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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
August 2, 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.
On August 2, 1999, Datametrics Corporation ("the Registrant") completed
the sale of an aggregate $2,300,000 of 12% Subordinated Convertible Secured
Notes (the "Notes") to twenty-one purchasers ("Purchasers"), pursuant to a 12%
Subordinated Convertible Secured Note Subscription Agreement (the "Subscription
Agreement").
A portion of the purchase price for the Notes was the tender back to
the Registrant and retirement of $600,000 of the Registrant's 10% Senior
Subordinated Secured Debentures and $150,000 of the Registrant's 10% Bridge
Notes. The remaining $1,550,000 of the purchase price for the Notes was paid in
cash.
The Notes accrue interest at a rate of 12% per annum, payable quarterly
in arrears. The Notes are secured by a subordinated lien on the assets of the
Registrant, pursuant to a security agreement between the Registrant and the
Purchasers ("Security Agreement"). At any time while the Notes remain
outstanding, the holders of the Notes are entitled to convert the Notes into
shares of the Registrant's Common Stock ("Conversion Shares") at a rate of $1.00
per share, subject to adjustment in certain circumstances. The Notes are subject
to call and automatic conversion by the Registrant, at its option, if its Common
Stock has traded at a price equal to or greater than $2.00 per share for a
period of 20 consecutive trading days, provided that the Conversion Shares have
either been registered or are otherwise transferable without restriction.
In connection with the sale of the Notes, the Purchasers received
warrants ("Warrants") to purchase up to an aggregate 1,150,000 shares of the
Registrant's Common Stock for an exercise price of $1.10 per share. The Warrants
are exercisable immediately and at any time commencing August 2, 1999 until 5:00
pm on August 2, 2004. The Warrants are subject to call and cancellation by the
Registrant if its Common Stock has traded at a price equal to or greater than
$2.00 per share for the 20 consecutive trading days prior to the date of the
call notice, provided that the Warrant Shares have either been registered or are
otherwise transferable without restriction. The Warrants are subject to
adjustment in certain circumstances to prevent dilution.
Under a related registration rights agreement ("Registration Rights
Agreement") between the Registrant and each of the Purchasers, the Registrant
has agreed to include the Conversion Shares and the shares of Common Stock
underlying the Warrants in an amendment to the Company's Registration Statement
on Form SB-2 filed on May 28, 1999.
Proceeds of the sale of the Notes and Warrants are to be used for
working capital. 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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The above discussion is qualified in its entirety by reference to the
Subscription Agreement, Notes, Warrants, Registration Rights Agreement and
Security Agreement, which are substantially the same as Exhibits 4.1, 4.2, 4.3,
4.4 and 4.5, 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 Form of 12% Subordinated Convertible Secured
Note Subscription Agreement.
4.2 Form of 12% Subordinated Convertible Secured
Note
4.3 Form of Warrant.
4.4 Form of Registration Rights Agreement.
4.5 Form of Security Agreement.
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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: August 23, 1999
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EXHIBIT INDEX
Exhibit No. Title.
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4.1 Form of 12% Subordinated Convertible Secured Note Subscription Agreement.
4.2 Form of 12% Subordinated Convertible Secured Note.
4.3 Form of Warrant.
4.4 Form of Registration Rights Agreement.
4.5 Form of Security Agreement.
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THE SECURITIES DESCRIBED IN THIS AGREEMENT HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR THE
SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND APPLICABLE STATE
SECURITIES LAWS. THIS SUBSCRIPTION AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO
SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES MAY NOT BE
SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS, OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE
SECURITIES LAWS.
12% SUBORDINATED CONVERTIBLE SECURED NOTE
SUBSCRIPTION AGREEMENT
DATAMETRICS CORPORATION
THIS 12% SUBORDINATED CONVERTIBLE SECURED NOTE SUBSCRIPTION AGREEMENT (this
"Agreement") is executed in reliance upon an exemption under the Securities and
Exchange Commission ("SEC"), under the Securities Act of 1933, as amended (the
"Act"). The undersigned hereby subcribes for the Notes hereinafter described in
the amount set forth on its/his/her signature page.
This Agreement has been executed by the undersigned subscribers
("Subscribers", and each a "Subscriber") in connection with the private
placement of up to $2,500,000 of 12% Subordinated Convertible Secured Notes (the
"Notes") and warrants to purchase up to One Million Two Hundred Fifty Thousand
(1,250,000) shares of Common Stock ("Warrants") of DATAMETRICS CORPORATION ,
with an address at 25B Hanover Road, No. 3305, Florham Park, NJ 07932, a
corporation organized under the laws of the State of Delaware, USA (the
"Company"). The terms of the Notes are set forth in the form of the 12%
Subordinated Convertible Secured Note Due 2000 annexed hereto as Exhibit A,
which terms include, without limitation, the Subscribers' right to exchange the
Notes for shares of the Company's Common Stock ("Conversion Shares"). The Notes
shall be secured by a security interest in the assets of the Company, pursuant
to a security agreement between the Company, the Subscribers and the Subscribers
Agent named therein ("Security Agreement"), in the form annexed hereto as
Exhibit B. The terms of the Warrants are set forth in the form annexed hereto as
Exhibit C. The shares of Common Stock issuable upon the exercise of the Warrants
("Warrant Shares") and the Conversion Shares are subject to a registration
rights agreement ("Registration Rights Agreement") between the Company and the
Subscribers, in the form annexed hereto as Exhibit D. The Notes, Warrants,
Security Agreement and Registration Rights Agreement are referred to herein as
the "Purchase Documents." The offer and sale of the Notes and the Warrants
(collectively the "Securities"), are being made in reliance upon an exemption
under the Act. The Closing Date shall be determined in accordance with Section 1
hereof.
SECTION 1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
1.1 CLOSING. The closing ("Closing") of the purchase and sale shall
occur on July 15, 1999 (the "Closing Date"). At the Closing, the Company will
sell and the Subscribers will buy, in reliance upon the representations and
warranties of the Company and each Subscriber contained in this Agreement and in
the Purchase Documents, upon the terms and conditions set forth herein and
therein, for an aggregate purchase
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price of up to Two Million Five Hundred Thousand U.S. Dollars ($2,500,000, the
"Purchase Price") in such amounts as are subscribed for pursuant hereto. All or
a portion of the Purchase Price in the case of certain Subscribers ("Existing
Securityholders") consists of the surrender and cancellation of the 1996 Senior
Subordinated Secured Debentures of the Company (the "Existing Debentures") held
by such Existing Securityholders, the instruments for which shall be delivered
to the Company at the Closing together with bond powers duly endorsed in blank.
Except as otherwise agreed, the cash portion of the Purchase Price shall be paid
on the Closing Date by federal funds wire transfer, as follows:
Lane Altman & Owens LLP
State Street Bank and Trust Company
Address: 225 Franklin Street, Boston, MA 02110
Account Title: Lane Altman & Owens Clients' Fund Account
Routing: ABA # 011000028
Account No.: 3901-4162
Attention: Gayle L. Rosenfeld, Vice President Tel (617) 664-3357
Fax (617) 654-3991
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBERS. Each of
the Subscribers individually acknowledges, represents, warrants and agrees as
follows, to the extent applicable to such Subscriber:
2.1 ORGANIZATION AND AUTHORIZATION. The Subscriber is duly incorporated
or organized and validly existing in the state or country of its incorporation
or organization and has all requisite power and authority to subscribe for and
purchase and hold the Securities and to enter into this Agreement and the
Purchase Documents. The decision to subscribe for the Securities and the
execution and delivery of this Agreement and the Purchase Documents by the
Subscriber, the performance by the Subscriber of its obligations hereunder and
thereunder, and the consummation by the Subscriber of the transactions
contemplated hereby and thereby have been duly authorized and require no other
proceedings on the part of the Subscriber. The undersigned signatory has all
right, power and authority to execute and deliver this Agreement and the
Purchase Documents on behalf of the Subscriber. This Agreement and the Purchase
Documents have been duly executed and delivered by the Subscriber and, assuming
the execution and delivery hereof and acceptance hereof by the Company,
constitutes the legal, valid and binding obligations of the Subscriber,
enforceable against the Subscriber in accordance with their terms.
2.2 EVALUATION OF RISKS. The Subscriber has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of, and bearing the economic risks entailed by, an investment
in the Company and of protecting its interests in connection with this
transaction. The Subscriber recognizes that its investment in the Company
involves a high degree of risk and could result in the complete loss of its
investment. The Subscriber's overall commitment to the Company and other
investments which are not readily marketable is not disproportionate to the
Subscriber's net worth and the Subscriber has no need for immediate liquidity in
the Subscriber's investment in the Company.
2.3 INDEPENDENT COUNSEL. The Subscriber acknowledges that it have been
advised to consult with its own attorney regarding legal matters concerning the
Company and its investment in the Securities and to consult with its tax advisor
regarding the tax consequences of acquiring the Securities.
2.4 DISCLOSURE DOCUMENTATION. To the full satisfaction of the
Subscriber, the Subscriber has received and reviewed copies of the Company's
reports and registration statements filed since October 25, 1998 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the Act,
including the
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Company's 10-K for the fiscal year ended October 25, 1998, 10-QSBs for the
fiscal quarters ended January 24, 1999 and April 25, 1999, 8-Ks filed on January
7, 1999 and May 17, 1999, and a Registration Statement on Form SB-2 filed on May
28, 1999 (collectively, the "Reports"). No representations or warranties have
been made to the Subscriber by the Company or any agent, employee or affiliate
of the Company which were or are in any way inconsistent with the Reports, and
in entering into this transaction the Subscriber is not relying upon any
information, other than that contained in the Reports and the results of the
Subscriber's independent investigation.
2.5 OPPORTUNITY TO ASK QUESTIONS. The Subscriber has had a reasonable
opportunity to ask questions of and receive answers from the Company concerning
the Company and the offering of the Securities, and all such questions, if any,
have been answered to the full satisfaction of such Subscriber.
2.6 INVESTMENT INTENT. Without limiting its ability to resell the
Securities pursuant to an effective registration statement under the Act, the
Subscriber acknowledges and agrees with the Company that it is acquiring the
Securities solely for its own account and not with a view to the distribution,
assignment or resale to others. The Subscriber understands and agrees that it
may have to bear the economic risk of its investment in the Securities for an
indefinite period of time.
2.7 NO ADVERTISEMENTS. The Subscriber is not subscribing for the
Securities as a result of or pursuant to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
2.8 EXISTING DEBENTURES. The Subscriber, if also an Existing
Securityholder, is the legal and beneficial owner of the Existing Debentures
free of all liens and encumbrances both on the date hereof and at the Closing.
The Subscriber agrees to execute all documents and instruments required to
terminate all liens and encumbrances on assets of the Company in its favor.
2.9 DILUTION. The Subscriber is aware and acknowledges that conversion
of the Notes and exercise of the Warrants could significantly increase the
outstanding number of shares of Common Stock and cause dilution to existing
stockholders.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE COMPANY
ACKNOWLEDGES, REPRESENTS, WARRANTS AND AGREES AS FOLLOWS:
3.1 ORGANIZATION/QUALIFICATION. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
its failure to be so qualified would not reasonably be expected to have a
material adverse effect on the condition (financial or otherwise) or on the
earnings, business affairs, properties, or assets of the Company (a "Material
Adverse Effect").
3.2 AUTHORIZATION. The Company has all requisite corporate right, power
and authority to execute and deliver this Agreement and the Purchase Documents
and to consummate the transactions contemplated hereby and thereby. All
corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Purchase Documents by the Company, the authorization, sale,
issuance and delivery of the Securities and
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the performance of the Company's obligations hereunder and thereunder has been
taken. Upon their issuance and delivery in accordance with this Agreement and
the Purchase Documents, the Securities will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances; provided, however,
that the Securities are subject to restrictions on transfer under state and/or
federal securities laws. The issuance and sale of the Securities will not give
rise to any preemptive right or right of first refusal or right of participation
on behalf of any person.
