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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 12, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________________
WEGENER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 81-0371341
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
11350 TECHNOLOGY CIRCLE
DULUTH, GEORGIA 30136
(770) 623-0096
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT A. PLACEK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
11350 TECHNOLOGY CIRCLE
DULUTH, GEORGIA 30136
(770) 623-0096
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
HELEN T. FERRARO, ESQ.
SMITH, GAMBRELL & RUSSELL
3343 PEACHTREE ROAD, N.E., SUITE 1800
ATLANTA, GEORGIA 30326
(404) 264-2620
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) FEE
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Common Stock, par value $0.01
per share..................... 1,000,000 shares $9.19 $9,190,000 $3,169
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(1) The shares of Common Stock being registered hereby are issuable upon
conversion of the Registrant's 8% Convertible Debentures Due 1999 (the
"Debentures"). Because the Debentures carry a variable conversion rate
that fluctuates with the market price of the Company's Common Stock, the
number of shares being registered constitutes the Company's reasonable
estimate of the maximum number of shares that may be needed upon
conversion. Pursuant to Rule 416, the Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may
become issuable on conversion of the Debentures as a result of any future
adjustments in the conversion price in accordance with the terms of the
Debentures.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
___________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
539,120 SHARES
WEGENER CORPORATION
COMMON STOCK
THE SHARES OF COMMON STOCK, $0.01 PAR VALUE PER SHARE (THE "COMMON STOCK"),
OF WEGENER CORPORATION (THE "COMPANY") COVERED BY THIS PROSPECTUS ARE SHARES
WHICH MAY BE OFFERED AND SOLD (THE "OFFERING"), FROM TIME TO TIME, BY CERTAIN
SHAREHOLDERS OF THE COMPANY (COLLECTIVELY, THE "SELLING SHAREHOLDERS"). SEE
"SELLING SHAREHOLDERS." THE SHARES OF COMMON STOCK COVERED BY THIS
PROSPECTUS ARE ISSUABLE TO THE SELLING SHAREHOLDERS UPON CONVERSION OF THE
COMPANY'S 8% CONVERTIBLE DEBENTURES DUE 1999 (THE "DEBENTURES"). ALL OF THE
SHARES COVERED HEREBY WILL ONLY BE SOLD BY THE SELLING SHAREHOLDERS. THIS
PROSPECTUS DOES NOT PURPORT TO COVER THE INITIAL ISSUANCE BY THE COMPANY OF
THE SHARES OF COMMON STOCK UPON CONVERSION OF THE DEBENTURES, BUT ONLY THE
REOFFER AND RESALE OF SUCH SHARES BY THE SELLING SHAREHOLDERS. THE COMPANY
WILL NOT RECEIVE ANY OF THE PROCEEDS FROM THE SHARES SOLD BY THE SELLING
SHAREHOLDERS.
THE SELLING SHAREHOLDERS MAY FROM TIME TO TIME SELL THE SHARES OF COMMON
STOCK COVERED BY THIS PROSPECTUS TO OR THROUGH ONE OR MORE UNDERWRITERS, AND
MAY ALSO SELL SHARES OF COMMON STOCK DIRECTLY TO OTHER PURCHASERS OR THROUGH
AGENTS, ON THE NASDAQ SMALL-CAP MARKET IN ORDINARY BROKERAGE TRANSACTIONS, IN
NEGOTIATED TRANSACTIONS, OR OTHERWISE, AT MARKET PRICES PREVAILING AT THE
TIME OF SALE, AT PRICES RELATED TO THE THEN PREVAILING MARKET PRICE OR AT
NEGOTIATED PRICES. SEE "PLAN OF DISTRIBUTION."
THE COMMON STOCK IS QUOTED ON THE NASDAQ SMALL-CAP MARKET SYSTEM UNDER THE
SYMBOL "WGNR." THE LAST SALE PRICE OF THE COMMON STOCK ON JULY 11, 1996 AS
REPORTED ON THE NASDAQ SMALL-CAP MARKET SYSTEM WAS $8.38 PER SHARE. SEE
"PRICE RANGE OF COMMON STOCK."
SEE "RISK FACTORS" ON PAGES 3 THROUGH 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PROCEEDS TO
PRICE TO UNDERWRITING SELLING PROCEEDS TO
PUBLIC DISCOUNT SHAREHOLDERS(1) COMPANY
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SEE TEXT SEE TEXT SEE TEXT
PER SHARE(1) . . . . . . BELOW BELOW BELOW $0
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SEE TEXT SEE TEXT SEE TEXT
TOTAL. . . . . . . . . . BELOW BELOW BELOW $0
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(1) THE SELLING SHAREHOLDERS HAVE ADVISED THE COMPANY THAT THEY PROPOSE TO
OFFER FOR SALE AND TO SELL THE COMMON STOCK FROM TIME TO TIME UNTIL MAY 31,
1999 THROUGH BROKERS IN THE OVER-THE-COUNTER MARKET, IN PRIVATE
TRANSACTIONS, AND OTHERWISE, AT MARKET PRICES THEN PREVAILING OR
OBTAINABLE. ACCORDINGLY, SALES PRICES AND PROCEEDS TO THE SELLING
SHAREHOLDERS WILL DEPEND UPON PRICE FLUCTUATIONS AND THE MANNER OF SALE.
IF THE COMMON STOCK IS SOLD THROUGH BROKERS, THE SELLING SHAREHOLDERS WILL
PAY BROKERAGE COMMISSIONS AND OTHER CHARGES (WHICH COMPENSATION AS TO A
PARTICULAR BROKER-DEALER MAY BE IN EXCESS OF CUSTOMARY COMMISSIONS).
