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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 0-10696
LOGIMETRICS, INC.
(Exact name of small business issuer in its charter)
DELAWARE #112171701
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121-03 DUPONT STREET, PLAINVIEW, NEW YORK 11803
(Address of principal executive offices) (Zip Code)
Issuer's telephone number:(516) 349-1700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant Section 12 (g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ___X____ No ________
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ ]
State issuer's revenues for its most recent fiscal year: $5,038,193
As of October 4, 1996, the aggregate market value of voting stock held by
non-affiliates of the Registrant was $2,216,215 as computed by reference to the
closing price of the stock ($.75) multiplied by the number of shares of voting
stock outstanding on October 4, 1996 held by non-affiliates (2,954,954).
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of October 4, 1996.
CLASS OF COMMON STOCK OUTSTANDING AT OCTOBER 4, 1996
Common Stock, par value 2,954,954 shares
$.01 per share
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one):
Yes _____ ; No __X__
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PART I
Item 1. Description of Business
(a) BUSINESS DEVELOPMENT
Incorporated in Delaware in 1968, LogiMetrics, Inc. (the "Company" or the
"Registrant") has been engaged in the manufacture and sale of high-power
amplifiers, including traveling wave tube amplifiers ("TWTAs"). The Company also
manufactures and sells complete electromagnetic test systems for the measurement
and control of "electromagnetic pollution" in the field of electromagnetic
compatibility and susceptibility and for microwave communications, including
earth satellite stations and wireless communications. These systems frequently
incorporate numerous TWTAs.
Effective with the recapitalization and change in control of the Company on
March 7, 1996, the Company has been redirecting its focus away from defense
applications and toward emerging commercial opportunities. Specifically, the
Company has been pursuing opportunities to supply high-power amplifiers and
other peripheral transmission equipment to companies currently operating in the
Ka-Band (27 - 30 GHz) that provide local multi-point distribution service
("LMDS") and satellite communications service. The application of this
relatively new LMDS technology includes the ability to transmit video, voice,
and data signals in a broadband wireless environment. Additionally, the Company
intends to capitalize on the planned nationwide auction of the new broadband, 28
GHz high frequency spectrum. Spectrum auction winners will utilize the spectrum
for wireless high frequency microwave delivery of video, voice, and data. As
yet, no auction date has been set by the Federal Communications Commission
("FCC"). The Company anticipates selling its proprietary transmitting and
amplifier equipment to the auction winners.
As used herein, unless the context otherwise indicates, the term "Company"
refers to LogiMetrics, Inc. and its wholly owned subsidiary, LogiMetrics FSC,
Inc., a foreign sales corporation.
The following table sets forth a comparison of the percentage of revenues by
class of products and services offered by the Company:
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
TWT Amplifiers/Systems 94.0% 86.2% 94.0% 89.2% 89.9%
Other(1) 6.0% 13.8% 6.0% 10.8% 10.1%
</TABLE>
- ----------------------------------
(1) Primarily miscellaneous spare parts and repairs.
(b) BUSINESS OF ISSUER
Set forth below is a detailed description of the business.
TRAVELING WAVE TUBE AMPLIFIERS: TWTAs are used for a variety of purposes,
including: (i) communication devices; (ii) radar and mapping devices; (iii)
radiated susceptibility testing; (iv) microwave studies; and (v) general
high-power component testing. Sales of TWTAs are made to both the domestic and
international markets. Domestic sales include those to the Federal Government
and various government agencies, as well as numerous commercial entities for
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both military and non-military applications. International sales have generally
focused on military applications.
COMPLETE SYSTEMS: The Company sells complete turn-key systems upon request and
by competitive bids to customers. These systems are usually designed to meet the
specific needs of a given customer and range in purposes from automatic
electromagnetic susceptibility testing systems to sophisticated electronic
ground based or airborne electronic warfare equipment. Systems usually
incorporate one or more TWTAs and may also incorporate software and ancillary
equipment.
MARKETING: The Company sells its products directly to customers and through
independent sales representatives who cover the United States and other
countries. During the fiscal year ended June 30, 1996, approximately 69% of the
Company's sales were made to domestic customers and approximately 31% of sales
were to foreign customers.
MANUFACTURE AND ASSEMBLY: The Company generally manufactures its products to
defined specifications based on firm customer orders. The Company's products are
composed of components manufactured by the Company and by others. Traveling wave
tubes ("TWTs") and other components are purchased from domestic and
international sources. The Company assembles certain of its printed circuit
requirements and maintains its own sheet metal and machine shop for various
fabrication needs. Additionally, the Company designs and manufactures most of
the critical high voltage power supplies and transformers and ferrite components
required for its product lines. The Company will modify products purchased from
outside sources as dictated by its customers' needs. Generally, the Company's
products are the result of either complete engineering design by the Company or
joint design by the Company and its customers.
SOURCE AND AVAILABILITY OF RAW MATERIAL: Generally, the materials and components
necessary for the Company's products are readily available for purchase from
distributors or directly from manufacturers. Certain purchased components, such
as TWTs, require order lead times which can be several months. In recent
periods, the Company's purchasing leverage with respect to price, terms, and
service has been negatively impacted by its shortage of cash. If the Company is
not able to improve the timeliness of vendor payments, it may experience delays
in obtaining materials and services.
SEASONALITY: The business of the Company is not seasonal. However, the accounts
receivable, costs and estimated earnings in excess of billings and inventory
balances can vary based on the levels of completion of significant systems
contracts at any given time.
MAJOR CUSTOMERS: Initially, the Company's customers were limited in both number
and type. The Company now serves a broader market as the worldwide cellular
communications and electronic pollution measurement markets have grown. For the
year ended June 30, 1996, approximately 54% of the Company's sales were made to
domestic industrial, non-defense customers. Agencies of the U.S. government
accounted for approximately 15% of the Company's sales. The Company intends to
continue to minimize defense related programs and to pursue additional
commercial applications. (Refer to Note 12 of the Notes to Consolidated
Financial Statements for a summary of sales to foreign customers as a percentage
of revenues for the two fiscal years ended June 30, 1996 and 1995.)
The Company may bid on large contracts. Any such bid, if won by the Company, may
result in one or more customers at a given time accounting for more than 10% of
revenues for a particular fiscal year. Once a contract is completed, the
customer may not require further products from the Company. However, in such
cases, the loss of a customer would not have a materially adverse effect on the
Company unless the Company were unable to replace revenues resulting from the
completed order with new revenues from new orders from either the same or other
customers.
BACKLOG: The backlog of unfilled firm orders for the Company's products was
$6,447,792 at June 30, 1996 and $6,625,089 at June 30, 1995, before reduction
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for costs and estimated earnings on uncompleted contracts. (Refer to Notes 1 and
3 of the Notes to Consolidated Financial Statements.) It is anticipated that
substantially all unfulfilled orders at June 30, 1996 will be filled during the
current fiscal year.
RENEGOTIATION: None of the Company's contracts are subject to renegotiation of
profits. With respect to contracts with the U.S. Government and its agencies,
however, there is the possibility of cancellation at the Government's
convenience. In such events, the Company is protected to a limited extent by
F.A.R. Regulations, which allow recovery of all costs to termination, and the
originally stipulated profit on those costs.
COMPETITION: The Company competes with several major corporations, most of which
are greater in size than the Company and have greater resources. The Company
competes with these corporations with respect to price, service and quality.
While certain competitors may have total sales that are greater than those of
the Company, the Company cannot determine what portion of its competitors' sales
is comparable to the Company's sales and, therefore, cannot specify its position
in the markets it serves relative to its competitors.
EMPLOYEES: The Company has 57 employees. The Company has entered into no
contract with unions and considers its relationship with its employees to be
excellent.
Item 2. Description of Property
The Company's executive offices and engineering plant are located in a 10,000
square foot, single story, brick, fire retardant office and manufacturing
building in Plainview, New York. This building houses the Company's executive
offices, its drafting and model shops, and non-portable testing and certain
production facilities. The Company leases these premises pursuant to a lease
expiring March 31, 1997. In addition to the rental rate, the Company pays a
proportionate share of all real estate taxes.
Additionally, the Company occupies approximately 13,000 square feet in an
adjacent building, with a lease expiring March 31, 1997. In addition to the
rental rate, the Company pays a proportionate share of all real estate taxes.
This building is used for production, as well as a stock warehouse for shipping
and receiving and for certain equipment and product testing. The Company's sheet
metal, machine shop, transformer, printed circuit board and other production
departments are located in this building.
Item 3. Legal Proceedings
There currently are no pending legal proceedings other than routine litigation
incidental to the Company's business.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year ended
June 30, 1996 to a vote of security holders.
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) MARKET INFORMATION:
The Company's common stock, par value $.01 per share ("Common Stock"), is traded
on the over-the-counter market. The following table sets forth the high and low
closing bid prices for the Common Stock, on a quarterly basis, for the fiscal
years ended June 30, 1996 and June 30, 1995. Quotations were obtained from the
National Quotation Bureau, Inc. and reflect inter-dealer prices, without retail
mark up, mark down, or commission, and may not represent actual transactions.
FOR THE QUARTER ENDED: HIGH LOW
FISCAL 1996
June 30, 1996 $2.375 $.875
March 31, 1996 * *
December 31, 1995 * *
September 30, 1995 * *
FISCAL 1995
June 30, 1995 * *
March 31, 1995 * *
December 31, 1994 * *
September 30, 1994 * *
* Not reported
(b) HOLDERS:
On October 4, 1996, there were approximately 416 holders of record of the Common
Stock.
(c) DIVIDENDS:
The Company has not paid cash dividends on its Common Stock during the last
three fiscal years. The Company also has paid no dividends on its Series A 12%
Cumulative Convertible Redeemable Preferred Stock (the "Preferred Stock"). The
Company is prohibited from paying any cash dividends on the Common Stock so long
as the 12% Convertible Senior Subordinated Debentures (the "Senior Debentures")
are outstanding and dividends on the Preferred Stock have not been paid.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
(a) GENERAL - PLAN OF OPERATION
On March 7, 1996, the Company was recapitalized and new management was brought
in to lead a restructuring of the Company's operations. (The recapitalization of
the Company is described in more detail below.) The primary objective of the
restructuring is to redirect the Company's focus toward the higher value-added,
broadband wireless communications market. The fiscal year ended June 30, 1996,
has been significantly impacted by this change in focus.
As a result of this change in focus, as well as the inactivity and other
operating inefficiencies preceding the change in control, the Company incurred a
net loss of $5.1 million for the year ended June 30, 1996. In addition, as of
October 4, 1996, the Company is in payment default under the Amended and
Restated 12% Convertible
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Subordinated Debentures (the "Subordinated Debentures") and the Senior
Debentures. As of October 4, 1996, accrued interest due to the holders of all of
these debentures totaled $162,117. The Company is also in default in respect of
certain financial covenants in the Fifth Restated and Amended Revolving Credit
Note (the "Revolver") and the Further Restated, Increased and Amended Term Loan
Note (the "Term Loan") with its senior lender, North Fork Bank (the "Bank"), and
the Senior Debentures. However, the Senior Debenture holder has waived
compliance with certain financial covenants through June 30, 1997 and has waived
its right to declare an event of default with respect to the late interest
payment until December 15, 1996. Pursuant to a Forbearance Agreement, by and
between the Company and the Bank, dated as of October 31, 1996 (the "Forbearance
Agreement"), the Bank has agreed to forbear any rights it may have under the
Revolver or Term Loan in connection with the Company's failure to comply with
the financial covenants of the Revolver and Term Loan until the earlier of
February 28, 1997, or the date on which the Bank receives the Company's December
31, 1996, interim financial statements. Therefore, the Company has reclassified
these Debentures, the Revolver and the Term Loan as current liabilities.
There can be no assurance that the Bank and the holder of the Senior Debentures
will agree to forbear any rights they may have after the Forbearance Agreement
and the waiver described above expire.
The Company has not paid any dividends on its Preferred Stock, which have
accumulated in the amount of $114,083 through October 4, 1996. Under the terms
of the Preferred Stock, these dividends accumulate. As of October 4, 1996, the
Company is overdue in payments to vendors in the amount of approximately $1.2
million.
The Company is currently seeking bridge financing and is exploring certain
strategic alliance opportunities so that it can pay overdue amounts to suppliers
and financial creditors, complete projects in process and fund the planned
growth in operations. If, however, the Company is unable to promptly obtain
bridge financing or other cash infusions, the Company may seek protection from
its creditors under the Bankruptcy Code or pursue an insolvency proceeding. The
Company's creditors could also file an involuntary petition against the Company
under the Bankruptcy Code.
(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net revenues for the fiscal year ended June 30, 1996, were $5,038,193. Compared
to the corresponding prior period, revenues declined $3,867,425 (43%). The
decline was a result of project delays and inactivity due to a shortage of cash.
Cost of revenues for the period was $7,953,237 (158% of revenues). In the
corresponding prior period, cost of revenues was $6,437,752 (72% of revenues).
The significant increase in cost reflects the operating inefficiencies resulting
from a shortage of cash, and restructuring and unusual charges arising from the
implementation of the new marketing focus.
Projects thought to be near completion at the beginning of the period were not
completed due to an inability to pay for components needed for timely
completion. In addition, certain key components on several projects were found
to be defective late in the production process. These events resulted in
significant unfavorable labor and overhead absorption and material usage
variances.
The restructuring and unusual charges primarily relate to the change in
marketing focus and include write-offs of slow moving and obsolete inventory
($448,000), write-downs of inventory to lower of cost or market ($960,000),
write-offs of previously capitalized product design costs ($391,000), and
establishment of a warranty reserve provision ($150,000).
Selling, general and administrative expense was $2,112,797 for the period.
Compared to the corresponding prior period, the expense increased $178,768 (9%).
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The increase includes an increase in the provision for bad debts of $71,000 and
recruiting expenses of $250,000, partially offset by lower travel costs, sales
commissions and other expenses.
Interest expense for the period was $410,021. Compared to the corresponding
prior period, interest expense increased $104,461 (34%). The increased expense
reflects increased borrowing levels, including the addition of the Senior
Debentures and the Subordinated Debentures, and amortization of discount on
these Debentures.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had $244,271 in cash at June 30, 1996 compared with $40,858 at June
30, 1995.
The increase in cash resulted from net cash provided by financing activities
($2,197,950), partially offset by net cash used in operating activities
($1,942,309) and capital expenditures ($52,228).
As more fully discussed under Item 6(a) above, the Company requires bridge
financing or other cash infusions in order to continue operating.
The existing capital structure of the Company is described below.
SUBORDINATED DEBENTURES AND SERIES A AND SERIES B WARRANTS
On July 14, 1995, the Company completed a private offering of 15 units of its
securities at a price of $20,800 per unit. Each unit consists of one $20,000 12%
Convertible Subordinated Debenture and one Common Stock Purchase Warrant, Series
A. For managing the financing, Common Stock Purchase Warrants, Series B, to
purchase 1,500,000 shares of Common Stock were sold to SFM Group, Ltd. ("SFM")
at a price of $.02 per share.
Subsequently, on March 7, 1996, in connection with the recapitalization and
change in control of the Company, all of the holders of the 12% Convertible
Subordinated Debentures and Common Stock Purchase Warrants, Series A, and Common
Stock Purchase Warrants, Series B, exchanged such debentures and warrants for
the Subordinated Debentures and Amended and Restated Series A and Series B
Warrants of like tenor (the "Series A Warrants" and "Series B Warrants,"
respectively).
The Subordinated Debentures are convertible into an aggregate of 1,200,000
shares of Common Stock at $.25 per share. As of October 4, 1996, the Company was
in default with respect to the payment of interest under the Subordinated
Debentures; accrued and unpaid interest totaled $45,175. Therefore, the Company
has reclassified these Debentures as current liabilities. Interest accrues at
the rate of 15% per annum on unpaid interest and 12% per annum on the
outstanding principal. The principal is payable in one balloon payment on July
14, 1997. The Subordinated Debentures are subordinated in right of payment to
the Company's Term Loan, Revolver, Senior Debentures and capital lease
obligations.
The Series A Warrants may be exercised at a price of $.25 per share for an
aggregate of 600,000 shares of Common Stock. The Series B Warrants may be
exercised at a price of $.25 per share for an aggregate of 1,500,000 shares of
Common Stock. Both Series A and Series B Warrants may be exercised at any time
until July 15, 2002. As of October 4, 1996, the Company has not timely filed the
registration statement effecting the Series A and Series B Warrant holders'
registration rights. See "Registration Rights" below.
SENIOR DEBENTURES AND SERIES C WARRANTS
On March 7, 1996, the Company completed a private offering with respect to an
additional 30 units of its securities. Pursuant to a Unit Purchase Agreement
between the Company and Cerberus Partners, L.P. ("Cerberus"), Cerberus purchased
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30 units, each unit composed of one $50,000 Senior Debenture and one Common
Stock Purchase Warrant, Series C ("Series C Warrant"). Each Series C Warrant
entitles the holder thereof to purchase 84,746 shares of Common Stock for $.01
per share at any time prior to March 7, 2003.
Each Senior Debenture is convertible into 84,746 shares of Common Stock. The
Senior Debentures are senior in right of payment to the Company's Subordinated
Debentures, but are subordinate to the Company's Term Loan and Revolver. The
principal is payable on the Senior Debentures in one balloon payment due
December 31, 1998.
As of October 4, 1996, the Company was in default with respect to the payment of
interest on the Senior Debentures, the timely filing of a registration statement
effecting the Senior Debentures and Series C Warrant holder's registration
rights, and compliance with the financial covenants described below. Therefore,
the Company has reclassified these Debentures as current liabilities. See
"Registration Rights" below.
Accrued and unpaid interest on the Senior Debentures totaled $116,942 as of
October 4, 1996. Interest is currently payable at the rate of 14% per annum on
the outstanding principal and at the rate of 15% on the interest with respect to
which the Company is currently in default. Interest accrued on the unpaid
principal at the rate of 12% per annum until June 5, 1996. On June 6, 1996, the
interest rate increased to 13.5% per annum for the ensuing three-month period,
due to the Company's failure to file a registration statement effecting the
Senior Debenture and Series C Warrant holder's registration rights. See
"Registration Rights" below. Thereafter, the interest rate increased by 0.5% per
annum to a rate of 14% per annum on October 4, 1996. Until the Company files a
registration statement effecting the Senior Debenture and Series C Warrant
holder's registration rights, the interest rate will increase by 0.5% per annum
for each ensuing 30 day period, to a maximum interest rate on unpaid principal
and interest of 17% per annum. Upon the filing of the registration statement and
the payment of past due interest, the interest rate will revert to 12% per
annum.
The Senior Debentures contain certain financial covenants, which were in default
as of June 30, 1996. The covenants have five components: (i) a minimum tangible
net worth of $4.5 million, (ii) a current ratio of at least 2.75 to 1.0, (iii) a
minimum working capital level of $5.5 million, (iv) a maximum ratio of total
liabilities to tangible net worth of 1.25 to 1.0, and (v) a minimum debt service
coverage ratio of 1.05 to 1.0. As of October 31, 1996, the holder of the Senior
Debentures has waived the requirements for the Company to comply with these
financial covenants through the end of the Company's fiscal year ending June 30,
1997 and has waived its right to declare an event of default with respect to the
late interest payment until December 15, 1996.
NORTH FORK BANK CREDIT FACILITIES
The Company has two credit facilities available to it from the Bank. The
facilities provide the Company with a Revolver of $2,200,000, which matures
October 31, 1997, and a Term Loan of $800,000, which matures December 31, 1998.
The Revolver bears interest at the rate of 2% per annum in excess of the Bank's
prime rate; the Term Loan bears interest at the rate of 1.5% per annum in excess
of the Bank's prime rate. On October 4, 1996, the Bank's prime rate was 8.25%
per annum.
The Company is current with respect to its interest payments on the Revolver and
its interest and principal payments on the Term Loan. However, the credit
facilities with the Bank contain certain financial covenants, which were in
default as of June 30, 1996. The covenants have five components: (i) a minimum
tangible net worth of $4.5 million, (ii) a current ratio of at least 2.75 to
1.0, (iii) a minimum working capital level of $5.5 million, (iv) a maximum ratio
of total liabilities to tangible net worth of 1.25 to 1.0, and (v) a minimum
debt service coverage ratio of 1.05 to 1.0. Pursuant to the Forbearance
Agreement, the Bank has agreed to forbear any rights it may have under the
Revolver or Term Loan in connection with the Company's failure to comply with
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the financial covenants of the Revolver and Term Loan until the earlier of
February 28, 1997, or the date on which the Bank receives the Company's December
31, 1996, interim financial statements. Therefore, the Company has reclassified
the Revolver and the Term Loan as current liabilities.
Under the Term Loan and the Revolver, the Company is required to maintain an
aggregate average monthly ledger balance of $175,000 in non-interest deposit
accounts with the Bank ("Compensating Balance Requirement"). Through October 4,
1996, the Company's aggregate average monthly ledger balance has been less than
the required amount. Accordingly, the Company paid penalties totaling
approximately $3,000 to the Bank, which represent (a) the difference between
$175,000 and the aggregate average monthly ledger balance maintained, multiplied
by (b) a fixed rate (the "Deficiency Rate") equal to four percent (4%) in excess
of the Bank's prime rate, based on a 360-day year and actual number of days
elapsed. The Deficiency Rate is established on the first day of each January and
July and is applicable for the immediately ensuing six month period.
PREFERRED STOCK AND SERIES D WARRANTS
On March 7, 1996, the Company also completed a private offering with respect to
an additional 30 units of its securities. Each unit was comprised of one share
of Preferred Stock and one Common Stock Purchase Warrant, Series D ("Series D
Warrant"). Each share of Preferred Stock is convertible into 94,340 shares of
Common Stock. Each Series D Warrant entitles the holder thereof to purchase
94,340 shares of Common Stock at $.01 per share at any time prior to March 7,
2003. Holders of Preferred Stock have no voting or preemptive rights.
Dividends on the Preferred Stock are payable quarterly, beginning June 15, 1996.
With respect to the dividend payments due on June 15, 1996 and September 15,
1996, the Board of Directors has elected to defer payment until the Company has
sufficient cash for that purpose. The holders of the Preferred Stock and the
Series D Warrants also have registration rights. The Company has not filed in a
timely fashion the registration statement in connection with these holders'
rights. See "Registration Rights" below.
The accumulated amount of dividends due on the Preferred Stock as of October 4,
1996, is $114,083. Accumulated dividends were payable at the rate of 12.0% per
annum until June 5, 1996. On June 6, 1996, the dividend rate increased to 13.5%
per annum for the ensuing three-month period, due to the Company's failure to
file a registration statement to effect the Preferred Stock and Series D Warrant
holders' registration rights. See "Registration Rights" below. Thereafter, the
dividend rate increased by 0.5% per annum to a rate of 14% per annum on October
4, 1996. Until the Company files this registration statement, the dividend rate
will increase by 0.5% per annum for each ensuing 30-day period to a maximum rate
on unpaid accumulated dividends of 17% per annum. Upon the filing of the
registration statement and the payment of accumulated dividends, the dividend
rate will revert to 12% per annum.
The Preferred Stock is redeemable, at the Company's option, upon the giving of
thirty days' prior written notice, unless the price of the Common Stock fell
below $5.00 per share during the 120-day period immediately preceding the date
of the notice. If redeemed by the Company, the Preferred Stock must be redeemed
at stated value plus all accrued and unpaid accumulated dividends.
SERIES E WARRANTS
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and Phipps, Teman & Company, L.L.C. ("PTCO"), for services to be
rendered in obtaining additional financing for the Company. In addition to fees
paid under the agreement, on March 7, 1996, SFM and PTCO were granted warrants
to purchase a total of 1,000,000 shares of the Company's Common Stock at $.50
per share any time prior to March 7, 2003 (the "Series E Warrants"). As of
October 4, 1996, the Company has not timely filed the registration
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statement effecting the Series E Warrant holders' registration rights. See
"Registration Rights" below.
SERIES F WARRANTS
On May 1, 1996, the Company granted Common Stock Purchase Warrants, Series F
("Series F Warrants") to certain directors, officers and other related parties
for services performed for the Company. The Series F Warrants are exercisable at
any time prior to March 7, 2003 at $.50 per share. The exercise price is subject
to adjustment in the event the Company issues or sells Common Stock at less than
$.30 per share other than on exercise of the Series A Warrants, the Series B
Warrants, the Series C Warrants, the Series D Warrants, the Series E Warrants,
the Senior Debentures, the Subordinated Debentures, the Preferred Stock, the
options granted to Richard K. Laird described below and the options granted to
each of Murray H. Feigenbaum and Jerome Deutsch to purchase 100,000 shares of
Common Stock at $.10 per share. Specifically, the Company granted: (i) Mr.
Lawrence I. Schneider, a director, Series F Warrants to purchase 331,190 shares
of Common Stock; (ii) PTCO, a company whose principals include director Norman
Phipps and officer Wade Teman, Series F Warrants to purchase 235,850 shares of
Common Stock; and (iii) Alfred Mendelsohn, a director, Series F Warrants to
purchase 100,000 shares of Common Stock. As of October 4, 1996, the Company has
not timely filed the registration statement effecting the Series F Warrant
holders' registration rights. See "Registration Rights" below.
REGISTRATION RIGHTS
Under the terms of the Senior Debentures, the Subordinated Debentures, the
Preferred Stock, the Series A Warrants, the Series B Warrants, the Series C
Warrants, the Series D Warrants, the Series E Warrants, the Series F Warrants
and the options granted to Russell J. Reardon (see "Common Stock" below), the
Company was obligated to file a registration statement effecting the respective
holders' registration rights within 90 days after issuance. As of October 4,
1996, the Company has not filed such a registration statement and, accordingly,
the Company is not in compliance with respect to this obligation.
COMMON STOCK
During the year ended June 30, 1995, the Company awarded 130,000 shares of Class
A Common Stock to two employees and options to purchase 200,000 shares of Class
A Common Stock were exercised, increasing the number of issued and outstanding
Class A shares to 2,610,614.
In August 1995, all outstanding shares (250,000 shares) of Class B Common Stock
were converted to Class A Common Stock. As a result of this conversion, the
number of shares of Class A Common Stock issued and outstanding increased by
250,000 shares to 2,860,614 shares.
In March 1996, the Company's Certificate of Incorporation was amended. Among
other things, the authorized Common Stock of the Company was increased from
7,000,000 shares of Class A Common Stock, par value $.10 per share, to
35,000,000 shares of Common Stock, par value, $.01 per share. The appellation
"Class A" was eliminated from the Common Stock, since there were no longer any
shares of Class B Common Stock outstanding. In addition, the Company's
Certificate of Incorporation was amended to authorize 200 shares of Preferred
Stock, par value $.01 per share.
During the year ended June 30, 1996, the Company granted stock options to two
officers. Richard K. Laird, the former President and Chief Executive Officer,
effectively received options to purchase 225,000 shares of Common Stock at an
exercise price of $.40 per share. Russell J. Reardon, the Chief Financial
Officer, received options to purchase 250,000 shares of Common Stock at an
exercise price of $.50 per share.
10
<PAGE>
In June 1996, a Series D Warrant was exercised. As a result, the number of
issued and outstanding shares of Common Stock increased by 94,340 to 2,954,954
shares.
ADDITIONAL PAYMENTS FOR SERVICES
During the fiscal year ended June 30, 1996, the Company made payments to related
parties for business development, investment banking and certain other
consulting services. See "Certain Relationships and Related Transactions."
EFFECT OF INFLATION
Not material.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("Statement 121"). Statement 121 is effective for fiscal years
beginning after December 15, 1995. Statement 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used for
long-lived assets and certain identifiable intangibles to be disposed of.
Statement 121 requires review of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company does not expect
that the adoption of Statement 121 will have a material effect on the
consolidated financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123"), which requires
adoption of its disclosure provisions for fiscal years beginning after December
15, 1995 and adoption of the measurement and recognition provisions for
non-employee transactions for fiscal years beginning after December 15, 1995.
The new standard defines a fair value method of accounting for stock options and
other equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Pursuant to Statement 123, companies are encouraged, but are not required, to
adopt the fair value method of accounting for employee stock-based transactions.
Companies are also permitted to continue to account for such transactions under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," but will be required to disclose in a note to the financial
statements, pro-forma net income and pro-forma earnings per share as if the
Company had applied the new method of accounting. Statement 123 also requires
increased disclosure for stock-based compensation arrangements regardless of the
method chosen to measure and recognize compensation for employee stock-based
arrangements.
The Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share should it elect to make such a change.
11
<PAGE>
Item 7. Consolidated Financial Statements
LOGIMETRICS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Opinions of Independent Certified Public Accountants 13, 14
Balance Sheet - June 30, 1996 15
Statements of Operations 16
Years ended June 30, 1996 and 1995
Statements of Stockholders' Equity (Deficiency) 17, 18
Years ended June 30, 1996 and 1995
Statements of Cash Flows 19
Years ended June 30, 1996 and 1995
Notes to Financial Statements 20-33
- --------------------------------------
All other schedules have been omitted because they are not applicable, not
required or the information is disclosed in the consolidated financial
statements, including the notes thereto.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
LogiMetrics, Inc. and Subsidiary
Plainview, New York
We have audited the consolidated balance sheet of LogiMetrics, Inc. and
Subsidiary as of June 30, 1996 and the related consolidated statements of
earnings, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LogiMetrics, Inc. and
Subsidiary as of June 30, 1996, and the results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's losses from operations and the
stockholders' capital deficiency raise substantial doubt about its ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Jericho, New York
October 31, 1996
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
LogiMetrics, Inc. and Subsidiary
Plainview, New York
We have audited the consolidated statements of operations, stockholders' equity
and cash flows of LogiMetrics, Inc. and Subsidiary for the year ended June 30,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of LogiMetrics,
Inc. and Subsidiary for the year ended June 30, 1995, in conformity with
generally accepted accounting principles.