3.3 FILING OF REPORTS. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act. The Company is in compliance, to the
extent applicable and material, with all reporting obligations under the 1934
Act. The Company has made all filings required to be filed pursuant to all
reporting obligations under either Section 13(a) or 15(d) of the 1934 Act during
the twelve (12) months immediately preceding the offer and sale of the
Securities (or for such shorter period that the Company has been required to
file such material).
3.4 FULL DISCLOSURE None of the Reports 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 light of the circumstances under
which they were made, not misleading. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been publicly disclosed by the Company or disclosed in writing to each of
the Subscribers which (i) could reasonably be expected to have a Material
Adverse Effect, or (ii) could reasonably be expected materially and adversely to
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
3.5 ENFORCEABILITY; NO CONFLICT. This Agreement and the Purchase
Documents have been duly executed and delivered by the Company and constitute
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to the indemnification provisions set forth
in this Agreement and the Purchase Documents. The execution and delivery of this
Agreement and the Purchase Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not result in any violation
of, constitute a default under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to a loss of a
material benefit under, any provision of the Company's Certificate of
Incorporation, or Bylaws each (as amended), or any material mortgage, indenture,
lease or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which (i) would reasonably be
expected to have a Material Adverse Effect, or (ii) could reasonably be expected
materially and adversely to affect the ability of the Company to perform its
obligations pursuant to this Agreement.
3.6 GOVERNMENTAL CONSENT, ETC. To the Company's knowledge, no consent,
approval or authorization of or designation, declaration or filing with any
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of this Agreement (including all Exhibits
annexed hereto), the consummation of any other transaction contemplated hereby,
or the offer, sale or issuance of the Securities, except as may be required by
applicable securities laws.
3.7 MATERIAL CONTRACTS. Except as set forth in the Reports, the
agreements to which the Company is a party described in the Reports are valid
agreements, in full force and effect, and the Company is not in breach or
default under any of such agreements which could (i) reasonably be expected to
have a Material
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Adverse Effect, or (ii) could reasonably be expected materially and adversely to
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
3.8 LITIGATION. Except as disclosed in the Reports, there is no action,
proceeding or investigation pending, or to the Company's knowledge threatened,
against the Company which might result, either individually or in the aggregate,
in any Material Adverse Effect, nor is the Company a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could (i) reasonably be expected to
have a Material Adverse Effect, or (ii) could reasonably be expected to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement.
3.9 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 par value per share, of
which 19,007,227 are outstanding. There are 5,000,000 shares of Preferred Stock
authorized and none outstanding. The Company has issued and outstanding Warrants
to purchase approximately 5,634,901 shares of Common Stock. All issued and
outstanding shares of Common Stock have been duly authorized, validly issued and
fully paid and nonassessable.
SECTION 4. SECURITIES ISSUES.
4.1 NO REGISTRATION, REVIEW OR APPROVAL. Each Subscriber acknowledges
and understands that the sale of Securities pursuant to this Agreement: (i) has
not been reviewed or approved by the SEC or by any state securities commission,
authority or agency, (ii) is not registered under the Act or under the
securities or "blue sky" laws, rules or regulations of any state, and (iii) are
being offered and sold hereunder pursuant to a private placement exemption to
the registration provisions of the Act pursuant to Section 3(b) or Section 4(2)
of such Act, and a similar exemption to the registration provisions of
applicable state securities laws. Each Subscriber acknowledges and understands
that the Securities, Conversion Shares and Warrant Shares may not be resold or
otherwise transferred unless so registered or subject to an exemption from such
registration.
4.2 RELIANCE BY COMPANY. The Subscriber understands that the
information provided herein, including specifically, but not limited to, the
responses provided in Section 9.2 or 9.3 (as applicable) of this Agreement, will
be relied upon by the Company for the purpose of determining the eligibility of
the Subscriber to purchase the Securities of the Company. The Subscriber
represents to the Company that his/her/its representations and warranties
contained herein are complete and accurate and may be relied upon by the Company
in determining the availability of an exemption from registration under federal
and state securities laws in connection with a private offering of securities.
The Subscriber agrees to provide, if requested, any additional information that
may reasonably be required to determine the eligibility of the Subscriber to
purchase the Securities of the Company.
4.3 INDEMNIFICATION. Each of the Subscribers agrees to indemnify, and
to hold harmless the Company and its affiliates, officers, directors,
controlling persons, attorneys, agents and employees, from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the Company and/or any of them may sustain or incur due
to, arising out of or in connection with the breach or threatened breach by such
Subscriber of any representation, warranty or covenant made by such Subscriber
in this Agreement, any of the Purchase Documents, or in any other document
provided by the Subscriber to the Company in connection with the Subscriber's
investment in the Securities, including, without limitation, transfer of the
Subscriber's Securities in violation of the Act.
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SECTION 5. Legend. Until such time as the Securities are registered
under the Act, the certificates representing the Securities shall be subject to
a legend restricting transfer under the Act, such legend to be substantially as
follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION, PROVIDED THAT
THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME."
The certificates representing these Securities, and each certificate issued in
transfer thereof, will also bear any legend required under any applicable state
securities law.
SECTION 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. Each
Subscriber understands that the Company's obligation to sell the Securities to
such Subscriber is conditioned upon:
(i) The receipt and acceptance by the Company of this Subscription
Agreement and all Purchase Documents duly executed by the
Subscriber;
(ii) Delivery by the Subscriber of the Purchase Price set forth in
Schedule A as payment in full for the purchase of the
Securities subscribed for by the Purchaser;
(iii) All representations and warranties of the Subscriber contained
herein shall remain true and correct as of the Closing Date;
and
(iv) The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the
Securities, or shall have the availability of exemptions
therefrom. At the Closing Date, the sale and issuance of the
Securities shall be legally permitted by all laws and
regulations to which the Subscriber and the Company are
subject.
SECTION 7. CONDITIONS TO SUBSCRIBER'S OBLIGATION TO PURCHASE. The
Company understands that each Subscriber's obligation to purchase the Securities
is conditioned upon:
(i) Acceptance by the Company of the Subscriber's Subscription
Agreement in the form hereof and the due execution by the
Company of the Exhibits hereto in favor of such Subscriber;
(ii) Delivery by the Company of the original Securities as
described herein;
(iii) All representations and warranties of the Company contained
herein shall remain true and correct in all material respects
as of the Closing Date; and
(iv) The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Securities
or shall have the availability of exemptions therefrom.
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At the Closing Date, the sale and issuance of the Securities
shall be legally permitted by all laws and regulations to
which the Company and each Subscriber are subject.
SECTION 8. MISCELLANEOUS.
8.1 GOVERNING LAW/JURISDICTION. This Agreement will be construed and
enforced in accordance with and governed by the laws of the State of New Jersey,
except for matters arising under the Act, without reference to principles of
conflicts of law. Each of the parties consents to the jurisdiction of the US
District Court for the State of New Jersey in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on forum non conveniens, to
the bringing of any such proceeding in such jurisdiction. Each party hereby
agrees that if another party to this Agreement obtains a judgment against it in
such a proceeding, the party which obtained such judgment may enforce same by
summary judgment in the courts of any state or country having jurisdiction over
the party against whom such judgment was obtained, and each party hereby waives,
to the extent permitted by law, any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this Agreement
irrevocably consents to the service of process in any such proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, to
such party at its address set forth herein. Nothing herein shall affect the
right of any party to serve process in any other manner permitted by law.
8.2 CONFIDENTIALITY. The Company and each of the Subscribers agrees to
keep confidential and not to disclose to or use for the benefit of any third
party the terms of this Agreement (including the names of the Subscribers) or
any other information which at any time is communicated by the other party as
being confidential without the prior written approval of the other party;
provided, however, that this provision shall not apply to information which, at
the time of disclosure, is already part of the public domain (except by breach
of this Agreement) and information which is required to be disclosed by law. If
for any reason the transactions contemplated by this Agreement are not
consummated, each of the parties hereto shall keep confidential any such
information obtained from any other party, including the names of each
Subscriber (except information publicly available or in such party's domain
prior to the date hereof, and except as required by court order) and shall
promptly return to the other parties all schedules, documents, instruments, work
papers or other written information, without retaining copies thereof,
previously furnished by it as a result of this Agreement or in connection
herewith.
8.3 FACSIMILE/COUNTERPARTS/ENTIRE AGREEMENT. Except as otherwise stated
herein, in lieu of the original, a facsimile transmission or copy of the
original shall be as effective and enforceable as the original. This Agreement,
and in particular the Signatures and Sections 9.2 and 9.3, may be executed in
counterparts which shall be considered an original document and which together
shall be considered a complete document. This Agreement, the Purchase Documents
and the Exhibits hereto and thereto, constitute the entire agreement between
each Subscriber and the Company with respect to the subject matter hereof.
8.4 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.5 LEGAL FEES AND EXPENSES. Each of the parties shall pay its own fees
and expenses (including the fees of any accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby.
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8.6 NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address or facsimile number as such party
shall have specified most recently in writing. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, 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), (b) on the second business day following the date of
mailing by reputable courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur, or (c) on
the fifth business day following date of mailing by registered or certified
mail, return receipt requested, postage prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
(i) If to the Company: to With a copy to:
Datametrics Corporation Lane Altman & Owens LLP
25B Hanover Road No. 3305 101 Federal Street
Florham Park, NJ 07932 Boston, MA 02110
Attn: Daniel P. Ginns, CEO Attn: Joseph F. Mazzella, Esq.
Telephone: (973) 377-3900 Telephone: (617) 345-9800
Facsimile: (973) 377-5736 Facsimile: (617) 345-0400
and
(ii) If to the Subscribers, at the addresses and numbers set forth
in Sections 9.2 and 9.3 with respect to each Subscriber
8.7 AMENDMENTS AND WAIVERS. Any term of this Agreement or of the Notes
may be amended and the observance of any term of this Agreement or of the Notes
may be waived (either generally or in a particular instance and either
retroactively or prospectively) only with the written consent of the Company and
the holders of a majority principal amount of the Notes at the time outstanding,
provided that (a) without the prior written consent of the holders of all the
Notes at the time outstanding, no such amendment or waiver shall (i) extend the
fixed maturity or reduce the principal amount of, or reduce the rate or extend
the time of payment of interest on, or reduce the amount or extend the time of
payment of any principal or premium payable on any redemption or prepayment of,
any Note, or (ii) reduce the aforesaid percentage of the principal amount of the
Notes the holders of which are required to consent to any such amendment or
waiver.
THE REST OFTHIS PAGE IS INTENTIONALLY BLANK
- 8 -
<PAGE>
SECTION 9. ACCREDITED INVESTOR REPRESENTATION - MUST BE COMPLETED:
9.1 EXISTING INVESTOR: Please check one box only: |_| New investor; or
|_| Current investor holding Common Stock, Warrants or other securities of the
Company.
9.2 ACCREDITED INVESTOR REPRESENTATIONS FOR INDIVIDUALS:(Entities go to
Section 9.3 on next Page). The Subscriber is (check all that apply):
|_| (a) a natural person who has an individual net worth, or, together
with his or her spouse, has a combined net worth in excess of $1,000,000. If
this category applies, complete the following (or provide a personal financial
statement): Net worth (including home, home furnishings and automobiles), over
total liabilities equals $________.
|_| (b) a natural person who has an individual income (exclusive of any
income attributable to a spouse) in excess of $200,000 in the last two (2)
calendar years, or joint income with such person's spouse in excess of $300,000
for each of those years, and reasonably expects reaching the same income level
in the current calendar year.
|_| (c) a director, executive officer, or general partner of the issuer
of the securities being offered or sold, or any director, executive officers, or
general partner of a general partner of that issuer.
Executed under seal as of the date set forth beside the signature of
the Company on Page 12 hereof.
