 and Warrants to purchase up to
200,000 shares of its Common Stock. Since March 1999, certain
officers of the Company have also made bridge loans to the
Company from time to time in the aggregate amount of $50,000.
In April 1998, the Company issued 150,000 shares of its Common
Stock to The Manufacturer's Life Insurance Company (U.S.A.)
pursuant to a Mutual Release and Settlement Agreement.
FOR A FULL DESCRIPTION OF THE FOREGOING, SEE THE SECTION
ENTITLED "LIQUIDITY AND CAPITAL RESOURCES" INCLUDED IN THE
PROSPECTUS CONTAINED IN THE COMPANY'S REGISTRATION STATEMENT
ON FORM SB-2.
(b) In December 1998, January 1999, and April 1999, the Company
issued an aggregate 30,000 shares to Directors in lieu of fees
for attendance of certain committee meetings of
<PAGE>
Directors. See the section entitled "Director Compensation"
included in the Prospectus contained in the Company's
Registration Statement on Form SB-2.
(ii) BORROWINGS.
In addition to the loans described in Schedule 3.1(o)(i)(a) above, the
Company executed a promissory note dated April 27, 1999 in the amount
of $250,000, payable to Settondown Capital International, Ltd.
(iii) None.
(iv) None.
(v) None.
(vi) DISCLOSURE OF PROPRIETARY CONFIDENTIAL INFORMATION.
The Company has discussed protection of its intellectual property with
patent and trademark counsel.
(vii) None.
(viii) None.
(ix) None.
(x) None.
(xi) None.
(xii) None.
(xiii) None.
(xiv) None.
(xv) None.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of May 7, 1999, among Datametrics Corporation, a Delaware
corporation (the "Company"), and the entities listed on Schedule A attached
hereto "Purchasers").
This Agreement is being entered into pursuant to the Common
Stock Purchase Agreement, dated as of the date hereof, by and among the Company
and the Purchasers (the "Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in Section 3(o).
"AFFILIATE" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"BLACKOUT PERIOD" shall have the meaning set forth in Section
3(n).
"BOARD" shall have the meaning set forth in Section 3(n).
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value
$.01 per share.
<PAGE>
"EFFECTIVENESS DATE" means with respect to the Registration
Statement the 90th day following the Closing Date (as that term is defined in
the Purchase Agreement).
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2(a). "Event" shall have the meaning set forth in
Section 7(e)(i).
"EVENT DATE" shall have the meaning set forth in Section
7(e)(i).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 30th day following the Closing Date.
"HOLDER" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means (i) the Common Stock and the
shares of Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares"), and upon any stock split, stock dividend, recapitalization or similar
event with respect to such Common Stock or Warrant Shares and (ii) the Common
Stock and the shares of Common Stock issuable upon exercise of Warrants issued
to the investment banker in connection with the sale of the Common Stock and the
Warrants.
2
<PAGE>
Notwithstanding anything herein contained to the contrary, such registered
shares of Common Stock shall be allocated among the Holders pro rata based on
the total number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the Commission. Notwithstanding
anything contained herein to the contrary, if the actual number of shares of
Common Stock issuable upon exercise of the Warrants exceeds 100% of the number
of shares of Common Stock issuable upon exercise of the Warrants based upon a
computation as at the Closing Date or the Filing Date, the term "Registrable
Securities" shall be deemed to include such additional shares of Common Stock.
"REGISTRATION STATEMENT" means the registration statements and
any additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
2. SHELF REGISTRATION.
On or prior to the Filing Date the Company shall prepare and
file with the Commission a "shelf" Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form SB-2 (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form SB-2, in which case such registration shall be on another appropriate
form in accordance herewith). The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Registration
Statement and (ii) use its best efforts to cause the Registration Statement to
be declared effective under the Securities Act as promptly as possible after the
filing
3
<PAGE>
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until
such date as is the earlier of (x) the date when all Registrable Securities
covered by such Registration Statement have been sold or (y) the date on which
the Registrable Securities may be sold without any restriction pursuant to Rule
144(k) as determined by the counsel to the Company pursuant to a written opinion
letter, addressed to the Company's transfer agent to such effect (the
"EFFECTIVENESS PERIOD"). If the Company is notified orally or in writing by the
Commission that the Commission has no comments with respect to the Registration
Statement (the "Commission Notice"), the Company shall use its best efforts to
cause the Registration Statement to be declared effective no later than five (5)
business days after receipt of the Commission Notice. If an additional
Registration Statement is required to be filed because the actual number of
shares of Common Stock into which the Warrants are exercisable exceeds the
number of shares of Common Stock initially registered in respect of the
Conversion Shares and the Warrant Shares based upon the computation on the
Closing Date, the Company shall have twenty (20) Business Days to file such
additional Registration Statement, and the Company shall use its best efforts to
cause such additional Registration Statement to be declared effective by the
Commission as soon as possible, but in no event later than forty-five (45) days
after filing.