/s/ Holtz Rubenstein & Co., LLP
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
August 28, 1995 (except for Note 7, as
to which the date is October 1, 1995)
14
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
------
CURRENT ASSETS:
Cash (Note 7) $ 244,271
Accounts receivable, less allowance
for doubtful accounts of $75,000 1,183,113
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 1,001,763
Inventories (Note 4) 2,271,453
Prepaid expenses and other current assets 188,486
----------
Total current assets 4,889,086
Equipment and fixtures (Net) (Note 6) 396,410
Deferred financing costs 287,936
Other assets 20,725
----------
TOTAL ASSETS $5,594,157
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable and other accrued expenses $2,375,251
Accrued professional fees 210,000
Accrued warranty expense 150,000
Current portion of long-term debt (Note 7) 3,715,276
---------
Total current liabilities 6,450,527
LONG-TERM DEBT (Note 7) 23,094
---------
TOTAL LIABILITIES 6,473,621
---------
COMMITMENTS (Note 11) STOCKHOLDERS' DEFICIENCY (Notes 7 and 9)
Preferred Stock:
Series A, stated value $50,000 per share;
authorized, 200 shares; issued and
outstanding, 30 shares 990,564
Warrants (Note 15) 1,023,234
Common Stock:
Par Value $.01; authorized,
35,000,000 shares; issued and
outstanding, 2,954,954 shares 29,549
Additional paid-in capital 1,836,061
Deficit (4,594,672)
Stock subscriptions receivable (Note 9(c)) (164,200)
---------
TOTAL STOCKHOLDERS' DEFICIENCY (879,464)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $5,594,157
==========
See Notes to Consolidated Financial Statements
15
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30,
-------------------
1996 1995
---- ----
Net Revenues $5,038,193 $8,905,618
Cost and expenses:
Cost of revenues (Notes 3 and 16) 7,953,237 6,437,752
Selling, general and
administrative expenses 2,112,797 1,934,029
--------- ---------
(Loss) income from operations (5,027,841) 533,837
Interest expense 410,021 305,560
--------- ---------
(Loss) income before income taxes (5,437,862) 228,277
(Benefit) provision for income taxes (Note 8) (299,000) 70,500
--------- ---------
Net (loss) income (5,138,862) 157,777
Preferred stock dividends 57,205 -
--------- ---------
Net (loss) income available
to common shareholders $(5,196,067) $ 157,777
========= ========
(Loss) income per common
share (Note 10) $ (1.82) $ .06
(Loss) income per fully diluted
share (Note 10) $ (1.82) $ .05
Weighted average number of common
shares and equivalents outstanding 2,862,418 2,722,614
(Note 10)
See Notes to Consolidated Financial Statements
16
<PAGE>
<TABLE>
<CAPTION>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIENCY)
Par Value
---------------------------------------------------
Class A Class B Additional
Common Common Preferred Paid-in
Stock Stock Stock Capital Warrants
----- ----- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 $228,060 $25,000 $ -- $1,949,209 $ --
Exercise of stock option
and issuance of stock 33,000 -- -- -- --
Net earnings -- -- -- -- --
------- ------ ------- --------- -------
Balance at June 30, 1995 261,060 25,000 -- 1,949,209 --
------- ------ ------- --------- -------
Receipt of stock
subscription payments -- -- -- -- --
Issuance of Series A
Warrants -- -- -- -- 11,285
Issuance of Series B
Warrants -- -- -- -- 28,215
Issuance of Series C
Warrants -- -- -- -- 457,628
Preferred Stock Issuance -- -- 990,564 -- --
Issuance of Series D
Warrants -- -- -- -- 509,436
Conversion of Class B
Common Stock to Class
A Common Stock 25,000 (25,000) -- -- --
Change in par value per
share from $.10 to $.01 (257,454) -- -- 257,454 --
Exercise of Series D
Warrants 943 -- -- -- --
Issuance of Series E
Warrants -- -- -- -- 10,000
Issuance of Series F
Warrants -- -- -- -- 6,670
Expenditures relating to
Preferred Stock offering
and registration statement -- -- -- (370,602) --
Net loss -- -- -- -- --
Preferred Stock dividends -- -- -- -- --
------- --------- -------- ---------- ----------
Balance at June 30, 1996 $29,549 $ -- $990,564 $1,836,061 $1,023,234
======= ========= ======== ========== ==========
</TABLE>
(continued)
17
<PAGE>
<TABLE>
<CAPTION>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY (DEFICIENCY)
Stock Retained Stockholders'
Subscriptions Earnings Equity
Receivable (Deficit) (Deficit)
---------- --------- ---------
<S> <C> <C> <C>
Balance at June 30, 1994 $(177,950) $443,618 $2,467,937
Exercise of stock option
and issuance of stock -- -- 33,000
Net earnings -- 157,777 157,777
--------- -------- -----------
Balance at June 30, 1995 (177,950) 601,395 2,658,714
--------- -------- -----------
Receipt of stock
subscription payments 13,750 -- 13,750
Issuance of Series A
Warrants -- -- 11,285
Issuance of Series B
Warrants -- -- 28,215
Issuance of Series C
Warrants -- -- 457,628
Preferred Stock Issuance -- -- 990,564
Issuance of Series D
Warrants -- -- 509,436
Conversion of Class B
Common Stock to Class
A Common Stock -- -- --
Change in par value per
share from $.10 to $.01 -- -- --
Exercise of Series D
Warrants -- -- 943
Issuance of Series E
Warrants -- -- 10,000
Issuance of Series F
Warrants -- -- 6,670
Expenditures relating to
Preferred Stock offering
and registration statement -- -- (370,602)
Net loss -- (5,138,862) (5,138,862)
Preferred Stock dividends -- (57,205) (57,205)
---------- ------------ ----------
Balance at June 30, 1996 $ (164,200) $ (4,594,672) $ (879,464)
========== ============ ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY) (Continued)
Class A Class B Preferred
Common Stock Common Stock Stock
------------ ------------ -----
<S> <C> <C> <C>
SHARES OUTSTANDING
Balance at June 30, 1994 2,280,614 250,000 -
Exercise of Stock Options 200,000 - -
Issuance of Stock 130,000 - -
--------- ------- ---
Balance at June 30, 1995 2,610,614 250,000 -
--------- ------- ---
Issuance of Preferred
Stock - - 30
Conversion of Class B 250,000 (250,000) -
Common Stock to Class A
Exercise of Series D
Warrant 94,340 - -
--------- ------- ---
Balance at June 30, 1996 2,954,954 - 30
========= ======= ===
</TABLE>
See Notes to Consolidated Financial Statements
18
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30,
-------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income available to
common shareholders $(5,196,067) $ 157,777
----------- --------
Adjustments to reconcile net (loss) income to
net cash used in operating activities:
Depreciation and amortization 146,358 108,647
Non-cash compensation/expenses 16,670 33,000
Allowance for doubtful accounts 70,500 -
Deferred income tax (benefit) provision (299,000) 69,500
Preferred stock dividends payable 57,205 -
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 772,433 (966,371)
Cost and estimated earnings
in excess of billings on
uncompleted contracts 2,357,220 (19,505)
Inventories (203,125) 174,822
Prepaid expenses and other
current assets (129,350) (3,717)
Other assets 10,155 (7,255)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 454,692 282,156
Income taxes payable - current - (40,000)
--------- ---------
Total adjustments 3,253,758 (368,723)
--------- --------
Net cash used in
operating activities (1,942,309) (210,946)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (52,228) (5,362)
--------- --------
Net cash used in investing activities (52,228) (5,362)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of debt and warrant issuance - net 1,543,050 300,000
Proceeds of Preferred Stock and
warrant issuance - net 1,129,398 -
Proceeds from exercise of warrant 943 -
Repayment of loans from stockholders (60,000) -
Decrease in stock subscriptions receivable 13,750 -
Repayment of debt (429,191) (122,916)
----------- --------
Net cash provided by financing activities 2,197,950 177,084
--------- -------
NET INCREASE (DECREASE) IN CASH 203,413 (39,224)
CASH and CASH EQUIVALENTS, beginning of year 40,858 80,082
---------- --------
CASH and CASH EQUIVALENTS, end of year $ 244,271 $ 40,858
========== ========
See Notes to Consolidated Financial Statements
19
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996 AND 1995
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
LogiMetrics, Inc. and its wholly owned subsidiary, LogiMetrics FSC, Inc.
(collectively, the "Company"). All intercompany balances and transactions
have been eliminated.
b. Revenue Recognition
Revenues related to products with short term production cycles are recognized
when the products are shipped. The Company reports revenues from the sale of
systems contracts, which have production cycles longer than three months, on the
percentage-of-completion method for financial reporting purposes. Revenues under
these contracts are recognized based on the proportion of contract costs
incurred to total estimated contract costs. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance, such as indirect labor, supplies, tools, repairs, and depreciation
costs. Selling, general, and administrative costs are charged to expense as
incurred. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
The net sales value of partially completed contracts in excess of billings is
included in current assets.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
d. Equipment and Fixtures
Equipment and fixtures are recorded at cost and include equipment under capital
leases. Depreciation and amortization are provided by the straight-line method
over an estimated useful life of five or ten years and in the case of leasehold
improvements, the remaining lease term.
e. Income Taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes." Under this
method, deferred tax assets are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
f. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
20
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
g. Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("Statement 121"). Statement 121 is effective for fiscal years
beginning after December 15, 1995. Statement 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used for
long-lived assets and certain identifiable intangibles to be disposed of.
Statement 121 requires review of long-lived assets and certain identifiable
intangibles whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company does not expect
that the adoption of Statement 121 will have a material effect on the
consolidated financial statements.
h. Fair Value of Financial Instruments
At June 30, 1996, the carrying amount of the Company's financial instruments,
including cash, accounts receivable, accounts payable, accrued liabilities, and
notes payable, approximated fair value because of their short-term maturities.
Long-term borrowings bear interest at variable rates, which approximate market.
i. Deferred Financing Costs
Deferred financing costs are amortized on a straight-line basis over the lives
of the related loans.
j. Stock Options and Warrants
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123"), which requires
adoption of its disclosure provisions for fiscal years beginning after December
15, 1995 and adoption of the measurement and recognition provisions for
non-employee transactions for fiscal years beginning after December 15, 1995.
The new standard defines a fair value method of accounting for stock options and
other equity instruments. Under the fair value method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period, which is usually the vesting period.
Pursuant to Statement 123, companies are encouraged, but are not required, to
adopt the fair value method of accounting for employee stock-based transactions.
Companies are also permitted to continue to account for such transactions under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," but will be required to disclose in a note to the financial
statements, pro-forma net income and pro-forma earnings per share as if the
Company had applied the new method of accounting. Statement 123 also requires
increased disclosure for stock-based compensation arrangements regardless of the
method chosen to measure and recognize compensation for employee stock-based
arrangements.
The Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share should it elect to make such a change.
21
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. FINANCIAL CONDITION AND LIQUIDITY
On March 7, 1996, the Company was recapitalized and new management was brought
in to lead a restructuring of the Company's operations. (The recapitalization of
the Company is described in more detail below.) The primary objective of the
restructuring is to redirect the Company's focus toward the higher value-added,
broadband wireless communications market. The fiscal year ended June 30, 1996,
has been significantly impacted by this change in focus.
As a result of this change in focus, as well as the inactivity and other
operating inefficiencies preceding the change in control, the Company incurred a
net loss of $5.1 million for the year ended June 30, 1996. In addition, as of
October 4, 1996, the Company is in payment default under the Amended and
Restated 12% Convertible Subordinated Debentures (the "Subordinated Debentures")
and the 12% Convertible Senior Subordinated Debentures (the "Senior
Debentures"). As of October 4, 1996, accrued interest due to the holders of all
of these debentures totaled $162,117. The Company is also in default in respect
of certain financial covenants in the Fifth Restated and Amended Revolving
Credit Note (the "Revolver") and the Further Restated, Increased and Amended
Term Loan Note (the "Term Loan") with its senior lender, the North Fork Bank
(the "Bank"), and the Senior Debentures. However, the Senior Debenture holder
has waived compliance with certain financial covenants through June 30, 1997 and
has waived its right to declare an event of default with respect to the late
interest payment until December 15, 1996. Pursuant to a Forbearance Agreement by
and between the Company and the Bank dated as of October 31, 1996 (the
"Forbearance Agreement"), the Bank has agreed to forbear any rights it may have
under the Revolver or Term Loan in connection with the Company's failure to
comply with the financial covenants of the Revolver and Term Loan until the
earlier of February 28, 1997, or the date on which the Bank receives the
Company's December 31, 1996, interim financial statements. Therefore, the
Company has reclassified these Debentures, the Revolver and the Term Loan as
current liabilities.
There can be no assurance that the Bank and the holder of the Senior Debentures
will agree to forbear any rights they may have after the Forbearance Agreement
and the waiver described above expire.
The Company has not paid any dividends on its Series A 12% Cumulative
Convertible Redeemable Preferred Stock ("Preferred Stock"), which have
accumulated in the amount of $114,083, through October 4, 1996. Under the terms
of the Preferred Stock, these dividends accumulate. As of October 4, 1996, the
Company is overdue in payments to vendors in the amount of approximately $1.2
million.
The Company is currently seeking bridge financing and is exploring certain
strategic alliance opportunities so that it can pay overdue amounts to suppliers
and financial creditors, complete projects in process and fund the planned
growth in operations. If, however, the Company is unable to promptly obtain
bridge financing or other cash infusions, the Company may seek protection from
its creditors under the Bankruptcy Code or pursue an insolvency proceeding. The
Company's creditors could also file an involuntary petition against the Company
under the Bankruptcy Code.
3. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLING ON UNCOMPLETED
CONTRACTS
Costs and estimated earnings in excess of billings on uncompleted contracts
consist of the following at June 30, 1996:
22
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Costs and estimated earnings $1,761,046
Less: Estimated loss upon completion (529,645)
Progress billings (229,638)
----------
$1,001,763
==========
4. INVENTORIES
Inventory consists of the following at June 30, 1996:
Raw material and components $ 1,431,629
Work-in-progress 839,824
-----------
$ 2,271,453
===========
5. SUPPLEMENTARY INFORMATION - STATEMENT OF CASH FLOWS
Cash paid during the period for:
Year ended June 30,
--------------------------------------
1996 1995
---- ----
Interest $281,978 $294,532
Income Taxes $ 9,931 --
The following details the non-cash investing and financing activities during the
period for:
Year ended June 30,
----------------------------------
1996 1995
---- ----
Machinery and equipment
purchased under capital lease $ 55,436 --
6. EQUIPMENT AND FIXTURES
Equipment and fixtures, at cost, are summarized as follows at June 30, 1996:
Machinery and equipment $2,036,270
Furniture and fixtures 131,129
Leasehold improvements 149,198
----------
2,316,597
Less: accumulated depreciation and amortization (1,920,187)
----------
$ 396,410
==========
23
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. LONG-TERM DEBT
Long-term debt consists of the following at June 30, 1996:
Notes payable to Bank $2,298,323
Senior Debentures 1,500,000
Less: Discount at issuance (457,628)
Plus: Amortization of discount 42,903
Subordinated Debentures 300,000
Capital lease obligations 54,772
----------
3,738,370
Less: current portion (3,715,276)
----------
$ 23,094
==========
SUBORDINATED DEBENTURES AND SERIES A AND SERIES B WARRANTS
On July 14, 1995, the Company completed a private offering of 15 units of its
securities at a price of $20,800 per unit. Each unit consists of one $20,000 12%
Convertible Subordinated Debenture and one Common Stock Purchase Warrant, Series
A. For managing the financing, Common Stock Purchase Warrants, Series B, to
purchase 1,500,000 shares of Common Stock were sold to SFM Group, Ltd. ("SFM")
at a price of $.02 per share.
Subsequently, on March 7, 1996, in connection with the recapitalization and
change in control of the Company, all of the holders of the 12% Convertible
Subordinated Debentures and Common Stock Purchase Warrants, Series A, and Common
Stock Purchase Warrants, Series B, exchanged such debentures and warrants for
the Subordinated Debentures and Amended and Restated Series A and Series B
Warrants of like tenor (the "Series A Warrants" and "Series B Warrants",
respectively).
The Subordinated Debentures are convertible into an aggregate of 1,200,000
shares of Common Stock $.01 par value per shares ("Common Stock"), at $.25 per
share. As of October 4, 1996, the Company was in default with respect to the
payment of interest under the Subordinated Debentures; accrued and unpaid
interest totaled $45,175. Therefore, the Company has reclassified these
Debentures as current liabilities. Interest accrues at the rate of 15% per annum
on unpaid interest and 12% per annum on the outstanding principal. The principal
is payable in one balloon payment on July 14, 1997. The Subordinated Debentures
are subordinated in right of payment to the Company's Term Loan and Revolver,
Senior Debentures and capital lease obligations.
The Series A Warrants may be exercised at a price of $.25 per share for an
aggregate of 600,000 shares of Common Stock. The Series B Warrants may be
exercised at a price of $.25 per share for an aggregate of 1,500,000 shares of
Common Stock. Both Series A and Series B Warrants may be exercised at any time
until July 15, 2002. As of October 4, 1996, the Company has not timely filed the
registration statement effecting the Series A and Series B Warrant holders'
registration rights.
SENIOR DEBENTURES AND SERIES C WARRANTS
On March 7, 1996, the Company completed a private offering with respect to an
additional 30 units of its securities. Pursuant to a Unit Purchase Agreement
between the Company and Cerberus Partners, L.P. ("Cerberus"), Cerberus purchased
30 units, each composed of one $50,000 Senior Debenture and one Common Stock
Purchase Warrant, Series C ("Series C Warrant") entitling the holder thereof to
purchase 84,746 shares of Common Stock for $.01 per share at any time prior to
March 7, 2003.
24
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company allocated the $1,500,000 received between the Senior Debentures and
the Series C Warrants based on their estimated fair value as of March 7, 1996.
Each Senior Debenture is convertible into 84,746 shares of Common Stock. The
Senior Debentures are senior in right of payment to the Company's Subordinated
Debentures, but are subordinate to the Company's Term Loan and Revolver. The
principal is payable on the Senior Debentures in one balloon payment due
December 31, 1998.
As of October 4, 1996, the Company was in default with respect to the payment of
interest on the Senior Debentures, the timely filing of a registration statement
effecting the Senior Debentures and Series C Warrant holder's registration
rights, and compliance with the financial covenants. Therefore, the Company has
reclassified these Debentures as current liabilities.
Accrued and unpaid interest on the Senior Debentures totaled $116,942 as of
October 4, 1996. Interest is currently payable at the rate of 14% per annum on
the outstanding principal and at the rate of 15% on the interest with respect to
which the Company is currently in default. Interest accrued on the unpaid
principal at the rate of 12% per annum until June 5, 1996. On June 6, 1996, the
interest rate increased to 13.5% for the ensuing three-month period, due to the
Company's failure to file a registration statement effecting the Senior
Debenture and Series C Warrant holder's registration rights. Thereafter, the
interest rate increased by 0.5% per annum to a rate of 14% per annum on October
4, 1996. Until the Company files a registration statement effecting the Senior
Debenture and Series C Warrant holder's registration rights, the interest rate
will increase by 0.5% per annum for each ensuing 30 day period, to a maximum
interest rate on unpaid principal and interest of 17% per annum. Upon the filing
of the registration statement and the payment of past due interest, the interest
rate will revert to 12% per annum.
The Senior Debentures contain certain financial covenants, which were in default
as of June 30, 1996. The covenants have five components: (i) a minimum tangible
net worth of $4.5 million, (ii) a current ratio of at least 2.75 to 1.0, (iii) a
minimum working capital level of $5.5 million, (iv) a maximum ratio of total
liabilities to tangible net worth of 1.25 to 1.0, and (v) a minimum debt service
coverage ratio of 1.05 to 1.0. As of October 31, 1996, the holder of the Senior
Debentures has waived the requirements for the Company to comply with these
financial covenants through the end of the Company's fiscal year ending June 30,
1997 and has waived its right to declare an event of default with respect to the
late interest payment until December 15, 1996.
NORTH FORK BANK CREDIT FACILITIES
The Company has two credit facilities available to it from the Bank. The
facilities, as amended in October 1995 and March 1996, provide the Company with
a revolving loan ("Revolver") of $2,200,000, which matures October 31, 1997, and
a term loan ("Term Loan") of $800,000, which matures December 31, 1998. The
Revolver bears interest at the rate of 2% per annum in excess of the Bank's
prime rate; the Term Loan bears interest at the rate of 1.5% per annum in excess
of the Bank's prime rate. On October 4, 1996, the Bank's prime rate was 8.25%
per annum.
The Company is current with respect to its interest payments on the Revolver and
its interest and principal payments on the Term Loan. However, the credit
facilities with the Bank contain certain financial covenants, which were in
default as of June 30, 1996. The covenants have five components: (i) a minimum
25
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
tangible net worth of $4.5 million, (ii) a current ratio of at least 2.75 to
1.0, (iii) a minimum working capital level of $5.5 million, (iv) a maximum ratio
of total liabilities to tangible net worth of 1.25 to 1.0, and (v) a minimum
debt service coverage ratio of 1.05 to 1.0. Pursuant to the Forbearance
Agreement, the Bank has agreed to forbear any rights it may have under the
Revolver or Term Loan in connection with the Company's failure to comply with
the financial covenants of the Revolver and Term Loan until the earlier of
February 28, 1997, or the date on which the Bank receives the Company's December
31, 1996, interim financial statements. Therefore, the Company has reclassified
the Revolver and the Term Loan as current liabilities.
Under the Term Loan and the Revolver, the Company is required to maintain an
aggregate average monthly ledger balance of $175,000 in non-interest deposit
accounts with the Bank ("Compensating Balance Requirement"). Through October 4,
1996, the Company's aggregate average month ledger balance has been less than
the required amount. Accordingly, the Company paid penalties totaling
approximately $3,000 to the Bank, which represent (a) the difference between
$175,000 and the aggregate average monthly ledger balance maintained, multiplied
by (b) a fixed rate (the "Deficiency Rate") equal to four percent (4%) in excess
of the Bank's prime rate, based on a 360-day year and actual number of days
elapsed. The Deficiency Rate is established on the first day of each January and
July and is applicable for the immediately ensuing six month period.
Principal payments due on all long-term debt consist of the following:
Fiscal year ending June 30, 1997 $3,715,276
Fiscal year ending June 30, 1998 17,550
Fiscal year ending June 30, 1999 5,544
----------
$3,738,370
==========
8. INCOME TAXES
The (benefit from) provision for income taxes consists of the following:
Year Ended June 30,
-------------------
1996 1995
---- ----
Federal - Current - $ 1,000
- Deferred ($299,000) 69,500
-------- -------
Total ($299,000) $70,500
======== =======
The following is a summary of deferred tax assets as of June 30, 1996:
Current:
Costs in excess of deferred contract revenues $229,645
Inventory reserves 85,000
Accounts receivable 25,500
Accrued expenses 23,889
----------
Total Current Deferred Tax Assets 364,034
Non-Current:
Net operating loss carry forward 813,447
----------
Total Deferred Tax Assets 1,177,481
Valuation allowance (1,177,481)
----------
Net Deferred Tax Assets $ - 0 -
==========
The Company has approximately $3.1 million in net operating loss carry forwards,
which expire in 2011.
26
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company's effective tax rate differs from the anticipated Federal statutory
rate. A reconciliation of the Federal statutory rate to the Company's effective
tax rate is as follows:
% of Pretax Earnings
Years Ended June 30,
--------------------
1996 1995
---- ----
Federal maximum tax rate 34.0% 34.0%
State income tax net of
federal tax benefit -- --
Effect of graduated tax rates -- (2.3)
Net operating (loss) (39.5) --
Other -- (.8)
------ ----
Effective Rate (5.5%) 30.9%
====== ====
9. STOCKHOLDERS' EQUITY
a) COMMON AND PREFERRED STOCK
During the year ended June 30, 1995, the Company awarded 130,000 shares of Class
A Common Stock to two employees and options to purchase 200,000 shares of Class
A Common Stock were exercised, increasing the number of issued and outstanding
Class A shares to 2,610,614.
In August 1995, all outstanding shares (250,000 shares) of Class B Common Stock
were converted to Class A Common Stock. As a result of this conversion, the
number of shares of Class A Common Stock issued and outstanding increased by
250,000 shares to 2,860,614 shares.
In March 1996, the Company's Certificate of Incorporation was amended. Among
other things, the authorized Common Stock of the Company was increased from
7,000,000 shares of Class A Common Stock, par value $.10 per share, to
35,000,000 shares of Common Stock, par value, $.01 per share. The appellation
"Class A" was eliminated from the Common Stock, since there were no longer any
shares of Class B Common Stock outstanding. In addition, the Company's
Certificate of Incorporation was amended to authorize 200 shares of Preferred
Stock, par value $.01 per share.
During the year ended June 30, 1996, the Company granted stock options to two
officers. Richard K. Laird, the former President and Chief Executive Officer,
effectively received options to purchase 225,000 shares of Common Stock at an
exercise price of $.40 per share. Russell J. Reardon, the Chief Financial
Officer, received options to purchase 250,000 shares of Common Stock at an
exercise price of $.50 per share.
In June 1996, a Series D Warrant was exercised. As a result, the number of
shares of Common Stock increased by 94,340 to 2,954,954 shares.
PREFERRED STOCK AND SERIES D WARRANTS
On March 7, 1996, the Company also completed a private offering with respect to
an additional 30 units of its securities. Each unit was comprised of one share
of Preferred Stock and one Common Stock Purchase Warrant, Series D ("Series D
Warrant"). Each share of Preferred Stock is convertible into 94,340 shares of
Common Stock. Each Series D Warrant entitles the holder thereof to purchase
94,340 shares of Common Stock at $.01 per share at any time prior to March 7,
2003. Holders of Preferred Stock have no voting or preemptive rights.
The Company allocated the $1,500,000 received between the Preferred Stock and
the Series D Warrants based on their estimated fair value as of March 7, 1996.
Dividends on the Preferred Stock are payable quarterly, beginning June 15, 1996.
With respect to the dividend payments due on June 15, 1996 and September 15,
1996, the Board of Directors has elected to defer payment until
27
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
the Company has sufficient cash for that purpose. The holders of the Preferred
Stock and the Series D Warrants also have registration rights. The Company has
not filed in a timely fashion the registration statement required to effect
these holders' rights.
The accumulated amount of dividends due on the Preferred Stock as of October 4,
1996, is $114,083. Accumulated dividends were payable at the rate of 12.0% per
annum until June 5, 1996. On June 6, 1996, the dividend rate increased to 13.5%
per annum for the ensuing three-month period because the Company failed to file
a registration statement to effect the Preferred Stock and Series D Warrant
holders' registration rights. Thereafter, the dividend rate increased by 0.5%
per annum to a rate of 14% per annum on October 4, 1996. Until the Company files
this registration statement, the dividend rate will increase by 0.5% per annum
for each ensuing 30-day period to a maximum rate on unpaid accumulated dividends
of 17% per annum. Upon the filing of the registration statement and the payment
of accumulated dividends, the dividend rate will revert to 12% per annum.
The Preferred Stock is redeemable, at the Company's option, upon the giving of
thirty days prior written notice, unless the price of the Company's Common Stock
fell below $5.00 per share during the 120-day period immediately preceding the
date of the notice. If redeemed by the Company, the Preferred Stock must be
redeemed at stated value plus all accrued and unpaid accumulated dividends.
SERIES E WARRANTS
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and Phipps, Teman & Company, L.L.C. ("PTCO"), for services to be
rendered in obtaining additional financing for the Company. In addition to fees
paid under the agreement, on March 7, 1996, SFM and PTCO were granted warrants
to purchase a total of 1,000,000 shares of the Company's Common Stock at $.50
per share any time prior to March 7, 2003 (the "Series E Warrants"). These
warrants were estimated to have a fair market value of $.01 per warrant, and the
Company reflected such amount as a charge to professional fee expense. As of
October 4, 1996, the Company has not timely filed the registration statement
effecting the Series E Warrant holders' registration rights.
SERIES F WARRANTS
On May 1, 1996, the Company granted Common Stock Purchase Warrants, Series F
("Series F Warrants") to certain directors, officers and other related parties
as compensation for services performed for the Company. These warrants were
estimated to have a fair market value of $.01 per warrant, and the Company
reflected such amount as a charge to professional fee expense. The Series F
Warrants are exercisable at any time prior to March 7, 2003 at $.50 per share.
The exercise price is subject to adjustment in the event the Company issues or
sells Common Stock at less than $.30 per share other than on exercise of the
Series A Warrants, the Series B Warrants, the Series C Warrants, the Series D
Warrants, the Series E Warrants, the Senior Debentures, the Subordinated
Debentures, the Preferred Stock, the options granted to Richard K. Laird
described below and the options granted to each of Murray H. Feigenbaum and
Jerome Deutsch to purchase 100,000 shares of Common Stock at $.10 per share.
Specifically, the Company granted: (i) Mr. Lawrence I. Schneider, a director,
Series F Warrants to purchase 331,190 shares of Common Stock; (ii) PTCO, a
company whose principals include director Norman Phipps and officer Wade Teman,
Series F Warrants to purchase 235,850 shares of Common Stock; and (iii) Alfred
Mendelsohn, a director, Series F Warrants to purchase 100,000 shares of Common
Stock. As of October 4, 1996, the Company has not timely filed the
28
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
registration statement effecting the Series F Warrant holders' registration
rights.
REGISTRATION RIGHTS
Under the terms of the Senior Debentures, the Subordinated Debentures, the
Preferred Stock, the Series A Warrants, the Series B Warrants, the Series C
Warrants, the Series D Warrants, the Series E Warrants, the Series F Warrants
and the options granted to Russell J. Reardon described above, the Company was
obligated to file a registration statement effecting the respective holders'
registration rights within 90 days after issuance. As of October 4, 1996, the
Company has not filed such a registration statement and, accordingly, the
Company is not in compliance with respect to this obligation.
b) STOCK OPTIONS
INCENTIVE STOCK OPTIONS
The Company had an Incentive Stock Option Plan (the "Plan"), which was
terminated in accordance with its own provisions on June 14, 1992. Under the
Plan, incentive stock options were granted to key employees of the Company at
not less than fair market value as determined by the Board of Directors on the
date of the grant. The term of each option was ten years from the date of the
grant. During the year ended June 30, 1996, the last remaining, exercisable
incentive stock option expired.
Price
at Date Number
of Grant of Shares
-------- ---------
Balance, June 30, 1994 $ 1.00 35,000
Expired and Canceled (20,000)
--------
Balance, June 30, 1995 $ 1.00 15,000
Expired and canceled (15,000)
--------
Balance, June 30, 1996, Final 0
========
NON-QUALIFIED STOCK OPTIONS
On May 16, 1994, the Board of Directors granted non-qualified stock options to
two officers to each purchase 300,000 shares of Common Stock at the fair market
value of $.10 per share. These options were exercisable in whole or in part at
any time until December 31, 1998. During the year ended June 30, 1995, each
officer exercised options for 100,000 shares of Common Stock. During the year
ended June 30, 1996, each officer agreed to terminate options for 100,000 shares
of Common Stock. At June 30, 1996, the balance of these exercisable options
equaled 100,000 shares of Common Stock for each of the two former officers.
On March 7, 1996, the Board of Directors granted non-qualified stock options to
an officer to purchase 1,000,000 shares of Common Stock at an exercise price
ranging from $.40 per share to $3.40 per share. Subsequently, on September 14,
1996, in connection with the settlement agreement with the former officer, the
grant was reduced to a total of 225,000 shares of Common Stock at $.40 per
share. (Refer to Note 17 of the Notes to Consolidated Financial Statements.)
29
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The options are exercisable in accordance with the following vesting schedule:
Date Vested Exercise Price Number of Shares
----------- -------------- ----------------
March 7, 1996 $.40 125,000
September 14, 1996 $.40 100,000
-------
Total 225,000
=======
On May 1, 1996, the Board of Directors granted non-qualified stock options to an
officer to purchase 250,000 shares of Common Stock at an exercise price of $.50
per share, exercisable at any time on or prior to March 7, 2003.
(c) STOCK SUBSCRIPTIONS RECEIVABLE
As of June 30, 1996, two former officers of the Company, Murray H. Feigenbaum
and Jerome Deutsch, owe the Company $106,350 and $57,850, respectively, for
Common Stock purchased from the Company. By agreement, such amounts are payable
at the rate of $.25 per common share as shares are sold. During the year ended
June 30, 1996, $7,000 and $6,750 was paid to the Company by Messrs.
Feigenbaum and Deutsch, respectively.
10. (LOSS) INCOME PER SHARE
(Loss) Income per common share was computed by dividing net (loss) income by the
weighted average number of shares of Common Stock and equivalents outstanding
during each of the years presented. For the fiscal year ended June 30, 1996, the
fully diluted earnings per share does not give effect to the contingently
issuable shares since they would have an antidilutive effect.
11. COMMITMENTS
Rental expenses under operating leases approximated $186,000 in each of the
years 1996 and 1995.
Minimum rents under operating lease obligations are as follows:
1997 $147,000
1998 6,000
1999 5,000
Thereafter -
12. MAJOR CUSTOMERS
For the fiscal years ended 1996 and 1995, the Company derived 15% and 29%,
respectively, of its revenue from sales to various agencies of the U.S.
Government. No one customer accounted for 10% of revenue for the years ended
June 30, 1996 and 1995.
Sales to foreign customers by geographic location, as a percentage of total
revenues, were as follows:
Years ended June 30, 1996 1995
-------------------- ---- ----
Middle East 1% 3%
Europe 9 15
Asia 21 28
Other -- 2
---- ----
31% 48%
==== ====
30
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. PENSION PLAN
The Company has a defined contribution plan covering eligible full-time
employees. Any employee who completes two months of service and has attained age
21 is eligible to participate. Participation in the plan is voluntary. Any
participant may elect to contribute between 1% and 15% of his or her earnings
under the plan and, at its discretion, the Company can make matching
contributions. For the years ended June 30, 1996 and 1995, the Company has made
no matching contributions.
14. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In July 1995, the Company sold to SFM Series B Warrants to purchase 1,500,000
shares of Common Stock, at a price of $.02 per share, for services rendered in
obtaining bridge financing for the Company. Directors of the Company, Alfred
Mendelsohn and Lawrence I. Schneider, are principals in SFM.
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and PTCO, for services to be rendered in obtaining additional
financing for the Company. SFM and PTCO were granted Series E Warrants to
purchase a total of 1,000,000 shares of the Company's Common Stock at $.50 per
share any time prior to March 7, 2003. SFM and PTCO also were subsequently paid
fees of $87,500 and $216,377, respectively, when the financing was provided in
March 1996. Norman M. Phipps, a director of the Company, and Wade Teman, an
officer of the Company, are principals in PTCO.