Amount Subscribed For: $________________
SIGNATURE PAGE FOR INDIVIDUALS
Form of Ownership INDIVIDUAL SIGNATURES
(Print Name(s) under Signature(s))
( ) INDIVIDUAL OWNERSHIP
(One signature required) _________________________________
( ) TENANTS IN COMMON
(All tenants must sign) _________________________________
( ) JOINT TENANTS WITH RIGHTS
OF SURVIVORSHIP _________________________________
(All tenants must sign)
- --------------------------------- ---------------------------------
(Social Security Number of Individual)
- --------------------------------- ---------------------------------
(Street Address) (Telephone)
- --------------------------------- ---------------------------------
(City/State/Zip Code) (Facsimile Number)
Date:__________________
- 9 -
<PAGE>
9.3 ACCREDITED INVESTOR REPRESENTATIONS FOR ENTITIES. The Subscriber is
(check all that apply):
|_| (d) a bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act, whether acting in its individual or fiduciary
capacity.
|_| (e) any broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934 (the "1934 Act").
|_| (f) an insurance company as defined in Section 2(13) of the Securities
Act.
|_| (g) an investment company registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), or a business development company as
defined in Section 2(a)(48) of the 1940 Act.
|_| (h) a small business investment company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958.
|_| (i) a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, which plan has total assets in
excess of $5,000,000.
|_| (j) an employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and (i) the
decision to invest in the Company was made by a plan fiduciary (as defined in
Section 3(21) of ERISA) that is either a bank, savings and loan association,
insurance company or registered investment advisor, or (ii) the employee benefit
plan has total assets in excess of $5,000,000, or (iii) if a self-directed plan,
with investment decisions made solely by persons that are accredited investors.
The Undersigned is aware of (i) the risk/return factors, (ii) the effect of the
plan's investment in the Securities on the diversification, liquidity and cash
flow needs of the plan, and (iii) the projected effect of the investment in
meeting the plan's funding objectives. The Undersigned has concluded that an
investment in the Securities is a prudent one.
|_| (k) a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended (the "Advisers
Act").
|_| (l) an organization described in Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended, (the "Code"), a corporation, Massachusetts or
similar business trust, or partnership not formed for specific purpose of
acquiring the Securities, with total assets in excess of $5,000,000.
|_| (m) a trust, with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the Securities, whose purchase of the
Securities is directed by a person who, either alone or with a purchaser
representative has such knowledge and experience in business and financial
matters that he is capable of revaluating the merits and risks of the
prospective investment.
|_| (n) an entity in which each of the equity owners (i.e., partners in
partnership or Shareholders in a corporation) meets all of the requirements of
one of the above categories.
- 10 -
<PAGE>
SIGNATURE PAGE FOR ENTITIES
ENTITY OWNERSHIP: CHECK FORM OF ORGANIZATION OF ENTITY SUBSCRIBER
( ) TRUST (Please attach a copy of trust instrument or
in lieu thereof an opinion of counsel that
such trust has the authority to purchase the
Securities).
( ) CORPORATION (Please include certified corporate
resolution authorizing signature).
( ) PARTNERSHIP (Please attach a copy of the partnership
agreement or in lieu thereof, an opinion of
counsel that such partnership has the
authority to purchase the Securities).
( ) EMPLOYEE BENEFIT PLAN (Please attach a copy of the Plan
Agreement or in lieu thereof, an opinion
of counsel that such employee benefit plan
has the authority to purchase the
Securities).
NUMBER OF OWNERS - If the subscriber is a grantor trust, partnership or S
corporation, provide the number of direct or indirect owners (or beneficiaries)
of such entity: ___________________. (The subscriber is required to inform the
Partnership if this number increases at any time during which the Subscriber
holds an interest in the Partnership).
Executed under seal as of the date set forth beside the signature of
the Company on Page 12 hereof.
Amount Subscribed For: $________________
ENTITY SIGNATURE:
- --------------------------------- -------------------------------
(Print Name of Entity) (Street Address)
By:______________________________ -------------------------------
(Signature of Officer or Agent) (City/State/Zip Code)
- --------------------------------- -------------------------------
(Print Name and Title of Person Signing) (Taxpayer ID Number)
- --------------------------------- -------------------------------
(Telephone) (Facsimile Number)
Date:__________________
- 11 -
<PAGE>
ACCEPTANCE OF SUBSCRIPTION
DATAMETRICS CORPORATION
The foregoing subscription of for 12% Subordinated Convertible Secured
Notes in the amount of $______________ and Warrants to purchase up to ________
shares of the Common Stock of the Company, is hereby accepted by DATAMETRICS
CORPORATION, and the foregoing Subscription Agreement is hereby executed under
seal by DATAMETRICS CORPORATION, this _____ day of ___________________, 199 .
DATAMETRICS CORPORATION
By:_________________________________
Name: Daniel P. Ginns
Title: Chief Executive Officer
- 12 -
THIS NOTE IS ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, IN THE ABSENCE
OF SUCH REGISTRATION UNLESS DATAMETRICS CORPORATION (THE "COMPANY") HAS RESERVED
THE WRITTEN OPINION OF THE COMPANY'S COUNSEL OR OTHER COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT, AFTER INVESTIGATION OF THE RELEVANT FACTS,
SUCH COUNSEL IS OF THE OPINION THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION OF SUCH SECURITIES UNDER THE ACT OR APPLICABLE STATE SECURITIES
LAWS.
DATAMETRICS CORPORATION
12% SENIOR SUBORDINATED CONVERTIBLE SECURED NOTE DUE 2000
$ Issue Date: ____, 1999
--------------------
The undersigned, DATAMETRICS CORPORATION, a Delaware corporation having
its chief executive office at 25B Hanover Road, Florham Park, NJ 07932 (the
"Company"), for value received, hereby promises to pay to or registered assigns
(the "Holder"), at the principal office of the Holder or at such other place as
the Holder may designate by written notice to the Company, the principal sum of
Thousand Dollars ($ ), together with all accrued interest from and after the
date hereof then unpaid, on _______, 2000 (the"Maturity Date"), or earlier as
shall be provided herein. The unpaid principal amount hereof shall accrue
interest at the rate of twelve percent (12%) per annum from and after the issue
date hereof until all unpaid principal and interest shall be paid in full. The
Company hereby promises to pay interest on the principal amount of this Note
quarterly in arrears on each September 30, December 31, March 31 and June 30,
during the term hereof (each an "Interest Payment Date"). Interest will be
computed on the basis of a 360-day year of twelve 30-day months. If any payment
shall become due hereunder on a Saturday, Sunday or other day on which banking
institutions in the State of New York are authorized to close, the due date
hereof shall be extended to the next day on which such banking institutions are
not authorized to close.
Notwithstanding anything to the contrary herein, any part of, or all, interest
payable on any particular Interest Payment Date may be paid, at the option of
the Company, in lieu of cash, in additional 12% Senior Subordinated Convertible
Secured Notes having the same Maturity Date as this Note ("Additional Notes").
An interest payment to be made by issuance of Additional Note(s) shall not be
considered paid if the Company has not caused such Additional Notes to be
delivered to the Holder within thirty (30) days after the applicable Interest
Payment Date.
This Note is one of a series (the "Notes") issued pursuant to a 12%
Senior Subordinated Convertible Note Subscription Agreement dated as of
________, 1999 (the "Subscription Agreement") among the Company and the holders
of the Notes (the "Holders").
<PAGE>
SECTION 1. DEFINITION OF SENIOR DEBT. The term "Senior Debt" shall mean
and consist of all present and future indebtedness and liabilities of the
Company (contingent or otherwise) for money borrowed from banks or other
institutional lenders (collectively the "Senior Lender"), including any
extension or renewals thereof, whether outstanding on the date hereof or
hereafter created or incurred, which are not by their terms subordinate and
junior to or on a parity with the Notes at the time they are created or
incurred, and all related agreements and instruments (collectively, the "Loan
Documents"), and any extension, increase, refinancing, refunding or replacement
of all or any part of such indebtedness entered into by the Company from time to
time.
SECTION 2. SECURITY FOR DEBENTURES. Except as otherwise subordinated to
the right of prior payment and satisfaction in full of all Senior Debt, the full
payment by the Company to the Lender of the principal amount hereof, together
with all accrued interest thereon, shall be secured in accordance with the terms
and provisions of that certain Security Agreement, dated as of even date
herewith, by and between the Company and the Holders (the "Security Agreement").
SECTION 3. SUBORDINATION OF NOTES.
(a) PAYMENT OF SENIOR DEBT. The Company, for itself, its
successors and assigns, covenants and agrees, and each Holder of this
Note, by its acceptance hereof likewise covenants and agrees, that the
obligations, liability and indebtedness of the Company evidenced by
this Note and the payment of the principal amount hereof and interest
thereon shall be subordinate in right of payment, to the extent and in
the manner hereinafter set forth, to the prior payment and satisfaction
in full of all Senior Debt, and each Holder of this Note will not,
without the express prior written consent of the Senior Lender, take or
receive, and the Company will not make, give or permit, directly or
indirectly, by set-off, redemption, purchase or in any other manner,
including, without limitation, any foreclosure under the Security
Agreement on the Company's Collateral (as such term is defined in the
Security Agreement), any payment on, whether of interest or principal
or security for the whole or any part of, the obligations evidenced by
this Note; PROVIDED, HOWEVER that so long as no event of default under
the Senior Debt shall have occurred and then be continuing or would
occur as a result of, or after giving effect to, such payment, the
Company may make, and the Holder of this Note may receive, quarterly
payments in arrears of interest accrued under this Note. Except for
payments permitted by this Section 3, no payment or distribution of any
kind or character, whether in cash, property or securities (including,
without limitation, proceeds or collateral for the obligations
evidenced by this Note), which, but for the subordination provisions
contained herein, would otherwise be payable or deliverable to the
Holder upon or in respect of the obligations evidenced by this Note,
shall be paid to the Holder, and, except for payments permitted by this
Section 3, the Holder shall not receive or accept any such payment or
distribution or any benefit therefrom unless and until the Senior Debt
shall have been fully paid and satisfied. Without limiting the
generality of the foregoing provisions of this Section 3, in the event
of any liquidation, termination, revocation or other winding-up of the
Company, or in the event of any receivership, insolvency,
reorganization or bankruptcy proceedings, assignment for the benefit of
creditors or any proceeding by or against the Company for any relief
under any bankruptcy, reorganization or insolvency law or laws, federal
or state, or any law, federal or state, relating to the relief of
debtors, readjustment of
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<PAGE>
indebtedness, reorganization, composition or extension of indebtedness,
then, and in any such event, all Senior Debt shall first be paid in
full, before any payment or distribution is made in respect of this
Note, and any payment or distribution of any kind or character, whether
in cash, property or securities (including, without limitation,
proceeds or collateral for this Note), which, but for the subordination
provisions contained herein, would otherwise be payable or deliverable
to the Holder upon or in respect of this Note, shall instead by paid
over or delivered to the Senior Lender or its representatives if the
Senior Debt has not been paid in full and satisfied, and the Holder
shall not receive any such payment or distribution or any benefit
therefrom unless and until the Senior Debt shall have been fully paid
and satisfied.
(b) SCOPE OF SECTION. The provisions of this Section 3 are
intended solely for the purpose of defining the relative rights of the
holder of the Debenture, on the one hand, and the holders of the Senior
Debt, on the other hand. Nothing contained in this Section 3 is
intended to or shall impair, as between the Company, its creditors
(other than the holders of Senior Debt) and the Holder, the obligation
of Company, which is unconditional and absolute, to pay to the Holders
the principal of and interest due on the Notes as and when the same
shall become due and payable in accordance with the terms hereof, or to
affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein
prevent the Holder from accepting any payment with respect to such Note
or exercising all remedies otherwise permitted by applicable law upon
default under such Note, subject to the rights, if any, under this
Section 3, of the holders of Senior Debt, in respect of cash, property
or securities of the Company received by the Holder of the Note.