3. REGISTRATION PROCEDURES.
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form SB-2 (or if the Company is not
then eligible to register for resale the Registrable Securities on Form SB-2
such registration shall be on another appropriate form in accordance herewith)
in accordance with the method or methods of distribution thereof as specified by
the Holders (except if otherwise directed by the Holders), and cause the
Registration Statement to become effective and remain effective as provided
herein; provided, however, that not less than five (5) Business Days prior to
the filing of the Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and any Special Counsel, copies of all such documents proposed to be filed,
which documents (other than those incorporated by reference) will be subject to
the review of such Holders and such Special Counsel, and (ii) at the request of
any Holder cause its officers and directors, counsel and independent certified
public accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel to such Holders, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities or any Special Counsel shall reasonably object in writing within
three (3) Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration
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Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
respond as promptly as possible to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and any Special Counsel as promptly as possible (and, in the case of (i)(A)
below, not less than five (5) Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
Proceeding for such purpose; and (vi) of the occurrence of any event that makes
any statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents so that, in the case of the Registration Statement
or the Prospectus, as the case may be, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of, (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension
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of the qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) If requested by the Holders of a majority in interest of
the Registrable Securities, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information as
the Company reasonably agrees should be included therein and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(f) Furnish to each Holder and any Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(g) Promptly deliver to each Holder and any Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders and any Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, however, that the Company shall not be required to qualify generally
to do business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to a Registration Statement, which certificates shall be free
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any Holder may request at
least two (2) Business Days prior to any sale of Registrable Securities.
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(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the American Stock
Exchange and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Comply in all material respects with all applicable rules
and regulations of the Commission and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
(m) The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the Prospectus as then amended or supplemented as contemplated in
Section 3(g) and notice from the Company that such Registration Statement and
any post-effective amendments thereto have become effective as contemplated by
Section 3(c) and (ii) it and its officers, directors or Affiliates, if any, will
comply with the prospectus
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delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
(n) If (i) there is material non-public information regarding
the Company which the Company's Board of Directors (the "Board") reasonably
determines not to be in the Company's best interest to disclose and which the
Company is not otherwise required to disclose, or (ii) there is a significant
business opportunity (including, but not limited to, the acquisition or
disposition of assets (other than in the ordinary course of business) or any
merger, consolidation, tender offer or other similar transaction) available to
the Company which the Board reasonably determines not to be in the Company's
best interest to disclose and which the Company would be required to disclose
under the Registration Statement, then the Company may postpone or suspend
filing or effectiveness of a registration statement for a period not to exceed
20 consecutive days, provided that the Company may not postpone or suspend its
obligation under this Section 3(n) for more than 45 days in the aggregate during
any 12 month period (each, a "Blackout Period"); provided, however, that no such
postponement or suspension shall be permitted for consecutive 20 day periods,
arising out of the same set of facts, circumstances or transactions.
4. REGISTRATION EXPENSES
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All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the OTC Bulletin Board and each other securities exchange or market on
which Registrable Securities are required hereunder to be listed, (B) with
respect to filings required to be made with the Commission, (C) with respect to
filings required to be made under the American Stock Exchange and (C) in
compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and Special Counsel for the Holders, in the case of the Special Counsel,
to a maximum amount of $10,000, (v) Securities Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
Company's independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue
or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
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<PAGE>
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied on by the Company for use therein or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto.
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of an
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Holders.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus and that such information was reasonably relied
upon by the Company for use in the Registration Statement, such Prospectus or
such form of prospectus or to the extent that such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus. Notwithstanding anything to the contrary contained herein, the
Holder shall be liable under this Section 5(b) for only that amount as does not
exceed the net proceeds to such Holder as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY) in writing, and
the Indemnifying Party shall assume the defense thereof,
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<PAGE>
including the employment of counsel reasonably satisfactory to the Indemnified
Party and the payment of all fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in
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connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying, Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms. Notwithstanding anything to the
contrary contained herein, the Holder shall be liable or required to contribute
under this Section 5(c) for only that amount as does not exceed the net proceeds
to such Holder as a result of the sale of Registrable Securities pursuant to
such Registration Statement.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties
6. RULE 144.
As long as any Holder owns Common Stock, Warrants or Warrant
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act and to promptly furnish the Holders with true and complete
copies of all such filings. As long as any Holder owns Common Stock, Warrants or
Warrant Shares, if the Company is not required to file reports pursuant to
Section 13(a) or 15(d) of the Exchange Act, it will prepare and furnish to the
Holders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act, as
well as any other information required thereby, in the time period that such
filings would have been required to have been made under the Exchange Act. The
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Person to sell
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Common Stock and Warrant Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 promulgated under
the Securities Act, including providing any legal opinions referred to in the
Purchase Agreement. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to whether
it has complied with such requirements.
7. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has, as of the date hereof entered into and currently in
effect, nor shall the Company or any of its subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority of
the then outstanding Registrable Securities, the Company shall not grant to any
Person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject in all
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict with the provisions of this Agreement, or the
Registration Rights Agreement has been declared effective by the SEC.
(c) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant hereto
and the Persons listed on Schedule 7(c) hereto) may include securities of the
Company in the Registration Statement, and the Company shall not after the date
hereof enter into any agreement providing such right to any of its security
holders, unless the right so granted is subject in all respects to the prior
rights in full of the Holders set forth herein, and is not otherwise in conflict
with the provisions of this Agreement.
(d) PIGGY-BACK REGISTRATIONS. If at any time when there is not
an effective Registration Statement covering (i) the Shares of Common Stock or
(ii) the Warrant Shares, the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or its then equivalents relating to equity securities to be
issued solely in connection with any
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acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, the Company shall
send to each holder of Registrable Securities written notice of such
determination and, if within thirty (30) days after receipt of such notice, any
such holder shall so request in writing (which request shall specify the
Registrable Securities intended to be disposed of by the Purchasers), the
Company will cause the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the holder, to
the extent requisite to permit the disposition of the Registrable Securities so
to be registered, provided that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to such holder and, thereupon, (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay expenses in accordance with Section 4 hereof), and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this Section 7(d) for the
same period as the delay in registering such other securities. The Company shall
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 7(d) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act. In the case of an underwritten public offering, if the managing
underwriter(s) or underwriter(s) should reasonably object to the inclusion of
the Registrable Securities in such registration statement, then if the Company
after consultation with the managing underwriter should reasonably determine
that the inclusion of such Registrable Securities, would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
or none of the Registrable Securities of the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro-rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration), if the
Company after consultation with the underwriter(s) recommends the inclusion of
fewer Registrable Securities, or (y) none of the Registrable Securities of the
Holders shall be included in such registration statement, if the Company after
consultation with the underwriter(s) recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other persons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).
(e) FAILURE TO FILE REGISTRATION STATEMENT AND OTHER EVENTS.
The Company and the Purchasers agree that the Holders will suffer damages if the
Registration Statement is not filed on or prior to the Filing Date and not
declared effective by the Commission on or prior to the Effectiveness Date and
maintained in the manner contemplated herein during the Effectiveness Time or if
certain other events occur. The Company and the Holders further agree that it
would not be
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feasible to ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration Statement is not filed on or prior to the Filing Date, or
is not declared effective by the Commission on or prior to the Effectiveness
Date (or in the event an additional Registration Statement is filed because the
actual number of shares of Common Stock into which the Warrants are exercisable
exceeds the number of shares of Common Stock initially registered is not filed
and declared effective within the time periods set forth in Section 2(a)), or
(ii) the Company fails to file with the Commission a request for acceleration in
accordance with Rule 12dl-2 promulgated under the Exchange Act within five (5)
Business Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will not
be "reviewed," or not subject to further review, or (iii) the Registration
Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities at any time prior to the
expiration of the Effectiveness Period, without being succeeded immediately by a
subsequent Registration Statement filed with and declared effective by the
Commission, and such cessation continues for a period of thirty days after
written notice thereof to the Company, or (iv) trading in the Common Stock shall
be suspended or if the Common Stock is delisted from the American Stock Exchange
for any reason for more than three Business Days in the aggregate, and such
suspension or delisting continues for a period of fourteen days after written
notice thereof to the Company, or (v) the Company breaches in a material respect
any covenant or other material term or condition to this Agreement, Purchase
Agreement (other than a representation or warranty contained therein) or any
other agreement, document, certificate or other instrument delivered in
connection with the transactions contemplated hereby and thereby, and such
breach continues for a period of thirty days after written notice thereof to the
Company, or (vii) the Company has breached Section 3(n) of this Agreement (any
such failure or breach being referred to as an "Event"), the Company shall pay
in cash as liquidated damages for such failure and not as a penalty to each
Holder an amount equal to 2% of such Holder's pro rata share of the purchase
price paid by all Holders for all shares of Common Stock purchased and then
outstanding pursuant to the Purchase Agreement for each thirty (30) day period
until the applicable Event has been cured, which shall be pro rated for such
periods less than thirty (30) days (the "Periodic Amount"). Payments to be made
pursuant to this Section 7(e) shall be due and payable in cash immediately upon
demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Holders if the Registration
Statement is not filed on or prior to the Filing Date or has not been declared
effective by the Commission on or prior to the Effectiveness Date and maintained
in the manner contemplated herein during the Effectiveness Time or if any other
Event as described herein has occurred.
(f) SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION.
(i) The Company and the Purchasers acknowledge and agree
that irreparable damage would occur in the event that any of the provisions of
this Registration Rights Agreement or the Purchase Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction
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or injunctions to prevent or cure breaches of the provisions of this
Registration Rights Agreement or the Purchase Agreement and to enforce
specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
(ii) Each of the Company and the Purchasers (i) hereby
irrevocably submits to the jurisdiction of the United States District Court
sitting in the Southern District of New York for the purposes of any suit,
action or proceeding arising out of or relating to this Agreement or the
Purchase Agreement and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Purchasers consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this Section 7(f) shall affect or limit any right to
serve process in any other manner permitted by law.