Pursuant to the terms of the consulting agreement, Messrs. Murray H. Feigenbaum
and Jerome Deutsch gave irrevocable proxies to SFM and PTCO to vote their shares
of Common Stock in respect of the election of five members of the Board of
Directors of the Company and certain other matters. Pursuant to the proxies, SFM
has the right to elect two directors and PTCO has the right to elect three
directors. Since Messrs. Feigenbaum and Deutsch together own more than fifty
percent (50%) of the issued and outstanding shares of Common Stock of the
Company, the proxies effectively transfer control of the Company to SFM and
PTCO.
In March 1996, former Directors of the Company, Murray H. Feigenbaum and Jerome
Deutsch, were each paid $30,000 plus accrued interest as repayment of loans made
to the Company.
In April 1996, the Company entered into a consulting agreement with PTCO to
provide investment banking services to the Company. The agreement includes a
$5,000 monthly retainer and reimbursement of expenses.
In May 1996, a Director of the Company, Lawrence I. Schneider, was elected
Chairman of the Executive Committee for a five-year term. As compensation, he
was paid $100,000, in June 1996.
During the fiscal year ended June 30, 1996, the Company paid Orbitrex
International, Inc., whose President is Alfred Mendelsohn, a director of the
Company, $71,000 for business development services provided to the Company.
Additionally, the Company granted Alfred Mendelsohn Series F Warrants to
purchase 100,000 shares of Common Stock at $.50 per share.
During the fiscal year ended June 30, 1996, the Company paid $2,500 each for the
personal legal expenses of former directors Murray H. Feigenbaum and Jerome
Deutsch.
31
<PAGE>
LOGIMETRICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. WARRANTS
The following details warrants outstanding based on their estimated value at the
dates of issuance.
<TABLE>
<CAPTION>
Date of Exercise Number of
Warrant Issuance Price Warrants Amount
------- -------- ----- -------- ------
<S> <C> <C> <C> <C>
Series A July 14, 1996 $.25 600,000 $ 11,285
Series B July 14, 1996 .25 1,500,000 28,215
Series C March 7, 1996 .01 2,542,380 457,628
Series D March 7, 1996 .01 2,830,200 509,436
Series E March 7, 1996 .40 1,000,000 10,000
Series F May 1, 1996 .50 667,040 6,670
--------- ----------
Total 9,139,620 $1,023,234
========= ==========
</TABLE>
16. RESTRUCTURING AND UNUSUAL CHARGES
The restructuring and unusual charges primarily relate to the change in
marketing focus and include write-offs of slow moving and obsolete inventory
($448,000), write-downs of inventory to lower of cost or market ($960,000),
write-offs of previously capitalized product design costs ($391,000), and
establishment of a warranty reserve provision ($150,000).
17. SUBSEQUENT EVENTS
The Company received and considered an internal investigation report (the
"Report") of certain allegations made by Richard K. Laird, the former Chairman,
President, and Chief Executive Officer of the Company, in a letter dated May 30,
1996. The Report was prepared by outside counsel. After careful review of the
Report, the Company determined that it was not appropriate to amend any of its
previously filed financial statements.
Separately, on September 14, 1996, the Company executed an agreement to settle
any claims or disputes that may have arisen out of Mr. Laird's relationship with
the Company or the termination thereof. Under the terms of the settlement, Mr.
Laird effectively forfeited all but 225,000 of the 1,000,000 options originally
granted to him. The remaining options to purchase 225,000 shares of Common Stock
have an exercise price of $.40 per share.
The Term Loan and Revolver with the Bank contain certain financial covenants,
which were in default as of June 30, 1996. Pursuant to the Forbearance
Agreement, the Bank has agreed to forbear any rights it may have under the
Revolver or Term Loan in connection with the Company's failure to comply with
the financial covenants of the Revolver and Term Loan until the earlier of
February 28, 1997, or the date on which the Bank receives the Company's December
31, 1996, interim financial statements. Also, as of October 31, 1996, the Senior
Debenture holder has waived the requirement for the Company to comply with the
covenants in the Senior Debenture through June 30, 1997.
32
<PAGE>
Item 8. Changes in and Disagreements on Accounting and Financial
Disclosures
The information was previously reported in a Form 8-K Report filed on September
9, 1996 and a Form 8-K Report filed on September 19, 1996.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons:
Compliance with Section 16(a) of the Exchange Act by the Company.
(a) The following persons are the current executive officers and directors.
Name Age Position
- ---- --- --------
Norman M. Phipps 36 Director, Chairman of the
Board, Acting Principal
Executive Officer,
and Acting President
Alfred Mendelsohn 52 Director
Henry N. Schneider 31 Director
Lawrence I. Schneider 60 Director
Russell J. Reardon 46 Chief Financial Officer,
Secretary, Senior Vice
President-Finance and
Administration
Wade Teman 32 Senior Vice President
The term of office of each above-named person ends on the date of the annual
meeting prescribed in the Company's By-Laws (a day within five months of the
close of the Company's fiscal year, as determined by the Board of Directors) or
until a successor is elected.
NORMAN M. PHIPPS, has served as a director of the Company since March 1996 and
as Chairman of the Board and Acting President since May 1996. Mr. Phipps has
served as a Principal of Phipps, Teman & Company, L.L.C., a private investment
firm, since August 1993. From January 1991 to July 1993, Mr. Phipps was
Managing General Partner of CP Capital Partners, a private investment firm.
Mr. Phipps currently serves as a Director of Avery Communications, Inc.
ALFRED MENDELSOHN, has been a Director of the Company since 1982. Mr.
Mendelsohn has served as President of Orbitrex International, Inc., a business
management and consulting firm, since 1979 and as a Director of Avery
Communications, Inc. since 1995.
HENRY N. SCHNEIDER, has served as a Director of the Company since March 1996.
Mr. Schneider has been a Principal in Global Capital Resources, a private
investment firm, since May 1994. From June 1989 to May 1994, Mr. Schneider
was an associate with the private investment firm, S&S Investments. He is
Lawrence I. Schneider's son.
LAWRENCE I. SCHNEIDER, has served as a Director of the Company since March
1996. Mr. Schneider has been a Principal of Global Capital Resources, a
private investment firm, since May 1993 and a general partner of the private
investment firm, S&S Investments, since January 1983. Mr. Schneider currently
33
<PAGE>
serves as a Director of Communications and Entertainment Corporation. He is
Henry Schneider's father.
RUSSELL J. REARDON, has served as the Company's Chief Financial Officer and
Senior Vice President-Finance and Administration since April 1996 and as
Secretary since May 1996. From October 1995 to April 1996, he served as
Executive Vice President of On Hold Productions, Inc., a telephone services and
production firm. From February 1991 to October 1995, he served as Chief
Financial Officer of Faulding, Inc., a generic pharmaceutical company.
WADE TEMAN, has served as the Company's Senior Vice President since May 1996.
Since August 1993, Mr. Teman has been a Principal of the private investment
firm, Phipps, Teman & Company, L.L.C. He was a Partner of the private investment
firm, CP Capital Partners, from January 1991 to July 1993.
Item 10. Executive Compensation
The following table shows the total compensation received by named
executive officers during the fiscal years ended June 30, 1996, June 30, 1995
and June 30, 1994.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------- Long-Term
Compensation
Other ---------------- All
Name and Fiscal Annual Awards / Options Other
Principal Position Year Salary Bonus Compensation (No. of Shares) Compensation
- ------------------ ---- ------ ----- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard K. Laird(A) 1996 $28,300 $200,000(B) - 225,000(C)
Former Chairman of the 1995 - - - -
Board, President & CEO 1994 - - - -
Norman M. Phipps 1996 - - - -
Chairman of the Board 1995 - - - -
Acting President and 1994 - - - -
Acting Principal
Executive Officer
Murray H. Feigenbaum(D) 1996 145,900 - - - $19,096(E)
Former Executive 1995 132,700 22,682 - -
Vice President and 1994 122,500 10,190 - -
Director
</TABLE>
______________________
(A) Employment commenced on March 7, 1996 and terminated with Mr. Laird's
resignation on May 30, 1996.
(B) Received in the form of a signing bonus.
(C) Options to purchase 1,000,000 shares of Common Stock were granted on
March 7, 1996, at exercise prices ranging from $.40 per share to $3.40
per share. Pursuant to a settlement agreement between Mr. Laird and the
Company dated September 14, 1996, Mr. Laird effectively forfeited all
but 225,000 of the 1,000,000 options originally granted to him. The
remaining options to purchase 225,000 shares of Common Stock have an
exercise price of $.40 per share. See "Director Settlement" below.
(D) Resigned as a director and retired from employment on June 13, 1996.
(E) Includes payment by the Company for medical insurance ($4,893),
disability insurance ($5,225), legal fees ($2,500) and life insurance
($6,478).
34
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR:
The following table reflects the stock option grants made to the Company's named
executive officers during the fiscal year ended June 30, 1996. The Company did
not grant any stock appreciation rights during this period.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date
---- ----------- ----------- --------- ----
<S> <C> <C> <C> <C>
Richard K. Laird 225,000(A) 47.4% $.40 9/14/99
Norman M. Phipps 0 0.0% --- ---
Murray H. Feigenbaum 0 0.0% --- ---
</TABLE>
________________________
(A) As adjusted pursuant to the settlement agreement dated September 14,
1996. See "Director Settlement."
FISCAL YEAR-END OPTION VALUES:
The table below sets forth information regarding unexercised options held by the
Company's named executive officers as of June 30, 1996.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Options Value of Unexercised
at Fiscal Year End In-The-Money Options at
(#) Exercisable/Unexercisable Fiscal Year End ($)
----------------------------- -------------------
<S> <C> <C>
Richard K. Laird 225,000/0 $303,750/0
Norman M. Phipps 0/0 0/0
Murray H. Feigenbaum 100,000/0 $165,000/0
COMPENSATION OF DIRECTORS:
</TABLE>
The Company does not regularly compensate directors for their services as
directors of the Company.
In May 1996, a Director of the Company, Lawrence I. Schneider, was elected
Chairman of the Executive Committee for a five-year term. As compensation, he
was paid $100,000, in June 1996.
DIRECTOR SETTLEMENT:
The Company received and considered an internal investigation report (the
"Report") of certain allegations made by Richard K. Laird, the former Chairman,
President, and Chief Executive Officer of the Company, in a letter dated May 30,
1996. The Report was prepared by outside counsel. After careful review of the
Report, the Company determined that it was not appropriate to amend any of its
previously filed financial statements.
35
<PAGE>
Separately, on September 14, 1996, the Company executed an agreement to settle
any claims or disputes that may have arisen out of Mr. Laird's relationship with
the Company or the termination thereof. Under the terms of the settlement, Mr.
Laird effectively forfeited all but 225,000 of the 1,000,000 options originally
granted to him. The remaining options to purchase 225,000 shares of Common Stock
have an exercise price of $.40 per share. The Company was not required to pay
any amounts to Mr. Laird under the settlement agreement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE:
To the best of the Company's knowledge, the following directors, officers, and
beneficial owners failed to file on a timely basis, reports required by Section
16(a) of the Securities and Exchange Act of 1934, as amended, during the fiscal
year ended June 30, 1996 or prior fiscal years.
<TABLE>
<CAPTION>
Date of Event
Reporting Requiring
Person Form Filing of Form Transaction(s)
- ------ ---- -------------- --------------
<S> <C> <C> <C>
PTCO Form 3 March 7, 1996 Acquisition of (i) 1/2 share of
Preferred Stock convertible into
47,170 shares of Common Stock;
(ii) Series D Warrant to purchase
47,170 shares of Common Stock;
(iii) Series E Warrants to
purchase 708,333 shares of Common
Stock.
Form 4 April 9, 1996 Distribution of (i) 1/2 share of
Preferred Stock convertible into
47,170 shares of Common Stock;
(ii) Series D Warrant to purchase
47,170 shares of Common Stock;
(iii) Series E Warrants to
purchase 708,333 shares of Common
Stock.
Form 4 May 1, 1996 Acquisition of 235,850 Series F
Warrants
Norman M. Form 3 March 7, 1996 Elected director.
Phipps
Beneficial ownership of the
following securities owned by
PTCO: (i) Series D Warrants
to purchase 23,585 shares
of Common Stock; (ii) Series E
Warrants to purchase 296,042
shares of Common Stock; and
(iii) 1/4 share of Preferred
Stock convertible into 23,585
shares of Common Stock.
Form 4 April 9, 1996 Change in form of beneficial
ownership (direct acquisition of
securities formerly owned by
PTCO).
Form 4 May 1, 1996 Acquisition of Series F Warrants
to purchase 147,406 shares of
Common Stock held by PTCO
36
<PAGE>
Date of Event
Reporting Requiring
Person Form Filing of Form Transaction(s)
- ------ ---- -------------- --------------
Alfred Form 3 July 1982 Elected director.
Mendelsohn
Form 3 December 1985 Ownership of 31,250 shares of
Common Stock
Form 3 July 14, 1995 Ownership of 31,250 shares of
Common Stock
Ownership of Series B
Warrants to purchase
290,000 shares of Common
Stock acquired from SFM
Form 4 May 1, 1996 Acquired Series F Warrants to
purchase 100,000 shares of Common
Stock
Richard K. Form 3 March 7, 1996 Elected director.
Laird Ownership of Series D Warrants to
purchase 94,340 shares of Common
Stock
Ownership of Preferred Stock
convertible into 94,340 Shares of
Common Stock
Options to purchase 1,000,000
shares of Common Stock
Form 4 September 14, Options to purchase 1,000,000
1996 shares of Common Stock were
reduced to options to purchase
225,000 shares of Common Stock
Mark Fisher Form 3 July 14, 1995 Ownership of Series B Warrants to
purchase 520,000 shares of Common
Stock from SFM
Ownership of Series A Warrants to
purchase 60,000 shares of Common
Stock
Ownership of 1 1/2 Subordinated
Debenture convertible into
120,000 shares of Common Stock
Wade Teman Form 3 March 7, 1996 Beneficial ownership of the
following securities owned by
PTCO: (i) Series D Warrants to
purchase 23,585 shares of Common
Stock; (ii) Series E Warrants to
purchase 200,125 shares of Common
Stock; and (iii) 1/4 share of
Preferred Stock convertible into
23,585 shares of Common Stock
Form 4 April 9, 1996 Change in form of beneficial
ownership (direct acquisition of
securities formerly owned by
PTCO).
37
<PAGE>
Date of Event
Reporting Requiring
Person Form Filing of Form Transaction(s)
- ------ ---- -------------- --------------
Form 4 May 1, 1996 Appointed Senior Vice President.
Ownership of the following
Securities: (i) Series D
Warrants to purchase 23,585
shares of Common Stock; (ii)
Series E Warrants to purchase
200,125 Shares of Common
Stock; and (iii) 1/4 share of
Preferred Stock convertible
into 23,585 shares of Common
Stock
Acquisition of Series F Warrants
to purchase 88,444 shares of
Common Stock held by PTCO
Russell J. Form 3 April 1, 1996 Appointed Chief Financial
Reardon Officer.
Form 4 May 1, 1996 Acquisition of options to
purchase 250,000 shares of Common
Stock
Henry N. Form 3 March 7, 1996 Elected director.
Schneider Ownership of Series D Warrants to
purchase 94,340 shares of Common
Stock
Ownership of 1 share of Preferred
Stock convertible into 94,340
shares of Common Stock
Form 4 April 9, 1996 Acquisition of Series E Warrants
to purchase 133,333 shares of
Common Stock from PTCO
Lawrence I. Form 3 July 14, 1995 Beneficial owner of Series B
Schneider Warrants to purchase 380,000
shares of Common Stock owned by
Rilar Family Associated, L.P.
Direct ownership of Series B
Warrants to purchase 200,000
shares of Common Stock from SFM
Form 4 July 14, 1995 Distribution of Series B Warrants
to purchase 200,000 shares of
Common Stock
Form 4 March 7, 1996 Acquired ownership of Series E
Warrants to purchase 291,667
shares of Common Stock
Beneficial ownership of Series D
Warrants to purchase 94,340
shares of Common Stock owned by
his wife, Rita Schneider
38
<PAGE>
Date of Event
Reporting Requiring
Person Form Filing of Form Transaction(s)
- ------ ---- -------------- --------------
Beneficial ownership of 1
share of Preferred Stock
convertible into 94,340
shares of Common Stock
owned by his wife, Rita
Schneider
Form 4 May 1, 1996 Acquired Series F Warrants to
purchase 331,190 shares of Common
Stock
SFM Form 3 July 14, 1995 Acquired Series B Warrants to
purchase 1,500,000 shares of
Common Stock
Form 4 July 14, 1995 Distribution of 1,500,000 Series
B Warrants
Rilar Family Form 3 July 14, 1995 Acquisition of Series B Warrants
Associates to purchase 380,000 shares of
L.P. Common Stock from SFM
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
Set forth below is a table indicating the beneficial ownership of the Company's
Common Stock as of October 4, 1996 by each of the Company's directors, named
executive officers and all current directors and executive officers as a group.
Amount and
Nature of
Name and Address of Beneficial Percent of
Beneficial Owner (1) Ownership (2) Class (3)
- -------------------- ------------- ---------
Alfred Mendelsohn 656,053(4) 19.6%
Norman M. Phipps 1,197,855(5) 34.8%
Henry N. Schneider 322,013(6) 9.8%
Lawrence I. Schneider 1,663,971(7) 40.1%
Richard K. Laird 413,680(8) 12.3%
Murray H. Feigenbaum 939,319(9) 30.7%
All Executive Officers 4,425,631(4),(5), 74.6%
and Directors as a (6),(7),(10)
group (6 persons)
____________________________
(1) Unless otherwise indicated, the mailing address of each shareholder is
121-03 Dupont Street, Plainview, New York 11803.
(2) Each shareholder possesses sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The number
of shares beneficially owned by each shareholder is determined under
rules promulgated by the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
39
<PAGE>
rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power, and
also any shares that the individual has the right to acquire within 60
days after October 4, 1996.
(3) Number of shares deemed outstanding includes shares subject to
conversion of the Senior Debentures, the Subordinated Debentures and
the Preferred Stock, and an exercise of the stock options and warrants,
beneficially owned by each individual or the group.
(4) Assumes the exercise of Series B Warrants to purchase 290,000 shares of
Common Stock and Series F Warrants to purchase 100,000 shares of Common
Stock. Also includes 234,803 shares of Common Stock, with respect to
which Mr. Mendelsohn has the right to vote for the election of two
directors nominated by SFM and mergers, acquisitions and sales of all
or substantially all of the Company's assets.
(5) Assumes the exercise of Series D Warrants to purchase 23,585 shares of
Common Stock, Series E Warrants to purchase 296,042 shares of Common
Stock, and Series F Warrants to purchase 147,406 shares of Common
Stock, and the conversion of the 1/4 share of Preferred Stock into
23,585 shares of Common Stock. Also includes 707,237 shares of Common
Stock, with respect to which Mr. Phipps has the right to vote for the
election ofthree directors nominated by PTCO and with respect to
mergers,acquisitions and sales of all or substantially all of the
Company'sassets, pursuant to proxies granted to PTCO, of which Mr.
Phipps is aprincipal, on June 13, 1996, by Murray H. Feigenbaum and
Jerome Deutsch.
(6) Assumes the exercise of Series D Warrants to purchase 94,340 shares of
Common Stock and Series E Warrants to purchase 133,333 shares of Common
Stock and the conversion of one share of Preferred Stock into 94,340
shares of Common Stock.
(7) Assumes: (i) the exercise by SFM, of which Lawrence I. Schneider is a
principal, of Series E Warrants to purchase 291,667 shares of Common
Stock; (ii) the exercise by Rilar Family Associates, L.P., a limited
partnership controlled by Lawrence I. Schneider, of Series B Warrants
to purchase 380,000 shares of Common Stock; (iii) the exercise by Rita
Schneider, the wife of Lawrence I. Schneider, of Series D Warrants to
purchase an aggregate of 94,340 shares of Common Stock; (iv) the
exercise of Series F Warrants to purchase 331,190 shares of Common
Stock; and (v) the conversion of the Preferred Stock held by Rita
Schneider into 94,340 shares of Common Stock. Also includes 472,434
shares of Common Stock, with respect to which Mr. Schneider has the
right to vote for the election of two directors nominated by SFM and
with respect to mergers, divestitures, acquisitions and sales of all or
substantially all of the company's assets, pursuant to proxies dated
June 13, 1996, granted to SFM, of which Mr. Schneider is a principal,
by Murray H. Feigenbaum and Jerome Deutsch.
(8) Assumes the exercise of options to purchase 225,000 shares of Common
Stock, Series D Warrants to purchase 94,340 shares of Common Stock and
the conversion of one share of the Preferred Stock into 94,340 shares
of Common Stock.
(9) Assumes the exercise of options to purchase 100,000 shares of Common
Stock.
(10) Also assumes: (i) exercise of options to purchase 250,000 shares of
Common Stock; (ii) conversion of Preferred Stock into 23,585 shares of
Common Stock; (iii) exercise of Series D Warrants to purchase 23,585
shares of Common Stock; (iv) exercise of Series E Warrants to purchase
40
<PAGE>
200,125 shares of Common Stock; and (v) exercise of Series F Warrants
to purchase 88,444 shares of Common Stock.
OTHER BENEFICIAL OWNERS (1)
The following table provides information, as of October 4, 1996, regarding the
beneficial ownership of more than five percent (5%) of the Company's Common
Stock held by persons who are not listed in the preceding table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------- --------
<S> <C> <C>
Jerome Deutsch 675,154(2) 22.1%
61-21A Richmond Blvd.
Ronkonkoma, NY 11779
Mark Fisher 700,000(3) 19.2%
8 East 83rd Street
New York, NY 10028
Jeremy Isaacs 188,680(4) 6.0%
c/o Schuckman Realty, Inc.
7600 Jericho Turnpike
Woodbury, NY 11797
Nathan A. Low 308,680(5) 9.5%
c/o Sunrise Financial
919 Third Avenue
New York, NY 10022
Leonard D. Pearlman 188,680(4) 6.0%
112 West 56th Street
Suite 205
New York, NY 10019
Stephen J. DeGroat 188,680(4) 6.0%
c/o Gilford Securities Corp.
850 Third Avenue
New York, NY 10022
Radix Associates 248,680(6) 7.8%
c/o Stuart Schapiro
41 Winged Foot Drive
Larchmont, NY 10538
Fraydun Manocherian 377,360(7) 11.3%
3 New York Plaza
New York, NY 10004
Seymour & Arlene Teman 188,680(4) 6.0%
9 Barrington Place
Melville, NY 11747
Steven Kalafer 188,680(8) 6.2%
c/o Flemington Car and
Truck Country
Route 202-31 South
Flemington, NJ 08822
41
<PAGE>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------- --------
Howard & Lois Lorsch 188,680(4) 6.0%
100 Thompson Avenue
Oceanside, NY 11572
Eric Ozada 188,680(4) 6.0%
530 East 76th Street, Apt.30K
New York, NY 10021
Frederick G. Graham 377,360(7) 11.3%
55 East 86th Street, Apt.2A
New York, NY 10028
Stanley Associates 377,360(7) 11.3%
c/o Alexandre Furs
150 West 30th Street
13th Fl.
New York, NY 10001
Venturetek, L.P. 214,340(9) 6.8%
c/o Mr. J. Morton Davis
D.H. Blair
44 Wall Street
New York, NY 10005
Weiskopf, Silver & Co. 248,680(6) 7.8%
74 Trinity, 14th Fl.
New York, NY 10006
Lamare Investments Ltd. 617,360(10) 17.3%
c/o Paul Downs, Esq.
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, NY 10022
Danilan Investments Inc. 188,680(4) 6.0%
of Panama
c/o Paul Downs, Esq.
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, NY 10022
UTO Bank 420,000(11) 12.4%
Attn: J.P. Kimche
Beethovenstrasse 24
CM-8022 Zurich, Switzerland
Beja International SA 943,400(12) 24.2%
c/o Gerard Mergen, Esq.
Managing Director
32, Rue J.P. Brasseur
L-1258, Luxembourg
Rilar Family Associates, L.P. 380,000(13) 11.4%
c/o Lawrence Schneider
927 5th Avenue
New York, NY 10021
</TABLE>
42
<PAGE>
- -------------------------
(1) Each shareholder possesses sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The
number of shares beneficially owned by each shareholder is determined
under rules promulgated by the SEC, and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to
which the individual has sole or shared voting power or investment
power, and also any shares that the individual has the right to
acquire within 60 days after October 4, 1996.
(2) Assumes the exercise of options to purchase 100,000 shares of Common
Stock.
(3) Assumes: (i) conversion of Subordinated Debentures into 120,000 shares
of Common Stock; (ii) exercise of Series A Warrants to purchase 60,000
shares of Common Stock; and (iii) exercise of Series B Warrants to
purchase 520,000 shares of Common Stock.
(4) Assumes: (i) the conversion of 1 share of Preferred Stock into 94,340
shares of Common Stock; and (ii) the exercise of 1 Series D Warrant
into 94,340 shares of Common Stock.
(5) Assumes: (i) the conversion of 1 share of Preferred Stock into 94,340
shares of Common Stock; (ii) the exercise of 1 Series D Warrant into
94,340 shares of Common Stock; (iii) the conversion of 1 Subordinated
Debenture into 80,000 shares of Common Stock; and (iv) the exercise of
1 Series A Warrant into 40,000 shares of Common Stock.
(6) Assumes: (i) the conversion of 1 share of Preferred Stock into 94,340
shares of Common Stock; (ii) the exercise of 1 Series D Warrant into
94,340 shares of Common Stock; (iii) the conversion of 1/2 Subordinated
Debenture into 40,000 shares of Common Stock; and (iv) the exercise of
1/2 Series A Warrant into 20,000 shares of Common Stock.
(7) Assumes: (i) the conversion of 2 shares of Preferred Stock into 188,680
shares of Common Stock; and (ii) the exercise of 2 Series D Warrants
into 188,680 shares of Common Stock.
(8) Assumes the conversion of 1 share of Preferred Stock into 94,340
shares of Common Stock.
(9) Assumes: (i) the conversion of 1/2 share of Preferred Stock into
47,170 shares of Common Stock; (ii) the exercise of 1/2 Series D
Warrant into 47,170 shares of Common Stock; (iii) the conversion of 1
Subordinated Debenture into 80,000 shares of Common Stock; and (iv)
the exercise of 1 Series A Warrant into 40,000 shares of Common
Stock.
(10) Assumes: (i) the conversion of 2 shares of Preferred Stock into 188,680
shares of Common Stock; (ii) the exercise of 2 Series D Warrants into
188,680 shares of Common Stock; (iii) the conversion of 2 Subordinated
Debentures into 160,000 shares of Common Stock; and (iv) the exercise
of 2 Series A Warrants into 80,000 shares of Common Stock.
(11) Assumes: (i) the conversion of 3 1/2 Subordinated Debentures into
280,000 shares of Common Stock; and (ii) the exercise of 3 1/2 Series A
Warrants into 140,000 shares of Common Stock.
43
<PAGE>
(12) Assumes: (i) the conversion of 5 shares of Preferred Stock into 471,700
shares of Common Stock; and (ii) the exercise of 5 Series D Warrants
into 471,700 shares of Common Stock.
(13) Assumes the exercise of Series B Warrants to purchase 380,000 shares
of Common Stock.
(b) CHANGES IN CONTROL: The Company knows of no arrangement, including any
pledge by any person of securities of the Company, the operation of which may
result in a future change in control of the Company.
Item 12. Certain Relationships and Related Transactions.
In July 1995, the Company sold to SFM Series B Warrants to purchase 1,500,000
shares of Common Stock, at a price of $.02 per share, for services rendered in
obtaining bridge financing for the Company. Directors of the Company, Alfred
Mendelsohn and Lawrence I. Schneider, are principals in SFM.
In December 1995, the Company entered into a consulting agreement with two
companies, SFM and PTCO, for services to be rendered in obtaining additional
financing for the Company. SFM and PTCO were granted Series E Warrants to
purchase a total of 1,000,000 shares of Common Stock at $.50 and were
subsequently paid fees of $87,500 and $216,377, respectively, when the financing
was provided in March 1996. Norman M. Phipps, a director of the Company, and
Wade Teman, an officer of the Company, are principals in PTCO.
Pursuant to the terms of the consulting agreement, Messrs. Murray H. Feigenbaum
and Jerome Deutsch gave irrevocable proxies to SFM and PTCO to vote their shares
in respect of the election of five members of the Board of Directors of the
Company and mergers, acquisitions and sales of all or substantially all of the
Company's assets. Pursuant to the proxies, SFM has the right to elect two
directors and PTCO has the right to elect three directors. Because Messrs.
Feigenbaum and Deutsch together own more than fifty percent (50%) of the issued
and outstanding shares of Common Stock of the Company, the proxies effectively
transfer control of the Company to SFM and PTCO.
In March 1996, former Directors of the Company, Murray H. Feigenbaum and Jerome
Deutsch, were each paid $30,000 plus accrued interest in repayment of loans made
to the Company.
In April 1996, the Company entered into a consulting agreement with PTCO to
provide investment banking services to the Company. The agreement includes a
$5,000 monthly retainer and reimbursement of expenses.
During the fiscal year ended June 30, 1996, the Company paid Orbitrex
International, Inc., whose President is Alfred Mendelsohn, a director of the
Company, $71,000 for business development services provided to the Company.
Additionally, the Company granted Alfred Mendelsohn Series F Warrants to
purchase 100,000 shares of Common Stock at $.50 per share.
During the fiscal year ended June 30, 1996, the Company paid $2,500 each
for the personal legal expenses of former directors Murray H. Feigenbaum
and Jerome Deutsch.
Certain holders of the Preferred Stock, the Subordinated Debentures, the
Series A Warrants, the Series B Warrants, the Series C Warrants, the Series
D Warrants, the Series E Warrants and the Series F Warrants are officers,
directors or more than 5% beneficial owners of the Company. These
44
<PAGE>
securities are described under Item 6. "Management's Discussion and
Analysis." In addition, these security holders, the holder of the Senior
Debentures and Russell J. Reardon, the Company's Chief Financial Officer,
hold registration rights. See Item 6. "Management's Discussion and
Analysis - Financial Condition, Liquidity and Capital Resources -
Registration Rights."
Item 13. Exhibits, Financial Statement, Schedules and Reports on
Form 8-K
(a) The following exhibits are filed as part of this Form 10-KSB:
Number Description
- ------ -----------
3.1 Certificate of Incorporation of LogiMetrics, Inc.**
3.2 Bylaws of LogiMetrics, Inc.**
9.1 Letter to Mr. Murray H. Feigenbaum from Phipps, Teman &
Company, L.L.C. and SFM Group, Ltd. dated December 20, 1995.
9.2 Letter to Mr. Richard K. Laird from Phipps, Teman & Company,
L.L.C. dated April 26, 1996.
9.3 Amended and Restated Irrevocable Proxy between Murray H.
Feigenbaum and Phipps, Teman & Company, L.L.C. dated June 13,
1996.
9.4 Amended and Restated Irrevocable Proxy between Murray H.
Feigenbaum and SFM Group, Ltd. dated June 13, 1996.
9.5 Amended and Restated Irrevocable Proxy between Jerome Deutsch
and Phipps, Teman & Company, L.L.C. dated June 13, 1996.
9.6 Amended and Restated Irrevocable Proxy between Jerome Deutsch
and SFM Group, Ltd. dated June 13, 1996.
10.1 Common Stock Purchase Warrant dated June 25, 1982 issued by
the Company to EHL**
10.2 Form of the 12% Convertible Senior Subordinated Debentures*
10.3 Form of the Amended and Restated 12% Convertible Subordinated
Debentures*
10.4 Form of the Series C Warrants*
10.5 Form of the Preferred Stock*
10.6 Designation of Powers, Preferences and Relative Participating,
Optional, Conversion or Other Rights and Qualifications,
Limitations and Restrictions of Series A Cumulative
Convertible Redeemable Preferred Stock
10.7 Form of the Series D Warrants*
10.8 Form of the Series E Warrants*
10.9 Form of the Series F Warrants
10.10 Form of the Amended and Restated Series A Warrants*
10.11 Form of the Amended and Restated Series B Warrants*
10.12 Fifth Restated and Amended Revolving Credit Note*
10.13 Further Restated, Increased and Amended Term Loan Note*
10.14 Employment Agreement between LogiMetrics, Inc. and
Richard K. Laird dated as of March 7, 1996*
10.15 Settlement and Option Agreement between Richard K. Laird and
LogiMetrics, Inc. dated as of September 14, 1996
10.16 Stock Option Agreement between LogiMetrics, Inc. and Russell
J. Reardon dated as of May 1, 1996
10.17 Forbearance Agreement between North Fork Bank and LogiMetrics,
Inc. dated October 31, 1996
10.18 Waiver Agreement between LogiMetrics, Inc. and Cerberus
Partners, L.P. dated October 31, 1996
11 Computation of Loss Per Share
21 Subsidiaries of LogiMetrics, Inc.
27 Financial Data Schedule for the year ended June 30, 1996
45
<PAGE>
* Incorporated by reference to Form 8-K dated March 7, 1996 filed on
March 22, 1996.