SECTION 4A. PREPAYMENTS. Subject to the restrictions contained in
Section 3 hereof, upon 15 days advance notice to the Holder (during which period
the Holder shall retain the rights set forth in Section 4B below) the Company
may prepay at any time all or any part of the principal amount owing with
respect to this Note, which payment of principal shall include the unpaid
interest accrued on the principal amount repaid through the date of repayment,
without penalty, but at a premium equal to 110% of the principal amount so
repaid.
SECTION 4B. CONVERSION RIGHTS. The Holder is entitled, at its option,
at any time and from time to time while this Note remains outstanding, to
convert this Note into that number of shares of fully paid and nonassessable
shares of Common Stock which is to be derived from dividing the Conversion
Amount by the Conversion Price (the "Conversion Rate"). For purposes of this
Note, the Conversion Amount shall mean the principal dollar amount of the Note
being converted and, subject to adjustment as herein provided, the Conversion
Price shall be equal to $1.00 per share of Common Stock. Any such conversion
shall be made in accordance with the following terms and conditions:
(a) The Holder may exercise its right to convert the Note by
telecopying an executed and completed notice of conversion
(the "Notice of Conversion") to the Company and delivering the
original Notice of Conversion and the original Note to the
Company by express courier. Each business date on which a
Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be
deemed a "Conversion Date". The Company will transmit the
certificates representing
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<PAGE>
shares of Common Stock issuable upon conversion of the Note
(together with a replacement Note representing the amount not
so converted) to the Holder via express courier, by electronic
transfer or otherwise within five (5) business days after the
Conversion Date if the Company has received the original
Notice of Conversion and Note being so converted by such date.
In addition to any other remedies which may be available to
the Holder, in the event that the Company fails to effect
delivery of such shares of Common Stock within five (5) such
business day period, the Holder will be entitled to revoke the
Notice of Conversion by delivering a notice to such effect to
the Company whereupon the Company and the Holder shall each be
restored to their respective positions immediately prior to
delivery of the Notice of Conversion. The Notice of Conversion
and Note representing the portion of the Note converted shall
be delivered to the Company as herein below provided.
(b) In the event that the Common Stock issuable upon conversion of
the Note is not delivered within five (5) business days of
receipt by the Company of a valid Notice of Conversion and the
Note to be converted, the Company shall pay to the Holder, in
immediately available funds, upon demand, as liquidated
damages for such failure and not as a penalty, for each
$100,000 principal amount of Note sought to be converted, $500
per day that the shares of Common Stock are not delivered,
which liquidated damages shall run from the sixth business day
after the Conversion Date up until the time that either the
Conversion Notice is revoked or the Common Stock is delivered,
at which time such liquidated damages shall cease. Any and all
payments required pursuant to this paragraph shall be payable
only in cash.
(c) The number of shares of Common Stock issuable upon the
conversion of the Note, and the Conversion Price shall be
subject to adjustment as follows:
(i) In case the Company shall (A) pay a dividend on Common
Stock in Common Stock or securities convertible into,
exchangeable for or otherwise entitling a Holder thereof to
receive Common Stock, (B) declare a dividend payable in cash
on its Common Stock and at substantially the same time offer
its Shareholder a right to purchase new Common Stock (or
securities convertible into, exchangeable for or otherwise
entitling a Holder thereof to receive Common Stock) from
proceeds of such dividend (all Common Stock so issued shall be
deemed to have been issued as a stock dividend), (C) subdivide
its outstanding shares of Common Stock into a greater number
of shares of Common Stock, (D) combine its outstanding shares
of Common Stock into a smaller number of shares of Common
Stock, or (E) issue by reclassification of its Common Stock
any shares of Common Stock of the Company, the number of
shares of Common Stock issuable upon conversion of the Note
immediately prior thereto shall be adjusted so that the Holder
shall be entitled to receive after the happening of any of the
events described above that number and kind of shares as the
Holder would have received had the Note been converted
immediately prior to the happening of such event or any record
date with respect thereto. Any adjustment made pursuant to
this subdivision shall become effective immediately after the
close of business on the record date in the case of a stock
dividend and shall
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<PAGE>
become effective immediately after the close of business on
the record date in the case of a stock split, subdivision,
combination or reclassification.
(ii) Any adjustment in the numbers of shares of Common Stock
issuable hereunder otherwise required to be made by this
paragraph 4.B.(c) will not have to be made if such adjustment
would not require an increase or decrease in one (1%) percent
or more in the number of shares of Common Stock issuable upon
conversion of this Note.
(iii) Whenever the number of shares of Common Stock issuable
upon the conversion of this Note is adjusted as herein
provided, the Conversion Price shall be adjusted (to the
nearest cent) by multiplying such Conversion Price immediately
prior to such adjustment by a fraction of which the numerator
shall be the number of shares of Common Stock issuable upon
the conversion of this Note immediately prior to such
adjustment, and of which the denominator shall be the number
of shares of Common Stock issuable immediately thereafter.
(d) In the case of any:
(i) consolidation or merger of the Company into any entity
(other than a consolidation or merger that does not result in
any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company),
(ii) sale, transfer, lease or conveyance of all or
substantially all of the assets of the Company as an entirety
or substantially as an entirety, or
(iii) reclassification, capital reorganization or change of
the Common Stock (other than solely a change in par value, or
from par value to no par value),
in each case as a result of which shares of Common Stock shall
be converted into the right to receive stock, securities or
other property (including cash or any combination thereof),
each Holder of a Note then outstanding shall have the right
thereafter to convert Note only into the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale, transfer, capital reorganization
or reclassification by a holder of the number of shares of
Common Stock of the Company into which such Note would have
been converted immediately prior to such consolidation,
merger, sale, transfer, capital reorganization or
reclassification, ASSUMING such holder of Common Stock of the
Company: (A) is not an entity with which the Company
consolidated or into which such sale or transfer was made, as
the case may be ("constituent entity"), or an affiliate of the
constituent entity, and (B) failed to exercise his or her
rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such
consolidation, merger, sale or transfer. If necessary,
appropriate adjustment shall be made in the application of the
provision set forth herein with respect to the rights and
interest thereafter of the Holders, to the end that the
provisions set forth herein shall thereafter correspondingly
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<PAGE>
be made applicable, as nearly as may reasonably be, in
relation to any shares of stock or other securities or
property thereafter deliverable on the conversion of this
Note.
(e) The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers, capital
reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless
prior to or simultaneously with the consummation thereof the
successor Company or entity (if other than the Company)
resulting from such consolidation, merger, sale or transfer
shall assume, by written instrument, the obligation to deliver
to the Company such shares of Common Stock, securities or
assets as, in accordance with the foregoing provisions, such
Holder may be entitled to receive under this Section. The
Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out
of all the provisions of this paragraph and in taking of all
such action as may be necessary or appropriate in order to
protect the conversion rights of the Holders against
impairment.
SECTION 4.C. OPTIONAL CALL. In the event the Closing Bid Price (as
hereunder defined) of the Common Stock is greater than $2.00 (U.S.) per share
(the "Target Price") for twenty (20) consecutive trading days (the "Call
Period"), at any time that either:
(i) the Company has on file with the Securities and Exchange
Commission (the "Commission") a fully effective registration
statement under the Securities Act of 1933, as amended (the
"ACT") covering all shares of Common Stock issuable upon
conversion of this Note, or
(ii) the shares of Common Stock issuable upon conversion of this
Note may be sold without any restriction pursuant to the rules
of the Commission as determined by the counsel to the Company
pursuant to a written opinion letter,
the Company shall have the right to "Call" this Note, in whole or in part,
thereby forcing conversion by the Holder at the Conversion Price. The Target
Price shall be adjusted proportionately to reflect any adjustments due to the
payment of a stock dividend, stock split, combination of shares or any other
similar event. For purposes hereof, the "Closing Bid Price" shall be deemed to
be the reported last bid price regular way as reported by Bloomberg LP or if
unavailable, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if the Common Stock is not listed or
admitted to trading on any national securities exchange, the closing bid price
as reported by NASDAQ or such other system then in use, or, if the Common Stock
is not quoted by any such organization, the closing bid price in the
over-the-counter market as furnished by the principal national securities
exchange on which the Common Stock is traded.
(a) The Company may exercise its right to Call by telecopying
written notice (the "Call Notice") to the Holder within five
(5) trading days after the aforementioned twenty consecutive
trading day period.
-6-
<PAGE>
(b) Once the Company has exercised its right to Call by giving
written notice to the Holder it shall be deemed irrevocable.
Each trading day on which the Call Notice is telecopied to and
received by the Holder shall be deemed a Conversion Date for
the purposes of completing this Call and calculating the
number of shares of Common Stock to be issued upon conversion.
The Company will transmit the certificates representing shares
of Common Stock issuable pursuant to the Call (together with
the replacement Notes representing the principal amount of the
Note not Called, if any) to the Holder via express courier, by
electronic transfer or otherwise within five (5) trading days
after the Call Notice was served upon the Holder (the "Call
Date").
(c) The Call Notice shall set forth (i) a calculation referencing
the conversion formula contained herein showing the number of
shares of Common Stock being issued pursuant to this Call,
(ii) a calculation referencing all accrued and unpaid interest
which shall be payable by the Company on or before the Call
Date, and (iii) a statement that interest on the Note being
Called will cease to accrue on such Call Date. The Call Notice
shall be irrevocable by the Company, and it shall be sent at
least five (5) trading days prior to the expiration of the
Call Period to the Holder. If less than all of the principal
amount of the Note owned by the Holder are then to be Called,
the Call Notice shall specify the amount thereof that is to be
Called.
(d) The portion of this Note being Called shall be automatically
canceled and converted into a right to receive the shares of
Common Stock, and all rights of this Note, including the right
to conversion shall cease without further action. Immediately
following the Call Date, the Holder shall surrender their
original Note being called at the office of the Company, and
the Company shall issue to the Holder a new Note for the
principal amount that remains outstanding, if any.
(e) The number of shares of Common Stock issuable upon the Call of
the Note shall be adjusted in accordance with the provisions
set forth in Section 4.B(d).
SECTION 5. EXCHANGE OF NOTES. The Company shall keep at its office a
register in which the Company shall provide for the registration of this Note
and for the registration of exchange of this Note. Subject to the restrictions
on this Note provided elsewhere herein, and subject to the restrictions of
applicable securities and other laws, the registered Holder of this Note may, at
its option and either in person or by duly authorized attorney, surrender the
same at such office, and without expense to such Holder (other than transfer
taxes, if any), receive in exchange therefor a Note, dated as of the date from
which unpaid interest has been accrued on the Note so exchanged, in the
principal amount hereof, and registered in the name of such person or registered
assign, as may be designated by such Holder. Every Note so made and delivered in
exchange for this Note shall in all other respects be in the same form and have
the same terms as this Note. The Company may treat the person in whose name this
Note is registered as the owner and Holder of this Note for the purpose of
making payment of principal of, and interest on, this Note and for all other
purposes whatsoever, whether or not this Note shall be overdue, and the Company
shall not be affected by notice to the contrary.
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<PAGE>
SECTION 6. LOSS, THEFT, DESTRUCTION OR MUTILATION OF THIS NOTE. Upon
receipt by the Company of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to the
Company, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, or, in case of mutilation, upon surrender and cancellation
of this Note, the Company will make and deliver a new Note of like tenor, in
lieu of this Note. Any Note made and delivered in accordance with the provisions
of this Section 6 shall be dated as of the date to which interest has been paid
on this Note.
SECTION 7. TRANSFER OF NOTE. The Holder of this Note, by its acceptance
hereof, agrees that it will not sell, transfer or otherwise dispose of this
Note, in whole or in part, in the absence of registration under the Act, and
applicable state securities laws, unless the Company has received the written
opinion of its counsel (or other counsel reasonably satisfactory to the Company)
that, after investigation of the relevant facts, that such transaction does not
require registration under said Act or applicable state securities laws.