(g) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and each of the Holders. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(h) NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earlier of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice prior to 5:00 p.m., eastern
standard time, on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified for notice later than 5:00 p.m., eastern
standard time, on any date and earlier than 11:59 p.m., eastern standard time,
on such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service or (iv) actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be with respect to each Holder at its address set forth
under its name on Schedule A attached hereto, or with respect to the Company,
addressed to:
Datametrics Corporation
25B Hanover Rd.
Florham Park, New Jersey 07932
Attention: Daniel P. Ginns
Facsimile No.: (973) 377-5736
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or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Company shall be sent to Lane Altman &
Owens LLP, 101 Federal Street, Boston, Massachusetts 02110, Attention: Joseph F.
Mazzella, Esq., Facsimile No.: (617) 345-0400. Copies of notices to any Holder
shall be sent to Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York 10036, Attention: Christopher S. Auguste, Esq.,
Facsimile No.:
(212) 704-6288.
(i) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns and shall inure to the benefit of each Holder and its successors and
assigns. The Company may not assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of each Holder. Each
Purchaser may assign its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.
(j) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each
Holder hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder to any transferee of such Holder of all
or a portion of the shares of Common Stock or the Registrable Securities if: (i)
the Holder agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. In
addition, each Holder shall have the right to assign its rights hereunder to any
other Person with the prior written consent of the Company, which consent shall
not be unreasonably withheld. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
(k) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
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party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(l) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof.
(m) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(n) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal, void or
unenforceable in any respect, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(o) HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
(p) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(q) Within two (2) business days after the Registration
Statement which includes the Registrable Securities is ordered effective by the
Commission, the Company shall deliver, and shall cause legal counsel for the
Company to deliver, to the transfer agent for such Registrable Securities (with
copies to the Holders whose Registrable Securities are included in such
Registration Statement) confirmation that the Registration Statement has been
declared effective by the Commission in the form attached hereto as Exhibit A.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
DATAMETRICS CORPORATION
By: /s/ Daniel P. Ginns
-------------------------------------------
Name: Daniel P. Ginns
Title: CEO
SETTONDOWN CAPITAL INTERNATIONAL, LTD.
By: /s/ Dawn E. Davies
-------------------------------------------
Name: Dawn E. Davies
Title: Vice President
HEADWATERS CAPITAL
By: /s/ Jonathan Ungar
-------------------------------------------
Name: Jonathan Ungar
Title: General Partner
MANCHESTER ASSET MANAGEMENT
By: /s/ Dawn E. Davies
-------------------------------------------
Name: Dawn E. Davies
Title: Vice President
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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn:_________________
Re: DATAMETRICS CORPORATION
Ladies and Gentlemen:
We are counsel to Datametrics Corporation, a Delaware corporation (the
"COMPANY"), and have represented the Company in connection with that certain
Common Stock Purchase Agreement (the "PURCHASE AGREEMENT") entered into by and
among the Company and the entities a party thereto (the "HOLDERS") pursuant to
which the Company issued to the Holders shares of its common stock, par value
$.01 per share (the "COMMON STOCK"), and warrants to purchase shares of the
Common Stock (the "WARRANTS"). Pursuant to the Purchase Agreement, the Company
also has entered into a Registration Rights Agreement with the Holder (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 1999, the Company filed a Registration
Statement on Form SB-2 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[COMPANY'S COUNSEL]
By:________________________
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cc: [LIST NAMES OF HOLDERS]
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SCHEDULE A
LIST OF PURCHASERS
Investor Address
Investor Name and Facsimile Number
------------- --------------------
Settondown Capital International, Ltd. Charlotte House
Charlotte Street
Nassau, Bahamas
Attn: Anthony L.M. Inder Rieden
Fax No.: 242-325-7918
Headwaters Capital 220 Montgomery Street
Suite 500
San Francisco, California 94104
Attn: Timothy Keating
Fax No.: 415-398-8204
Manchester Asset Management Charlotte House
Charlotte Street
Nassau, Bahamas
Attn: Anthony L.M. Inder Rieden
Fax No.: 242-325-7918
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SCHEDULE 7(c)
Registration Rights Agreement
Dated as of May 7, 1999
by and among Datametrics Corporation
and the Purchasers Named Herein
- ------------------------------------------------------------------------------
All shareholders listed in the section of the Prospectus entitled "Princiapal
and Selling Shareholders" have registration rights.