** Incorporated by reference to Form 10-K for the fiscal year ended June 30,
1983.
(b) Reports on Form 8-K:
On June 6, 1996, the Company filed with the Securities and Exchange Commission a
Current Report on Form 8-K dated May 31, 1996 relating to (i) the resignation of
Richard K. Laird as Chairman, President, Chief Executive Officer and Director of
the Company, (ii) the engagement of a special audit committee to investigate the
allegations made by Mr. Laird and (iii) the appointment of Norman M. Phipps as
Chairman of the Board and Acting President.
On September 9, 1996, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K dated August 27, 1996 relating to the
dismissal of the Company's independent accountants.
On September 19, 1996, the Company filed with the Securities and Exchange
Commission a Current Report on Form 8-K dated September 13, 1996 relating to the
engagement of Deloitte & Touche LLP as the Company's independent accountants.
46
<PAGE>
SIGNATURES
In accordance with Section 13 of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
LOGIMETRICS, INC.
By:/s/ Norman M. Phipps
--------------------
Date: October 31, 1996 Norman M. Phipps
Chairman of the Board
(Acting Principal Executive Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, this report on Form 10-KSB has been signed below by the following
persons on behalf of the Company and in the capacities and on the dates
indicated.
By: /s/ Norman M. Phipps
---------------------
Date: October 31, 1996 Norman M. Phipps
Chairman of the Board
(Acting Principal Executive Officer)
Date: October 31, 1996 By:/s/ Russell J. Reardon
----------------------
Russell J. Reardon
Chief Financial Officer
(Principal Accounting Officer)
Date: October 31, 1996 By:/s/ Alfred Mendelsohn
---------------------
Alfred Mendelsohn, Director
Date: October 31, 1996 By:/s/ Henry N. Schneider
----------------------
Henry N. Schneider, Director
Date: October 31, 1996 By:/s/ Lawrence I. Schneider
-------------------------
Lawrence I. Schneider, Director
47
<PAGE>
<PAGE>
December 20, 1995
By Telecopy and Federal Express
-------------------------------
PERSONAL AND CONFIDENTIAL
LogiMetrics, Inc.
121-03 Dupont Street
Plainview, New York 11803
Attention: Mr. Murray H. Feigenbaum, President
Gentlemen:
You have advised us that LogiMetrics, Inc., a Delaware corporation,
including its subsidiaries, divisions and affiliates (collectively,
"LogiMetrics" or the "Company") has expressed an interest in
recapitalizing its balance sheet and restructuring its other financial
arrangements, by means, inter alia, of issuance(s) of securities in
amounts of up to US$3,000,000 (collectively, the "Transaction"). Phipps,
Teman & Company, L.L.C. ("PTC"), in conjunction with SFM Group, Ltd.
("SFM") are pleased to act as co-exclusive financial advisors to
LogiMetrics in connection with providing certain financial advisory
services relating to the Transaction. This letter agreement (the
"Advisory Agreement") is to confirm our understanding and agreement
regarding the co-exclusive engagement by LogiMetrics of PTC and SFM with
respect to the matters referred to herein.
1. LogiMetrics hereby engages PTC and SFM on a co-exclusive basis
to: (i) advise with respect to the proposed financing(s) and
capital structure in order to effect the Transaction; and (ii)
provide such other financial advisory services from time to time
as may be mutually agreed upon by and among the parties hereto,
and which may be the subject of a separate advisory agreement.
2. PTC and SFM hereby accept the engagement described in paragraph 1
above and, in that connection, agree that they will, inter alia:
(a) examine publicly available documents and other
information provided by the Company, and perform
such other analyses as may be necessary to assist
in ascertaining a range of approximate values for
the Company;
(b) assist in the negotiations with and presentations
to subordinated lenders, equity investors and
other parties required to effect the Transaction;
and
<PAGE>
(c) severally use their best efforts to assist the
Company in obtaining the financing(s) necessary
to consummate the Transaction on commercially
reasonable terms and conditions.
3. (a) In consideration of the services to be provided
pursuant to the terms of paragraph 2 above,
LogiMetrics agrees that the terms of any
Transaction that may be effected shall provide
that PTC and SFM, collectively, shall be paid at
the closing date of the Transaction (the "Closing
Date"), an advisory fee which shall equal: (A) a
cash payment (the "Cash Fee") in the amount of
Three Hundred Thousand and 00/100 ($300,000.00)
Dollars, plus (B) warrants, exercisable at any
time from the date of issuance over a period of
seven (7) years, to purchase one million
(1,000,000) shares of the Company's Class A
common stock at a price of $0.40 per share (the
"Warrant Fee") (the Cash Fee and the Warrant Fee
being collectively referred to herein as the
"Advisory Fee").
(b) In addition to the consideration set forth in
paragraph 3(a) above, LogiMetrics agrees to
reimburse PTC and SFM promptly, upon requests
made by PTC and SFM from time to time, for the
reasonable out-of-pocket expenses of PTC and SFM
incurred in connection with the activities of PTC
and SFM under this Advisory Agreement, including,
without limitation, the reasonable fees and
disbursements of their legal counsel in an
aggregate amount of not more than US$5,000.00.
4. PTC and SFM shall not be liable for, or have their compensation
hereunder reduced by, any obligation LogiMetrics or anyone else
may incur to any third party in connection with the Transaction
or any transaction contemplated herein.
5. At the Closing Date, and until December 31, 1998, PTC shall have
the right to appoint three (3) directors, and SFM has the right
to appoint two (2) directors to the Company's Board of Directors.
It is hereby agreed that PTC shall appoint Messrs. Lawrence I.
Schneider, Richard K. Laird and Norman M. Phipps (collectively,
the "PTC Director Nominees") to the Company's Board of Directors.
It is hereby agreed that SFM shall appoint Messrs. Alfred
Mendelsohn and Mark Fisher to the Company's Board of Directors
(the "SFM Director Nominees"). Subsequent to the appointment of
the PTC Director Nominees and the SFM Director Nominees, the
Company's Board of Directors shall be comprised of six (6)
directors.
- 2 -
<PAGE>
Further, Messrs. Murray H. Feigenbaum and Jerome Deutsch (the
"Principals") hereby agree that they shall, at the Closing Date,
grant an irrevocable proxy coupled with an interest to each of
PTC and SFM (collectively, the "Principals' Proxy") each in
respect of fifty percent (50.0%) of all the shares of common
stock of the Company owned of record by the Principals, or which
are eligible to be voted by the Principals as stockholders of the
Company (the "Shares"), for the following exclusive purposes: (i)
voting the shares in favor of the election of three (3) persons
to be designated by PTC and two (2) persons designated by SFM as
members of the Company's board of directors, and (ii) voting the
shares with respect to any of the following matters: (a) mergers,
diveritures and acquisitions; and (b) sale of all or
substantially all of the Company's assets. Each Principal's
Proxy shall not be revokable or revoked by the Principals, is
coupled with an interest and shall be binding upon the respective
heirs and personal representatives until the earlier to occur (x)
December 31, 1998, or (y) in respect of each Principal, the
earliest of (A) the date upon which the Company terminates that
certain employment agreement with each Principal dated as of
January 21, 1994 (the "Employment Agreement") other than for
Cause (as that term is defined in the Employment Agreement), or
(B) the date the Employment Agreement expires by its terms
(unless the Company and the Principals have entered into an
extension or renewal of the Employment Agreement).
6. LogiMetrics agrees to indemnify PTC and SFM and their affiliates
and their respective members, directors, officers, employees,
representatives, attorneys, partners and agents (or the
equivalent of any of the foregoing) (PTC, SFM and each such
person being and "Indemnified Party") from and against any and
all losses, claims, damages and liabilities, joint or several, to
which such Indemnified Party may become subject under any
applicable federal or state law, or otherwise, related to or
arising out of any services contemplated by this Advisory
Agreement or the engagement of PTC and SFM pursuant to, and the
performance by PTC and SFM of the services contemplated by, this
Advisory Agreement and will reimburse any Indemnified Party for
all expenses (including reasonable fees and expenses of legal
counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto. The
Company shall not be liable to an Indemnified Party under the
foregoing indemnification provision to the extent that any loss,
claim, damage, liability or expense is found in a final judgment
by a court of competent jurisdiction to have resulted primarily
from the willful misconduct or gross negligence of that
Indemnified Party.
In the event of the assertion against any Indemnified Party of
any such claim or the commencement of any such action or
- 3 -
<PAGE>
proceeding as described in the preceding paragraph, the Company
shall be entitled to participate in such action or proceeding and
in the investigation of such claim and, after written consent
from PTC and SFM, to assume the investigation or defense of such
claim, action or proceeding with counsel of the Company's choice
at the Company's expense; provided however, that such counsel
shall be reasonably satisfactory to PTC and SFM.
Notwithstanding the Company's election to assume the defense or
investigation of such claim, action or proceeding, PTC and SFM
shall have the right to employ separate counsel if: (i) in the
written opinion of counsel to PTC and SFM, use of counsel of the
Company's choice would be reasonably expected to give rise to a
conflict of interest; (ii) the Company shall not have employed
counsel reasonably satisfactory to PTC and SFM to represent the
Indemnified Party within a reasonable time after notice of the
institution of any such litigation or proceeding; or (iii) the
Company shall authorize PTC and SFM in writing to employ separate
counsel at the Company's expense.
The rights, powers and authority accorded PTC, SFM and the other
Indemnified Parties by the foregoing provisions shall be in
addition to any rights that PTC, SFM or any Indemnified Party may
have at common law or otherwise and shall survive the termination
of this Advisory Agreement.
If for any reason the above-described indemnification rights
shall be unavailable to any Indemnified Party or insufficient to
hold it harmless as and to the extent contemplated by the
preceding paragraphs, then the Company shall contribute to the
amount paid or payable by the applicable Indemnified Party as a
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative benefits
received by it, on the one hand, and PTC, SFM and any other
applicable Indemnified Party, as the case may be, on the other
hand, and also the relative fault of the Company and PTC, SFM and
any other applicable Indemnified Party, as the case may be, as
well as any other relevant equitable considerations.
7. The term of the engagement with PTC and SFM hereunder shall
extend from the date hereof through September 30, 1996 unless
terminated by any party hereto on account of the default
hereunder or of another party.
8. Any such termination referred to in paragraph 7 hereof shall be
effected on not less than thirty (30) days prior written notice
to all other parties to this Advisory Agreement. Notwithstanding
the foregoing, upon any termination of PTC's engagement
hereunder, all the provisions hereof relating to the payment of
PTC's expenses and the indemnification of PTC shall survive any
such termination. PTC and SFM shall be entitled to the Advisory
Fee if, within twelve (12) months after the termination of this
- 4 -
<PAGE>
Advisory Agreement for any reason, LogiMetrics, or any affiliated
party thereof, shall consummate the Transaction or any similar
transaction with any party or parties introduced to LogiMetrics
by PTC or SFM.
9. LogiMetrics, PTC and SFM agree that PTC and SFM shall be the co-
exclusive financial advisors to the Company and any partner, co-
venturer or associate of the Company that participates in the
Transaction or any reasonably similar transaction. LogiMetrics,
PTC and SFM further agree that each will give the other parties
prior notice of and consult with the other party prior to taking
any significant action in connection with or relating to the
Transaction or any of the transactions contemplated hereby.
10. The Company agrees that, during the term of this Advisory
Agreement, (a) it will provide PTC and SFM with complete and
accurate information with respect to any matter reasonably
requested by PTC and SFM; (b) none of the information provided to
PTC and SFM in connection with this Advisory Agreement, or
presented in any written material provided by the Company and
used by PTC and SFM for any purpose under this Advisory
Agreement, will contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading; and
(c) the Company will promptly inform PTC and SFM of any material
change or development in its business, property or prospects.
11. This Advisory Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York and
any disputes shall be subject to the jurisdiction of the courts
of the State of New York.
12. The rights and privileges granted to each of PTC and SFM pursuant
to this Advisory Agreement may be assigned by either or both PTC
or SFM to any of their affiliates, respectively.
- 5 -
<PAGE>
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to PTC and SFM the duplicate copy of this Advisory
Agreement enclosed herewith.
Yours truly,
PHIPPS, TEMAN & COMPANY, L.L.C. SFM GROUP, LTD.
By: /s/ Norman M. Phipps By: /s/ Lawrence I. Schneider
--------------------------- -------------------------
Norman M. Phipps Lawrence I. Schneider
ACCEPTED AND AGREED
THIS ___ DAY OF DECEMBER, 1995
LOGIMETRICS, INC.
By: /s/ Murray H. Feigenbaum
------------------------
Name: Murray H. Feigenbaum
Title: President
- 6 -
<PAGE>
April 26, 1996
By Telecopy and Federal Express
-------------------------------
LogiMetrics, Inc.
121-03 Dupont Street
Plainview, New York 11803-1693
PERSONAL AND CONFIDENTIAL
-------------------------
Attention: Mr. Richard K. Laird, President
Gentlemen:
You have us advised that LogiMetrics, Inc., including its subsidiaries,
divisions and affiliates (collectively, "LogiMetrics" or the "Company")
has expressed an interest in acquiring the capital stock or the
identifiable assets (including the assumption of certain identifiable
liabilities) of MMTech, Inc. ("MMT"), and/or Instruments For Industry,
Inc. ("IFI"), by means, inter alia, of a cash payment(s) and/or issuances
of securities (collectively, the "Transactions"). In addition to the
Transactions, you have advised us that the Company desires to review, from
time to time, other potential acquisition, merger or joint venture
candidates (collectively, the "Acquisition Search"). Phipps, Teman &
Company, L.L.C. ("PTCO") is pleased to act as exclusive financial advisor
to LogiMetrics in connection with providing certain financial advisory
services relating to the Transactions and the Acquisition Search. This
letter agreement (the "Advisory Agreement") is to confirm our
understanding and agreement regarding the engagement of PTCO by
LogiMetrics with respect to the matters referred to herein.
1. LogiMetrics engages PTCO on an exclusive basis to: (i) provide
certain financial advisory services in order to effect the
Transactions; and (ii) provide such other financial advisory
services from time to time as may be mutually agreed upon by and
between LogiMetrics and PTCO with respect to the Acquisition
Search.
2. PTCO hereby accepts the engagement described in paragraph 1 above
and, in that connection, agrees that it will, inter alia:
(a) examine publicly available documents and other
information provided by the Company, MMT and/or IFI and
perform such other analyses as may be necessary to assist
in ascertaining a range of approximate values for the
Company, MMT and/or IFI;
<PAGE>
Mr. Richard K. Laird
April 26, 1996
Page 2
(b) make recommendations with respect to the structure(s) of
the Transactions;
(c) advise in developing strategies to be used in the
approach to, and negotiations with, the existing
shareholders of MMT and/or IFI;
(d) assist in the negotiations with and presentations to MMT
and IFI, senior and subordinated lenders, equity
investors and other parties required to effect the
Transactions; and
(e) assist the Company in the Acquisition Search.
3. (a) In consideration of the services to be provided pursuant
to the terms of paragraph 2 above, LogiMetrics agrees
that should (i) one or both of the Transactions be
effected, or (ii) the Acquisition Search result in a
completed acquisition, merger or joint venture, the
Company shall pay to PTCO at the closing date of the
Transaction(s) or the closing of any transaction
resulting from the Acquisition Search, a standard and
customary fee (comprised of cash and warrants) for
transactions of this type which shall be mutually agreed
upon by and between PTCO and the Company (the "Success
Fee").
(b) In addition to the Success Fee, LogiMetrics covenants and
agrees to pay to PTCO a monthly retainer of Five Thousand
and 00/100 (US$5,000.00) Dollars for each month, or for
any part thereof (the "Monthly Fee"), for the duration of
PTCO's engagement hereunder, payable on the first
business day of each month, commencing May 1, 1996.
(c) In addition to the consideration set forth in paragraphs
3 (a) and 3 (b) above, LogiMetrics agrees to reimburse
PTCO promptly, upon requests made by PTCO from time to
time, for PTCO's reasonable out-of-pocket expenses
incurred in connection with PTCO's activities under this
Advisory Agreement, including, without limitation, the
reasonable fees and disbursements of its legal counsel.
PTCO agrees that it will work with counsel satisfactory
to LogiMetrics, and shall not incur legal expenses in
excess of US$5,000.00 without the prior written consent
of the Company.
4. PTCO shall not be liable for, or have its compensation hereunder
reduced by, any obligation LogiMetrics or anyone else may incur
to any third party in connection with any transaction
contemplated herein.
<PAGE>
Mr. Richard K. Laird
April 26, 1996
Page 3
5. LogiMetrics agrees to indemnify PTCO and its affiliates and their
respective members, directors, officers, employees,
representatives, attorneys, partners and agents (or the
equivalent of any of the foregoing) (PTCO and each such person
being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to
which such Indemnified Party may become subject under any
applicable federal or state law, or otherwise, related to or
arising out of any services contemplated by this Advisory
Agreement or the engagement of PTCO pursuant to, and the
performance by PTCO of the services contemplated by, this
Advisory Agreement and will reimburse any Indemnified Party for
all expenses (including reasonable fees and expenses of legal
counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or
threatened claim or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party thereto.
LogiMetrics shall not be liable under the foregoing
indemnification provision to the extent that any loss, claim,
damage, liability or expense is found in a final judgment by a
court of competent jurisdiction to have resulted primarily from
PTCO's willful misconduct or gross negligence.
In the event of the assertion against any Indemnified Party of
any such claim or the commencement of any such action or
proceeding as described in the preceding paragraph, LogiMetrics
shall be entitled to participate in such action or proceeding and
in the investigation of such claim and, after written consent
from PTCO, to assume the investigation or defense of such claim,
action or proceeding with counsel of LogiMetrics' choice at
LogiMetrics' expense; PROVIDED, HOWEVER, that such counsel shall
be reasonably satisfactory to PTCO. Notwithstanding LogiMetrics'
election to assume the defense or investigation of such claim,
action or proceeding, PTCO shall have the right to employ
separate counsel if: (i) in the written opinion of counsel to
PTCO, use of counsel of LogiMetrics' choice could be reasonably
expected to give rise to a conflict of interest; (ii) LogiMetrics
shall not have employed counsel reasonably satisfactory to PTCO
to represent the Indemnified Party within a reasonable time after
notice of the institution of any such litigation or proceeding;
or (iii) LogiMetrics shall authorize PTCO in writing to employ
separate counsel at LogiMetrics' expense.
The rights, powers and authority accorded PTCO and the other
Indemnified Parties by the foregoing provisions shall be in
addition to any rights that PTCO or any Indemnified Party may
have at common law or otherwise and shall survive the termination
of this Advisory Agreement.
If for any reason the above-described indemnification rights
shall be unavailable to any Indemnified Party or insufficient to
hold it harmless as and to the extent contemplated by the
preceding paragraphs, then LogiMetrics shall contribute to the
amount paid or payable by the applicable Indemnified Party as a
<PAGE>
Mr. Richard K. Laird
April 26, 1996
Page 4
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative benefits
received by it, on the one hand, and PTCO and any other
applicable Indemnified Party, as the case may be, on the other
hand, and also the relative fault of LogiMetrics and PTCO and any
other applicable Indemnified Party, as the case may be, as well
as any other relevant equitable considerations.
6. The term of PTCO's engagement hereunder shall extend from the
date hereof through October 31, 1996 unless terminated earlier in
accordance with the terms and provisions hereof.
7. PTCO's engagement may be terminated by either LogiMetrics or PTCO
at any time upon ten (10) days prior express written notice to
the other party; PROVIDED, HOWEVER, that upon such termination of
PTCO's engagement by LogiMetrics, all the provisions hereof
relating to the payment of expenses and indemnification shall
survive any such termination. Furthermore, such termination by
LogiMetrics shall cause any and all Monthly Fees for the period
commencing from the date hereof through October 31, 1996, which
shall not have been paid at the date of termination, to become
immediately due and payable. PTCO shall be entitled to the
Success Fee if, within twelve (12) months after the termination
of this Advisory Agreement for any reason, LogiMetrics, or any
affiliated party thereof, shall consummate the Transactions or
any transaction with any party or parties related to the
Acquisition Search and with whom PTCO was involved.
8. LogiMetrics and PTCO agree that PTCO shall be the exclusive
financial advisor to LogiMetrics and any partner, co-venturer or
associate of LogiMetrics that participates in the Transactions or
any reasonably similar transaction. LogiMetrics and PTCO further
agree that each will give the other party prior notice of and
consult with the other party prior to taking any significant
action in connection with or relating to the Transactions or any
of the transactions contemplated hereby.
9. The Company agrees that, during the term of this Advisory
Agreement, (a) it will provide PTCO with complete and accurate
information with respect to any matter reasonably requested by
PTCO; (b) none of the information provided to PTCO in connection
with this Advisory Agreement, or presented in any written
material provided by the Company and used by PTCO for any purpose
under this Advisory Agreement, will contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made
therein not misleading; and (c) the Company will promptly inform
PTCO of any material change or development in its business,
property or prospects.
10. This Advisory Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York and
any disputes shall be subject to the jurisdiction of the courts
of the State of New York.
<PAGE>
Mr. Richard K. Laird
April 26, 1996
Page 5
Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to PTCO the duplicate copy of this Advisory
Agreement enclosed herewith.
Yours truly,
PHIPPS, TEMAN & COMPANY, L.L.C.
By: /s/ Norman M. Phipps
------------------------
Norman M. Phipps
ACCEPTED AND AGREED
THIS 26th DAY OF APRIL, 1996
LOGIMETRICS, INC.
By: /s/ Richard K. Laird
-------------------------
Name: Richard K. Laird
Title: President
<PAGE>
<PAGE>
<PAGE>
AMENDMENT TO IRREVOCABLE PROXY
------------------------------
Amendment dated June 13, 1996 to Irrevocable Proxy dated March 7,
1996 between Phipps, Teman & Company, L.L.C. ("Proxyholder") and Murray H.
Feigenbaum ("Principal"):
WHEREAS Principal issued and delivered to Proxyholder that
certain Irrevocable Proxy dated March 7, 1996 ("Proxy");
WHEREAS Principal desires to retire from his employment with
LogiMetrics, Inc. ("Company");
WHEREAS Principal and Proxyholder desire to amend the Proxy to
provide for its continuance, notwithstanding the termination of
Principal's employment with the Company;
NOW, THEREFORE, in consideration of the foregoing, Principal and
Proxyholder agree as follows:
1. The Proxy is hereby amended in its entirety and the
following substituted therefor:
"KNOW ALL MEN BY THESE PRESENTS that the
undersigned, Murray H. Feigenbaum (the "Principal"), does
hereby make, constitute and appoint Phipps, Teman &
Company, L.L.C. (the "Proxyholder"), his true and lawful
attorney, for him and in his name, place and stead, to
act as his proxy in respect of 50% of all the shares of
common stock of LogiMetrics, Inc. ("Stock"), a Delaware
corporation (the "Corporation") owned of record by the
Principal or which are eligible to be voted by the
Principal (except as otherwise provided in this
irrevocable proxy) as stockholders of the Corporation
(the "Shares") for the following exclusive purposes: (i)
voting the Shares in favor of the election of three
persons to be designated by the Proxyholder and two
persons designated by SFM Group, Ltd. as members of the
Corporation's Board of Directors and (ii) voting the
Shares with respect to any of the following matters: (i)
mergers, divestitures and acquisitions; (ii) sale of all
or substantially all the Corporation's assets, giving and
granting to the Proxyholder full power and authority to
the premises, as fully as it might or could do if
personally present with full power of substitution,
appointment and revocation, hereby ratifying and
confirming all that its said attorneys shall do or cause
to be done by virtue hereof. Nothing contained herein
shall preclude the Principal from selling Stock.
This proxy shall not be revocable or revoked by
the Principal, may not be assigned by the Proxyholder and
is coupled with an interest and shall be binding upon the
<PAGE>
Principal and the respective heirs and personal
representatives of the Principal until December 31,
1998."
2. As amended hereby the Proxy shall remain in full force
and effect.
IN WITNESS WHEREOF, Principal and Proxyholder have executed this
Amendment to Irrevocable Proxy the date and year first above written.
Phipps, Teman & Company, L.L.C.
By: /s/ Norman M. Phipps
-------------------------
Name: Norman M. Phipps
-----------------------
Title: Principal
----------------------
/s/ Murray H. Feigenbaum
----------------------------
Murray H. Feigenbaum
- 2 -
<PAGE>
<PAGE>
AMENDMENT TO IRREVOCABLE PROXY
------------------------------
Amendment dated June 13, 1996 to Irrevocable Proxy dated March 7,
1996 between SFM Group, Ltd. ("Proxyholder") and Murray H. Feigenbaum
("Principal"):
WHEREAS Principal issued and delivered to Proxyholder that
certain Irrevocable Proxy dated March 7, 1996 ("Proxy");
WHEREAS Principal desires to retire from his employment with
LogiMetrics, Inc. ("Company");
WHEREAS Principal and Proxyholder desire to amend the Proxy to
provide for its continuance, notwithstanding the termination of
Principal's employment with the Company;
NOW, THEREFORE, in consideration of the foregoing, Principal and
Proxyholder agree as follows:
1. The Proxy is hereby amended in its entirety and the
following substituted therefor:
"KNOW ALL MEN BY THESE PRESENTS that the
undersigned, Murray H. Feigenbaum (the "Principal"), does
hereby make, constitute and appoint SFM Group, Ltd. (the
"Proxyholder"), his true and lawful attorney, for him and
in his name, place and stead, to act as his proxy in
respect of 50% of all the shares of common stock of
LogiMetrics, Inc. ("Stock"), a Delaware corporation (the
"Corporation") owned of record by the Principal or which
are eligible to be voted by the Principal (except as
otherwise provided in this irrevocable proxy) as
stockholders of the Corporation (the "Shares") for the
following exclusive purposes: (i) voting the Shares in
favor of the election of two persons designated by the
Proxyholder and three persons designated by Phipps, Teman
& Company, L.L.C., as members of the Corporation's Board
of Directors and (ii) voting the Shares with respect to
any of the following matters: (i) mergers and
acquisitions; (ii) sale of all or substantially all the
Corporation's assets, giving and granting to the
Proxyholder full power and authority to the premises, as
fully as it might or could do if personally present with
full power of substitution, appointment and revocation,
hereby ratifying and confirming all that its said
attorneys shall do or cause to be done by virtue hereof.
Nothing contained herein shall preclude the Principal
from selling Stock.
This proxy shall not be revocable or revoked by
the Principal, may not be assigned by the Proxyholder and
is coupled with an interest and shall be binding upon the
<PAGE>
Principal and the respective heirs and personal
representatives of the Principal until December 31,
1998."
2. As amended hereby the Proxy shall remain in full force
and effect.
IN WITNESS WHEREOF, Principal and Proxyholder have executed this
Amendment to Irrevocable Proxy the date and year first above written.
SFM Group, Ltd.
By: /s/ Lawrence Schneider
-------------------------
Name: Lawrence Schneider
-----------------------
Title: President
----------------------
/s/ Murray H. Feigengaum
-----------------------------
Murray H. Feigenbaum
- 2 -
<PAGE>
<PAGE>
AMENDMENT TO IRREVOCABLE PROXY
------------------------------
Amendment dated June 13, 1996 to Irrevocable Proxy dated March 7,
1996 between Phipps, Teman & Company, L.L.C. ("Proxyholder") and Jerome
Deutsch ("Principal").
WHEREAS Principal issued and delivered to Proxyholder that
certain Irrevocable Proxy dated March 7, 1996 ("Proxy");
WHEREAS Principal desires to terminate his employment with
LogiMetrics, Inc. ("Company");
WHEREAS Principal and Proxyholder desire to amend the Proxy to
provide for its continuance, notwithstanding the termination of
Principal's employment with the Company;
NOW, THEREFORE, in consideration of the foregoing, Principal and
Proxyholder agree as follows:
1. The Proxy is hereby amended in its entirety and the
following substituted therefor:
"KNOW ALL MEN BY THESE PRESENTS that the
undersigned, Jerome Deutsch (the "Principal"), does
hereby make, constitute and appoint Phipps, Teman &
Company, L.L.C. (the "Proxyholder"), his true and lawful
attorney, for him and in his name, place and stead, to
act as his proxy in respect of 50% of all the shares of
common stock of LogiMetrics, Inc. ("Stock"), a Delaware
corporation (the "Corporation") owned of record by the
Principal or which are eligible to be voted by the
Principal (except as otherwise provided in this
irrevocable proxy) as stockholders of the Corporation
(the "Shares") for the following exclusive purposes: (i)
voting the Shares in favor of the election of three
persons to be designated by the Proxyholder and two
persons designated by SFM Group, Ltd. as members of the
Corporation's Board of Directors and (ii) voting the
Shares with respect to any of the following matters: (i)
mergers, divestitures and acquisitions; (ii) sale of all
or substantially all the Corporation's assets, giving and
granting to the Proxyholder full power and authority to
the premises, as fully as it might or could do if
personally present with full power of substitution,
appointment and revocation, hereby ratifying and
confirming all that its said attorneys shall do or cause
to be done by virtue hereof. Nothing contained herein
shall preclude the Principal from selling Stock, and once
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<PAGE>
sold, the successor owner of such Stock shall not be
bound by the terms hereof.
This proxy shall not be revocable or revoked by
the Principal, may not be assigned by the Proxyholder and
is coupled with an interest and shall be binding upon the
Principal and the respective heirs and personal
representatives of the Principal until December 31,
1998."
2. As amended hereby the Proxy shall remain in full force
and effect.
IN WITNESS WHEREOF, Principal and Proxyholder have executed this
Amendment to Irrevocable Proxy the date and year first above written.
Phipps, Teman & Company, L.L.C.
By: /s/ Wade Teman
---------------------------
Name: Wade Teman
-------------------------
Title: Principal
------------------------
/s/ Jerome Deutsch
-------------------------------
Jerome Deutsch
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<PAGE>
<PAGE>
AMENDMENT TO IRREVOCABLE PROXY
------------------------------
Amendment dated June 13, 1996 to Irrevocable Proxy dated March 7,
1996 between SFM Group, Ltd. ("Proxyholder") and Jerome Deutsch
("Principal"):
WHEREAS Principal issued and delivered to Proxyholder that
certain Irrevocable Proxy dated March 7, 1996 ("Proxy");
WHEREAS Principal desires to terminate his employment with
LogiMetrics, Inc. ("Company");
WHEREAS Principal and Proxyholder desire to amend the Proxy to
provide for its continuance, notwithstanding the termination of
Principal's employment with the Company;
NOW, THEREFORE, in consideration of the foregoing, Principal and
Proxyholder agree as follows:
1. The Proxy is hereby amended in its entirety and the
following substituted therefor:
"KNOW ALL MEN BY THESE PRESENTS that the
undersigned, Jerome Deutsch (the "Principal"), does
hereby make, constitute and appoint SFM Group, Ltd. (the
"Proxyholder"), his true and lawful attorney, for him and
in his name, place and stead, to act as his proxy in
respect of 50% of all the shares of common stock of
LogiMetrics, Inc. ("Stock"), a Delaware corporation (the
"Corporation") owned of record by the Principal or which
are eligible to be voted by the Principal (except as
otherwise provided in this irrevocable proxy) as
stockholders of the Corporation (the "Shares") for the
following exclusive purposes: (i) voting the Shares in
favor of the election of two persons designated by the
Proxyholder and three persons designated by Phipps, Teman
& Company, L.L.C., as members of the Corporation's Board
of Directors and (ii) voting the Shares with respect to
any of the following matters: (i) mergers and
acquisitions; (ii) sale of all or substantially all the
Corporation's assets, giving and granting to the
Proxyholder full power and authority to the premises, as
fully as it might or could do if personally present with
full power of substitution, appointment and revocation,
hereby ratifying and confirming all that its said
attorneys shall do or cause to be done by virtue hereof.
Nothing contained herein shall preclude the Principal
from selling Stock, and once sold, the successor owner of
such Stock shall not be bound by the terms hereof.