SECTION 8. EVENTS OF DEFAULT. The entire unpaid portion of this Note
may be declared immediately due and payable by a Holder of this Note, by written
notice from such Holder to the Company upon the happening and continuing of any
of the following events (each an "Event of Default"):
(a) The Company shall default in the payment of principal or
interest under this Note when the same shall become due and
payable and such default shall remain uncured for twenty (20)
days or more after notice of such default is given to the
Company by such Holder;
(b) The Company shall default in the performance of any material
obligation under any of the Loan Documents and such default
results in the acceleration of any material indebtedness of
the Company to the Senior Lender for amounts owing thereunder;
(c) The Company or any present or future subsidiary of the Company
shall make an assignment for the benefit of creditors or shall
admit in writing its inability to pay its debts as they become
due, or shall file a voluntary petition in bankruptcy, or
shall be adjudicated a bankrupt or insolvent, or shall file
any arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation pertaining to insolvency or
creditors' rights, or shall file any answer admitting the
material allegations of a petition filed against it in any
such proceeding, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of it
or all or any substantial part of its properties; or
(d) Any proceeding is filed against the Company or any present or
future subsidiary of the Company, seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
statute, law or regulation pertaining to solvency or
creditors' rights, and such proceeding continues for sixty
(60) days undismissed, unstayed, unbonded and discharged.
-8-
<PAGE>
SECTION 9. REIMBURSEMENT. The Company agrees to reimburse the Holder of
this Note for all its costs and expenses, including reasonable attorneys' fees
and disbursements, expended in collecting any amounts due hereunder or in
otherwise enforcing any of its rights hereunder.
SECTION 10. NOTICES. All notices and other communications required or
permitted to be given in respect of this Note shall be in writing and shall be
given as and shall be deemed to have been given if so given) by delivery,
telegram, telex or facsimile, or by mail (registered or certified mail, postage
prepaid, return receipt requested) or by any courier service, such as Federal
Express, providing proof of delivery, provided that any notice delivered as
herein provided shall also be delivered by facsimile (if a facsimile number is
provided below) at the time of such delivery. All communications hereunder shall
be delivered to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof):
(a) If to the Company, to:
Datametrics Corporation
25B Hanover Road; #3305
Florham Park, NJ 07932
Attn.: Daniel P. Ginns, CEO
Facsimile No.: (973) 377-5736
With a copy to:
Lane Altman & Owens LLP
101 Federal Street
Boston, MA 02110
Attn: Joseph F. Mazzella
Facsimile No.: (617) 345-0400
(b) If to the Holder, to:
SECTION 11. GOVERNING LAW. This Note has been executed and delivered in
the State of New Jersey and shall be governed by and construed in accordance
with the laws of the State of New Jersey without reference to the principles of
conflicts of law thereof.
SECTION 12. JURISDICTION. The Company hereby irrevocably consents and
submits to, and each Holder of this Note, by its acceptance hereof, likewise
hereby irrevocably consents and submits to, the exclusive jurisdiction of the
United States District Court for the District of New Jersey in connection with
any proceeding arising out of or relating to this Note, waives any objection to
venue in such District (unless such court lacks jurisdiction with respect to
such proceeding in which case, the Company irrevocably consents and submits to,
and each Holder of this Note, by its acceptance hereof, likewise irrevocably
consents and submits to, the jurisdiction of the Courts of the State of New
-9-
<PAGE>
Jersey in connection with such proceeding and waives any objection to venue in
any court of appropriate jurisdiction in the State of New Jersey), and agrees
that service of any summons, complaint, notice or other process relating to such
proceeding may be effected in the manner provided by Section 10 hereof.
SECTION 13. SUCCESSORS AND ASSIGNS. All of the covenants, stipulations,
proses and agreements of the Company set forth in this Note shall be binding on
its successor and assigns, whether so expressed or not.
SECTION 14. HEADINGS. The section headings contained in this Note are
inserted for reference purposes only and shall not be deemed to constitute a
part hereof.
SECTION 15. WAIVERS. The terms of this Note may not be amended,
modified, waived or eliminated except by a written instrument duly executed by
the Company and the Holder of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its corporate name by a duly authorized officer and to be dated as of the day
and year first above written.
DATAMETRICS CORPORATION
By:______________________________
Name: Daniel P. Ginns
Title: Chairman and CEO
-10-
NEITHER THIS WARRANT NOR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE
UPON EXERCISE OF THIS WARRANT MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS UNLESS DATAMETRICS CORPORATION (THE "COMPANY") HAS RECEIVED THE
WRITTEN OPINION OF THE COMPANY'S COUNSEL OR OTHER COUNSEL REASONABLY
SATISFACTORY THE COMPANY THAT, AFTER INVESTIGATION OF THE RELEVANT FACTS, SUCH
COUNSEL IS OF THE OPINION THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION
UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
No.____
WARRANT TO PURCHASE COMMON STOCK
DATAMETRICS CORPORATION
VOID AFTER 5:00 P.M., NEW YORK TIME ON AUGUST __, 2004
This certifies that, for value received,____________________ or its permissible
transferees, designees, successors and assigns (collectively, the "Holder"), is
entitled, subject to the terms set forth below, to purchase from Datametrics
Corporation, a Delaware corporation (the "Company"), THE NUMBER OF SHARES OF THE
COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON STOCK"), AS SET
FORTH IN ON THE SIGNATURE PAGE HEREOF UPON SURRENDER HEREOF, at the principal
office of the Company referred to below, with the Notice of Exercise attached
hereto duly executed, and simultaneous payment therefor in lawful money of the
United States, or otherwise as hereinafter provided, at the exercise price as
set forth in Section 2 hereof. The number of, and exercise price for, such
shares of Common Stock are subject to adjustment as provided herein.
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the date hereof (the "Warrant Issue Date" and terminating on or
before 5:00 p.m., New York time, on August__, 2004 (the "Warrant Expiration
Date"). Outstanding Warrants not exercised prior to the Warrant Expiration Date
shall become void and all rights thereunder and all rights in respect thereof
shall cease as of such time.
<PAGE>
2. EXERCISE PRICE. The exercise price shall be $1.10 per share of
Common Stock (the "WARRANT EXERCISE PRICE").
3. EXERCISE OF WARRANT. (a) This Warrant is exercisable by the Holder,
in whole or in part, at any time, or from time to time, during the term hereof
as described in Section 1 hereof, by the surrender of this Certificate and the
Notice of Exercise annexed hereto duly completed and executed on behalf of the
Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company), upon payment in cash or by
check acceptable to the Company, for the purchase price of the shares to be
purchased. Upon payment in full of all Notes, this Warrant shall be canceled
automatically as to all shares of Common Stock as to which it is not then
exercisable.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided in Section 3 (a) hereof, and the person entitled to receive
the shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. Unless exercised in connection with an underwritten public offering,
as promptly as practicable on or after such date and in any event within ten
(10) days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Warrant
is exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised. In the event of exercise at the time of an
underwritten public offering, the Company will provide instructions as to the
exercise of this Warrant and the issuance of certificates.
4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the exercise price
multiplied by such fraction.
5. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company, in its sole and absolute discretion, of the loss,
theft, destruction or mutilation of this Warrant and, in the case of loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and substance to the Company or, in the case of mutilation, upon
surrender and cancellation of this Warrant, the Company at its expense shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount.
6. RIGHTS OF STOCKHOLDERS. The Holder shall not be entitled to vote or
receive dividends or be deemed the holder of Common Stock or any other
securities of the Company that may at any time be issuable on the exercise
hereof for any purpose, nor shall anything contained herein be construed to
confer upon the Holder, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, consolidation,
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<PAGE>
merger or otherwise) or to receive notices of meetings, or to receive dividends
or subscription rights or otherwise until the Warrant shall have been exercised
and the shares of Common Stock purchasable upon the exercise hereof shall have
been issued, as provided herein.
7. COMPLIANCE WITH SECURITIES LAWS. (a) The Holder of this Warrant, by
acceptance hereof, acknowledges that the shares of Common 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 any shares of Common Stock to be
issued upon exercise hereof, except under circumstances that will not result in
a violation of the United States Securities Act of 1933, as amended (the "Act"),
or any foreign or state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's, own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) All shares of Common Stock issued upon exercise hereof may
be stamped or imprinted with the following legend (in addition to any legend
required by the Act and the securities laws of any state of the United States)
as determined by counsel for the Company:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER (THE "ACT"), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS UNLESS DATAMETRICS CORPORATION (THE "COMPANY") HAS
RECEIVED THE WRITTEN OPINION OF THE COMPANY'S COUNSEL OR OTHER COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT, AFTER INVESTIGATION OF THE
RELEVANT FACTS, SUCH COUNSEL IS OF THE OPINION THAT SUCH TRANSACTION
DOES NOT REQUIRE REGISTRATION UNDER THE ACT OR APPLICABLE STATE
SECURITIES LAWS.
8. RESTRICTIONS ON TRANSFER OF UNDERLYING COMMON STOCK. The Holder of
this Warrant by acceptance hereof agrees that the transfer of the shares of
Common Stock issuable upon the exercise of all or any portion of this Warrant is
subject to the provisions of this Warrant, which include certain restrictions on
the transfer of such shares of Common Stock.
9. RESERVATION OF COMMON STOCK. The Company hereby covenants and agrees
that during the term that this Warrant is exercisable, the Company will reserve
from its authorized and unissued shares of Common Stock a sufficient number of
shares to provide for the issuance of Common Stock upon the exercise of this
Warrant and, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide a sufficient reserve of shares of Common
Stock issuable upon exercise of the Warrant. The Company further covenants that
all shares that may be issued upon the exercise of rights represented by this
Warrant and payment of
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<PAGE>
the exercise price, all as set forth herein, will be free from all taxes, liens
and charges in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously or otherwise specified herein). The Company
agrees that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Common Stock upon the
exercise of this Warrant.
10. NOTICES. (a) Whenever the exercise price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 12 hereof, the
Company shall issue a certificate signed by its Secretary setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated and the exercise
price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by first
class mail, postage prepaid to the Holder of this Warrant.
(b) In case: (i) the Company shall take a record of the
holders of its Common Stock (or other stock or securities at the time receivable
upon the exercise of this Warrant) for the purpose of entitling them to receive
any dividend or other distribution, or any right to subscribe for or purchase
any shares of stock of any class or any other securities, or to receive any
other right; or (ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any sale, lease or
conveyance of all or substantially all of the assets of the Company to another
person; or (iii) of any voluntary dissolution, liquidation or winding-up of the
Company, then, and in each such case, the Company will mail or cause to be
mailed to the Holder a notice specifying, as the case may be, (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or such stock or securities at the time receivable upon
the exercise of this Warrant) shall be entitled to exchange their shares of
Common Stock (or such other stock or securities) for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall be
mailed at least ten (10) days prior to the date therein specified.
(c) All such notices and communications shall be deemed to
have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the second business day following
the date of such mailing.
11. AMENDMENTS. (a) Any term of this Warrant may be amended with the
written consent of the Company and the holders of warrants which, if exercised
would then represent not less than a majority of the shares of Common Stock
issuable upon exercise of any and all outstanding warrants for shares of Common
Stock issued by the Company on the date hereof (the "COMMON STOCK WARRANTS"),
even without the specific consent of the Holder. An amendment effected in
accordance with this Section 11 shall be binding upon each holder of any of the
Common Stock Warrants, each future holder of all such Common Stock Warrants, and
the
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<PAGE>
Company. The Company shall promptly give notice to all holders of Common Stock
Warrants of any amendment effected in accordance with this Section 11.
(b) No waivers of or exceptions to any term, condition or
provision of this Warrant, in any one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of any such term, condition or
provision.
12. ADJUSTMENTS; ANTIDILUTION. The exercise prices and the number of
shares purchasable hereunder are subject to adjustment from time to time as
follows:
(a) MERGER, SALE OF ASSETS, ETC. If at any time, while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving person, or a reverse triangular merger in which the
Company is the surviving person but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of cash, securities or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the Holder shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified herein and upon payment of
the exercise price then in effect, the number of shares of stock or other
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer which a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 12. The foregoing provisions of this subsection (a) shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation which are
at the time receivable upon the exercise of this Warrant. If the per share
consideration payable to the Holder for shares in connection with any such
transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors, whose determination shall be final and binding. In all
events, appropriate adjustment (as determined in good faith by the Company's
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant shall be applicable
after that event, as nearly as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.