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR DATAMETRICS CORPORATION SHALL HAVE RECEIVED
AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
DATAMETRICS CORPORATION
Expires May 7, 2004
No.: W-__ Number of Shares: __________
Date of Issuance: May 7, 1999
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, Datametrics Corporation, a Delaware corporation (together with
its successors and assigns, the "Issuer"), hereby certifies that
___________________ or its registered assigns is entitled to subscribe for and
purchase, during the period specified in this Warrant, up to ___________ shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Common Stock of the Issuer, at an exercise
price per share equal to the Warrant Price then in effect, subject, however, to
the provisions and upon the terms and conditions hereinafter set forth.
Capitalized terms used in this Warrant and not otherwise defined herein shall
have the respective meanings specified in Section 7 hereof.
1. TERM. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at
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5:00 p.m., eastern time, on the fifth anniversary of the Closing Date (as such
term is defined in the Purchase Agreement) (such period being the "Term").
2. METHOD OF EXERCISE PAYMENT: ISSUANCE OF NEW WARRANT: TRANSFER AND
EXCHANGE.
(a) TIME OF EXERCISE. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) METHOD OF EXERCISE. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by the
payment to the Issuer of an amount of consideration therefor equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder's election (i) by certified or official bank
check or (ii) by surrender to the Issuer for cancellation of a portion of this
Warrant representing that number of unissued shares of Warrant Stock which is
equal to the quotient obtained by dividing (A) the product obtained by
multiplying the Warrant Price by the number of shares of Warrant Stock being
purchased upon such exercise by (B) the difference obtained by subtracting the
Warrant Price from the Per Share Market Value as of the date of such exercise,
or (iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the provisions of clause
(ii) of this subsection (b), such exercise shall be accompanied by written
notice from the Holder of this Warrant specifying the manner of payment thereof
and containing a calculation showing the number of shares of Warrant Stock with
respect to which rights are being surrendered thereunder and the net number of
shares to be issued after giving effect to such surrender.
(c) ISSUANCE OF STOCK CERTIFICATES. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three Trading Days after such
exercise, and the Holder hereof shall be deemed for all purposes to be the
Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) TRANSFERABILITY OF WARRANT. Subject to Section 2(e), this Warrant
may be transferred by a Purchaser without the consent of the Company. If
transferred pursuant to this paragraph and subject to the provisions of
subsection (e) of this Section 2, this Warrant may be transferred on the books
of the Issuer by the Holder hereof in person or by duly authorized
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attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants for the purchase of the same aggregate number
of shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant except
as to the number of shares of Warrant Stock issuable pursuant hereto.
(e) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant or the shares of Warrant Stock to be
issued upon exercise hereof are being acquired solely for the Holder's
own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration
statement, or an exemption from registration, under the Securities Act
and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR DATAMETRICS
CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.
(iii) The restrictions imposed by this subsection (e) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that
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such restrictions are no longer required to ensure compliance with the
Securities Act and state securities laws or (C) upon the Issuer's
receipt of other evidence reasonably satisfactory to the Issuer that
such registration and qualification under state securities laws is not
required. Whenever such restrictions shall cease and terminate as to
any such securities, the Holder thereof shall be entitled to receive
from the Issuer (or its transfer agent and registrar), without expense
(other than applicable transfer taxes, if any), new Warrants (or, in
the case of shares of Warrant Stock, new stock certificates) of like
tenor not bearing the applicable legend required by paragraph (ii)
above relating to the Securities Act and state securities laws.
(f) CONTINUING RIGHTS OF HOLDER. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.
3. STOCK FULLY PAID: RESERVATION AND LISTING OF SHARES: COVENANTS.
(a) STOCK FULLY PAID. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(b) RESERVATION. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
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<PAGE>
(c) COVENANTS. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the Certificate of Incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(d) LOSS, THEFT, DESTRUCTION OF WARRANTS. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(e) RIGHTS AND OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. The
shares of Warrant Stock are entitled to the benefits and subject to the terms of
the Registration Rights Agreement dated as of even date herewith between the
Issuer and the Holders listed on the signature pages thereof (as amended from
time to time, the "Registration Rights Agreement"). The Issuer shall keep or
cause to be kept a copy of the Registration Rights Agreement, and any amendments
thereto, at its chief executive office and shall furnish, without charge, copies
thereof to the Holder upon request.
4. ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARE NUMBER. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) RECAPITALIZATION, REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. (i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate with or merge
into any other Person and the Issuer shall not be the continuing or surviving
corporation of such consolidation or merger, or (b) permit any
5
<PAGE>
other Person to consolidate with or merge into the Issuer and the Issuer shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, any Capital Stock of the Issuer shall be changed into or exchanged
for Securities of any other Person or cash or any other property, or (c)
transfer all or substantially all of its properties or assets to any other
Person, or (d) effect a capital reorganization or reclassification of its
Capital Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Warrant, the Holder of this Warrant shall be entitled (x) upon
the exercise hereof at any time after the consummation of such Triggering Event,
to the extent this Warrant is not exercised prior to such Triggering Event, or
is redeemed in connection with such Triggering Event, to receive at the Warrant
Price in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such exercise of this
Warrant prior to such Triggering Event, the Securities, cash and property to
which such Holder would have been entitled upon the consummation of such
Triggering Event if such Holder had exercised the rights represented by this
Warrant immediately prior thereto, subject to adjustments and increases
(subsequent to such corporate action) as nearly equivalent as possible to the
adjustments provided for in Section 4 hereof or (y) to sell this Warrant (or, at
such Holder's election, a portion hereof) concurrently with the Triggering Event
to the Person continuing after or surviving such Triggering Event, or to the
Issuer (if Issuer is the continuing or surviving Person) at a sales price equal
to the amount of cash, property and/or Securities to which a holder of the
number of shares of Common Stock which would otherwise have been delivered upon
the exercise of this Warrant would have been entitled upon the effective date or
closing of any such Triggering Event (the "Event Consideration"), less the
amount or portion of such Event Consideration having a fair value equal to the
aggregate Warrant Price applicable to this Warrant or the portion hereof so
sold.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior to the
consummation thereof, each Person (other than the Issuer) which may be required
to deliver any Securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (A) the obligations of the Issuer
under this Warrant (and if the Issuer shall survive the consummation of such
Triggering Event, such assumption shall be in addition to, and shall not release
the Issuer from, any continuing obligations of the Issuer under this Warrant)
and (B) the obligation to deliver to such Holder such shares of Securities, cash
or property as, in accordance with the foregoing provisions of this subsection
(a), such Holder shall be entitled to receive, and such Person shall have
similarly delivered to such Holder an opinion of counsel for such Person, which
counsel shall be reasonably satisfactory to such Holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this subsection (a))
shall be applicable to the Securities, cash or property which such Person may be
required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
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(iii) If with respect to any Triggering Event, the Holder of this
Warrant has exercised its right as provided in clause (y) of subparagraph (i) of
this subsection (a) to sell this Warrant or a portion thereof, the Issuer agrees
that as a condition to the consummation of any such Triggering Event the Issuer
shall secure such right of Holder to sell this Warrant to the Person continuing
after or surviving such Triggering Event and the Issuer shall not effect any
such Triggering Event unless upon or prior to the consummation thereof the
amounts of cash, property and/or Securities required under such clause (y) are
delivered to the Holder of this Warrant. The obligation of the Issuer to secure
such right of the Holder to sell this Warrant shall be subject to such Holder's
cooperation with the Issuer, including, without limitation, the giving of
customary representations and warranties to the purchaser in connection with any
such sale. Prior notice of any Triggering Event shall be given to the Holder of
this Warrant in accordance with Section 11 hereof.
(b) SUBDIVISION OR COMBINATION OF SHARES. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) STOCK DIVIDENDS. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying
the Warrant Price in effect immediately prior to such record date (or
if no such record is taken, then immediately prior to such payment or
other distribution), by a fraction (1) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (2) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend or distribution (plus in the event that
the Issuer paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Issuer issued
fractional shares in connection with said dividends); or
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(ii) OTHER DIVIDENDS. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common
Stock (other than as described in clause (i) of this subsection (c)),
or in the event that the Company shall offer options or rights to
subscribe for shares of Common Stock, or issue any Common Stock
Equivalents, to all of its holders of Common Stock, then on the record
date for such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer, the
Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer.
(d) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If the Issuer, at
any time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the Warrant Price
then in effect or less than the Per Share Market Value then in effect or without
consideration, then the Warrant Price upon each such issuance shall be adjusted
to that price (rounded to the nearest cent) determined by multiplying the
Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the greater of the Per Share Market Value then in
effect and the Warrant Price then in effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (Y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in
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Common Stock or Convertible Securities or the reclassification, subdivision or
combination of Common Stock into a greater or smaller number of shares, the
foregoing figure of $.01 per share (or such figure as last adjusted) shall be
adjusted (to the nearest one-half cent) in proportion to the adjustment in the
Warrant Price.
(e) ISSUANCE OF COMMON STOCK EQUIVALENTS. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the
Warrant Price then in effect or less than the Per Share Market Value then in
effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
Warrant Price or less than the Per Share Market Value in effect at the time of
such amendment, then the Warrant Price upon each such issuance or amendment
shall be adjusted as provided in the first sentence of subsection (d) of this
Section 4 on the basis that (1) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such Common Stock Equivalents shall be
deemed to have been issued (whether or not such Common Stock Equivalents are
actually then exercisable, convertible or exchangeable in whole or in part) as
of the earlier of (A) the date on which the Issuer shall enter into a firm
contract for the issuance of such Common Stock Equivalent, or (B) the date of
actual issuance of such Common Stock Equivalent, and (2) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received or receivable by the Issuer
for the issuance of such Additional Shares of Common Stock pursuant to such
Common Stock Equivalent. No adjustment of the Warrant Price shall be made under
this subsection (e) upon the issuance of any Convertible Security which is
issued pursuant to the exercise of any warrants or other subscription or
purchase rights therefor, if any adjustment shall previously have been made in
the Warrant Price then in effect upon the issuance of such warrants or other
rights pursuant to this subsection (e). If no adjustment is required under this
subsection (e) upon issuance of any Common Stock Equivalent or once an
adjustment is made under this subsection (e) based upon the Per Share Market
Value in effect on the date of such adjustment, no further adjustment shall be
made under this subsection (e) based solely upon a change in the Per Share
Market Value after such date.