This proxy shall not be revocable or revoked by
the Principal, may not be assigned by the Proxyholder and
<PAGE>
is coupled with an interest and shall be binding upon the
Principal and the respective heirs and personal
representatives of the Principal until December 31,
1998."
2. As amended hereby the Proxy shall remain in full force
and effect.
IN WITNESS WHEREOF, Principal and Proxyholder have executed this
Amendment to Irrevocable Proxy the date and year first above written.
SFM Group, Ltd.
By: /s/ Lawrence Schneider
-------------------------
Name: Lawrence Schneider
-----------------------
Title: President
----------------------
/s/ Jerome Deutsch
-----------------------------
Jerome Deutsch
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<PAGE>
<PAGE>
Designation of Powers, Preferences and Relative Participating, Optional,
Conversion or Other Rights and Qualifications, Limitations and
Restrictions of Series A Cumulative Convertible Redeemable Preferred
Stock:
NOW THEREFORE BE IT RESOLVED, that pursuant to the authority vested
in the Board of Directors of the Corporation by the provisions of Article
FOURTH of the Certificate of Incorporation to authorize the issuance of
one or more series of preferred stock and to fix and determine with
respect to each series the designation, powers, preferences and relative
participating, optional, conversion or other rights and qualifications,
limitations and restrictions thereof, the Corporation shall, and hereby
does authorize issuance of a series of thirty (30) shares of Series A
cumulative convertible redeemable preferred stock, having the following
designation, powers, preferences and relative participating, optional,
conversion or other rights and qualifications, limitations and
restrictions:
1. Designation. Such series of cumulative convertible redeemable
preferred stock shall be designated and known as: "Series A 12% Cumulative
Convertible Redeemable Preferred Stock" ("Preferred Stock"). The stated
value of each share of Preferred Stock shall be $50,000 ("Stated Value").
2. Dividends. The holders of shares of Preferred Stock shall be
entitled to receive, but only when and as declared by the Board of
Directors, cash dividends in an amount equal to twelve percent (12%) of
the Stated Value per share per annum, payable quarterly on such dates in
each year as shall be fixed by the Board of Directors.
Such dividends on the Preferred Stock shall be cumulative from and
after such date or dates as shall be fixed by the Board of Directors for
such Series. No dividends shall be paid or set apart for payment on the
Corporation's Common Stock, nor shall any distribution be made on the
Common Stock, other than a dividend payable in Common Stock or in stock
ranking junior to the Preferred Stock ("Junior Stock"), nor shall any
shares of Common Stock or Junior Stock be redeemed, retired or otherwise
acquired for a valuable consideration (except upon the conversion
thereof) unless full cumulative dividends on all Preferred Stock for all
dividend periods shall have been declared and the Corporation shall have
paid such dividends or shall have set aside a sum sufficient for the
payment thereof.
Any accumulation of dividends on the Preferred stock shall not bear
interest. The holders of Preferred Stock shall not be entitled to receive
any dividends thereon other than the dividends provided for herein.
Dividends on Preferred Stock shall be declared if, when and as the
Board of Directors shall in its sole discretion deem advisable, and only
from the net profits or surplus of the Corporation as such shall be fixed
and determined by the said Board of Directors. The determination of the
Board of Directors at any time of the amount of net profits or surplus
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<PAGE>
available for dividend shall be binding and conclusive on the holders of
all the stock of the Corporation at the time outstanding.
3. No preemptive rights. No holder of the Preferred Stock shall be
entitled, as of right, to purchase or subscribe for any part of the
unissued stock of the Corporation or of any stock of the Corporation to be
issued by reason of any increase of the authorized capital stock of the
Corporation, or to purchase or subscribe for any bonds, certificates of
indebtedness, debentures or other securities convertible into or carrying
options or warrants to purchase stock or other securities of the
Corporation or to purchase or subscribe for any stock of the Corporation
purchased by the Corporation or by its nominee or nominees, or to have any
other preemptive rights now or hereafter defined by the laws of the State
of Delaware.
4. Preference on liquidation, etc. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, or
any reduction in its capital resulting in any distribution of assets to
its stockholders, holders of Preferred Stock shall be entitled to receive
in cash out of the assets of the Corporation, whether from capital or from
earnings, available for distribution to its stockholders, before any
amount shall be paid to the holders of Common Stock, a sum equal to Stated
Value, plus an amount equal to all accumulated and unpaid dividends
thereon to the date fixed for payment of such distributive amount. The
purchase or redemption by the Corporation of stock of any class, in any
manner permitted by law, shall not for the purpose of this paragraph be
regarded as a liquidation, dissolution or winding up of the Corporation or
as a reduction of its capital. Neither the consolidation nor merger of
the Corporation with or into any other corporation or corporations, nor
the sale or transfer by the Corporation of all or any part of its assets,
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for the purposes of this paragraph. A dividend or
distribution to stockholders from net profits or surplus earned after the
date of any reduction of capital shall not be deemed to be a distribution
resulting from such reduction in capital. No holder of Preferred Stock
shall be entitled to receive any amounts with respect thereto upon any
liquidation, dissolution or winding up of the Corporation other than the
amounts provided for in this paragraph.
5. Redemption. The Corporation, by action of its Board of
Directors, may redeem all (but not less than all) the Preferred Stock at
any time after six (6) months from the date of issuance of the Preferred
Stock at a price equal to the Stated Value of each share redeemed , plus a
sum equal to all accumulated and unpaid dividends thereon to the date
fixed for redemption, but only if the average closing price of the
Corporation's Common Stock on the dates during the 120-day period
immediately prior to the date notice of redemption is given (as provided
herein below) such Common Stock was traded shall have been not less than
$5.00 per share, and the closing price of the Corporation's Common Stock
for each of the thirty (30) trading days immediately preceding the date of
such notice shall have been not less than $5.00 per share, adjusted in
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<PAGE>
each case for stock splits, stock dividends or other similar transactions
effecting the price of the Common Stock.
Notice of the election of the Corporation to redeem any Preferred
Stock shall be given by the Corporation by mailing a copy of such notice
in person or by registered or certified mail, return receipt requested not
less than thirty (30) business days prior to the date designated therein
as the date for such redemption, to the holders of record of the Preferred
Stock to be redeemed, addressed to them at their respective address
appearing on the books of the Corporation.
The Board of Directors shall have full power and authority, subject
to the limitations and provisions herein contained, to prescribe the
manner in which and the terms and conditions upon which the Preferred
Stock shall from time to time be redeemable. On and after the date
specified in such notice, each holder of the Preferred Stock called for
redemption as aforesaid, upon presentation and surrender at the place
designated in such notice of the certificate or certificates for such
Preferred Stock held by him, properly endorsed in blank for transfer or
accompanied by proper instruments of assignment in blank (if required by
the Corporation) and bearing all necessary stock transfer tax stamps
thereto affixed and cancelled, shall be entitled to receive therefor the
redemption price thereof.
From and after the date of redemption specified in such notice
(unless default shall be made by the Corporation in providing moneys for
the payment of the redemption price) all dividends upon the Preferred
Stock so called for redemption shall cease to accrue and, from and after
said date (unless default shall be made by the Corporation as aforesaid)
or, if the Corporation shall so elect, from and after the date specified
therefor in the notice of redemption (prior to the date of redemption so
specified) on which the Corporation shall provide the moneys for the
payment of the redemption price by depositing the amount thereof in trust
for such purpose with a bank or trust company doing business in the City,
County and State of New York, and having a capital and surplus of at least
$500,000,000, all rights of the holders of the Preferred Stock so called
for redemption as stockholders of the Corporation, excepting only the
right to receive the redemption price of such shares on and after the
redemption date without interest thereon, shall cease and determine.
In the event the rights of the holders of the Preferred Stock as
stockholders of the Corporation shall cease prior to the date of
redemption as aforesaid, the amount of dividends which would otherwise
have accrued (if such rights had not ceased) on such Preferred Stock from
the time such rights cease to the date of redemption, shall be deemed an
additional premium. Any interest accrued on funds so deposited shall be
paid to the Corporation from time to time. In case any holders of
Preferred Stock so called for redemption shall not, within six years after
such deposit, claim the amounts deposited with respect to the redemption
thereof, any such bank or trust company shall, upon demand, pay over to
the Corporation such unclaimed amounts and thereupon such bank or trust
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<PAGE>
company shall be relieved of all responsibility in respect thereof to such
holders.
All Preferred Stock at any time redeemed shall be cancelled and shall
not be reissued.
The Corporation may also from time to time, to the extent now or
hereafter permitted by law, purchase Preferred Stock at a purchase price
not exceeding the redemption price thereof. Except in accordance with an
offer made to all holders of Preferred Stock, the Corporation shall not at
any time purchase less than the whole amount of its then outstanding
Preferred Stock unless full cumulative dividends to such date of purchase
(if the same be a dividend payment date, or to the next preceding dividend
payment date if such date of purchase is not a dividend payment date) upon
all Preferred Stock outstanding, and not then to be purchased, shall have
been paid or declared and set apart for payment.
6. Conversion. The holders of shares of Preferred Stock shall have
the right, at their option, to convert such shares into shares of Common
Stock of the Corporation ("Conversion Right") on the following terms and
conditions:
(a) Each share of Preferred Stock shall be convertible, but only in
whole, at any time commencing ninety (90) days after its issuance (or, if
such share is called for redemption, at any time up to and including, but
not after, the close of business on the fifth full business day prior to
the date fixed for such redemption, unless default shall be made by the
Corporation in providing moneys for the payment of the redemption price),
into ninety-four thousand, three hundred forty (94,340) fully paid and
non-assessable shares of Common Stock of the Corporation as constituted
at the time of such conversion. Every reference herein to the Common
Stock of the Corporation (unless a different intention is expressed) shall
be to the shares of the Common Stock of the Corporation, par value $.01
per share, as such stock exists immediately after the issuance of shares
of Preferred Stock provided for hereunder, or to stock into which said
Common Stock may be changed from time to time thereafter.
(b) The Conversion Right is exercisable upon presentation and
surrender of the certificate of Preferred Stock, duly endorsed for
transfer, at the principal office to the Corporation or at any other
office or agency maintained by the Corporation for the transfer of the
Preferred Stock, whereupon the holder of such Preferred Stock, shall be
entitled, subject to the limitations herein contained, to receive in
exchange therefor a certificate or certificates for fully paid and
nonassessable shares of Common Stock, as provided above. The Preferred
Stock shall be deemed to have been converted and the person converting the
same to have become the holder of record of Common Stock, for the purpose
of receiving dividends and for all other purposes whatever, as of the date
when the certificate or certificates for such Preferred Stock are
surrendered to the Corporation as aforesaid. The Corporation shall not be
required to make any such conversion, and no surrender of the Preferred
Stock shall be effective for such purpose, while the books for the
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<PAGE>
transfer of either class of stock are closed for any purpose, but the
surrender of such shares of the Preferred Stock for conversion during any
period while such books are closed shall become effective for all purposes
of conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares of Preferred Stock were
surrendered.
7. Dilution.
(a) In case, at any time or from time to time after the date of
issuance of the Preferred Stock ("Issuance Date"), the Corporation shall
issue or sell shares of its Common Stock (other than any Common Stock
issued upon (i) conversion of the Corporation's (A) 12% Convertible
Subordinated Debentures and (B) 12% Convertible Senior Subordinated
Debentures (together "Debentures"), (ii) exercise of those certain Amended
and Restated Series A Warrants dated March 7, 1996 to purchase 600,000
shares of Common Stock ("Series A Warrants"), (iii) exercise by each of
Murray H. Feigenbaum and Jerome Deutsch of his option to purchase 100,000
shares of Common Stock at a price of $.10 per share ("Principals'
Options"), (iv) exercise of those certain Amended and Restated Series B
Warrants dated March 7, 1996 to purchase 1,500,000 shares of Common Stock
("Series B Warrants"), (v) exercise of those certain Series C Warrants
dated March 7, 1996 to purchase 2,542,380 shares of Common Stock ("Series
C Warrants"), (vi) exercise of those certain Series D Warrants dated
March 7, 1996 to purchase 2,830,200 shares of Common Stock ("Series D
Warrants"), (vii) exercise of those certain Series E Warrants dated
March 7, 1996 to purchase 1,000,000 shares of Common Stock ("Series E
Warrants" and together with the Series A, B, C and D Warrants, "Warrants")
and (viii) exercise of those certain Stock Options, dated March 7, 1996 to
purchase 1,000,000 shares of Common Stock issued to Richard K. Laird
("Laird Options" and together with the Debentures, the Warrants, the
Principals' Options and the Laird Options, the "Subject Securities") for a
consideration per share less than $.27 per share ("Trigger Price"), or, if
a Pro Forma Adjusted Trigger Price (hereinafter defined) shall be in
effect as provided below in this paragraph 7, then less than such Pro
Forma Adjusted Trigger Price per share, then and in each such case the
holder of Preferred Stock, upon the conversion hereof as provided in
paragraph (a) hereof, shall be entitled to receive, in lieu of the shares
of Common Stock theretofore receivable upon the conversion of the
Preferred Stock, a number of shares of Common Stock determined by (a)
dividing the Trigger Price by a Pro Forma Adjusted Trigger Price per share
to be computed as provided below in this paragraph 7, and (b) multiplying
the resulting quotient by the number of shares of Common Stock into which
the Preferred Stock is convertible. A Pro Forma Adjusted Trigger Price
per share shall be the price computed (to the nearest cent, a fraction of
half cent or more being considered a full cent):
by dividing (i) the sum of (x) the result obtained by
multiplying the number of shares of Common Stock of the
Corporation outstanding immediately prior to such issue or
sale by the Trigger Price (or, if a Pro Forma Adjusted
Trigger Price shall be in effect, by such Price), and (y)
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<PAGE>
the consideration, if any, received by the Corporation upon
such issue or sale, by (ii) the number of shares of Common
Stock of the Corporation outstanding immediately after such
issue or sale.
For the purpose of this paragraph 7:
(1) In case the Corporation splits its Common Stock or
shall declare any dividend, or make any other distribution,
upon any stock of the Corporation of any class payable in
Common Stock, or in any stock or other securities directly
or indirectly convertible into or exchangeable for Common
Stock (any such stock or other securities being hereinafter
called "Convertible Securities"), such split, declaration
or distribution shall be deemed to be an issue or sale (as
of the record date for such split, dividend or other
distribution), without consideration, of such Common Stock
or such Convertible Securities, as the case may be.
(2) In case the Corporation shall issue or sell any
Convertible Securities other than the Subject Securities,
there shall be determined the price per share for which
Common Stock is issuable upon the conversion or exchange
thereof, such determination to be made by dividing (a) the
total amount received or receivable by the Corporation as
consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the
conversion or exchange thereof, by (b) the maximum number
of shares of Common Stock of the Corporation issuable upon
the conversion or exchange of all such Convertible
Securities.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such Pro Forma Adjusted Trigger Price) as of the date of
such issue or sale, then such issue or sale shall be deemed to be an issue
or sale for cash (as of the date of issue or sale of such Convertible
Securities) of such maximum number of shares of Common Stock at the price
per share so determined, provided that, if such Convertible Securities
shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration, if any,
payable to the Corporation, or in the rate of exchange, upon the
conversion or exchange thereof, the Pro Forma Adjusted Trigger Price per
share shall, forthwith upon any such increase becoming effective, be
readjusted to reflect the same, and provided, further, that upon the
expiration of such rights of conversion or exchange of such Convertible
Securities, if any thereof shall not have been exercised, the Pro Forma
Adjusted Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only shares of Common Stock so issued or sold
were those issued or sold upon the conversion or exchange of such
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<PAGE>
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Corporation upon such conversion or
exchange, plus the consideration, if any, actually received by the
Corporation for the issue or sale of all such Convertible Securities which
shall have been converted or exchanged.
(b) In case the Corporation shall grant any rights or options to
subscribe for, purchase or otherwise acquire Common Stock of any class
other than the Subject Securities, there shall be determined the price per
share for which Common Stock is issuable upon the exercise of such rights
or options, such determination to be made by dividing (a) the total
amount, if any, received or receivable by the Corporation as consideration
for the granting of such rights or options, plus the minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the exercise of such rights or options, by (b) the maximum number of
shares of Common Stock issuable upon the exercise of such rights or
options.
If the price per share so determined shall be less than the
Trigger Price (or, if a Pro Forma Adjusted Trigger Price shall be in
effect, less than such Price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options)
of such maximum number of shares of Common Stock at the price per share
so determined, provided that, if such rights or options shall by their
terms provide for an increase or increases, with the passage of time, in
the amount of additional consideration, if any, payable to the Corporation
upon the exercise thereof, the Pro Forma Adjusted Trigger Price per share
shall, forthwith upon any such increase becoming effective, be readjusted
to reflect the same, and provided, further, that upon the expiration of
such rights or options, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment
been made on the basis that the only shares of Common Stock so issued or
sold were those issued or sold upon the exercise of such rights or options
and that they were issued or sold for the consideration actually received
by the Corporation upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting of all such rights
or options, whether or not exercised.
(c) In case the Corporation shall grant any rights or options to
subscribe for, purchase or otherwise acquire Convertible Securities, such
Convertible Securities shall be deemed, for the purposes of
paragraph 7(a)(2) above, to have been issued or sold for the total amount
received or receivable by the Corporation as consideration for the
granting of such rights or options plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
exercise of such rights or options, provided that, upon the expiration of
such rights or options, if any thereof shall not have been exercised, the
Pro Forma Adjusted Trigger Price per share shall forthwith be readjusted
and thereafter be the price which it would have been had an adjustment
been made upon the basis that the only Convertible Securities so issued or
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<PAGE>
sold were those issued or sold upon the exercise of such rights or options
and that they were issued or sold for the consideration actually received
by the Corporation upon such exercise, plus the consideration, if any,
actually received by the Corporation for the granting of all such rights
or options, whether or not exercised.
(d) In case any shares of stock or other securities, other than
Common Stock of the Corporation, shall at any time be receivable upon the
conversion of Preferred Stock, and in case any additional shares of such
stock or any additional such securities (or any stock or other securities
convertible into or exchangeable for any such stock or securities) shall
be issued or sold for a consideration per share such as to dilute the
purchase rights evidenced by Preferred Stock, then and in each such case
the Pro Forma Adjusted Trigger Price per share shall forthwith be
adjusted, substantially in the manner provided for above in this
paragraph 7, so as to protect the holder of Preferred Stock against the
effect of such dilution.
(e) In case any shares of Common Stock or Convertible Securities or
any rights or options to subscribe for, purchase or otherwise acquire any
Common Stock or Convertible Securities shall be issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, after deducting any expenses
incurred and any underwriting or similar commissions, compensation or
concessions paid or allowed by the Corporation in connection with such
issue or sale.
(f) In case any shares of Common Stock or Convertible Securities or
any rights or options to subscribe for, purchase or otherwise acquire any
Common Stock or Convertible Securities shall be issued or sold for a
consideration other than cash (or a consideration which includes cash, if
any cash constitutes a part of the assets of a corporation or business
substantially all of the assets of which are being received a such
consideration) then, for the purpose of this paragraph 7(f), the Board of
Directors of the Corporation shall promptly determine the fair value of
such consideration, and such Common Stock, Convertible Securities, rights
or options shall be deemed to have been issued or sold on the date of such
determination in good faith. Such value shall not be more than the amount
at which such consideration is recorded in the books of the Corporation
for accounting purposes except in the case of an acquisition accounted for
on a pooling of interest basis. In case any Common Stock or Convertible
Securities or any rights or options to subscribe for, purchase or
otherwise acquire any Common Stock or Convertible Securities shall be
issued or sold together with other stock or securities or other assets of
the Corporation for a consideration which covers both, the Board of
Directors of the Corporation shall promptly determine what part of the
consideration so received is to be deemed to be the consideration for the
issue or sale of such Common Stock or Convertible Securities or such
rights or options.
The Corporation covenants and agrees that, should any
determination of fair value of consideration or of allocation of
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<PAGE>
consideration be made by the Board of Directors of the Corporation,
pursuant to this paragraph 7(f), it will, not less than seven (7) days
after any and each such determination, deliver to the holder of the
Preferred Stock a certificate signed by the President or a Vice President
and the Treasurer or an Assistant Treasurer of the Corporation reciting
such value as thus determined and setting forth the nature of the
transaction for which such determination was required to be made, the
nature of any consideration, other than cash, for which Common Stock,
Convertible Securities, rights or options have been or are to be issued,
the basis for its valuation, the number of shares of Common Stock which
have been or are to be issued, and a description of any Convertible
Securities, rights or options which have been or are to be issued,
including their number, amount and terms.
(g) In case the Corporation shall take a record of the holders of
shares of its stock of any class for the purpose of entitling them (a) to
receive a dividend or a distribution payable in Common Stock or in
Convertible Securities, or (b) to subscribe for, purchase or otherwise
acquire Common Stock or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the Common Stock
issued or sold or deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution, or the date of
the granting of such rights of subscription, purchase or other
acquisition, as the case may be.
(h) The number of shares of Common Stock outstanding at any given
time shall include shares issuable in respect of scrip certificates issued
in lieu of fractions of shares of Common Stock, but shall exclude shares
in the treasury of the Corporation.
(i) Following each computation or readjustment of a Pro Forma
Adjusted Trigger Price as provided in this paragraph 7, the newly computed
or adjusted Pro Forma Adjusted Trigger Price shall remain in effect until
a further computation or readjustment thereof is required by this
paragraph 7.
(j) In case at any time or from time to time after the Issuance Date
the holders of the Common Stock of the Corporation of any class (or any
other shares of stock or other securities at the time receivable upon the
conversion of Preferred Stock) shall have received, or, on or after the
record date fixed for the determination of eligible stockholders, shall
have become entitled to receive:
(A) other or additional stock or other securities or property
(other than cash) by way of dividend;
(B) any cash paid or payable out of capital or paid-in surplus
or surplus created as a result of a revaluation of property by way of
dividend; or
(C) other or additional (or less) stock or other securities or
property (including cash) by way of stock-split, spin-off, split-off,
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<PAGE>
split-up, reclassification, combination of shares or similar
corporate rearrangement;
(other than additional shares of Common Stock issued to holders of
Common Stock as a stock dividend or stock-split, adjustments in respect of
which shall be covered by the provisions of this paragraph 7), then in
each case the holder of the Preferred Stock, upon the conversion thereof
as provided in paragraph 6, shall be entitled to receive, in lieu of, or
in addition to, as the case may be, the shares theretofore receivable upon
the conversion of the Preferred Stock, the amount of stock or other
securities or property (including cash in the cases referred to in clauses
(B) and (C) above) which such holder would hold on the date of such
exercise if, on the Issuance Date, he, she or it had been the holder of
record of the number of shares of Common Stock of the Corporation into
which the Preferred Stock is convertible and had thereafter, during the
period from the Issuance Date to and including the date of such
conversion, retained such shares and/or all other or additional (or less)
stock or other securities or property (including cash in the cases
referred to in clauses (B) and (C) above) receivable by him, her or it as
aforesaid during such period, giving effect to all adjustments called for
during such period by paragraphs 7(a) and 7(k) hereof.
(k) In case of any reorganization of the Corporation (or any other
corporation the stock or other securities of which are at the time
deliverable on the conversion of the Preferred Stock) after the date
hereof, or in case, after such date, the Corporation (or any such other
corporation) shall consolidate with or merge into another corporation or
convey all or substantially all its assets to another corporation, then
and in each such case the holder of the Preferred Stock, upon the
conversion thereof as provided in paragraph 6 hereof, at any time after
the consummation of such reorganization, consolidation, merger or
conveyance, shall be entitled to receive the stock or other securities or
property to which such holder would have been entitled upon such
consummation if such holder had converted the Preferred Stock immediately
prior thereto, all subject to further adjustments as provided for herein;
in each such case, the terms of the Preferred Stock shall be applicable to
the shares of stock or other securities or property receivable upon the
conversion of the Preferred Stock after such consummation.
(l) The Corporation will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Preferred Stock, but will at all
times in good faith assist in the carrying out of all such terms and in
the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder hereof against dilution or other
impairment. Without limiting the generality of the foregoing, the
Corporation will not increase the par value of any shares of stock
receivable upon the conversion of the Preferred Stock above the amount
payable therefor upon such exercise, and at all times will take all such
action as may be necessary or appropriate in order that the Corporation
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may validly and legally issue fully paid and non-assessable stock upon the
conversion of the Preferred Stock.
(m) In each case of an adjustment in the number of shares of Common
Stock or other stock, securities or property receivable on the conversion
of the Preferred Stock, at the request of the holder of the Preferred
Stock the Corporation at its expense shall promptly cause independent
public accountants of recognized standing, selected by the Corporation, to
compute such adjustment in accordance with the terms of the Preferred
Stock and prepare a certificate setting forth such adjustment and showing
in detail the facts upon which such adjustment is based, including a
statement of (A) the consideration received or to be received by the
Corporation for any additional shares issued or sold or deemed to have
been issued or sold, (B) the number of shares of Common Stock outstanding
or deemed to be outstanding and (C) the Pro Forma Adjusted Trigger Price.
The Corporation will forthwith mail a copy of each such certificate to the
holder of the Preferred Stock.
(n) In case:
(A) the Corporation shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable
upon the conversion of the Preferred Stock) for the purpose of
entitling or enabling them to receive any dividend (other than a cash
or stock dividend at the same rate as the rate of the last cash or
stock dividend theretofore paid) or other distribution, or to
exercise any preemptive right pursuant to the Corporation's charter,
or to receive any right to subscribe for or purchase any shares of
stock of any class or any other securities, or to receive any other
right; or
(B) of any capital reorganization of the Corporation, any
reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into another
corporation, or any conveyance of all or substantially all of the
assets of the Corporation to another corporation; or
(C) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, and in each such case, the Corporation will mail or cause to be
mailed to the holder of the Preferred Stock a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose
of such dividend, distribution or right, and stating the amount and
character of such dividend, distribution or right, or (ii) the date on
which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take place, and
the times, if any is to be fixed, as of which the holders of record of
Common Stock (or such other stock or securities at the time deliverable
upon the exercise of the Preferred Stock) shall be entitled to exchange
their shares of Common Stock of any class (or such other stock or
securities) for reclassification, consolidation, merger, conveyance,
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dissolution, liquidation or winding up or (iii) the amount and character
of the stock or other securities proposed to be issued or granted, the
date of such proposed issuance or grant and the persons or class of
persons to whom such stock or other securities are to be offered, issued
or granted. Such notice shall be mailed at least thirty (30) days prior
to the date therein specified.
(o) The Corporation shall, so long as any of the Preferred Stock is
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Preferred Stock, such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of the
Preferred Stock, then outstanding. The Corporation shall from time to
time increase its authorized Common Stock and take such other action as
may be necessary to permit the issuance from time to time of the shares of
Common Stock, as fully paid and nonassessable shares, upon the conversion
of the Preferred Stock, as herein provided.
(p) The Corporation shall pay any and all taxes which may be imposed
upon it with respect to the issuance and delivery of Common Stock upon
the conversion of Preferred Stock as herein provided. The Corporation
shall not be required in any event to pay any transfer or other taxes by
reason of the issuance of such Common Stock in names other than those in
which the Preferred Stock surrendered for conversion may stand, and no
such conversion or issuance of Common Stock shall be made unless and
until the person requesting such issuance has paid to the Corporation the
amount of any such tax, or has established to the satisfaction of the
Corporation and its transfer agent, if any, that such tax has been paid.
Upon any conversion of Preferred Stock, as herein provided, no adjustment
or allowance shall be made for dividends on the Preferred Stock, so
converted, and all rights to dividends, if any, shall cease and be deemed
satisfied, but nothing in this sentence shall be deemed to relieve the
Corporation from its obligation to pay any dividends which shall have been
declared and shall be payable to holders of Preferred Stock, of record as
of a date prior to such conversion even though the payment date for such
dividend is subsequent to the date of conversion.
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(q) Preferred Stock surrendered upon conversion thereof shall not be
reissued and no Preferred Stock shall be issued in lieu thereof or in
exchange thereof.
8. Voting rights of preferred. Except as herein or by law expressly
provided, the Preferred Stock shall have no right or power to vote on
any question or in any proceeding or to be represented at or to receive
notice of any meeting of the stockholders. Notwithstanding the
provisions of the preceding sentence, so long as any shares of Preferred
Stock are outstanding, the Corporation shall not, without the affirmative
vote at a meeting (the notice of which shall state the general character
of the matters to be submitted thereat), or the written consent with or
without a meeting, of the holders of at least two thirds (66 2/3%) of the
then outstanding shares of Preferred Stock:
(a) increase the authorized amount of Preferred Stock, or authorize
or create; or increase the authorized amount of, any additional class of
stock ranking prior to or on a parity with the Preferred Stock as to
dividends or assets; or authorize or create, or increase the authorized
amount of, any class of stock or obligations convertible into or
evidencing the right to purchase any class of stock ranking prior to or on
a parity with the Preferred Stock as to dividends or assets; or
(b) amend, alter or repeal any of the provisions of the Certificate
of Incorporation or any of the rights, preferences or powers of the
outstanding Preferred Stock fixed herein or determined by the Board of
Directors for any series of Preferred Stock as herein authorized; so as
adversely to affect the rights, preferences or powers of the preferred
stock or its holders; provided, however, that if any such amendment,
alteration or repeal would adversely affect the rights, preferences or
powers of outstanding shares of preferred stock of any particular series
without correspondingly affecting the rights, preferences or powers of the
outstanding shares of all series, then like vote or consent by the holders
of at least two thirds (66 2/3%) of the Preferred Stock of that particular
series at the time outstanding shall also be necessary for effecting or
validating any such amendment, alteration or repeal; or
(c) sell, lease or convey all, or substantially all, of its property
or business; or
(d) merge or consolidate with or into any other corporation or
corporations, unless the corporation surviving or resulting from such
merger or consolidation will have after such merger or consolidation no
class of stock either authorized or outstanding ranking prior to or on a
parity with the Preferred Stock as to dividends or assets except the same
number of shares of Preferred Stock with the same rights, preferences and
powers as the preferred stock of the Corporation authorized and
outstanding immediately preceding such merger or consolidation, and unless
each holder of Preferred Stock at the time of such merger or consolidation
and in connection therewith shall continue to hold (in the case of a
merger in which the Corporation is the surviving corporation) his shares
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<PAGE>
of Preferred Stock, or (in the case of a consolidation or a merger of the
Corporation into some other corporation) shall receive the same number of
shares of Preferred Stock, with the same rights, preferences and powers,
of such resulting Corporation; or
(e) amend or repeal any of the provisions of this paragraph 8.
9. Registration Rights. Within 90 days after the date of issuance
of the Preferred Stock, the Corporation shall prepare and file a
registration statement ("Registration Statement") with the Securities and
Exchange Commission ("SEC") covering the shares of Common Stock issuable
upon conversion of the Preferred Stock ("Registrable Securities"), and
will use its best efforts to cause the Registration Statement to become
effective within ninety (90) days following the date of such filing. Once
effective, the Corporation shall keep the Registration Statement effective
for a period of seven (7) years from the date it is declared effective by
the SEC.
In the event (i) the registration Statement is not filed by the
Corporation with the SEC on or prior to ninety (90) days after the date of
issuance of the Preferred Stock or (ii) the Registration Statement has not
been declared effective by the SEC on or prior to one hundred-eighty (180)
days after the date of issuance of the Preferred Stock, the annual
dividend rate on the Preferred Stock shall be increased to thirteen and
one-half percent (13 1/2%) per annum for the first three (3) months
immediately following the expiration of such ninety (90) day period or one
hundred-eighty (180) day period, as the case may be, and by an additional
one-half percent (1/2%) per annum at the beginning of each subsequent
thirty (30) day period thereafter, until such time as the requirements of
clause (i) or (ii) above, as the case may be, have been satisfied, at
which time such dividend rate shall revert to the rate that otherwise
would be in effect but for the operation of this sentence; PROVIDED,
HOWEVER, that in no event shall the dividend rate applicable to the
Preferred Stock exceed seventeen percent (17%) per annum pursuant to this
sentence.