(b) RECLASSIFICATION, ETC. If the Company at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired shall,
by reclassification of securities or otherwise, change any of the securities as
to which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the
- 5 -
<PAGE>
purchase rights under this Warrant immediately prior to such reclassification or
other change and the exercise price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 12.
(c) SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall split, subdivide or combine the securities as to
which purchase rights under this Warrant exist, into a different number of
securities of the same class, the exercise price for such securities shall be
proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(d) ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion thereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company which such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 12.
(e) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 12, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request, at any time, of any such Holder, furnish or cause to be furnished to
such Holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the exercise price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property which at the time
would be received upon the exercise of the Warrant.
(f) NO IMPAIRMENT. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 12
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders against impairment.
13. REGISTRATION RIGHTS. Pursuant to the terms and provisions of that
certain Registration Rights Agreement dated as of even date herewith, by and
between the Company and
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<PAGE>
the Holder (the "RIGHTS AGREEMENT"), the Holder of this Warrant is entitled to
certain registration rights with respect to the shares of Common Stock
underlying this Warrant.
14. "CALL" BY THE COMPANY. The Warrants are subject to call and
cancellation by the Company at its option at any time prior to the Warrant
Expiration Date if:
(a) the closing sale price of the Company's Common Stock, if
listed on the American Stock Exchange or some other national exchange, or if not
listed on a national exchange, then the closing bid quotation of the Common
Stock as reported on NASDAQ, if listed thereon, or if not, some other reporting
system that provides last sale prices, shall have for a period of twenty (20)
consecutive days on which such market is open for trading (each a "Trading Day")
ending on the day prior to the date on which the Company gives the Call Notice
(as such term is hereinafter defined) equaled or exceeded $2.00 (as equitably
adjusted to reflect the occurrence if any of the events described in Section 12
hereof); and
(b) either: (i) the Company has on file with the Securities
and Exchange Commission (the "COMMISSION") a fully effective registration
statement under the Act covering all shares of Common Stock issuable upon
exercise of the outstanding Common Stock Warrants, or (ii) the shares of Common
Stock issuable upon exercise of the outstanding Common Stock Warrants may be
sold without any restriction pursuant to the rules of the Commission as
determined by the counsel to the Company pursuant to a written opinion letter.
Notice of the Company's exercise of its call (the "Call Notice") shall be given
by the Company to the Holder in writing not less than twenty (20) Trading Days
before the date fixed for call, prior to which fixed date the Holder shall
maintain all of its rights hereunder. On and after the dated fixed for call, the
Holder shall have no rights with respect to outstanding Warrants, all of which
shall be canceled and, without more, shall be of no further force or effect.
15. MISCELLANEOUS PROVISIONS.
(a) GOVERNING LAW. This Warrant has been executed and
delivered in the State of New Jersey and shall be governed by and construed in
accordance with the laws of the State of New Jersey without reference to the
principles of conflicts of law thereof
(b) JURISDICTION. The Company hereby irrevocably consents and
submits to, and the Holder, by its acceptance of this Warrant, likewise hereby
irrevocably consents and submits to, the exclusive jurisdiction of the United
States District Court for the District of New Jersey in connection with any
proceeding arising out of or relating to this Warrant, waives any objection to
venue in such District (unless such court lacks jurisdiction with respect to
such proceeding, in which case, the Company irrevocably consents and submits to,
and the Holder, by its acceptance of this Warrant, likewise irrevocably consents
and submits to, the jurisdiction of the Courts of the State of New Jersey in
connection with such proceeding and waives any objection to venue in the State
of New Jersey), and agrees that service of any summons, complaint, notice or
other process
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<PAGE>
relating to such proceeding may be effected in the manner provided by Section
10(g) of the Rights Agreement.
(c) ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Warrant, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and disbursements,
in addition to any other relief to which such party may be entitled.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed in its corporate name by a duly authorized officer and to be dated as of
the day and year written below.
Dated as of August___, 1999
Total No. of Shares:______
DATAMETRICS CORPORATION
By:____________________________________
Name: Daniel P. Ginns
Title: Chairman and CEO
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<PAGE>
NOTICE OF EXERCISE
To: DATAMETRICS CORPORATION
25B Hanover Road
Suite 3305
Florham Park, NJ 07932
(1) The undersigned hereby elects to purchase __________ shares of
Common Stock of DATAMETRICS CORPORATION, pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock, except under circumstances that will not
result in a violation of the United States Securities Act of 1933, as amended,
or any foreign or state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
____________________ __________________________________
Date: Name:
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REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of July ___, 1999, among Datametrics Corporation, a Delaware
corporation (the "Company"), and the entities or individuals listed on Schedule
A attached hereto "Subscribers"). This Agreement is being entered into in
connection with that certain 12% Subordinated Convertible Secured Note
Subscription Agreement, dated of even date herewith, by and among the Company
and the Subscribers (the "Subscription Agreement") pursuant to which the Company
issued 12% Subordinated Convertible Secured Notes ("Notes") to the Subscribers.
The Company and the Subscribers hereby agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein shall have the meanings given such terms in the Subscription Agreement.
As used in this Agreement, the following terms shall have the following
meanings:
"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.
"BANK FINANCING" means an institutional line of credit or
working capital loans of at least $1,500,000.
"BOARD" shall have the meaning set forth in Section 3(l).
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday in the state of New Jersey or a day
on which banking institutions in the state of New Jersey 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.
"CONVERSION SHARES" means the shares of the Common Stock
issuable upon the conversion of the Notes.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the earlier of (i) the 30th day following
the Closing of any Bank Financing in excess of One Million Dollars
($1,000,000), or (ii) August 31, 1999.
"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).
<PAGE>
"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 Warrant Shares and (ii)
the Conversion Shares. 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 conversion of the Notes or the
exercise of the Warrants exceeds 100% of the number of shares of Common
Stock issuable upon conversion of the Notes or the 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 3,
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.
"WARRANTS" means the Warrants to purchase shares of the
Company's Common Stock issued in connection with the Subscription
Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable
upon the exercise of any of the Warrants.
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2. REGISTRATION. No later than the Filing Date, the Company shall
prepare and file with the Commission a Registration Statement covering all
Registrable Securities for an offering to be made on a continuous basis pursuant
to Rule 415. The Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to December 31, 1999,
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"). In the event that a Registration
Statement under the Securities Act covering all Registrable Securities is not
effective by December 31, 1999, the Company shall pay to the Holder, in
immediately available funds, upon demand, as liquidated damages for such failure
and not as a penalty, 2% of the outstanding principal amount of Note, for each
month after such date that such a Registration Statement is not fully effective,
until the earlier of the dates described in clauses (x) or (y) above, at which
time such liquidated damages shall cease. Any and all payments required pursuant
to this paragraph shall be payable only in cash.
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 a form appropriate for the
purposes hereof, 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, at the request of any Holder
(i) furnish to the Holders 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 (ii) 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 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 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 promptly to any
comments received from the Commission with respect to the Registration
Statement or any amendment thereto; 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 with respect to (i)(C) below, the Company's transfer agent, as
promptly as possible (and, in the case of (i)(A) below, not
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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; and (B) 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 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 upon request and without
charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules,
and also, to the extent requested by such person, 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, 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 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
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<PAGE>
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, provided the Company is
given five (5) Business Days' notice of such sale.
(j) Upon the occurrence of any event described in 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) Comply in all material respects with all applicable rules
and regulations of the Commission.
Notwithstanding anything to the contrary herein contained, the
Company shall be entitled to postpone, for a reasonable period of time
not in excess of 120 days, the filing, or suspend filing or
effectiveness, of a Registration Statement, or any amendment thereto,
otherwise required pursuant to this Agreement if the Company
determines, in the good faith exercise of its reasonable business
judgment, that (i) such registration and offering would materially
interfere with bona fide financing plans of the Company; or (ii) such
registration and offering would require disclosure of 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.
4. OBLIGATIONS OF HOLDERS.
(a) 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 delivery requirements of the Securities Act as applicable to
them in connection with sales of Registrable Securities pursuant to the
Registration Statement.
(b) Each Holder agrees by its acquisition of 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 by the
Company that the use of the applicable Prospectus may be
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<PAGE>
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.
(c) 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 known by the
Company and/or 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.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act and/or Section 20 of
the Exchange Act) and the officers, directors, agents, brokers,
investment advisors and employees of each of them, 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 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, each Person
who controls the Company (within the meaning of Section 15 of the
Securities Act and/or Section 20 of the Exchange Act), and the
directors, officers, agents or employees of each of the Company and
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
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<PAGE>
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. (i) 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, 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.
(ii) 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: (A) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
or (B) 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 (C)
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.
(iii) 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 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
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<PAGE>
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. 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 any Note, Warrants or
Registrable Securities, the Company shall 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 furnish the Holders upon request with
true and complete copies of all such filings. As long as any Holder owns any
Note, Warrants or Registrable Securities, 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 applicable Holders and make publicly available the
information required by Rule 144(c)(2) promulgated under the Securities Act. The
Company further 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 Conversion Shares 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.
7. REGISTRATION EXPENSES. 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 American Stock Exchange and any 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, 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) Securities Act liability insurance, if the
Company so desires such insurance, and (v) 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.
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<PAGE>
8. 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) GOVERNING LAW/JURISDICTION. This Agreement will be
construed and enforced in accordance with and governed by the laws of
the State of New Jersey, except for matters arising under the Act,
without reference to principles of conflicts of law. Each of the
parties consents to the jurisdiction of the US District Court for the
State of New Jersey in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdiction. Each party
hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such
judgment may enforce same by summary judgment in the courts of any
state or country having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives, to the extent
permitted by law, any defenses available to it under local law and
agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in
any other manner permitted by law.
(d) 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.
(e) NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified
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<PAGE>
herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address or facsimile number as such
party shall have specified most recently in writing. Any notice or
other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile,
with accurate confirmation generated by the transmitting facsimile
machine, 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), (b) on the second business day
following the date of mailing by reputable courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur or (c) on the fifth business day
following date of mailing by registered or certified mail, return
receipt requested, postage prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
(i) If to the Company: to With a copy to:
Datametrics Corporation Lane Altman & Owens LLP
25B Hanover Road No. 3305 101 Federal Street
Florham Park, NJ 07932 Boston, MA 02110
Attn: Daniel P. Ginns, CEO Attn: Joseph F. Mazzella, Esq.
Telephone: (973) 377-3900 Telephone: (617) 345-9800
Facsimile: (973) 377-5736 Facsimile: (617) 345-0400
and
(ii) If to the Subscriber(s), at the addresses and numbers
set forth beside its name below, unless otherwise
listed on Schedule A annexed hereto.
(f) 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.
(g) 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.
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<PAGE>
(h) FACSIMILE/COUNTERPARTS/ENTIRE AGREEMENT. Except as
otherwise stated herein, in lieu of the original, a facsimile
transmission or copy of the original shall be as effective and
enforceable as the original. This Agreement may be executed in
counterparts which shall be considered an original document and which
together shall be considered a complete document. This Agreement and
the Schedules and Exhibits hereto, constitute the entire agreement
between each Subscriber and the Company with respect to the subject
matter hereof.
(i) SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or void, this Agreement shall continue in
full force and effect without said provision; provided that no such
severability shall be effective if it materially changes the economic
benefit of this Agreement to any party.
(j) 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.