(f) PURCHASE OF COMMON STOCK BY THE ISSUER. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
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outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) COMPUTATION OF CONSIDERATION. The consideration received
by the Issuer shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received by
the Issuer therefor, or if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by the Issuer for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions, or expenses paid or incurred by
the Issuer for or in connection with the underwriting thereof or
otherwise in connection with the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the, time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so
paid or satisfied. In any case in which the consideration to be
received or paid shall be other than cash, the Board shall notify the
Holder of this Warrant of its determination of the fair market value of
such consideration prior to payment or accepting receipt thereof. If,
within thirty days after receipt of said notice, the Majority Holders
shall notify the Board in writing of their objection to such
determination, a determination of the fair market value of such
consideration shall be
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made by an Independent Appraiser selected by the Majority Holders with
the approval of the Board (which approval shall not be unreasonably
withheld), whose fees and expenses shall be paid by the Issuer.
(ii) READJUSTMENT OF WARRANT PRICE. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with
the issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(iii) OUTSTANDING COMMON STOCK. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (B) be deemed to include all
shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of Indebtedness, shares of Capital Stock or other Securities
which are or may be at any time convertible into or exchangeable for
shares of Common Stock or Other Common Stock.
(h) OTHER ACTION AFFECTING COMMON STOCK. In case after the Original
Issue Date the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections (a) through (g) of
this Section 4, inclusive, and the failure to make any adjustment would not
fairly protect the purchase rights represented by this Warrant in accordance
with the essential intent and principle of this Section 4, then the Warrant
Price shall be adjusted in such manner and at such time as the Board may in good
faith determine to be equitable in the circumstances.
(i) ADJUSTMENT OF WARRANT SHARE NUMBER. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving
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effect to such adjustment and the denominator of which shall be the Warrant
Price immediately after giving effect to such adjustment. If the Issuer shall be
in default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(j) FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection. The firm selected by the Holder of this Warrant as provided in the
preceding sentence shall be instructed to deliver a written opinion as to such
matters to the Issuer and such Holder within thirty days after submission to it
of such dispute. Such opinion shall be final and binding on the parties hereto.
The fees and expenses of such accounting firm shall be paid by the Issuer.
6. WARRANT CALL. At any time after the Registration Statement is
declared effective, the Issuer, at its option, may call upon 30 calendar days
written notice to the Holder (the "Call Notice") 25% of the Warrants if the
Common Stock of the Issuer trades at a price equal to or greater than $3.00 per
share for 20 consecutive Trading Days prior to the date of the Call Notice.
7. FRACTIONAL SHARES. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
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8. DEFINITIONS. For the purposes of this Warrant, the following terms
have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except the Warrant Stock, the Management Stock, the Future
Warrant Stock and Common Stock issuable upon exercise of existing stock
options issued under any employee incentive stock option and/or any
qualified stock option plan adopted by the Issuer.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Issuer as in effect on the Original Issue Date,
and as hereafter from time to time amended, modified, supplemented or
restated in accordance with the terms hereof and thereof and pursuant
to applicable law.
"Closing Price" means the VWAP of the Common Stock on the
trading day immediately preceding the Closing Date.
"Common Stock" means the Common Stock, $.01 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security, other
than the Debt Financing Warrants and the Continental Capital Warrants.
"Continental Capital Common Stock" means such shares of Common
Stock to be issued by the Issuer to Continental Capital and Equity
Company ("Continental Capital"), not to exceed 105,000 shares.
"Continental Capital Warrants" means such warrants to be
issued by Issuer to Continental Capital to purchase Common Stock, not
to exceed 200,000 shares.
"Convertible Securities" means evidences of Indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for
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Additional Shares of Common Stock. The term "Convertible Security"
means one of the Convertible Securities.
"Debt Financing Warrants" means such warrants to purchase up
to 400,000 shares of Common Stock to be issued by the Issuer in
connection with the proposed senior debt financing.
"Future Warrant Stock" means Common Stock issuable upon the
exercise of the Debt Financing Warrants or the Continental Capital
Warrants.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
"Issuer" means Datametrics Corporation, a Delaware
corporation, and its successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"Management Stock" means up to 250,000 shares of Common Stock
issuable upon the exercise of stock options, issued by the Issuer to
its managers, provided such stock options are not exercisable at a
price per share less than the Per Share Market Value then in effect.