Except as otherwise expressly stated herein, the following
provisions shall be applicable to the Registration Statement:
(a) The Corporation will use its best efforts to cause the
Registration Statement to become effective as promptly as possible within
the time periods specified above, and if any stop order shall be issued by
the SEC in connection therewith to use its reasonable efforts to obtain
the removal of such order. Following the effective date of the
Registration Statement, the Corporation shall, upon the request of the
holder, forthwith supply such reasonable number of copies of the
Registration Statement, preliminary prospectus and prospectus meeting the
requirements of the Securities Act, and other documents necessary or
incidental to a public offering of the Registrable Securities, as shall be
reasonably requested by the holder to permit the holder to make a public
distribution of its, his or her Registrable Securities. The Corporation
will use its reasonable efforts to qualify the Registrable Securities for
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<PAGE>
sale in such states as the holder of Registrable Securities shall
reasonably request, provided that no such qualification will be required
in any jurisdiction where, solely as a result thereof, the Corporation
would be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such
jurisdiction. The obligations of the Corporation hereunder with respect
to the holder's Registrable Securities are expressly conditioned on the
holder's furnishing to the Corporation such appropriate information
concerning the holder, the holder's Registrable Securities and the terms
of the holder's offering of such Registrable Securities as the Corporation
may reasonably request.
(b) The Corporation shall pay all expenses incurred in complying
with the provisions of this paragraph 9, including, without limitation,
all registration and filing fees (including all expenses incident to
filing with the National Association of Securities Dealers, Inc.),
printing expenses, fees and disbursements of counsel to the Corporation,
securities law and blue sky fees and expenses and the expenses of any
regular and special audits incident to or required by any such
registration. All underwriting discounts and selling commissions
applicable to the sales of the Registrable Securities, and any state or
federal transfer taxes payable with respect to the sales of the
Registrable Securities and all fees and disbursements of counsel for the
holder, if any, in each case arising in connection with registration of
the Registrable Securities shall be payable by the holder.
(c) In connection with the registration of the Registrable
Securities pursuant to this paragraph 9, the Corporation shall indemnify
and hold harmless the holder, its affiliates, officers, directors,
partners, employees, agents and representatives, each person, if any, who
controls the holder within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any person claiming by or through any of
them (collectively, the "Indemnified Persons") from and against all
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) which arise out of or are based upon any untrue statement of any
material fact contained in the Registration Statement or alleged untrue
statement, under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or arise out of or are
based upon the omission to state therein a material fact required to be
stated therein or necessary to make the statements made therein, in light
of the circumstances under which they are made, not misleading, or any
violation by the Corporation of the Securities Act, the Exchange Act or
state securities or blue sky laws applicable to the Corporation and
relating to action or inaction required of the Corporation in connection
with such registration or qualification under such state securities or
blue sky laws; and will reimburse the Indemnified Persons for any legal or
any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the Corporation will not be liable in any
such case to any Indemnified Person to the extent that any such loss,
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<PAGE>
claim, damage or liability arises out of or is based upon an untrue
statement or omission made in the Registration Statement, said preliminary
prospectus or said final prospectus or said amendment or supplement or any
document incident thereto in reliance upon and in conformity with written
information furnished to the Corporation by or on behalf of the holder.
(d) The holder will indemnify and hold harmless the Corporation and
each person, if any, who controls the Corporation within the meaning of
the Securities Act or the Exchange Act, each officer of the Corporation
who signs the Registration Statement and each director of the Corporation
from and against any and all such losses, claims, damages or liabilities
arising from any untrue statement in, or omission from, the Registration
Statement, any such preliminary or final prospectus, amendment, or
supplement or document incident thereto if the statement or omission in
respect of which such loss, claim, damage or liability is asserted was
made in reliance upon and in conformity with information furnished in
writing to the Corporation by or on behalf of the holder for use in
connection with the preparation of the Registration Statement or such
prospectus or amendment or supplement thereof.
(e) The reimbursements required by subparagraphs 9(c) and (d) shall
be made by periodic payments during the course of the investigation or
defense as and when bills are received or expenses incurred; PROVIDED,
HOWEVER, that to the extent that an indemnified party receives periodic
payments for legal or other expenses during the course of an investigation
or defense, and such party subsequently received payments for such
expenses from any other parties to the proceeding, such payments shall be
used by the indemnified party to reimburse the indemnifying party for such
periodic payments. Any party which proposes to assert the right to be
indemnified under subparagraphs 9(c) or (d) will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim is to be made against any indemnified
party hereunder, notify each such indemnifying party of the commencement
of such action, suit or proceeding, enclosing a copy of all papers served,
but the failure to so notify such indemnifying party of any such action,
suit or proceeding shall not relieve the indemnifying party from any
obligation which it may have to any indemnified party hereunder unless and
only to the extent that the indemnifying party is prejudiced by said lack
of notice. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying party
of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expense,
other than reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified
party shall have the right to employ its own counsel in any such action,
but the reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party, when and as incurred, unless (A) the
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employment of counsel by such indemnified party has been authorized by the
indemnifying party, (B) the indemnified party has reasonably concluded
(based on advice of counsel), that there may be legal defenses available
to it that are different from or in addition to those available to the
indemnifying party, (C) the indemnified party shall have reasonably
concluded (based on advice of counsel) that there may be a conflict of
interest between the indemnifying party and the indemnified party in the
conduct of defense of such action (in which case the indemnifying party
shall not have the right to direct the defense of such action on behalf of
the indemnified party), or (D) the indemnifying party shall not in fact
have employed counsel to assume the defense of such action within 15 days
after receipt of notice of such action. An indemnifying party shall not
be liable for any settlement or any action or claim effected without its
consent.
(f) If the indemnification provided for in this paragraph 9 is
unavailable to any indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the actions
that resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth herein, any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(g) The Corporation has determined that it would not be just and
equitable if contribution pursuant to subparagraph 9(f) were determined by
pro rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding any other provision
hereof, in no event shall the contribution obligation of the indemnifying
party be greater in amount than the excess of (A) the dollar amount of
proceeds received by the indemnifying party upon the sale of the
securities giving rise to such contribution obligation over (B) the dollar
amount of any damages that the indemnifying party has otherwise been
required to pay by reason of the untrue or alleged untrue statement or
omission or alleged omission giving rise to such obligation. No person
guilty of fraudulent misrepresentation (within the meaning of
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<PAGE>
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(h) Neither the filing of the Registration Statement by the
Corporation nor the making of any request for prospectuses by the holder
shall impose upon the holder any obligation to sell his, her or its
Registrable Securities.
(i) The holder, upon receipt of notice from the Corporation that an
event has occurred which requires a post-effective amendment to the
Registration Statement or a supplement to the prospectus included therein,
shall promptly discontinue the sale of his, her or its Registrable
Securities until the holder receives a copy of a supplemented or amended
prospectus from the Corporation, which the Corporation shall provide as
soon as practicable after such notice.
10. Replacement of certificates. Upon receipt of evidence
reasonably satisfactory to the Corporation of the loss, theft, destruction
or mutilation of the certificate of Preferred Stock and (in the case of
loss, theft or destruction) upon delivery of an indemnity agreement (with
surety if reasonably required) in an amount reasonably satisfactory to it,
or (in the case of mutilation) upon surrender and cancellation thereof,
the Corporation will issue, in lieu thereof, a new certificate of like
tenor.
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<PAGE>
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT, EXCEPT IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO LOGIMETRICS, INC., QUALIFIES
AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
LOGIMETRICS, INC.
Common Stock Purchase Warrant
Series F
LOGIMETRICS, INC. (the "Company"), a Delaware corporation, hereby
certifies that, for value received, _________________, or assigns, is
entitled, subject to the terms set forth below, to purchase from the
Company _____________________________________(________) fully paid and
non-assessable shares of Common Stock of the Company, at a purchase price,
subject to the provisions of Paragraph 3 hereof, of fifty cents ($.50) per
share (the "Purchase Price") at any time prior to ____________ , ____.
The number and character of such shares are subject to adjustment as
provided below, and the term "Common Stock" shall mean, unless the context
otherwise requires, the stock or other securities or property at the time
deliverable upon the exercise of this Warrant. This Warrant is herein
called the "Warrant".
1. EXERCISE OF WARRANT. The purchase rights evidenced by
this Warrant shall be exercised by the holder hereof ("Holder")
surrendering this Warrant, with the form of subscription at the end hereof
duly executed by such Holder, to the Company at its office in Plainview,
New York, accompanied by payment (in cash or by certified or official bank
check). This Warrant may be exercised for less than the full number of
shares of Common Stock at the time called for hereby, in which case the
number of shares receivable upon the exercise of this Warrant as a whole,
and the sum payable upon the exercise of this Warrant as a whole, shall be
proportionately reduced. Upon any such partial exercise, the Company at
its expense will forthwith issue to the Holder hereof a new Warrant or
Warrants of like tenor calling for the number of shares of Common Stock as
to which rights have not been exercised, such Warrant or Warrants to be
issued in the name of the Holder hereof or his nominee.
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the Purchase
Price, and in any event within five (5) days thereafter, the Company, at
its expense, will cause to be issued in the name of and delivered to the
Holder hereof a certificate or certificates for the number of fully paid
and non-assessable shares or other securities or property to which such
Holder shall be entitled upon such exercise, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash
equal to such fraction multiplied by the then current market value of one
full share.
<PAGE>
3. ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN
PURCHASE PRICE. In case, at any time or from time to time after the date
of issuance of this Warrant ("Issuance Date"), the Company shall issue or
sell shares of its Common Stock (other than any Common Stock issuable upon
(i) conversion of the Company's Amended and Restated 12% Convertible
Subordinated Debentures dated as of July 14, 1995 ("1995 Debentures"),
(ii) exercise of those certain Amended and Restated Series A Warrants
dated March 7, 1996 to purchase 600,000 shares of Common Stock ("Series A
Warrants"), (iii) exercise by each of Murray H. Feigenbaum and Jerome
Deutsch (the "Principals") of their right to purchase 100,000 shares of
Common Stock at a price of $.10 per share ("Principals' Options"), (iv)
exercise of those certain Amended and Restated Series B Warrants dated
March 7, 1996 to purchase 1,500,000 shares of Common Stock ("Series B
Warrants"), (v) conversion of the Company's 12% Convertible Senior
Subordinated Debentures dated March 7, 1996 ("Senior Subordinated
Debentures"), (vi) exercise of those certain Series C Warrants dated
March 7, 1996 to purchase an aggregate of 2,542,380 shares of Common Stock
("Series C Warrants"), (vii) exercise of those certain Series D Warrants
dated March 7, 1996 to purchase an aggregate of 2,830,200 shares of Common
Stock ("Series D Warrants"), (viii) exercise of those certain Stock
Options, dated March 7, 1996 to purchase 1,000,000 shares of Common Stock
issued to Richard K. Laird ("Laird Options"), (ix) exercise of those
certain Series E Warrants dated March 7, 1996 to purchase an aggregate of
1,000,000 shares of Common Stock ("Series E Warrants") and (x) conversion
of the Company's 30 shares of Series A 12% Cumulative Convertible
Redeemable Preferred Stock ("Preferred Stock" and together with the 1995
Debentures, the Senior Subordinated Debentures, the Series A, B, C, D and
E Warrants (collectively, the "Warrants"), the Laird Options, the
Principals' Options and any shares of Common Stock issuable upon
conversion or exercise thereof, the "Subject Securities")), for a
consideration per share less than thirty cents ($.30) per share (the
"Trigger Price") (or, if a Pro Forma Trigger Price shall be in effect as
provided below in this Paragraph 3, then less than such Pro Forma Trigger
Price per share), then and in each such case the Holder of this Warrant,
upon the exercise hereof as provided in Paragraph 1 hereof, shall be
entitled to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of Common
Stock determined by (a) dividing the Trigger Price by a Pro Forma Trigger
Price per share to be computed as provided below in this Paragraph 3, and
(b) multiplying the resulting quotient by the number of shares of Common
Stock called for on the face of this Warrant. A Pro Forma Trigger Price
per share shall be the price computed (to the nearest cent, a fraction of
half cent or more being considered a full cent):
by dividing (i) the sum of (x) the
result obtained by multiplying the
number of shares of Common Stock of the
Company outstanding immediately prior to
such issue or sale by the Trigger Price
(or, if a Pro Forma Trigger Price shall
be in effect, by such Price), and (y)
the consideration, if any, received by
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the Company upon such issue or sale, by
(ii) the number of shares of Common
Stock of the Company outstanding
immediately after such issue or sale.
For the purpose of this Paragraph 3:
3.1. Stock Splits, Dividends, etc., in Common Stock or
Convertible Securities. In case the Company splits its Common Stock or
shall declare any dividend, or make any other distribution, upon any stock
of the Company of any class payable in Common Stock, or in any stock or
other securities directly or indirectly convertible into or exchangeable
for Common Stock (any such stock or other securities being hereinafter
called "Convertible Securities"), such split, declaration or distribution
shall be deemed to be an issue or sale (as of the record date for such
split, dividend or other distribution), without consideration, of such
Common Stock or such Convertible Securities, as the case may be.
3.2. Issuance or Sale of Convertible Securities. In case the
Company shall issue or sell any Convertible Securities other than the
Subject Securities, there shall be determined the price per share for
which Common Stock is issuable upon the conversion or exchange thereof,
such determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of shares of Common Stock of
the Company issuable upon the conversion or exchange of all such
Convertible Securities.
If the price per share so determined shall be less than
the Trigger Price (or, if a Pro Forma Trigger Price shall be in effect,
less than such Price) as of the date of such issue or sale, then such
issue or sale shall be deemed to be an issue or sale for cash (as of the
date of issue or sale of such Convertible Securities) of such maximum
number of shares of Common Stock at the price per share so determined,
provided that, if such Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate
of exchange, upon the conversion or exchange thereof, the Pro Forma
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only shares of Common Stock so issued or sold
were those issued or sold upon the conversion or exchange of such
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
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for the issue or sale of all such Convertible Securities which shall have
been converted or exchanged.
3.3. Grant of Rights or Options for Common Stock. In case the
Company shall grant any rights or options to subscribe for, purchase or
otherwise acquire Common Stock of any class other than the Subject
Securities, there shall be determined the price per share for which Common
Stock is issuable upon the exercise of such rights or options, such
determination to be made by dividing (a) the total amount, if any,
received or receivable by the Company as consideration for the granting of
such rights or options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, by (b) the maximum number of shares of Common Stock
issuable upon the exercise of such rights or options.
If the price per share so determined shall be less than
the Trigger Price (or, if a Pro Forma Trigger Price shall be in effect,
less than such Price) as of the date of such issue or sale, then the
granting of such rights or options shall be deemed to be an issue or sale
for cash (as of the date of the granting of such rights or options) of
such maximum number of shares of Common Stock at the price per share so
determined, provided that, if such rights or options shall by their terms
provide for an increase or increases, with the passage of time, in the
amount of additional consideration, if any, payable to the Company upon
the exercise thereof, the Pro Forma Trigger Price per share shall,
forthwith upon any such increase becoming effective, be readjusted to
reflect the same, and provided, further, that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the Pro
Forma Trigger Price per share shall forthwith be readjusted and thereafter
be the price which it would have been had an adjustment been made on the
basis that the only shares of Common Stock so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
3.4. Grant of Rights or Options for Convertible Securities. In
case the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Convertible Securities, such Convertible
Securities shall be deemed, for the purposes of subparagraph 3.2. above,
to have been issued or sold for the total amount received or receivable by
the Company as consideration for the granting of such rights or options
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of such rights or options,
provided that, upon the expiration of such rights or options, if any
thereof shall not have been exercised, the Pro Forma Trigger Price per
share shall forthwith be readjusted and thereafter be the price which it
would have been had an adjustment been made upon the basis that the only
Convertible Securities so issued or sold were those issued or sold upon
the exercise of such rights or options and that they were issued or sold
for the consideration actually received by the Company upon such exercise,
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plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised.
3.5. Dilution in Case of Other Stock or Securities. In case any
shares of stock or other securities, other than Common Stock of the
Company, shall at any time be receivable upon the exercise of this
Warrant, and in case any additional shares of such stock or any additional
such securities (or any stock or other securities convertible into or
exchangeable for any such stock or securities) shall be issued or sold for
a consideration per share such as to dilute the purchase rights evidenced
by this Warrant, then and in each such case the Pro Forma Trigger Price
per share shall forthwith be adjusted, substantially in the manner
provided for above in this Paragraph 3, so as to protect the Holder of
this Warrant against the effect of such dilution.
3.6. Expenses, etc., Deducted. In case any shares of Common
Stock or Convertible Securities or any rights or options to subscribe for,
purchase or otherwise acquire any Common Stock or Convertible Securities
shall be issued or sold for cash, the consideration received therefor
shall be deemed to be the amount received by the Company therefor, after
deducting any expenses incurred and any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale.
3.7. Determination of Consideration. In case any shares of
Common Stock or Convertible Securities or any rights or options to
subscribe for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold for a consideration other
than cash (or a consideration which includes cash, if any cash constitutes
a part of the assets of a corporation or business substantially all of the
assets of which are being received a such consideration) then, for the
purpose of this Paragraph 3, the Board of Directors of the Company shall
promptly determine the fair value of such consideration, and such Common
Stock, Convertible Securities, rights or options shall be deemed to have
been issued or sold on the date of such determination in good faith. Such
value shall not be more than the amount at which such consideration is
recorded in the books of the Company for accounting purposes except in the
case of an acquisition accounted for on a pooling of interest basis. In
case any Common Stock or Convertible Securities or any rights or options
to subscribe for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold together with other stock
or securities or other assets of the Company for a consideration which
covers both, the Board of Directors of the Company shall promptly
determine what part of the consideration so received is to be deemed to be
the consideration for the issue or sale of such Common Stock or
Convertible Securities or such rights or options.
The Company covenants and agrees that, should any
determination of fair value of consideration or of allocation of
consideration be made by the Board of Directors of the Company, pursuant
to this subparagraph 3.7, it will, not less than seven (7) days after any
and each such determination, deliver to the Holder of this Warrant a
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certificate signed by the President or a Vice President and the Treasurer
or an Assistant Treasurer of the Company reciting such value as thus
determined and setting forth the nature of the transaction for which such
determination was required to be made, the nature of any consideration,
other than cash, for which Common Stock, Convertible Securities, rights or
options have been or are to be issued, the basis for its valuation, the
number of shares of Common Stock which have been or are to be issued, and
a description of any Convertible Securities, rights or options which have
been or are to be issued, including their number, amount and terms.
3.8. Record Date Deemed Issue Date. In case the Company shall
take a record of the Holders of shares of its stock of any class for the
purpose of entitling them (a) to receive a dividend or a distribution
payable in Common Stock or in Convertible Securities, or (b) to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale
of the Common Stock issued or sold or deemed to have been issued or sold
upon the declaration of such dividend or the making of such other
distribution, or the date of the granting of such rights of subscription,
purchase or other acquisition, as the case may be.
3.9. Shares Considered Outstanding. The number of shares of
Common Stock outstanding at any given time shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares of
Common Stock, but shall exclude shares in the treasury of the Company.
3.10. Duration of Pro Forma Trigger Price. Following each
computation or readjustment of a Pro Forma Trigger Price as provided in
this Paragraph 3, the newly computed or adjusted Pro Forma Trigger Price
shall remain in effect until a further computation or readjustment thereof
is required by this Paragraph 3.
4. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
RECLASSIFICATIONS, ETC. In case at any time or from time to time after
the Issuance Date the Holders of the Common Stock of the Company of any
class (or any other shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received, or, on
or after the record date fixed for the determination of eligible
stockHolders, shall have become entitled to receive:
(a) other or additional stock or other securities or
property (other than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-
in surplus or surplus created as a result of a
revaluation of property by way of dividend; or
(c) other or additional (or less) stock or other
securities or property (including cash) by way of
stock-split, spin-off, split-off, split-up,
reclassification, combination of shares or
similar corporate rearrangement;
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(other than additional shares of Common Stock issued to Holders of Common
Stock as a stock dividend or stock-split, adjustments in respect of which
shall be covered by the provisions of Paragraph 3 hereof), then in each
case the Holder of this Warrant, upon the exercise hereof as provided in
Paragraph 1 hereof, shall be entitled to receive, in lieu of, or in
addition to, as the case may be, the shares theretofore receivable upon
the exercise of this Warrant, the amount of stock or other securities or
property (including cash in the cases referred to in clauses (b) and (c)
above) which such Holder would hold on the date of such exercise if, on
the Issuance Date, he had been the Holder of record of the number of
shares of Common Stock of the Company called for on the face of this
Warrant and had thereafter, during the period from the Issuance Date to
and including the date of such exercise, retained such shares and/or all
other or additional (or less) stock or other securities or property
(including cash in the cases referred to in clauses (b) and (c) above)
receivable by him as aforesaid during such period, giving effect to all
adjustments called for during such period by Paragraphs 3 and 5 hereof.
5. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER,
ETC. In case of any reorganization of the Company (or any other
corporation the stock or other securities of which are at the time
deliverable on the exercise of this Warrant) after the date hereof, or in
case, after such date, the Company (or any such other corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all its assets to another corporation, then and in each such
case the Holder of this Warrant, upon the exercise hereof as provided in
Paragraph 1 hereof, at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had
exercised this Warrant immediately prior thereto, all subject to further
adjustments as provided in Paragraphs 3 and 4 hereof; in each such case,
the terms of this Warrant shall be applicable to the shares of stock or
other securities or property receivable upon the exercise of this Warrant
after such consummation.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by
amendment of its charter or through reorganization, consolidation, merger,
dissolution, sale of assets or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereof against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company will not increase the par value of any shares of
stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise, and at all times will take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable stock upon the
exercise of this Warrant.
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7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case
of an adjustment in the number of shares of Common Stock or other stock,
securities or property receivable on the exercise of this Warrant, at the
request of the Holder of this Warrant the Company at its expense shall
promptly cause independent public accountants of recognized standing,
selected by the Company, to compute such adjustment in accordance with the
terms of this Warrant and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is
based, including a statement of (a) the consideration received or to be
received by the Company for any additional shares issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding and (c) the Pro Forma Trigger
Price. The Company will forthwith mail a copy of each such certificate to
the Holder of this Warrant.
8. NOTICES OF RECORD DATE, ETC. In case:
(a) the Company shall take a record of the Holders of
its Common Stock (or other stock or securities at
the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling
them to receive any dividend (other than a cash
or stock dividend at the same rate as the rate of
the last cash or stock dividend theretofore paid)
or other distribution, or to exercise any
preemptive right pursuant to the Company's
charter, or to receive any right to subscribe for
or purchase any shares of stock of any class or
any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the
Company, any consolidation or merger of the
Company with or into another corporation, or any
conveyance of all or substantially all of the
assets of the Company to another corporation; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed
to the Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the date on which such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up is to take place, and the times, if
any is to be fixed, as of which the Holders of record of Common Stock (or
such other stock or securities at the time deliverable upon the exercise
of this Warrant) shall be entitled to exchange their shares of Common
Stock of any class (or such other stock or securities) for
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reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up or (iii) the amount and character of the stock
or other securities proposed to be issued or granted, the date of such
proposed issuance or grant and the persons or class of persons to whom
such stock or other securities ar to be offered, issued or granted. Such
notice shall be mailed at least thirty (30) days prior to the date therein
specified.
9. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF
WARRANTS. The Company will at all times reserve and keep available,
solely for insurance and delivery upon the exercise of this Warrant and
other similar Warrants, such shares of Common Stock and other stock,
securities and property as from time to time shall be issuable upon the
exercise of this Warrant and all other similar Warrants at the time
outstanding.
10. REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company 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 in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. REMEDIES. The Company stipulates that the remedies at
law of the Holder of this Warrant in the event of any default by the
Company in its performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that the same may be
specifically enforced.
12. NEGOTIABILITY, ETC. This Warrant is issued upon the
following terms, to all of which each taker or owner hereof consents and
agrees:
(a) Title to this warrant may be transferred by
endorsement (by the Holder hereof executing the
form of assignment at the end hereof including
guaranty of signature) and delivery in the same
manner as in the case of a negotiable instrument
transferable by endorsement and delivery.
(b) Any person in possession of this Warrant properly
endorsed is authorized to represent himself as
absolute owner hereof and is granted power to
transfer absolute title hereto by endorsement and
delivery hereof to a bona fide purchaser hereof
for value; each prior taker or owner waives and
renounces all of his equities or rights in this
Warrant in favor of every such bona fide
purchaser, and every such bona fide purchaser
shall acquire title hereto and to all rights
represented hereby.
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<PAGE>
(c) Until this Warrant is transferred on the books of
the Company, the Company may treat the registered
Holder of this Warrant as the absolute owner
hereof for all purposes without being affected by
any notice to the contrary.
13. SUBDIVISION OF RIGHTS. This Warrant (as well as any new
warrants issued pursuant to the provisions of this paragraph) is
exchangeable, upon the surrender hereof by the Holder hereof, at the
principal office of the Company for any number of new warrants of like
tenor and date representing in the aggregate the right to subscribe for
and purchase the number of shares of Common Stock of the Company which may
be subscribed for and purchased hereunder.
14. REGISTRATION RIGHTS.
a. Registration. As soon as reasonably practicable
after the date hereof, the Company will file a registration statement
("Registration Statement") with the Securities and Exchange Commission
("SEC") covering the Warrants and shares of Common Stock issuable upon
conversion of the 1995 Debentures, the Senior Subordinated Debentures and
the Preferred Stock, and upon exercise of the Warrants and the Laird
Options as well as Common Stock owned by the Principals and issuable upon
exercise of the Principals' Options (collectively "Registrable
Securities"), and will use its best efforts to cause the Registration
Statement to become effective on or prior to the ninetieth day after such
filing and to keep the Registration Statement effective for a period of
seven years from the date it is declared effective by the SEC.
b. Additional Terms. Except as otherwise expressly
stated herein, the following provisions shall be applicable to the
Registration Statement:
(i) The Company will use its best efforts to
cause the Registration Statement to become effective as promptly
as possible, and if any stop order shall be issued by the SEC in
connection therewith to use its reasonable efforts to obtain the
removal of such order. Following the effective date of the
Registration Statement, the Company shall, upon the request of
the Holder, forthwith supply such reasonable number of copies of
the Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Act, and other documents
necessary or incidental to a public offering of the Registrable
Securities, as shall be reasonably requested by the Holder to
permit the Holder to make a public distribution of its, his or
her Registrable Securities. The Company will use its reasonable
efforts to qualify the Registrable Securities for sale in such
states as the Holder of Registrable Securities shall reasonably
request, provided that no such qualification will be required in
any jurisdiction where, solely as a result thereof, the Company
would be subject to service of general process or to taxation or
qualification as a foreign corporation doing business in such
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<PAGE>
jurisdiction. The obligations of the Company hereunder with
respect to the Holder's Registrable Securities are expressly
conditioned on the Holder's furnishing to the Company such
appropriate information concerning the Holder, the Holder's
Registrable Securities and the terms of the Holder's offering of
such Registrable Securities as the Company may reasonably
request.
(ii) The Company shall pay all expenses incurred
in complying with the provisions of this Paragraph 14, including,
without limitation, all registration and filing fees (including
all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel to the Company, securities law and blue
sky fees and expenses and the expenses of any regular and special
audits incident to or required by any such registration. All
underwriting discounts and selling commissions applicable to the
sales of the Registrable Securities, and any state or federal
transfer taxes payable with respect to the sales of the
Registrable Securities and all fees and disbursements of counsel
for the Holder, if any, in each case arising in connection with
registration of the Registrable Securities shall be payable by
the Holder.
(iii) In connection with the registration of the
Registrable Securities pursuant to this Paragraph 14, the Company
shall indemnify and hold harmless the Holder, its affiliates,
officers, directors, partners, employees, agents and
representatives, each person, if any, who controls the Holder
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any person claiming by or
through any of them (collectively, the "Indemnified Persons")
from and against all losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arising out of or are
based upon any untrue statement of any material fact contained in
the Registration Statement or alleged untrue statement, under
which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are
based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made,
not misleading, or any violation by the Company of the Securities
Act, the Exchange Act or state securities or blue sky laws
applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and
will reimburse the Indemnified Persons for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company will not
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be liable in any such case to any Indemnified Person to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission made in the
Registration Statement, said preliminary prospectus or said final
prospectus or said amendment or supplement or any document
incident thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the
Holder.
(iv) The Holder will indemnify and hold harmless
the Company and each person, if any, who controls the Company
within the meaning of the Securities Act or the Exchange Act,
each officer of the Company who signs the Registration Statement
and each director of the Company from and against any and all
such losses, claims, damages or liabilities arising from any
untrue statement in, or omission from, the Registration
Statement, any such preliminary or final prospectus, amendment,
or supplement or document incident thereto if the statement or
omission in respect of which such loss, claim, damage or
liability is asserted was made in reliance upon and in conformity
with information furnished in writing to the Company by or on
behalf of the Holder for use in connection with the preparation
of the Registration Statement or such prospectus or amendment or
supplement thereof.
(v) The reimbursements required by clauses
(iii) and (iv) shall be made by periodic payments during the
course of the investigation or defense as and when bills are
received or expenses incurred; PROVIDED, HOWEVER, that to the
extent that an indemnified party receives periodic payments for
legal or other expenses during the course of an investigation or
defense, and such party subsequently received payments for such
expenses from any other parties to the proceeding, such payments
shall be used by the indemnified party to reimburse the
indemnifying party for such periodic payments. Any party which
proposes to assert the right to be indemnified under clause (iii)
or (iv) will, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of
which a claim is to be made against any indemnified party
hereunder, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy
of all papers served, but the failure to so notify such
indemnifying party of any such action, suit or proceeding shall
not relieve the indemnifying party from any obligation which it
may have to any indemnified party hereunder unless and only to
the extent that the indemnifying party is prejudiced by said lack
of notice. In case any such action, suit or proceeding shall be
brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent that
it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
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satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other
expense, other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the
right to employ its own counsel in any such action, but the
reasonable fees and expenses of such counsel shall be at the
expense of such indemnified party, when and as incurred, unless
(A) the employment of counsel by such indemnified party has been
authorized by the indemnifying party, (B) the indemnified party
has reasonably concluded (based on advice of counsel), that there
may be legal defenses available to it that are different from or
in addition to those available to the indemnifying party, (C) the
indemnified party shall have reasonably concluded (based on
advice of counsel) that there may be a conflict of interest
between the indemnifying party and the indemnified party in the
conduct of defense of such action (in which case the indemnifying
party shall not have the right to direct the defense of such
action on behalf of the indemnified party), or (D) the
indemnifying party shall not in fact have employed counsel to
assume the defense of such action within 15 days after receipt of
notice of such action. An indemnifying party shall not be liable
for any settlement or any action or claim effected without its
consent.
(vi) If the indemnification provided for in this
Paragraph 14 is unavailable to any indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the
actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth herein, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
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(vii) The Company and the Holder agree that it
would not be just and equitable if contribution pursuant to
clause (vi) were determined by pro rata allocation or by any
other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding any other provision hereof, in no
event shall the contribution obligation of the Holder be greater
in amount than the excess of (A) the dollar amount of proceeds
received by the Holder upon the sale of the securities giving
rise to such contribution obligation over (B) the dollar amount
of any damages that the Holder has otherwise been required to pay
by reason of the untrue or alleged untrue statement or omission
or alleged omission giving rise to such obligation. No person
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
(viii) Neither the filing of the Registration
Statement by the Company pursuant to this Agreement nor the
making of any request for prospectuses by the Holder shall impose
upon the Holder any obligation to sell his, her or its
Registrable Securities.
(ix) The Holder, upon receipt of notice from the
Company that an event has occurred which requires a post-
effective amendment to the Registration Statement or a supplement
to the prospectus included therein, shall promptly discontinue
the sale of his, her or its Registrable Securities until the
Holder receives a copy of a supplemented or amended prospectus
from the Company, which the Company shall provide as soon as
practicable after such notice.
15. MAILING OF NOTICES, ETC. All notices and other
communications from the Company to the Holder of this Warrant shall be
mailed by first-class certified mail, postage prepaid, to the address
furnished to the Company in writing by the last Holder of this Warrant who
shall have furnished an address to the Company in writing.
16. HEADINGS, ETC. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect the
meaning hereof.
17. CHANGE, WAIVER, ETC. Neither this Warrant nor any term
hereof may be changed, waived, discharged or terminated orally but only by
an instrument in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought.
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18. GOVERNING LAW. This Series F Warrant shall be construed
and enforced in accordance with the laws of the State of New York.
LOGIMETRICS, INC.