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:_________________________________
Name: Daniel P. Ginns
Title: CEO
SUBSCRIBER:_________________________
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
Address:____________________________
No. and Street
____________________________
City (Town), State and Zip
____________________________
Telephone
____________________________
Facsimile Telephone Number
- 11 -
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of July __, 1999 (as the same may be
supplemented, modified, amended or restated from time to time in the manner
provided herein, this "Agreement"), by and among DATAMETRICS CORPORATION, a
Delaware corporation having its chief executive office at 25B Hanover Road,
Suite 3305, Florham Park, New Jersey 07932 (the "Debtor"); Bruce Galloway, an
individual with an address of c/o Burnham Securities, 1325 Avenue of the
Americas, 17th Floor, New York, NY 10105 as Agent (the "Secured Party Agent")
for certain parties described as "Subscribers" in that certain 12% Subordinated
Convertible Secured Note Subscription Agreement(s) of even date herewith
(collectively, the "Subscription Agreement") between the Debtor, the Secured
Party; and such Subscribers ("Holders"). Any capitalized terms not specifically
defined herein shall have the meaning assigned to such terms in the Subscription
Agreement and the documents and instruments related thereto.
WITNESSETH:
WHEREAS, pursuant to the Subscription Agreement, the Debtor is
concurrently herewith issuing to each of the Holders a 12% Subordinated
Convertible Secured Note (the "Notes") in the amount set forth in the
Subscription Agreement, pursuant to which the Debtor promises to pay to the
Holders thereof, the principal amount thereof, together with all accrued
interest thereon, secured by a security interest in the Collateral (as such term
is hereinafter defined) in favor of the Holders and the Secured Party Agent;
WHEREAS, the security interests of the Holders rank pari passu to each
other; and
WHEREAS, each of the Holder and the Debtor desire that the security
interest in the Collateral granted in favor of the respective Holders shall be
subordinate to the rights of any holders of any Senior Debt in the Collateral.
WHEREAS, each of the Holders does hereby appoint the Secured Party
Agent as its agent and attorney in fact to hold, and act on behalf of him, her,
it with respect to, the security interests and rights granted hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreement hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein and not
defend herein shall have the meaning given such term in the Notes. As used
herein, the following words shall have the following meanings:
(a) "ACCOUNT(S)": Any and all rights of Debtor to payment for goods
sold or leased or for services rendered at the Property; all accounts
receivable of Debtor; all obligations owing to Debtor and evidenced by
an instrument or chattel paper; all rights of Debtor to
<PAGE>
payment under contracts not yet earned by performance and not evidenced
by an instrument or chattel paper; any and all obligations owing to
Debtor of any kind or nature, including all writings, if any,
evidencing the same, including all instruments, drafts, acceptances and
chattel paper; and all proceeds of any of the foregoing. There is
further included within the term "Accounts" all right, title and
interest of Debtor in and to the Inventory which gave rise to any
Account (including the right of stoppage in transit) all guaranties of,
and security and liens with respect to any Account, and all accounts
and documents of Debtor as those terms are defined in the Uniform
Commercial Code. The term "Accounts" shall also include any of the
foregoing types of property related to the Property in which the Debtor
has any interest.
(b) "ACCOUNT DEBTOR": Any person, firm, corporation or other entity who
is obligated to the Debtor on an Account.
(c) "COLLATERAL": All present and future right, title and interest of
Debtor in all Accounts, Inventory, Equipment and Leasehold
Improvements, General Intangibles and all of Debtor's other real and
personal property of every kind and nature located in or on, or used,
or intended to be used in connection with, related to or incidental to
the Debtor's business, whether now existing or hereafter arising or
acquired, and wherever located and all proceeds and products thereof,
including without limitation all proceeds of fire, credit and other
insurance, excluding however, all insurance maintained on the lives of
current or former employees.
(d) "EQUIPMENT AND LEASEHOLD IMPROVEMENTS": All of Debtor's machinery,
equipment, furniture, fixtures, trade fixtures, rolling stock and
leasehold improvements, and intending to include all tangible personal
property utilized in the conduct of Debtor's business (but excluding
any property hereinbefore defined as "Inventory") and all additions,
accessions, substitutions, components and replacements thereto,
therefor and thereof and all proceeds thereof. (The reservation by
Secured Party of its right to proceeds shall not be construed as a
consent by Secured Party to the sale or other disposition of Equipment
or of any interest therein.)
(e) "GENERAL INTANGIBLES": All of Debtor's general intangibles as
defined in the Uniform Commercial Code and all proceeds thereof,
including without limitation, any and all rights of Debtor to any
refund of any tax assessed against Debtor or paid by Debtor, and all
contracts, licenses, permits, interests, agreements, warranties and
approvals.
(f) "INVENTORY": All of the Debtor's inventory, goods, merchandise, raw
materials, work-in-process, finished inventory and other tangible
personal property held by Debtor for sale or lease, furnished or to be
furnished under contracts of service, or used or consumed in Debtor's
business, goods in transit, any and all returned or repossessed
inventory or merchandise, and all documents of title (whether
negotiable or non-negotiable) representing any of the foregoing, and
all proceeds thereof.
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<PAGE>
(g) "MATERIAL ADVERSE EFFECT": A material adverse effect on the
condition (financial or otherwise) or on the earnings, business
affairs, properties, or assets of the Debtor.
(h) "MAJORITY OF THE HOLDERS": Holders of Notes representing 65% of the
aggregate principal balance remaining outstanding under the Notes as of
the time of calculation.
(i) "OBLIGATIONS": All debts, liabilities and obligation of Debtor to
the Holders and the Secured Party Agent, as agent for the Holders,
under the Note and this Agreement.
SECTION 2. PLEDGE. Subject to the rights of the Senior Lender, and
pursuant to the grant of authority and agency hereby irrevocably grants to the
Secured Party Agent by each of the Holders, Debtor hereby pledges, assigns,
transfers and grants to Secured Party Agent, a security interest in all of the
Collateral, which security interest is to secure the prompt and full payment and
performance of all of the Obligations.
SECTION 3. REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to the Holder that, as of the date of this Agreement:
3.1 ORGANIZATION/QUALIFICATION. The Debtor is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Debtor has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Debtor is qualified to do business as a
foreign corporation in each jurisdiction in which the ownership of its property
or the nature of its business requires such qualification, except where its
failure to be so qualified would not have a Material Adverse Effect on the
Debtor.
3.2 AUTHORIZATION. The Debtor has all requisite corporate right, power
and authority to execute and deliver this Agreement and the Security Documents
and to consummate the transactions contemplated hereby and thereby. All
corporate action on the part of the Debtor, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement.
SECTION 4. AFFIRMATIVE COVENANTS. The Debtor hereby covenants and
agrees that, from the date hereof and until the principal and interest hereunder
have been fully paid and satisfied, unless a Majority of the Holders shall
consent otherwise in writing:
4.1 CORPORATE EXISTENCE. The Debtor: (i) shall do, or cause to be done,
all things, or proceed with due diligence with any actions or courses of action,
that may be necessary (A) to maintain its due organization, valid existence and
good standing under the laws of its state of incorporation, and (B) to preserve
and keep in full force and effect all qualifications, licenses and registrations
in those jurisdictions in which the failure to do so could have a Material
Adverse Effect; and (ii) shall not do, and shall not cause, suffer or permit to
be done (by itself or otherwise), any act impairing its power or authority (A)
to carry on its business as now conducted or (B) to execute or deliver this
Agreement or any other Security Document to which it is a party, or to perform
any of its obligations hereunder or thereunder.
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<PAGE>
4.2 PAYMENT OF CREDITORS. The Debtor shall comply with and observe all
material provisions of any instrument or agreement delivered to the Senior
Lender in connection with the Senior Debt. During any period in which there is
no Senior Debt outstanding, the Debtor shall: (i) pay, or cause to be paid, all
of its indebtedness and other liabilities and lawful claims (whether for
services, labor, materials, supplies or otherwise) as and when due, unless
alternative payment arrangements have been made; (ii) perform, or cause to be
performed, all of its obligations promptly and in accordance with the respective
terms and provisions thereof, unless alternative performance arrangements have
been made; and (iii) promptly pay and discharge, or cause to be paid and
discharged, all taxes, assessments and other governmental charges and levies
imposed upon the Debtor, upon its income or receipts or upon any of its assets
and properties on or before the last day on which the same may be paid without
penalty; provided, however, that it shall not constitute a breach of this
Section if the Debtor fails to perform any such obligation or to pay any such
indebtedness or other liability (except for the principal and interest
obligations hereunder), tax, assessment, or governmental or other charge, levy
or claim: (A) that (1) is being delayed, in the case of trade payables (but not
other obligations), in accordance with the normal payment practices of the
Debtor, or (2) is being contested in good faith and by proper proceedings
diligently pursued, or (3) is less than $100,000 in the aggregate; (B) if the
effect of such failure to pay or perform will not (1) cause or permit the
acceleration of the maturity of any other indebtedness or obligation of the
Debtor (i.e., other than the one being contested), or (2) subject any part of
the assets and properties of the Debtor to attachment, levy or forfeiture; (C)
for which the Debtor has obtained a bond or insurance, or established a reserve,
in an amount that in the judgment of the Secured Party is adequate and
satisfactory; and (D) so long as the aggregate amount of such unpaid overdue
items does not at any time exceed $1,500,000.
SECTION 5. NEGATIVE COVENANTS. The Debtor covenants and agrees that,
from the date hereof until its obligations under the Notes have been fully paid
and satisfied, unless the Secured Party Agent, acting on behalf of a Majority of
the Holders, shall consent otherwise in writing:
5.1 NO PAYMENTS. The Debtor shall not prepay, acquire or otherwise
satisfy, in whole or in part, any of its indebtedness prior to when due, except
indebtedness owed to the holder(s) of any Senior Debt or the Obligations.
5.2 NO GUARANTEES. The Debtor shall not directly or indirectly make,
create, incur, assume, permit to exist, increase, renew or extend any guaranty
on its part of any indebtedness or other obligation of any other person.
5.3 NO SALES. The Debtor shall not directly or indirectly effect, enter
into or offer or agree to: (i) any sale, lease, assignment, conveyance, spin-off
or other transfer or disposition of all or any material part of its business or
assets and properties; (ii) any merger, consolidation, dissolution, liquidation
or winding up, excluding, however, any merger or similar transaction of the
subsidiaries of the Debtor into the Debtor; or (iii) any material change in the
character of its business as conducted on the date of this Agreement, or any
adverse change in the method by which that business is conducted.
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<PAGE>
5.4 NO REDEMPTIONS. The Debtor shall not directly or indirectly: (i)
redeem, purchase or otherwise acquire any securities issued by the Debtor or any
option or other right to acquire any such securities other than as and when the
same shall come due or be available for call under the terms of any governing
instruments; or (ii) covenant or otherwise arrange with any person other than a
Senior Lender to directly or indirectly limit or otherwise restrict any
dividend, advance or other payment or distribution (whether of cash or
otherwise) to or for the benefit of the Holders.
5.5 NO RELATED TRANSACTIONS. The Debtor shall not directly or
indirectly enter into any transaction with, or use any material asset or
property of, any affiliate of the Debtor (including, without limitation, the
lease, purchase, sale or exchange of any asset or property, any advance or loan,
the provision of any services, or any allocation of administrative salaries,
expenses and other general overhead), other than in the ordinary course and
pursuant to the reasonable requirement of the business of the Debtor and upon
fair and reasonable terms and provisions no less favorable to the Debtor than it
could have obtained in a comparable arm'slength transaction with a person who is
not an affiliate of the Debtor; provided that the foregoing restriction shall
not apply to (i) the payment of reasonable and customary regular fees to
directors of the Debtor who are not employees of the Debtor; (ii) loans and
advances to officers of the Debtor approved by the Board of Directors of the
Debtor; (iii) reasonable employment arrangements and benefit programs approved
by the Board of Directors of the Debtor; and (iv) the grant of reasonable stock
options or similar rights to employees and directors of the Debtor pursuant to
plans approved by the Board of Directors.
5.6 OFFICES; RECORDS. Debtor has places of business only at 25B Hanover
Road, Suite 3305, Florham Park, NJ; 1717 Diplomacy Row, Orlando, FL; and , CA
and all Collateral presently owned or hereafter acquired by Debtor, and all
records relating thereto shall be kept only at one of those locations, and
Debtor shall notify Secured Party Agent no less than thirty (30) days before any
change is made in the foregoing addresses.