"Original Issue Date" means May 7, 1999.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
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"OTC Bulletin Board" means the over-the-counter electronic
bulletin board.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the
American Stock Exchange or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation
system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the American Stock Exchange or any
registered national stock exchange, the closing bid price for a share
of Common Stock in the over-the-counter market, as reported by the OTC
Bulletin Board or in the National Quotation Bureau Incorporated or
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the OTC Bulletin Board or the National
Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the holder, or (d) if the Common Stock is
not then publicly traded the fair market value of a share of Common
Stock as determined by an Independent Appraiser selected in good faith
by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which case,
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided,
further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The Issuer shall pay all costs
and expenses of each Independent Appraiser. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Purchase Agreement" means the Common Stock Purchase Agreement
dated as of May 7, 1999 among the Issuer and the investors a party
thereto.
"Registration Rights Agreement" has the meaning specified in
Section 3(e) hereof.
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"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security.
"Security" means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange as reported by Bloomberg L.P., or
(b) if the Common Stock is not listed on the American Stock Exchange, a
day on which the Common Stock is traded on any other registered
national stock exchange, or (c) if the Common Stock is not quoted on
the OTC Bulletin Board, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding
its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or
required by law or other government action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"VWAP" means the volume weighted average price of the Common
Stock (based on a trading day from 9:00 a.m to 4:00 p.) on the American
Stock Exchange as reported by Bloomberg Financial using the AQR
function.
"Warrants" means the Warrants issued and sold pursuant to the
Purchase Agreement, including, without limitation, this Warrant, and
any other warrants of like tenor issued in substitution or exchange for
any thereof pursuant to the provisions of Section 2(c), 2(d) or 2(e)
hereof or of any of such other Warrants.
"Warrant Price" means the lesser of (i) $1.35 and (ii) 100% of
the VWAP for the 20 trading days immediately preceding the notice to
exercise, as such price may be
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adjusted from time to time as shall result from the adjustments
specified in Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
9. OTHER NOTICES. In case at any time:
(A) the Issuer shall make any distributions to the
holders of Common Stock; or
(B) the Issuer shall authorize the granting to all
holders of its Common Stock of rights to subscribe for
or purchase any shares of Capital Stock of any class or
of any Common Stock Equivalents or Convertible
Securities or other rights; or
(C) there shall be any reclassification of the Capital
Stock of the Issuer; or
(D) there shall be any capital reorganization by the
Issuer; or
(E) there shall be any (i) consolidation or merger
involving the Issuer or (ii) sale, transfer or other
disposition of all or substantially all of the Issuer's
property, assets or business (except a merger or other
reorganization in which the Issuer shall be the
surviving corporation and its shares of Capital Stock
shall continue to be outstanding and unchanged and
except a consolidation, merger, sale, transfer or other
disposition involving a wholly-owned Subsidiary); or
(F) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Issuer or
any partial liquidation of the Issuer or distribution
to holders of Common Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or
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subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding-up, as
the case may be, shall take place. Such notice also shall specify the date as of
which the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
certificates for Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such notice shall be
given at least twenty days prior to the action in question and not less than
twenty days prior to the record date or the date on which the Issuer's transfer
books are closed in respect thereto. The Issuer shall give to the Holder notice
of all meetings and actions by written consent of its stockholders, at the same
time in the same manner as notice of any meetings of stockholders is required to
be given to stockholders who do not waive such notice (or, if such requires no
notice, then two Trading Days written notice thereof describing the matters upon
which action is to be taken). The Holder shall have the right to send two
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.
10. AMENDMENT AND WAIVER. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share Number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
12. NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., pacific standard time,
on a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., pacific standard time, on any
date and earlier than 11:59 p.m., pacific standard time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
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Datametrics Corporation
25B Hanover Rd.
Florham Park, New Jersey 07932
Attn: Daniel P. Ginns
Telephone Number:
Fax: (973) 377-5736
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Issuer shall be sent to Lane Altman &
Owens LLP, 101 Federal Street, Boston, Massachusetts 02110, Attn: Joseph F.
Mazzella, Esq., Facsimile no.: (617) 345-0400. Copies of notices to the Holder
shall be sent to Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York 10036, Attention: Christopher S. Auguste, Esq.,
Facsimile no.: (212) 704-6288.
13. WARRANT AGENT. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
14. REMEDIES. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
15. SUCCESSORS AND ASSIGNS. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock
16. MODIFICATION AND SEVERABILITY. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
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17. HEADINGS. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
DATAMETRICS CORPORATION
By:______________________________
Name: Daniel P. Ginns
Title:
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EXERCISE FORM
[NAME OF ISSUER]
The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of
___________________ covered by the within Warrant.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.
Dated: _________________ Signature ___________________________
Address _____________________
_____________________
FOR USE BY THE ISSUER ONLY:
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This Warrant No. W-_____ cancelled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W- _____ issued for ____ shares of Common Stock in
the name of _______________.
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