By:____________________
Dated: ___________, 1996
Attest:
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[To be signed only upon exercise of Warrant]
To LOGIMETRICS, INC.:
The undersigned, the Holder of the within Series F Warrant,
hereby irrevocably elects to exercise the purchase right represented by
such Warrant for, and to purchase thereunder, _______________ shares of
Common Stock of LOGIMETRICS, INC. and herewith makes payment of
$___________ therefor, and requests that the certificates for such shares
be issued in the name of, and be delivered to, ______________, whose
address is ________________________.
Dated:
_____________________
__________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
Address:
_____________________________
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<PAGE>
[To be signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ______________________ the right represented by the within
Series F Warrant to purchase the _______________ shares of the Common
Stock of LOGIMETRICS, INC. to which the within Series F Warrant relates,
and appoints ______________________ attorney to transfer said right on the
books of LOGIMETRICS, INC. with full power of substitution in the
premises.
Dated:
_______________________________ _______________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant)
Address: _____________________
In the presence of
____________________________
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<PAGE>
SETTLEMENT AND OPTION AGREEMENT
Agreement made as of this 14th day of September, 1996, by
and between RICHARD K. LAIRD, having an address of 1831 Celeste Drive,
Wall, New Jersey 07719 (hereinafter referred to as "Laird"), and
LOGIMETRICS, INC., a corporation organized and existing under the laws of
the State of Delaware, having an address of 121-03 Dupont Street,
Plainview, New York 11803 (hereinafter referred to as "LogiMetrics").
W I T N E S S E T H:
WHEREAS, Laird and LogiMetrics entered into that certain
Employment Agreement, effective as of March 7, 1996 ("Employment
Agreement"); and
WHEREAS, pursuant to the terms of the Employment
Agreement, Laird received a one-time signing bonus of $200,000 ("Bonus");
and
WHEREAS, pursuant to the terms of the Employment
Agreement, Laird received stock options to purchase 1,000,000 shares of
Common Stock of LogiMetrics in accordance with the vesting schedule set
forth in the Employment Agreement; and
WHEREAS, at or about the commencement of Laird's
employment with LogiMetrics, Laird purchased one unit for the sum of
$50,000 consisting of one share of $50,000 stated value 12% Cumulative
Convertible Redeemable Preferred Stock of LogiMetrics (the "Preferred
Stock") accompanied by one (1) seven year Series D warrant (the "Warrant")
to purchase 94,340 shares of Common Stock of LogiMetrics at a price of
$0.01 per share, which Preferred Stock and Warrant and other rights and
benefits deriving therefrom shall be referred to collectively herein as
the "Unit"; and
WHEREAS, on May 30, 1996, Laird terminated his employment
relationship with LogiMetrics, claiming "Good Reason" as that term is
defined in the Employment Agreement, resigning as Chairman, President,
Chief Executive Officer and Director of LogiMetrics; and
WHEREAS, LogiMetrics is neither admitting nor conceding
that Laird's termination of employment was either in accordance with the
terms of the Employment Agreement or was for "Good Reason" as that term is
defined in the Employment Agreement; and
WHEREAS, the parties are desirous of settling any claims
or disputes that may arise out of Laird's relationship with LogiMetrics or
the termination thereof, consistent with the terms and the conditions of
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises
and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, it is agreed as follows:
<PAGE>
1. SIGNING BONUS - Laird shall retain the Bonus.
2. UNIT OWNERSHIP - Laird shall retain the Unit.
3. STOCK OPTION GRANTS
(a) NUMBER OF SHARES - Of the stock options for
the purchase of 1,000,000 shares of Common Stock of LogiMetrics granted to
Laird pursuant to Article 7(d) of the Employment Agreement, Laird shall
retain the right to exercise stock options to purchase 125,000 shares,
which vested immediately upon the effective date of the Employment
Agreement ("Original Options"). In addition, LogiMetrics hereby grants
Laird stock options ("Additional Options") to purchase an additional
100,000 shares of Common Stock of LogiMetrics, which shall vest
immediately. The Original Options and the Additional Options for the
purchase of a total of 225,000 shares of Common Stock in LogiMetrics
(hereinafter collectively referred to as "Options") shall be exercisable
by Laird or his personal representative at Forty Cents ($0.40) per share
in accordance with the terms hereof. All other stock options referred to
in the Employment Agreement are hereby canceled.
(b) DURATION OF STOCK OPTIONS - The Options for
the purchase of 225,000 shares of Common Stock of LogiMetrics referred to
in subparagraph (a) must be exercised by Laird or his personal
representative on or before 5 P.M. New York City time on the third
anniversary date of the execution of this Agreement by the last of the
parties hereto (the "Effective Date").
(c) PAYMENT OF EXERCISE PRICE OF OPTIONS -
Payments for the exercise of any of the Options must be:
(i) In cash;
(ii) By certified, bank or cashier's
check;
(iii) By surrender of other shares of
Common Stock of LogiMetrics which have a fair market value (which shall be
determined by the weighted average closing sales price on the principal
exchange or system on which the shares of Common Stock are then listed or
quoted for the last three (3) consecutive days the stock was traded
preceding the exercise date) on the date of surrender equal to the
exercise prices of the shares as to which the Option is being exercised;
or
(iv) By conversion of Options into shares by
surrender of Options representing a specified number of shares whereupon
Laird shall be entitled to receive the number of shares ("Y") equal to the
quotient obtained by dividing ((A-B)(X)) by A, where:
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<PAGE>
A = the fair market value as defined in
paragraph (iii) above of one share of Common Stock on the date of
conversion;
B = the exercise price, as adjusted to
the date of exercise in accordance with the terms hereof, of one share of
Common Stock under Option; and
X = the number of shares of Common Stock
issuable upon exercise of the Option represented by the option for a
specific number of shares of Common Stock being surrendered as if
exercised for cash (if the above calculation results in a negative number,
then no shares shall be issued or issuable upon conversion of this
Option).
(d) PARTIAL EXERCISE OF OPTIONS PERMITTED - The Options
granted to Laird hereunder may be exercised in whole or in part at any
time and from time to time until the third anniversary of the Effective
Date. Each partial exercise of the Option shall be for not less that One
Thousand (1,000) shares or the remaining number of shares subject to the
Option if less, and shall be for whole shares only.
(e) HOW OPTIONS MAY BE EXERCISED - The option is
exercisable by a written notice signed by Laird and delivered to
LogiMetrics at 121-03 DuPont Street, Plainview, New York 11803, attention
of the Office of the President, signifying Laird's election to exercise
the Option. The notice must state the number of shares of Common Stock as
to which the Option is being exercised, must contain a statement by Laird
(in a form acceptable to LogiMetrics) that such shares are being acquired
by Laird for investment and not with a present view to their distribution
or resale and must be accompanied by payment as provided in subparagraph
(c) hereof. If a notice of the exercise of the Option is given by a
person or persons other than Laird, LogiMetrics may require as a condition
to the exercise of the Option, the submission to LogiMetrics of
appropriate proof of the right of such person or persons to exercise the
Option. Certificates for shares of Common Stock so purchased will be
issued as soon as practicable. LogiMetrics, however, shall not be
required to issue or deliver a certificate for any shares until it has
complied with all requirements of the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules of any stock
exchange or quotation system on which LogiMetrics Common Stock may then be
listed or authorized for inclusion and all applicable state laws in
connection with the issuance or sale of such shares or the listing of such
shares on said Exchange. Until the issuance of the certificate for such
shares, neither Laird nor such other person as may be entitled to exercise
this Option shall have the rights of a stockholder with respect to the
shares subject to the Options.
(f) NON-TRANSFERABILITY OF OPTIONS - The Options shall
not be transferable except by Will or the laws of descent or distribution
and may be exercised during Laird's lifetime only by Laird.
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<PAGE>
(g) ADJUSTMENTS UPON CHANGE IN CAPITALIZATION - In the
event that the number of issued and outstanding shares of Common Stock is
hereafter increased without receipt of consideration by LogiMetrics
(provided, however, that conversion of any convertible securities of
LogiMetrics shall not be deemed to have been "without receipt of
consideration") decreased, changed into or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made by LogiMetrics in
the number and kind of shares as to which any unexercised Options are then
exercisable. Any such adjustments shall be made without change in the
aggregate purchase price applicable to the unexercised Options but with a
corresponding adjustment in the price for each share or other unit of any
security covered by the Options. In making any adjustment pursuant to
this subparagraph (g), any fractional shares shall be disregarded.
(h) REGISTRATION OF OFFER AND SALE OF SHARES - In the
event that any of LogiMetrics shares of stock or other equity shall be
registered with the Securities and Exchange Commission under either the
Securities Act of 1933, as amended, or the Securities and Exchange Act of
1934, as amended, or any other similar legislation, LogiMetrics will use
its best efforts to register the shares of stock of LogiMetrics issued to
or to be issued to Laird pursuant to the Options at no cost to Laird;
provided, however, that Laird shall pay all commissions or similar
expenses attributable to the sale of his shares of Common Stock. In the
event that Laird elects to retain the services of any professional to
review any registration by LogiMetrics, he shall do so at his own cost and
expense.
4. COOPERATION - The parties further agree that in
the event that either party is contacted by any regulatory body, federal,
state or local governing body or administrative agency in connection with
any inquiry or investigation arising from Laird's employment with
LogiMetrics or the termination of said employment or the circumstances
existing at the time thereof, each party hereby agrees to notify the other
of said contact, inquiry or investigation, and further agrees to cooperate
with each other to the extent permitted by law.
5. SECRECY OBLIGATION - Without the express prior
written consent of LogiMetrics, Laird shall not disclose or use at any
time any secret or confidential, information, knowledge or data of
LogiMetrics. LogiMetrics and Laird acknowledge that Laird has or will
upon the execution of this Agreement return all notes, memoranda,
notebooks, drawing or other documents, compiled by or delivered to Laird
concerning any product, apparatus or process manufactured, used or
developed or investigated by LogiMetrics during the period of Laird's
employment with LogiMetrics and which contains any secret or confidential
information. Notwithstanding the foregoing, nothing in this Agreement
shall prohibit Laird's use of information (including, but not limited to
ideas, concepts, know-how, techniques and methodologies): (a) previously
known to him; (b) independently developed by him; (c) acquired by him from
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<PAGE>
a third party which is not to Laird's knowledge under an obligation to
LogiMetrics not to disclose such information; or (d) which is or becomes
publicly available through no breach of Laird of this Agreement.
6. NON-DEFAMATION - For a period of three (3) years
from the date hereof, the parties shall observe the following obligations:
Laird shall not intentionally or knowingly defame LogiMetrics, its
officers, directors, employees, agents, or representatives nor shall
LogiMetrics, its officers, directors, employees, agents or representative
intentionally or knowingly defame Laird.
7. (a) RELEASE BY LAIRD - Laird hereby, for
himself and for his personal representatives, agents, heirs and assigns
forever and unconditionally remises, releases and discharges LogiMetrics,
its affiliates and their respective past, present and future officers,
partners, directors, agents, employees, managers, and their respective
successors, assigns, heirs and representatives (hereinafter collectively
referred to in this paragraph 7(a) as "Releasees") of and from any and all
obligations, liabilities, claims, actions, causes of action, proceedings,
covenants, contracts, controversies, agreements, promises, grievances and
demands of whatever nature, in law or in equity, which he, his personal
representatives, agents, heirs or assigns had, now have or may ever have
against any of the Releasees, whether accrued, absolute, contingent,
unliquidated or otherwise and whether, known or unknown, matured or not
matured on the date hereof, and which have or may have arisen out of any
transaction or state of facts existing prior to the date hereof, including
but not limited to claims arising under Title VII of the Civil Rights Act
of 1964, the Age Discrimination in Employment Act, the Older Workers
Benefit Protection Act of 1990, the Americans with Disabilities Act, the
Employee Retirement Income Security Act, the Equal Pay Act, Fair Labor
Standards Act, all applicable state and local labor and employment laws,
including but not limited to the New York Human Rights Law, the New Jersey
Law Against Discrimination, breach of contract, wrongful discharge,
defamation or intentional infliction of emotional distress. Laird, on his
own behalf and on behalf of his personal representatives, agents, heirs
and assigns, further agrees not to institute any action, claim or
complaint of whatsoever kind or nature in any federal, state or local
court or other governmental agency or administrative tribunal relating to
any claim which has been released hereby. This release is for any relief
no matter how called, including but not limited to compensatory damages,
punitive damages, pain and suffering or attorneys' fees. Nothing
contained in this paragraph shall release or affect any rights of Laird
pursuant to or under the terms of this Agreement.
(b) INDIVIDUAL RELEASES - Without limiting the
generality of paragraph 7(a) hereof, Laird shall execute and deliver to
LogiMetrics releases in the form attached hereto as Exhibit A for delivery
by LogiMetrics to the following individuals and as of the Effective Date
of this Agreement: Jerome Deutsch, Murray H. Feigenbaum, Steven D.
Feigenbaum, Mark Fisher, Alfred Mendelsohn, Norman M. Phipps, Henry N.
Schneider, Lawrence I. Schneider and Cerberus Partners, L.P.
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<PAGE>
8. (a) RELEASE BY LOGIMETRICS - LogiMetrics, on
its own behalf and on behalf of its affiliates, and their past, present
and future officers, partners, directors, agents, employees, managers and
their respective successors, assigns, heirs and representatives hereby,
forever and unconditionally remises, releases and discharges Laird, his
personal representatives, agents, heirs and assigns (hereinafter
collectively referred to in this paragraph 8(a) as "Releasees"), of and
from any and all obligations, liabilities, claims, actions, causes of
action, proceedings, covenants, contracts, controversies, agreements,
promises, grievances and demands of whatever nature, in law or in equity,
which LogiMetrics, its affiliates, and their past, present and future
officers, partners, directors, agents, employees, managers and their
respective successors, assigns, heirs and representatives had, now has or
may ever have against any of the Releasees, whether accrued, absolute,
contingent, unliquidated or otherwise and whether, known or unknown,
matured or not matured on the date hereof, and which have or may have
arisen out of any transaction or state of facts existing prior to the date
hereof, including but not limited to claims of breach of contract,
defamation, or intentional infliction of emotional distress. LogiMetrics,
on its own behalf and on behalf of its affiliates, and their past, present
and future officers, partners, directors, agents, employees, managers and
their respective successors, assigns, heirs and representatives further
agrees not to institute any action, claim or complaint of whatsoever kind
or nature in any federal, state or local court or other governmental
agency or administrative tribunal relating to any claim which has been
released hereby. This release is for any relief, no matter how called,
including but not limited to compensatory damages, punitive damages, pain
and suffering or attorneys' fees. Nothing contained in this paragraph
shall release or affect any rights of LogiMetrics pursuant to or under the
terms of this Agreement.
(b) INDIVIDUAL RELEASES - Without limiting
the generality of paragraph 8(a) hereof, LogiMetrics shall cause the
following to execute and deliver to Laird, and LogiMetrics shall deliver
to Laird releases in the form attached hereto as Exhibit B dated as of the
Effective Date of this Agreement from the following: Jerome Deutsch,
Murray H. Feigenbaum, Steven D. Feigenbaum, Mark Fisher, Alfred
Mendelsohn, Norman M. Phipps, Henry N. Schneider, Lawrence I. Schneider
and Cerberus Partners, L.P.
9. INDEMNIFICATION - The Indemnity Agreement, dated
as of March 7, 1996 by and between LogiMetrics and Laird shall continue in
full force and effect in accordance with the terms of such Indemnity
Agreement as though fully set forth in this Agreement.
10. ENTIRE AGREEMENT - This Agreement contains the
entire understanding between the parties and supersedes any prior
understanding or agreement between them, including but not limited to the
Employment Agreement. There are no representations, agreements,
arrangements, understandings, oral or written, between the parties hereto
relating to the subject matter of this Agreement other than those which
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<PAGE>
are expressed herein either directly or indirectly or by reference. Any
amendments to this Agreement must be in writing, signed by the parties.
11. NOTICES - Whenever under the provisions of this
Agreement, notice is to be given, it shall be in writing and shall be
served personally or mailed, postage prepaid, by registered or certified
mail, return receipt requested or sent by Federal Express or by similar
overnight delivery service and addressed to the parties at their addresses
set forth herein, or to such other address as any party shall hereafter
designate by notice to the other. Notices to Laird shall be sent to 1831
Celeste Drive, Wall, New Jersey 07719. Copies of any notices sent to
Laird shall also be sent to his counsel, Ronald P. Mealey, Esq., 1360
Hamburg Turnpike, 8 Breckenridge, Wayne, New Jersey 07470-4060. Copies of
any notices sent to LogiMetrics shall be sent to LogiMetrics, Attention:
Norman Phipps, 121-03 Dupont Street, Plainview, New York 11803. Copies of
any notices sent to LogiMetrics shall also be sent to its counsel, Paul M.
Colwell, Esq., Wolff & Samson, 5 Becker Farm Road, Roseland, New Jersey
07068. Each such notice so mailed shall be deemed to have been given
seven (7) days after the date of mailing and if sent by overnight delivery
service on the next business day. Any notice given hereunder shall state
in reasonable detail the factual basis underlying such notice.
12. GOVERNING LAW AND ARBITRATION
(a) This Agreement shall be governed by the
laws of the State of New Jersey, without regard to the conflicts of law
principles thereof. The parties agree that service of process may be
effected by certified or registered mail, return receipt requested, or by
regular mail if certified or regular mail is refused.
(b) ARBITRATION - All disputes or
controversies or claims arising out of or relating to this Agreement,
including, but not limited to, a breach thereof or a refusal to perform
the whole or part of this Agreement shall be submitted to arbitration
pursuant to the Revised Statues of New Jersey, Section 2A:24-1, et seq.
and in accordance with the following terms and conditions.
(i) Any arbitration proceedings shall
be conducted in Newark, New Jersey before three (3) arbitrators selected
by Laird and LogiMetrics pursuant to the Rules of Arbitration of the
American Arbitration Association;
(ii) If either party elects to proceed
to arbitration hereunder, that party shall first have filed a demand for
expedited arbitration, to be conducted within thirty (30) days of the
filing and shall have served a written notice on the other party hereto by
certified mail, demanding such arbitration and specifying the facts and
circumstances which are the basis for its action, including the names of
witnesses and copies of any documents to be relied upon;
(iii) The expense of the arbitration
proceeding shall be shared equally by the parties and each party shall
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<PAGE>
bear its own legal expenses and those of the witnesses to the hearing;
provided, however, that if Laird prevails on the merits of such
arbitration, LogiMetrics shall reimburse Laird for Laird's arbitration
expenses in connection with such arbitration proceedings, including
reasonable attorneys' fees.
(iv) At the request of either party all
arbitration proceedings shall be recorded by a certified court reporter
and each party shall have the right in any such arbitration proceedings to
full discovery and subpoena witnesses in accordance with the discovery
rules and procedures of the Courts of the State of New Jersey, including
the discovery rules and procedures of the United States District Court for
the District of New Jersey and each party hereto and the arbitrators shall
have the right to avail themselves of the benefits and shall observe the
obligations under such rules and procedures under the supervision of the
arbitrators or a majority of them and in accordance with the time frames
and constraints set forth by the arbitrators or a majority of them
conducting the arbitration;
(v) The arbitrators' decision shall be
issued within ten (10) days of the close of the hearing, shall be in
writing and shall contain findings of fact, conclusions of law and the
reasons for the arbitration decision and shall be signed by all
arbitrators or the majority decision shall be signed by a majority of the
arbitrators and the minority decision shall be signed by the dissenting
arbitrator;
(vi) Judgment upon any award rendered
may be entered in any court having appropriate jurisdiction and the
parties hereto expressly consent to having all such judicial proceedings
occur in the Superior Court of the State of New Jersey, Essex County; and
(vii) Such arbitration proceedings
shall be subject to appeal to the Courts of the State of New Jersey,
including initially the Superior Court of the State of New Jersey in Essex
County and either party to the arbitration shall be entitled to appeal on
the basis of errors of law or findings of fact that are not supported by
the evidence and such other grounds as may be appropriate for the appeal
of the arbitration decision, including failure to follow the procedures
set forth in this paragraph.
13. BINDING EFFECT/VALIDITY - This Agreement shall
be binding upon and inure to the benefit of the parties, their successors
and assigns. If any provision of this Agreement, or the application of
such provision shall be held to be invalid, the remainder of this
Agreement shall not be affected thereby.
14. FURTHER DOCUMENTS AND ACTIONS - The parties
hereto agree to execute such documents, if any, and take such action, if
any as may be required to carry out the intent of this Agreement.
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<PAGE>
15. REPRESENTATIONS AND PARTIES - The parties
acknowledge that each has been represented by counsel of its own choosing
with regard to this Agreement and the subject matter hereof.
16. COUNTERPARTS - This Agreement may be executed in
several counterparts, each of which shall constitute the agreement among
the parties as if all signatures were appended to the original instrument.
The parties acknowledge that there is no need for all to execute the same
copy of this Agreement.
17. WAIVERS - The failure of a party to insist upon
strict adherence to any term of this Agreement on any occasion shall not
be considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
18. HEADINGS AND SYNTAX - The headings set forth in
this Agreement are for convenience and reference only and are not intended
to modify, limit, describe or affect in any way the content, scope or
intent of this Agreement. All references made and pronouns used shall be
construed in the singular or the plural and in such gender as the sense
and circumstances require.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement.
LOGIMETRICS, INC.
By: /s/ Norman M. Phipps
--------------------------
NORMAN M. PHIPPS
Acting President
/s/ Richard K. Laird
----------------------------
RICHARD K. LAIRD
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<PAGE>
<PAGE>
LOGIMETRICS, INC.
Stock Option Agreement
-----------------------
Mr. Russell J. Reardon
11 Old Quarry Road
Cedar Grove, NJ 07009
Dear Mr. Reardon:
We are pleased to notify you that by the determination of the
Board of Directors an option to purchase an aggregate of 250,000 shares of
the Common Stock of LogiMetrics, Inc. (herein called the "Company") at an
exercise price of $.50 per share has this 1st day of May, 1996 been
granted to you. This option may be exercised only upon the terms and
conditions set forth below:
1. Purpose of Option.
-----------------
The purpose of this option is to further the growth and
development of the Company by encouraging employees of the Company to
obtain a proprietary interest in the Company through the ownership of
stock, thereby providing such employees with an added incentive to
continue in the employ and to promote the success of the Company, and
affording the Company a means of attracting to its service employees of
outstanding ability.
2. Acceptance of Option Agreement.
------------------------------
Your execution of this option agreement will indicate
your acceptance of and your willingness to be bound by its terms; it
imposes no obligation upon you to purchase any of the shares subject to
the option. Your obligation to purchase shares can arise only upon your
exercise of the option in the manner set forth in paragraph 4 hereof.
3. When Option May be Exercised.
----------------------------
The option granted you hereunder may be exercised in
whole or in part at any time and from time to time until the close of
business on March 7, 2003.
4. Adjustment for Issue or Sale of Common Stock at Less Than
Purchase Price. In case, at any time or from time to time after the date
hereof ("Issuance Date"), the Company shall issue or sell shares of its
Common Stock (other than any Common Stock issuable upon (i) conversion of
the Company's Amended and Restated 12% Convertible Subordinated Debentures
<PAGE>
dated as of July 14, 1995 ("1995 Debentures"), (ii) exercise of those
certain Amended and Restated Series A Warrants dated March 7, 1996 to
purchase 600,000 shares of Common Stock ("Series A Warrants"), (iii)
exercise by each of Murray H. Feigenbaum and Jerome Deutsch (the
"Principals") of their right to purchase 100,000 shares of Common Stock at
a price of $.10 per share ("Principals' Options"), (iv) exercise of those
certain Amended and Restated Series B Warrants dated March 7, 1996 to
purchase 1,500,000 shares of Common Stock ("Series B Warrants"), (v)
conversion of the Company's 12% Convertible Senior Subordinated Debentures
dated March 7, 1996 ("Senior Subordinated Debentures"), (vi) exercise of
those certain Series C Warrants dated March 7, 1996 to purchase an
aggregate of 2,542,380 shares of Common Stock ("Series C Warrants"), (vii)
exercise of those certain Series D Warrants dated March 7, 1996 to
purchase an aggregate of 2,830,200 shares of Common Stock ("Series D
Warrants"), (viii) exercise of those certain Stock Options, dated March 7,
1996 to purchase 225,000 shares of Common Stock issued to Richard K. Laird
("Laird Options"), (ix) exercise of those certain Series E Warrants dated
March 7, 1996 to purchase an aggregate of 1,000,000 shares of Common Stock
("Series E Warrants"), and (x) conversion of the Company's 30 shares of
Series A 12% Cumulative Convertible Redeemable Preferred Stock ("Preferred
Stock" and together with the 1995 Debentures, the Senior Subordinated
Debentures, the Series A, B, C, D and E Warrants (collectively, the
"Warrants"), the Laird Options, the Principals' Options and any shares of
Common Stock issuable upon conversion or exercise thereof, the "Subject
Securities")), for a consideration per share less than thirty cents ($.30)
per share (the "Trigger Price") (or, if a Pro Forma Trigger Price shall be
in effect as provided below in this Paragraph 3, then less than such Pro
Forma Trigger Price per share), then and in each such case, upon the
exercise hereof as provided in Paragraph 1 hereof, you shall be entitled
to receive, in lieu of the shares of Common Stock theretofore receivable
upon the exercise of this Option, a number of shares of Common Stock
determined by (a) dividing the Trigger Price by a Pro Forma Trigger Price
per share to be computed as provided below in this Paragraph 4, and (b)
multiplying the resulting quotient by the number of shares of Common Stock
provided called for by this Option. A Pro Forma Trigger Price per share
shall be the price computed (to the nearest cent, a fraction of half cent
or more being considered a full cent):
by dividing (i) the sum of (x) the result obtained by
multiplying the number of shares of Common Stock of the
Company outstanding immediately prior to such issue or
sale by the Trigger Price (or, if a Pro Forma Trigger
Price shall be in effect, by such Price), and (y) the
consideration, if any, received by the Company upon such
issue or sale, by (ii) the number of shares of Common
Stock of the Company outstanding immediately after such
issue or sale.
For the purpose of this Paragraph 4:
4.1. Stock Splits, Dividends, etc., in Common Stock or
Convertible Securities. In case the Company splits its Common Stock or
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<PAGE>
shall declare any dividend, or make any other distribution, upon any stock
of the Company of any class payable in Common Stock, or in any stock or
other securities directly or indirectly convertible into or exchangeable
for Common Stock (any such stock or other securities being hereinafter
called "Convertible Securities"), such split, declaration or distribution
shall be deemed to be an issue or sale (as of the record date for such
split, dividend or other distribution), without consideration, of such
Common Stock or such Convertible Securities, as the case may be.
4.2. Issuance or Sale of Convertible Securities. In
case the Company shall issue or sell any Convertible Securities other than
the Subject Securities, there shall be determined the price per share for
which Common Stock is issuable upon the conversion or exchange thereof,
such determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of shares of Common Stock of
the Company issuable upon the conversion or exchange of all such
Convertible Securities.
If the price per share so determined shall be less
than the Trigger Price (or, if a Pro Forma Trigger Price shall be in
effect, less than such Price) as of the date of such issue or sale, then
such issue or sale shall be deemed to be an issue or sale for cash (as of
the date of issue or sale of such Convertible Securities) of such maximum
number of shares of Common Stock at the price per share so determined,
provided that, if such Convertible Securities shall by their terms provide
for an increase or increases, with the passage of time, in the amount of
additional consideration, if any, payable to the Company, or in the rate
of exchange, upon the conversion or exchange thereof, the Pro Forma
Trigger Price per share shall, forthwith upon any such increase becoming
effective, be readjusted to reflect the same, and provided, further, that
upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
Pro Forma Trigger Price per share shall forthwith be readjusted and
thereafter be the price which it would have been had an adjustment been
made on the basis that the only shares of Common Stock so issued or sold
were those issued or sold upon the conversion or exchange of such
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all such Convertible Securities which shall have
been converted or exchanged.
4.3. Grant of Rights or Options for Common Stock. In
case the Company shall grant any rights or options to subscribe for,
purchase or otherwise acquire Common Stock of any class other than the
Subject Securities, there shall be determined the price per share for
which Common Stock is issuable upon the exercise of such rights or
options, such determination to be made by dividing (a) the total amount,
if any, received or receivable by the Company as consideration for the
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granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise
of such rights or options, by (b) the maximum number of shares of Common
Stock issuable upon the exercise of such rights or options.
If the price per share so determined shall be less
than the Trigger Price (or, if a Pro Forma Trigger Price shall be in
effect, less than such Price) as of the date of such issue or sale, then
the granting of such rights or options shall be deemed to be an issue or
sale for cash (as of the date of the granting of such rights or options)
of such maximum number of shares of Common Stock at the price per share so
determined, provided that, if such rights or options shall by their terms
provide for an increase or increases, with the passage of time, in the
amount of additional consideration, if any, payable to the Company upon
the exercise thereof, the Pro Forma Trigger Price per share shall,
forthwith upon any such increase becoming effective, be readjusted to
reflect the same, and provided, further, that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the Pro
Forma Trigger Price per share shall forthwith be readjusted and thereafter
be the price which it would have been had an adjustment been made on the
basis that the only shares of Common Stock so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
4.4. Grant of Rights or Options for Convertible
Securities.
In case the Company shall grant any rights or options to
subscribe for, purchase or otherwise acquire Convertible Securities, such
Convertible Securities shall be deemed, for the purposes of
subparagraph 4.2. above, to have been issued or sold for the total amount
received or receivable by the Company as consideration for the granting of
such rights or options plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of such
rights or options, provided that, upon the expiration of such rights or
options, if any thereof shall not have been exercised, the Pro Forma
Trigger Price per share shall forthwith be readjusted and thereafter be
the price which it would have been had an adjustment been made upon the
basis that the only Convertible Securities so issued or sold were those
issued or sold upon the exercise of such rights or options and that they
were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by
the Company for the granting of all such rights or options, whether or not
exercised.
4.5. Dilution in Case of Other Stock or Securities. In
case any shares of stock or other securities, other than Common Stock of
the Company, shall at any time be receivable upon the exercise of this
Option, and in case any additional shares of such stock or any additional
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such securities (or any stock or other securities convertible into or
exchangeable for any such stock or securities) shall be issued or sold for
a consideration per share such as to dilute the purchase rights evidenced
by this Option, then and in each such case the Pro Forma Trigger Price per
share shall forthwith be adjusted, substantially in the manner provided
for above in this Paragraph 4, so as to protect against the effect of such
dilution.
4.6. Expenses, etc., Deducted. In case any shares of
Common Stock or Convertible Securities or any rights or options to
subscribe for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount received by the Company
therefor, after deducting any expenses incurred and any underwriting or
similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale.
4.7. Determination of Consideration. In case any shares
of Common Stock or Convertible Securities or any rights or options to
subscribe for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold for a consideration other
than cash (or a consideration which includes cash, if any cash constitutes
a part of the assets of a corporation or business substantially all of the
assets of which are being received a such consideration) then, for the
purpose of this Paragraph 4, the Board of Directors of the Company shall
promptly determine the fair value of such consideration, and such Common
Stock, Convertible Securities, rights or options shall be deemed to have
been issued or sold on the date of such determination in good faith. Such
value shall not be more than the amount at which such consideration is
recorded in the books of the Company for accounting purposes except in the
case of an acquisition accounted for on a pooling of interest basis. In
case any Common Stock or Convertible Securities or any rights or options
to subscribe for, purchase or otherwise acquire any Common Stock or
Convertible Securities shall be issued or sold together with other stock
or securities or other assets of the Company for a consideration which
covers both, the Board of Directors of the Company shall promptly
determine what part of the consideration so received is to be deemed to be
the consideration for the issue or sale of such Common Stock or
Convertible Securities or such rights or options.
The Company covenants and agrees that, should any
determination of fair value of consideration or of allocation of
consideration be made by the Board of Directors of the Company, pursuant
to this subparagraph 4.7, it will, not less than seven (7) days after any
and each such determination, deliver to you a certificate signed by the
President or a Vice President and the Treasurer or an Assistant Treasurer
of the Company reciting such value as thus determined and setting forth
the nature of the transaction for which such determination was required to
be made, the nature of any consideration, other than cash, for which
Common Stock, Convertible Securities, rights or options have been or are
to be issued, the basis for its valuation, the number of shares of Common
Stock which have been or are to be issued, and a description of any
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<PAGE>
Convertible Securities, rights or options which have been or are to be
issued, including their number, amount and terms.