SECTION 6. TERMINATION OF SECURITY INTEREST. The Security Interest
granted hereunder shall terminate when the Obligations shall have been fully
paid and satisfied. Upon such complete payment and satisfaction, the Secured
Party Agent shall reassign, release and/or deliver to the Debtor all Collateral
then held by or at the direction of the Secured Party; and the Secured Party
Agent shall execute and deliver to the Debtor for filing in each office in which
any financing statement, mortgage, or lease, or assignment thereof, relating to
the Collateral, or any part thereof, shall have been filed, a termination
statement under the Uniform Commercial Code or an appropriate satisfaction,
release, reconveyance or reassignment releasing the Secured Party Agent's and
the Holders' interests therein, and any other instrument or document that the
Debtor deems reasonably necessary to evidence the termination of the Secured
Party's and the Holders' security interest.
SECTION 7. EVENTS OF DEFAULT. Each of the following events shall
constitute a default under this Agreement (each, an "EVENT OF DEFAULT"): (a) the
material breach of any representation, warranty or covenant contained in this
Agreement; or (b) the occurrence of any Event of Default set forth in the Note.
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<PAGE>
SECTION 8. RIGHTS OF THE HOLDERS AND SECURED PARTY AGENT TO THE
COLLATERAL. Upon the occurrence and during the continuance of any Event of
Default and subject and subordinated in right of payment to any rights of the
holder(s) of any Senior Debt in and to the Collateral, a Majority of the Holders
may cause the Secured Party Agent to take any or all of the following actions,
after giving the Debtor and the holders of Senior Debt at least 20 business
days' prior written notice (which notice period the Debtor acknowledges and
agrees to be adequate and reasonable):
(a) prohibit the Debtor from taking any action respecting any
Collateral otherwise permitted by this Agreement;
(b) notify any other obligors, issuers, custodians and parties with
respect to or interested in any item of the Collateral of the Holder's
interest therein or of any action proposed to be taken with respect
thereto, and direct one or more of those parties to make all payments,
distributions and proceeds otherwise payable to the Debtor with respect
thereto directly to the Secured Party Agent on behalf of the Holders
Party, or its order, until notified by a Secured Party Agent that all
of the Obligations to the Holders have been fully paid and satisfied;
(c) receive and retain all payments, distributions and proceeds of any
kind with respect to any and all of the Collateral;
(d) take any action with respect to the offer, sale, lease or other
disposition, and delivery of the whole of, or from time to time any one
or more items of, the Collateral;
(e) exercise any voting, consent, enforcement or other right, power,
privilege, remedy or interest of the Debtor pertaining to any item of
Collateral to the same extent as if the Holders were the outright
owners thereof;
(f) take possession of and thereafter deal with or use from time to
time all or any part of the Collateral in all respects as if the
Holders were the outright owners thereof; and
(g) in addition to, and not by way of limitation of, any of the rights
specified above, exercise or enforce any and all rights, powers,
privileges, remedies and interest afforded to the Secured Parties under
the Note, this Agreement and any and all provisions of applicable law
(including, without limitation, the Uniform Commercial Code), whether
as a secured party in possession of Collateral or otherwise.
SECTION 9. APPLICATION OF PROCEEDS, ETC. The Secured Party Agent shall
collect the cash proceeds received from any sale or other disposition or from
any other source contemplated by Section 8 hereof, and, after deducting all
costs and expenses incurred by him and any person designated to take any of the
actions enumerated in Section 8 hereof in connection with such collection and
sale or disposition (including, without limitation, attorneys' fees,
disbursements and expenses), the Secured Party Agent shall apply the same to the
Obligations in accordance with the terms and provisions of the Note and this
Agreement. In the event any funds remain after
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<PAGE>
satisfaction in full of all such Obligations, then the remainder shall be
returned to the Debtor. In the event that the amount of all proceeds received
with respect to and in liquidation of the Collateral shall be insufficient to
pay and satisfy Obligations in full, the Debtor acknowledges and agrees that the
Debtor shall remain and be liable for any deficiency.
SECTION 10. FURTHER ASSURANCES.
(a) The Debtor agrees to do such further acts and things, and to
execute and deliver, all such statements, assignments, agreements,
instruments and other documents, as the Secured Party from time to time
reasonably request in connection with the administration, maintenance,
enforcement or adjudication of the Notes and this Agreement in order
(i) to evidence, confirm, perfect or protect the Security Interest
granted or required to have been granted under this Agreement, or (ii)
to otherwise effectuate the purpose and the terms and provisions of
this Agreement, provided that, the Secured Party Agent shall be
responsible for the preparation and filing, if applicable, of any such
assignments, financing statements and other documents.
(b) The Holders and the Secured Party Agent jointly and severally
hereby agree to do such further acts and things, and to execute and
deliver, all such statements, assignments, agreements, instruments and
other documents as the Debtor or any Senior Lender may from time to
time or at any time reasonably request in connection with the
administration, maintenance, enforcement or adjudication of the Notes
or this Agreement, the priority of the Senior Lender and the
subordination of the rights of the Holders and the Secured Party Agent
to the Senior Lender, or otherwise as needed (i) to evidence, confirm,
perfect or effect the subordinate nature of the Notes and the Security
Interest granted or intended to have been granted under this Agreement,
or (ii) to otherwise effectuate the purpose and the terms and
provisions of the Notes and this Agreement, provided that, the Debtor
shall be responsible for the preparation and filing, if applicable, of
any such assignments, subordination statements and other documents.
SECTION 11. SECURED PARTY AGREEMENT. The Secured Party Agent shall hold
the Collateral and act hereunder solely for the benefit of Holders; and the
duties and responsibilities of the Secured Party Agent are limited to those
expressly set forth herein: (a) The Secured Party Agent, in its sole discretion,
may disregard any and all notices or instructions, excepting only such notices
or instructions as are hereinabove provided for and excepting orders or process
of any court or binding arbitration entered or issued with or without
jurisdiction, including without limitation any attachment, garnishment, levy,
stay, injunction, or declaratory judgment; (b) the Secured Party Agent may rely
and shall be fully protected in acting upon any paper or other document which
may be submitted to it in connection with its duties hereunder and which it has
no reasonable basis to believe to be other than accurate, truthful and genuine
and to have been signed as presented by the proper party or parties and shall
have no liability or responsibility with respect to the form, execution or
validity thereof; (c) the Secured Party Agent shall not be required to institute
or defend any action or legal process involving any matter referred to herein
which in any manner affects it or its duties or liabilities hereunder unless and
until it has received full indemnity in an amount, and of such character, as it
shall in its sole discretion require, against any
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<PAGE>
and all claims, liabilities, judgments, attorneys' fees and other costs and
expenses of any and every kind in relation thereto; (d) the Holders agree
jointly and severally to indemnify and save the Secured Party Agent harmless
from and against any and all claims, liabilities, judgments, attorneys' fees and
other costs and expenses of any and every kind and nature, whether or not suit
is commenced, which may be incurred or sustained by it by reason of its
compliance or attempted compliance with the terms hereof; (e) the Secured Party
Agent shall provide prompt written notice to each Holder each time the Secured
Agent Party becomes aware of any event for which the Secured Party Agent
believes it is entitled to be indemnified hereunder; each Holder shall have the
opportunity to defend, or participate in the defense of, all claims for which
they may have to indemnify the Secured Party Agent hereunder; (f) the Secured
Party Agent shall not be responsible for any act or failure to act on its part
except in the case of its own bad faith or gross negligence; (g) the Secured
Party Agent shall have no responsibility whatsoever with respect to the recitals
contained herein or any other agreements, documents, obligations or rights
between Holders and Debtor.
SECTION 12. JURISDICTION. The Debtor hereby irrevocably consents and
submits to, and the Secured Party, by its acceptance hereof, likewise hereby
irrevocably consents and submits to, the exclusive jurisdiction of the United
States District Court for the State of New Jersey in connection with any
proceeding arising out of or relating to this Agreement or the Security
Documents, waives any objection to venue in such District (unless such court
lacks jurisdiction with respect to such proceeding in which case, the Debtor
irrevocably consents and submits to, and the Secured Party, by its acceptance
hereof, likewise irrevocably consents and submits to, the jurisdiction of the
courts of the State of New Jersey in connection with such proceeding and waives
any objection to venue in Morris County, State of New Jersey) and agrees that
service of any summons, complaint, notice or other process relating to such
proceeding may be effected in the manner provided by Section 13 hereof.
SECTION 13. NOTICES. All notices and other communications required or
permitted to be given in respect of this Agreement shall be in writing and shall
be given as and shall be deemed to have been given if so given) by delivery,
telegram, telex or facsimile, or by mail (registered or certified mail, postage
prepaid, return receipt requested) or by any courier service, such as Federal
Express, providing proof of delivery, provided that any notice delivered as
herein provided shall also be delivered by facsimile (if a facsimile number is
provided below) at the time of such delivery. All communications hereunder shall
be delivered to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof):
(i) If to the Debtor, to:
Datametrics Corporation
25B Hanover Road; #3305
Florham Park, NJ 07932
Attn.: Daniel P. Ginns, CEO
Facsimile No.: (973) 377-5736
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<PAGE>
With a copy to:
Lane Altman & Owens LLP
101 Federal Street
Boston, MA 02110
Attn: Joseph F. Mazzella
Facsimile No.: (617) 345-0400
(ii) If to the Secured Party Agent, to:
c/o Burnham Securities
1325 Avenue of the Americas, 17th Floor
New York, NY 10105
SECTION 14. REIMBURSEMENT. The Debtor agrees to reimburse the Secured
Party for all its costs and expenses, including reasonable attorneys' fees and
disbursements, expended in collecting any amounts due hereunder or in otherwise
enforcing any of its rights hereunder.
SECTION 15. SEVERABILITY. In the event that any term or provision of
this Agreement shall be finally determined to be superseded, invalid, illegal or
otherwise unenforceable pursuant to applicable law by a governmental authority
having jurisdiction and venue, that determination shall not impair or otherwise
affect the validity, legality or enforceability (i) by or before that authority
of the remaining terms and provisions of this Agreement and the other Security
Documents, which shall be enforced as if the unenforceable term or provision
were deleted, or (ii) by or before any other authority of any of the terms and
provisions of this Agreement.
SECTION 16. SECTION AND OTHER HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
SECTION 17. GOVERNING LAW. This Agreement has been executed and
delivered in the State of New Jersey and shall be governed by and construed in
accordance with the applicable laws pertaining in the State of New Jersey (other
than those that would defer to the substantive laws of another jurisdiction).
SECTION 18. SUCCESSORS AND ASSIGNS, ASSIGNMENT AND INTENDED
BENEFICIARIES. Whenever in this Agreement reference is made to any party, such
reference shall be deemed to include the successors, assigns, heirs and legal
representatives of such party, and, without limiting the generality of the
foregoing, all representations, warranties, covenants and other agreements made
by or on behalf of the Debtor in this Agreement shall inure to the benefit of
the participants and other successors and assigns of the Secured Party.
SECTION 19. ENTIRE AGREEMENT. This Agreement, the Note, and the other
instruments executed pursuant to the Subscription Agreement contain the entire
agreement of the parties and supersedes all other representations, warranties,
agreements and understandings, oral or otherwise, among the parties with respect
to the matters contained herein and therein.
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<PAGE>
IN WITNESS WHEREOF, the Debtor, each Holder and the Secured Party Agent
have executed and delivered this Agreement as of the date first written above.
DEBTOR: DATAMETRICS CORPORATION
By: _____________________________________
Name: Daniel P. Ginns
Title: Chief Executive Officer
25B Hanover Road, Suite 3305
Florham Park, New Jersey 07932
Facsimile No.: 973-377-5736
SECURED PARTY AGENT:
__________________________________
Name: Bruce Galloway
Holders:
_____________________________ _______________________________
_____________________________ _______________________________
_____________________________ _______________________________
_____________________________ _______________________________
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