4.8. Record Date Deemed Issue Date. In case the Company
shall take a record of the holders of shares of its stock of any class for
the purpose of entitling them (a) to receive a dividend or a distribution
payable in Common Stock or in Convertible Securities, or (b) to subscribe
for, purchase or otherwise acquire Common Stock or Convertible Securities,
then such record date shall be deemed to be the date of the issue or sale
of the Common Stock issued or sold or deemed to have been issued or sold
upon the declaration of such dividend or the making of such other
distribution, or the date of the granting of such rights of subscription,
purchase or other acquisition, as the case may be.
4.9. Shares Considered Outstanding. The number of
shares of Common Stock outstanding at any given time shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock, but shall exclude shares in the treasury of the
Company.
4.10. Duration of Pro Forma Trigger Price. Following
each computation or readjustment of a Pro Forma Trigger Price as provided
in this Paragraph 3, the newly computed or adjusted Pro Forma Trigger
Price shall remain in effect until a further computation or readjustment
thereof is required by this Paragraph 4.
5. Adjustment for Dividends in Other Stock, Property, Etc.;
Reclassifications, Etc.
In case at any time or from time to time after the
Issuance Date the holders of the Common Stock of the Company of any class
(or any other shares of stock or other securities at the time receivable
upon the exercise of this Option) shall have received, or, on or after the
record date fixed for the determination of eligible stockholders, shall
have become entitled to receive:
(a) other or additional stock or other securities or
property (other than cash) by way of dividend;
(b) any cash paid or payable out of capital or paid-
in surplus or surplus created as a result of a
revaluation of property by way of dividend; or
(c) other or additional (or less) stock or other
securities or property (including cash) by way of
stock-split, spin-off, split-off, split-up,
reclassification, combination of shares or
similar corporate rearrangement;
(other than additional shares of Common Stock issued to holders of Common
Stock as a stock dividend or stock-split, adjustments in respect of which
shall be covered by the provisions of Paragraph 3 hereof), then in each
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<PAGE>
case, upon the exercise of this Option as provided in Paragraph 3 hereof,
you shall be entitled to receive, in lieu of, or in addition to, as the
case may be, the shares theretofore receivable upon the exercise of this
Option, the amount of stock or other securities or property (including
cash in the cases referred to in clauses (b) and (c) above) which you
would hold on the date of such exercise if, on the Issuance Date, you had
been the holder of record of the number of shares of Common Stock of the
Company called for on the face of this Option and had thereafter, during
the period from the Issuance Date to and including the date of such
exercise, retained such shares and/or all other or additional (or less)
stock or other securities or property (including cash in the cases
referred to in clauses (b) and (c) above) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during
such period by Paragraphs 4 and 6 hereof.
6. Adjustment for Reorganization, Consolidation, Merger,
Etc.
In case of any reorganization of the Company (or any
other corporation the stock or other securities of which are at the time
deliverable on the exercise of this Option) after the date hereof, or in
case, after such date, the Company (or any such other corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all its assets to another corporation, then and in each such
case, upon the exercise hereof as provided in Paragraph 3 hereof, at any
time after the consummation of such reorganization, consolidation, merger
or conveyance, you shall be entitled to receive the stock or other
securities or property to which you would have been entitled upon such
consummation if you had exercised this Option immediately prior thereto,
all subject to further adjustments as provided in Paragraphs 4 and 6
hereof; in each such case, the terms of this Option shall be applicable to
the shares of stock or other securities or property receivable upon the
exercise of this Option after such consummation.
7. No Dilution or Impairment.
-------------------------
The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Option, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect
against dilution or other impairment. Without limiting the generality of
the foregoing, the Company will not increase the par value of any shares
of stock receivable upon the exercise of this Option above the amount
payable therefor upon such exercise, and at all times will take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable stock upon the
exercise of this Option.
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8. Accountants' Certificate as to Adjustments.
------------------------------------------
In each case of an adjustment in the number of shares of
Common Stock or other stock, securities or property receivable on the
exercise of this Option, at your request the Company at its expense shall
promptly cause independent public accountants of recognized standing,
selected by the Company, to compute such adjustment in accordance with the
terms of this Option and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is
based, including a statement of (a) the consideration received or to be
received by the Company for any additional shares issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding and (c) the Pro Forma Trigger
Price. The Company will forthwith mail to you a copy of each such
certificate.
9. Notices of Record Date, Etc.
----------------------------
In case:
(a) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at
the time deliverable upon the exercise of this
Option) for the purpose of entitling or enabling
them to receive any dividend (other than a cash
or stock dividend at the same rate as the rate of
the last cash or stock dividend theretofore paid)
or other distribution, or to exercise any
preemptive right pursuant to the Company's
charter, or to receive any right to subscribe for
or purchase any shares of stock of any class or
any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the
Company, any consolidation or merger of the
Company with or into another corporation, or any
conveyance of all or substantially all of the
assets of the Company to another corporation; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, and in each such case, the Company will mail or cause to be mailed
to you a notice specifying, as the case may be, (i) the date on which a
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution
or right, or (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up
8
<PAGE>
is to take place, and the times, if any is to be fixed, as of which the
holders of record of Common Stock (or such other stock or securities at
the time deliverable upon the exercise of this Option) shall be entitled
to exchange their shares of Common Stock of any class (or such other stock
or securities) for reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up or (iii) the amount and character
of the stock or other securities proposed to be issued or granted, the
date of such proposed issuance or grant and the persons or class of
persons to whom such stock or other securities ar to be offered, issued or
granted. Such notice shall be mailed at least thirty (30) days prior to
the date therein specified.
10. Reservation of Stock, Etc., Issuable on Exercise of
Warrants.
The Company will at all times reserve and keep available,
solely for insurance and delivery upon the exercise of this Option, such
shares of Common Stock and other stock, securities and property as from
time to time shall be issuable upon the exercise of this Option.
11. Registration Rights.
-------------------
a. Registration. As soon as reasonably practicable
after the date hereof, the Company will file a registration statement
("Registration Statement") with the Securities and Exchange Commission
("SEC") covering the shares of Common Stock issuable upon exercise of this
Option ("Registrable Securities"), and will use its best efforts to cause
the Registration Statement to become effective on or prior to the
ninetieth day after such filing and to keep the Registration Statement
effective for a period of seven years from the date it is declared
effective by the SEC.
b. Additional Terms. Except as otherwise expressly
stated herein, the following provisions shall be applicable to the
Registration Statement:
(i) The Company will use its best efforts to
cause the Registration Statement to become effective as promptly
as possible, and if any stop order shall be issued by the SEC in
connection therewith to use its reasonable efforts to obtain the
removal of such order. Following the effective date of the
Registration Statement, the Company shall, upon your request,
forthwith supply such reasonable number of copies of the
Registration Statement, preliminary prospectus and prospectus
meeting the requirements of the Act, and other documents
necessary or incidental to a public offering of the Registrable
Securities, as shall be reasonably requested by you to permit you
to make a public distribution of your Registrable Securities.
The Company will use its reasonable efforts to qualify the
Registrable Securities for sale in such states as you shall
reasonably request, provided that no such qualification will be
9
<PAGE>
required in any jurisdiction where, solely as a result thereof,
the Company would be subject to service of general process or to
taxation or qualification as a foreign corporation doing business
in such jurisdiction. The obligations of the Company hereunder
with respect to your Registrable Securities are expressly
conditioned on your furnishing to the Company such appropriate
information concerning you, your Registrable Securities and the
terms of your offering of such Registrable Securities as the
Company may reasonably request.
(ii) The Company shall pay all expenses incurred
in complying with the provisions of this Paragraph 11, including,
without limitation, all registration and filing fees (including
all expenses incident to filing with the National Association of
Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel to the Company, securities law and blue
sky fees and expenses and the expenses of any regular and special
audits incident to or required by any such registration. All
underwriting discounts and selling commissions applicable to the
sales of the Registrable Securities, and any state or federal
transfer taxes payable with respect to the sales of the
Registrable Securities and all fees and disbursements of your
counsel, if any, in each case arising in connection with
registration of the Registrable Securities shall be payable by
you.
(iii) In connection with the registration of the
Registrable Securities pursuant to this Paragraph 11, the Company
shall indemnify and hold harmless you, your affiliates, agents
and representatives, each person, if any, who controls the holder
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and any person claiming by or
through any of them (collectively, the "Indemnified Persons")
from and against all losses, claims, damages, expenses or
liabilities (or actions in respect thereof) arising out of or are
based upon any untrue statement of any material fact contained in
the Registration Statement or alleged untrue statement, under
which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereto, or arise out of or are
based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they are made,
not misleading, or any violation by the Company of the Securities
Act, the Exchange Act or state securities or blue sky laws
applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and
will reimburse the Indemnified Persons for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage,
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liability or action; provided, however, that the Company will not
be liable in any such case to any Indemnified Person to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission made in the
Registration Statement, said preliminary prospectus or said final
prospectus or said amendment or supplement or any document
incident thereto in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such
Indemnified Person.
(iv) You will indemnify and hold harmless the
Company and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, each
officer of the Company who signs the Registration Statement and
each director of the Company from and against any and all such
losses, claims, damages or liabilities arising from any untrue
statement in, or omission from, the Registration Statement, any
such preliminary or final prospectus, amendment, or supplement or
document incident thereto if the statement or omission in respect
of which such loss, claim, damage or liability is asserted was
made in reliance upon and in conformity with information
furnished in writing to the Company by you or on your behalf for
use in connection with the preparation of the Registration
Statement or such prospectus or amendment or supplement thereof.
(v) The reimbursements required by clauses
(iii) and (iv) shall be made by periodic payments during the
course of the investigation or defense as and when bills are
received or expenses incurred; provided, however, that to the
extent that an Indemnified Person receives periodic payments for
legal or other expenses during the course of an investigation or
defense, and such person subsequently received payments for such
expenses from any other parties to the proceeding, such payments
shall be used by the Indemnified Person to reimburse the
indemnifying party for such periodic payments. Any party which
proposes to assert the right to be indemnified under clause (iii)
or (iv) will, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of
which a claim is to be made against any Indemnified Person
hereunder, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy
of all papers served, but the failure to so notify such
indemnifying party of any such action, suit or proceeding shall
not relieve the indemnifying party from any obligation which it
may have to any Indemnified Person hereunder unless and only to
the extent that the indemnifying party is prejudiced by said lack
of notice. In case any such action, suit or proceeding shall be
brought against any Indemnified Person and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent that
it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
11
<PAGE>
satisfactory to such Indemnified Person, and after notice from
the indemnifying party to such Indemnified Person of its election
so to assume the defense thereof, the indemnifying party shall
not be liable to such Indemnified Person for any legal or other
expense, other than reasonable costs of investigation
subsequently incurred by such Indemnified Person in connection
with the defense thereof. The Indemnified Person shall have the
right to employ its own counsel in any such action, but the
reasonable fees and expenses of such counsel shall be at the
expense of such Indemnified Person, when and as incurred, unless
(A) the employment of counsel by such Indemnified Person has been
authorized by the indemnifying party, (B) the Indemnified Person
has reasonably concluded (based on advice of counsel), that there
may be legal defenses available to it that are different from or
in addition to those available to the indemnifying party, (C) the
Indemnified Person shall have reasonably concluded (based on
advice of counsel) that there may be a conflict of interest
between the indemnifying party and the Indemnified Person in the
conduct of defense of such action (in which case the indemnifying
party shall not have the right to direct the defense of such
action on behalf of the Indemnified Person), or (D) the
indemnifying party shall not in fact have employed counsel to
assume the defense of such action within 15 days after receipt of
notice of such action. An indemnifying party shall not be liable
for any settlement or any action or claim effected without its
consent.
(vi) If the indemnification provided for in this
Paragraph 11 is unavailable to any Indemnified Person hereunder
in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such Indemnified Person, shall contribute to
the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and Indemnified Persons in connection with the
actions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party
and Indemnified Persons shall be determined by reference to,
among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or
Indemnified Persons, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth herein, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or
proceeding.
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(vii) The Company and you agree that it would not
be just and equitable if contribution pursuant to clause (vi)
were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding any other provision hereof, in no
event shall your contribution obligation be greater in amount
than the excess of (A) the dollar amount of proceeds received by
you upon the sale of the securities giving rise to such
contribution obligation over (B) the dollar amount of any damages
that you have otherwise been required to pay by reason of the
untrue or alleged untrue statement or omission or alleged
omission giving rise to such obligation. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(viii) Neither the filing of the Registration
Statement by the Company pursuant to this Agreement nor the
making of any request for prospectuses by you shall impose upon
you any obligation to sell his, her or its Registrable
Securities.
(ix) Upon receipt of notice from the Company
that an event has occurred which requires a post-effective
amendment to the Registration Statement or a supplement to the
prospectus included therein, you shall promptly discontinue the
sale of your Registrable Securities until you receive a copy of a
supplemented or amended prospectus from the Company, which the
Company shall provide as soon as practicable after such notice.
12. How Option May be Exercised.
---------------------------
This option is exercisable by a written notice signed by
you and delivered to the Company at 121-03 Dupont Street, Plainview, New
York 11803, attention of the Office of the President, signifying your
election to exercise the option. The notice must state the number of
shares of Common Stock as to which your option is being exercised, must
contain a statement by you (in a form acceptable to the Company) that such
shares are being acquired by you for investment and not with a view to
their distribution or resale and must be accompanied by cash or a check to
the order of the Company for the full purchase price of the shares being
purchased.
If a notice of the exercise of this option is given by a
person or persons other than you, the Company may require as a condition
to the exercise of the option the submission to the Company of appropriate
proof of the right of such person or persons to exercise the option.
Certificates for shares of the Common Stock so purchased
will be issued as soon as practicable. Except as otherwise provided
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herein, the Company, however, shall not be required to register with the
Securities and Exchange Commission or any other applicable state authority
any shares of Common Stock issued upon exercise of this option and your
right to sell, transfer, assign or otherwise dispose of such shares shall
be subject to your compliance with all applicable federal and state
securities laws.
13. Non-transferability of Option.
-----------------------------
This option shall not be transferable except by Will or
the laws of descent and distribution, and, may be exercised during your
lifetime only by you.
Dated: May 1, 1996
LOGIMETRICS, INC.
------------------------
By: /s/ Norman M. Phipps
Agreed:
/s/ Russell J. Reardon
----------------------
Russell J. Reardon
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<PAGE>
AGREEMENT
Agreement made the 31st day of October, 1996 by and between North Fork
Bank, a New York banking corporation with offices located at 245 Love Lane,
Mattituck, New York (the "Bank") and Logimetrics, Inc., a New York corporation
with offices located at 121-03 DuPont Street, Plainview, New York 11803 (the
"Borrower").
W I T N E S S E T H
WHEREAS, on March 7, 1996, the Borrower executed and delivered to the
Bank a certain Fifth Restated and Amended Revolving Credit Note in the principal
amount of Two Million Two Hundred Thousand ($2,200,000) Dollars (the "Revolving
Credit Note") pursuant to which the Borrower undertook to repay to the Bank
those sums advanced thereunder to the Borrower, plus interest thereon, pursuant
to the terms thereof and certain related documents;
WHEREAS, on March 7, 1996, the Borrower executed and delivered to the
Bank a certain Further, Restated, Increased and Amended Term Loan Note in the
principal amount of Eight Hundred Thousand ($800,000) Dollars (the "Term Loan
Note") pursuant to which the Borrower undertook to repay the sums evidenced
thereby to the Bank, plus interest thereon, pursuant to the terms thereof and of
certain related documents (all of the documents evidencing the aforementioned
transactions are collectively referred to herein as the "Loan Documents");
WHEREAS, on March 7, 1996, the Borrower executed and delivered to the
Bank a certain Restated and Amended General Security Agreement (the "General
Security Agreement") pursuant to which the Borrower restated the terms of its
existing General Security Agreement with the Bank whereby the Borrower granted
to the Bank a first security interest in all of the Borrower's assets as more
fully defined therein;
WHEREAS, there is currently outstanding from the Borrower to the Bank
under the Revolving Credit Note the principal sum of $1,524,988.76;
WHEREAS, there is currently outstanding from the Borrower to the Bank
under the Term Loan Note the principal sum of $720,000.02;
WHEREAS, the Revolving Credit Note and the Term Loan Note (the
Revolving Credit Note and Term Loan Note are collectively referred to herein as
the "Notes") include certain provisions requiring, in part, that the Borrower
comply during the terms of the Notes with certain financial covenants as more
fully defined therein (the "Financial Covenants");
WHEREAS, the Bank has been advised by the Borrower that it is in
violation of the Financial Covenants and therefore in default under the Notes;
WHEREAS, the Borrower has requested that the Bank forebear from
exercising those rights and remedies available to it under the Notes and/or
other documents executed and delivered by the Borrower in connection therewith
in order to permit the Borrower to comply with the
<PAGE>
financial covenants and all other terms and provisions of the Loan
Documents;
WHEREAS, the Bank has conditionally agreed to forebear from exercising
such rights and remedies limited to the specific terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals, which are
incorporated herein by reference as if fully set forth below, and for other
valuable and good consideration, the receipt and sufficiency of which is hereby
acknowledged, the Bank and the Borrower hereby agree as follows:
1. The Borrower acknowledges that it is currently indebted to the Bank
under the terms of the Revolving Credit Note in the principal amount of
$1,524,988.76 together with interest thereon, costs, and attorneys' fees as have
accrued and may accrue pursuant to the terms of the Loan Documents.
2. The Borrower acknowledges that it is currently indebted to the Bank
under the terms of the Term Loan Note in the principal amount of $720,000.02
together with interest thereon, costs, and attorneys' fees as have accrued and
may accrue pursuant to the terms of the Loan Documents.
3. The Borrower acknowledges, ratifies and confirms that the
indebtedness described in paragraphs "1" and "2" hereof is owing to the Bank by
the Borrower in full without offset, defense or counterclaim.
4. The Borrower acknowledges and agrees that if and to the extent that
it maintains any defense to its obligations to the Bank under the Loan Documents
hereinbefore mentioned, any such defense is hereby knowingly waived and released
as a specific condition of this Agreement, which waiver and release are
unconditional and without limitation.
5. The Borrower hereby ratifies and acknowledges the validity and
binding nature, both at the time of delivery and on the date hereof, of the
Notes and the Loan Documents and hereby acknowledges that any indebtedness,
liabilities, and obligations of the Borrower under this Agreement shall be
deemed to be secured by the Security Agreement and other Loan Documents.
6. The Borrower hereby acknowledges and agrees that it is in fact in
violation of the Financial Covenants and that said violation constitutes an
Event of Default under the Loan Documents pursuant to which the Bank is entitled
to declare a formal default thereunder and to immediately commence any action to
enforce its rights and remedies under the Loan Documents.
7. This Agreement shall expire upon the earlier of (a) February 28,
1997, or (b) receipt by the Bank of the Borrower's December 31, 1996 interim
financial statements. Prior to the expiration hereof, and provided that (i) the
Borrower shall continue to operate its business
- 2 -
<PAGE>
in the ordinary course of business, (ii) there shall not occur or have occurred
any Event of Default under the terms of the Loan Documents other than as
previously defined herein, and, (iii) the Borrower shall in all respects abide
by the terms of this Agreement, the Bank shall forebear from the following:
A. Commencing any action to enforce its rights and remedies
under the Loan Documents described herein and/or
B. Prosecuting in any way or taking any further action in
order to enforce those rights available to the Bank under the
Loan documents.
8. During the term hereof, the Borrower shall use its best efforts to
resolve the existing defaults under the Financial Covenants in accordance with
the terms and conditions set forth herein.
9. Upon the expiration hereof, or in the event that the Borrower shall
in any way default in their obligations or their representations and warranties
hereunder, the Bank may, upon written notice, exercise all rights and remedies
available to it under the Loan Documents.
10. Notwithstanding anything to the contrary set forth in the
Revolving Credit Note, no further advances will be made to the Borrower
thereunder during the term hereof.
11. In the event that the outstanding principal balance due from the
Borrower to the Bank under the Revolving Credit Note shall at any time during
the term hereof exceed the amounts available to the Borrower under the Borrowing
Base provisions thereof, the Borrower shall immediately make payment to the Bank
of such moneys necessary to comply with said Borrowing Base calculation.
12. During the term hereof, the Borrower shall continue to make all
payments of principal and/or interest due to the Bank under the Notes on a
timely basis and shall comply with all other terms and provisions thereof.
13. During the term hereof, the Borrower shall submit to the Bank (a) a
monthly financial projection on a stand alone basis, (b) monthly financial
statements of the Borrower, (c) weekly Borrowing Base certificates accompanied
by an accounts receivable aging,inventory designation and an accounts payable
aging. The aforementioned shall be delivered to the Bank within three (3) days
after the end of each respective period.
14. During the term hereof, the Borrower shall permit the Bank to
perform a field examination or examinations of the Borrower if and when the Bank
shall determine that same is required. All expenses to be incurred by the Bank
in connection with said examination or examinations shall be paid in full by the
Borrower.
- 3 -
<PAGE>
15. During the term hereof, the Borrower shall not make any payments,
or apply any assets, toward the payment of any dividends and/or officer or
shareholder loans.
16. Simultaneously with the execution thereof, the Borrower shall pay
to the Bank a fee in the amount of Ten Thousand ($10,000) Dollars as in
consideration of the forbearance set forth herein and shall make payment of all
Borrower's legal expenses in connection herewith.
17. The Borrower shall, upon the request of the Bank, properly execute
such further instruments, documents and agreements, and take such further
actions, as the Bank may request to effectuate the transactions contemplated by
this Agreement.
18. This Agreement shall be governed and construe in
accordance with the laws of the State of New York.
19. The Borrower acknowledges and represents as follows:
a. the Borrower is currently paying its
debts as they become due (except for that certain interest payments due
from Borrower to the holders of all subordinated debentures);
b. as of the date of the Loan Documents and
the date hereof, and as of the various dates of all transfers, obligations,
exchanges and conveyances pursuant thereto were or will be made and incurred,
the sum of the respective debt of the Borrower was and will not be greater than
the value of the Borrower's assets;
c. the Borrower has not engaged nor shall
engage in any business or transaction for which the value of its remaining
assets were or will be unreasonably low in relation to the subject business or
transaction;
d. the Borrower has not and shall not incur
debts beyond its ability to pay as its respective debts become due or
mature.
20. All financial statements delivered to the Bank at or prior to the
execution of this Agreement regarding the Borrower fairly represent the
financial condition of the Borrower at the times and for the periods stated
therein. Since the effective date covered by the most recent financial statement
so delivered to the Bank, there has been no material adverse change in the
financial condition, the operations or other condition of the Borrower.
21. The Borrower shall maintain all checking accounts and all other
deposit accounts with the Bank. All funds received by or due to the Borrower
whether from the sale of inventory, equipment or otherwise in the operation of
its business, shall be deposited only with the Bank in the Bank's present
operating account on a daily basis and all funds shall be maintained exclusively
with the Bank in those accounts in the name of the Borrower. No other accounts
shall be opened or maintained by the Borrower, other than a separate payroll
account which may be opened by the
- 4 -
<PAGE>
Borrower and which shall be used exclusively to pay employee wages, withholding
and employment taxes in the ordinary course of business. All funds, cash and
cash equivalents received by the Borrower must be deposited with the Bank. All
funds of the Borrower shall be used only to pay expenses in the ordinary course
of its business.
22. Any declared default by the Borrower hereunder or under any other
loan obligation with the Bank or any other entity (except for those interest
payments now past due from the Borrower to holders of subordinated debentures,
provided that the Borrower shall obtain a waiver of said default from Cerberus
Partners, within ten (10) days from the date hereof) shall constitute an Event
of Default hereunder and under the Loan Documents.
23. The Borrower acknowledges that the Loan Documents prohibit, in
part, the incurrence of additional debt by the Borrower. Notwithstanding the
foregoing prohibition, the Borrower has requested that the Bank consent to the
addition of the sum of Fifteen Thousand ($15,000) Dollars to that certain
subordinated debt due from the Borrower to Cerberus Partners. Pursuant to said
request, the Borrower hereby waives the declaration of any default under the
Loan Documents as a request of the aforementioned debt.
24. The relationship between the Borrower and the Bank is solely that
of Lender and Borrower in a commercial loan transaction and nothing contained in
this Agreement or in any of the other agreements referred to herein shall in any
manner be construed as establishing a partnership, joint venture or any
confidential or fiduciary relationship nor shall it establish or constitute any
other relationship other than an arm's length relationship of Lender and
Borrower.
25. The provisions of this Agreement are severable solely at the option
of the Bank, and if any cause or provision shall be held invalid or
unenforceable in all or in part of any jurisdiction, then such invalidity of
unenforceability shall, at the sole election of the Bank, affect only such
clause or provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision in this Agreement in any jurisdiction.
26. This Agreement shall be binding upon the Borrower and any successor
and shall be binding upon and inure to the benefit of the Bank and any successor
or assign. The rights and obligations of the Borrower under this Agreement and
the Loan Documents shall not be assigned or delegated without the prior written
consent of the Bank; any such purported assignment or delegation without such
consent shall be void.
27. Except as specifically set forth herein, nothing
contained in this Agreement shall be deemed (a) to be a waiver of or
consent to or amendment, supplement or modification of any term or
- 5 -
<PAGE>
condition of the Loan Documents or a waiver of any defaults or event of default
which have arisen or may arise in the future, or (b) to prejudice any other
right that the Bank may have at any time under or in connection with the Loan
Documents, or any other instruments or agreements referred to therein. Except as
specifically provided herein, all terms and provisions of the Loan Documents and
all other related documents remain in full force and effect in accordance with
the original terms.
28. The Borrower represents and warrants that this Agreement has been
duly authorized, executed and delivered by an authorized representative of the
Borrower pursuant to its corporate power and constitutes the legal valid and
binding obligation of the Borrower.
29. The Borrower agrees to pay all reasonable fees and out-of-pocket
expenses incurred by the Bank in connection with the existing default under the
Loan Documents, including the preparation, execution, delivery and enforcement
of this Agreement and any documents referred to herein as well as past, present
or future collateral examinations arising in connection therewith, which fees
shall be deemed to be included in the Borrower's obligations to the Bank under
the Loan Documents.
30. The Borrower agrees to indemnify, defend and hold the Bank
harmless, together with its directors, officers, employees, affiliates, agents
and counsel from and against any and all losses, claims, damages, liabilities,
deficiencies, judgments and expenses suffered or incurred by any of them arising
out of or by reason of any litigation, investigation, claim or proceeding,
pending or threatened, which arises out of or is in any way based upon the
transactions referred to herein, or otherwise, including, without limitation,
amounts paid in settlement, court costs and attorneys' fees and expenses
incurred in connection with any such litigation, investigation, claim or
proceeding.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
LOGIMETRICS, INC.
By: /s/ Norman M. Phipps
-----------------------------
Norman M. Phipps
Acting President
NORTH FORK BANK
By: /s/ Christopher Esposito
------------------------------
Christopher Esposito
Vice President
- 6 -
<PAGE>
<PAGE>
Cerberus
Partners, L.P.
- ------------------------------------------------------------------------------
950 Third Avenue . 20th Floor . New York, New York 10022
(212) 421-2600 . Fax (212) 421-2947
October 31, 1996
LogiMetrics, Inc.
121-03 Dupont Street
Plainview, New York 11801
Attention: Norman M. Phipps,
Acting President
Dear Sirs:
Reference is hereby made to the 12% Convertible Senior Subordinated
Debentures due December 31, 1998 (the "Debentures") issued by LogiMetrics,
Inc. (the "Company") to Cerberus Partners, L.P. ("Cerberus"). As we have
previously discussed, in exchange for the issuance to Cerberus of the
Company's 12% Senior Subordinated Note due December 31, 1998, substantially in
the form of Annex A attached hereto (the "Note"), Cerberus hereby agrees that
(x) until December 15, 1996, it hereby waives its right to declare an event of
default or to exercise any other remedy under the Debentures as a result of
the Company's failure to pay the September 15, 1996 interest payment due on
the Debentures (together with any penalty interest, or interest on interest
due thereon, if any), and (y) until July 1, 1997, Cerberus waives compliance
by the Company with the financial covenants set forth in Section 7(b) of the
Debentures. From and after the respective dates set forth above, the waivers
granted herein shall be null and void and of no further force and effect and
Cerberus shall be entitled to require the strict performance by the Company of
its obligations under the Debentures. Except as expressly provided herein,
Cerberus has not, and shall not be deemed to have, waived any of the terms and
conditions of the Debentures, or its rights thereunder, all of which shall be
unaffected hereby and shall continue in full force and effect.
Pursuant to the terms of this waiver, any amounts received by Cerberus on
account of the Debentures shall be applied first to the payment of overdue
installments of interest due thereon (including penalty interest and interest
on interest, if any, due thereon) so that the earliest installments shall be
paid in full (together with any penalty interest and interest, if any, due
thereon) before any such amounts shall be applied to any subsequent
installment; second to the payment of the then-current interest installment;
and third to the principal amount of the Debentures.
Cerberus hereby acknowledges payment in full of the June 15, 1996
interest payment due on the Debentures.
The Company shall pay on demand the fees and expenses of counsel to
Cerberus in connection with the matters contemplated hereby.
<PAGE>
If the foregoing accurately reflects our mutual understanding, please so
indicate by signing a counterpart of this letter in the space provided below
and return it to the undersigned, at which time this letter will constitute a
binding agreement between the parties hereto. This letter shall be governed
by, and construed in accordance with, the laws of the State of New York,
without regard to the choice of law principles thereof.
CERBERUS PARTNERS, L.P.
By: /s/ Seth Plattus
---------------------
Authorized Signatory
SETH PLATTUS
Managing Director
Cerebus Partners, L.P.
ACCEPTED AND AGREED:
LOGIMETRICS, INC.
By: /s/ Norman M. Phipps
--------------------
Norman M. Phipps,
Acting President
<PAGE>
Exhibit 11
COMPUTATION OF(LOSS) INCOME PER SHARE
<TABLE>
<CAPTION>
Fiscal year ended June 30, 1996: Number Number
------------------------------- shares of days
------ -------
<S> <C> <C>
Common Shares outstanding - July 1, 1995 2,860,614 366
Exercise of
Series D Warrant - June 24, 1996 94,340 7
---------
Common Shares outstanding - June 30, 1996 2,954,954
=========
Weighted average number of common shares outstanding
2,862,418
=========
(Loss) per common share:
$5,196,067 = $(1.82)
---------- =========
2,862,418
</TABLE>
The above calculation is not presented on a fully diluted basis because
the result would be antidilutive for the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
Fiscal year ended June 30, 1995: Number Number
------------------------------- shares of days
------ -------
<S> <C> <C>
Common Shares outstanding - July 1, 1994 2,530,614 365
Exercise of Options - December 31, 1994 200,000 184
Issuance of shares - October 18, 1994 130,000 256
---------
Common Shares outstanding - June 30, 1995 2,860,614
=========
Weighted average number of common shares outstanding 2,722,614
=========
Incremental shares outstanding: 240,000
Stock options ---------
<PAGE>
Weighted average fully diluted shares 2,962,614
---------
Income per common share:
$ 157,777 = $.06
--------- =========
2,722,614
Fully diluted income per share: $ 157,777 = $.05
--------- =========
2,962,614
</TABLE>
<PAGE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF LOGIMETRICS, INC.
LogiMetrics FSC, Inc. is a wholly owned foreign sales
corporation. It was created in accordance with Sections 992 through 927 of
the Internal Revenue Code in order to effect tax savings with respect to
export transactions.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 244,271
<SECURITIES> 0
<RECEIVABLES> 1,258,113
<ALLOWANCES> (75,000)
<INVENTORY> 2,271,453
<CURRENT-ASSETS> 4,889,086
<PP&E> 2,316,597
<DEPRECIATION> 1,920,187
<TOTAL-ASSETS> 5,594,157
<CURRENT-LIABILITIES> 6,450,527
<BONDS> 23,094
0
990,564
<COMMON> 29,549
<OTHER-SE> (1,899,577)
<TOTAL-LIABILITY-AND-EQUITY> 5,594,157
<SALES> 5,038,193
<TOTAL-REVENUES> 5,038,193
<CGS> 7,953,237
<TOTAL-COSTS> 9,995,314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70,720
<INTEREST-EXPENSE> 410,021
<INCOME-PRETAX> (5,437,862)
<INCOME-TAX> (299,000)
<INCOME-CONTINUING> (5,138,862)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,138,862)
<EPS-PRIMARY> (1.82)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