EXCEPT FOR THE PAYMENT OF SUCH BROKERAGE COMMISSIONS AND CHARGES AND THE
LEGAL FEES, IF ANY, OF THE SELLING SHAREHOLDERS, THE COMPANY WILL BEAR ALL
EXPENSES IN CONNECTION WITH REGISTERING THE SHARES OFFERED HEREBY. SUCH
EXPENSES ARE ESTIMATED TO TOTAL APPROXIMATELY $35,000. SEE "PLAN OF
DISTRIBUTION."
THIS PROSPECTUS ALSO RELATES TO SUCH ADDITIONAL SHARES AS MAY BE ISSUED TO
THE SELLING SHAREHOLDERS BECAUSE OF FUTURE STOCK DIVIDENDS, STOCK
DISTRIBUTIONS, STOCK SPLITS, OR SIMILAR CAPITAL READJUSTMENTS.
THE DATE OF THIS PROSPECTUS IS __________, 1996
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AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information
can be inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices located at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, such reports, proxy statements and
other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006-1506.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments and exhibits filed or to be filed in connection therewith, the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of
documents are necessarily summaries of such documents, and each statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission pursuant to
the 1934 Act are hereby incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended September 1,
1995;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended December
1, 1995;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended March 1,
1996;
4. The Company's Quarterly Report on Form 10-Q for the quarter ended May 31,
1996; and
5. The description of the Company's Common Stock contained in the
Registration Statement on Form 8-A of Telecrafter Corporation, predecessor
to the Company, Registration No. 0-11003 as filed with the Securities and
Exchange Commission on March 25, 1983.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective
dates of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified and superseded, to constitute a
part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any and
all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into such documents). Please direct such requests
to the Secretary, Wegener Corporation, 11350 Technology Circle, Duluth,
Georgia 30136, telephone number (770) 623-0096.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK OFFERED
HEREBY. EXCEPT FOR HISTORICAL INFORMATION CONTAINED IN THIS PROSPECTUS AND IN
THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS BY REFERENCE, THE MATTERS
DISCUSSED HEREIN AND THEREIN CONTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE SUGGESTED IN THE FORWARD-LOOKING STATEMENTS, INCLUDING WITHOUT
LIMITATION, THE EFFECT OF ECONOMIC CONDITIONS, PRODUCT DEMAND, COMPETITIVE
PRODUCTS AND OTHER RISKS DETAILED HEREIN AND IN THE COMPANY'S OTHER FILINGS
WITH THE COMMISSION.
WORKING CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FINANCING. The Company
may require additional capital or other financing to finance its operations
and continued growth. The Company may seek additional equity financing
through the issuance of Common Stock upon the exercise of outstanding
warrants and options or through the sale of securities on a public or a
private placement basis on such terms as are reasonably attainable. There
can be no assurance that the Company will be able to obtain such financing
when needed, or that if obtained, it will be sufficient or on terms and
conditions acceptable to the Company.
LIMITED HISTORY OF PROFITABILITY. Over the past five fiscal years, the
Company has reported positive net income only in the most recent fiscal year.
As a consequence, the Company had an accumulated deficit of $2,524,553 at the
end of the fiscal year ended September 1, 1995. The deficit was $2,092,029
at May 31, 1996. There can be no certainty regarding the Company's ability
to achieve or sustain profitability in the future. Whether or not the
Company is able to operate profitably, the Company may require additional
capital to finance its operations. During the second half of fiscal 1995
(year ended September 1, 1995) the Company issued 1.7 million shares of
Common Stock in private placements and received net proceeds of $7,662,000.
During May 1996, the Company issued $5,000,000 aggregate principal amount of
8% Convertible Debentures due 1999, also in a private placement. The
proceeds received in the private placements as well as the Company's other
current sources of funds (including a $8.5 million revolving line of credit)
are expected to satisfy the Company's liquidity needs in the short term.
Depending on the levels of revenues and profitability for the remainder of
fiscal 1996 and for fiscal 1997, additional funds for working capital may be
needed. Management believes that the Company's ability to continue
operations is dependent upon successfully obtaining additional funds through
debt or equity financing to provide working capital and other funds for
operations, and ultimately, the achievement of sustained profitability.
There can be no assurance that the Company will be successful in achieving
these goals.
TECHNOLOGICAL CHANGE AND NEW PRODUCTS. The market for the Company's
products is characterized by rapidly changing technology, evolving industry
standards and frequent product introductions. Product introductions are
generally characterized by increased functionality and better quality,
sometimes at reduced prices. The introduction of products embodying new
technology may render existing products obsolete and unmarketable. The
Company's ability to successfully develop and introduce on a timely basis new
and enhanced products that embody new technology, and achieve levels of
functionality and price acceptable to the market will be a significant factor
in the Company's ability to grow and to remain competitive. If the Company
is unable, for technological or other reasons, to develop competitive
products in a timely manner in response to changes in the industry, the
Company's business and operating results will be materially and adversely
affected.
CONCENTRATION OF CUSTOMERS. The Company sells to a variety of domestic and
international customers on an open-unsecured account basis. The customers
principally operate in the cable television, broadcast
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business music, private network and data communications industries. One
customer, Glenayre Technologies, Inc., accounted for approximately 15.0% of
revenues in fiscal 1995. Sales to Muzak accounted for approximately 18.6% of
revenues in fiscal 1994, and 13.3% of revenues in fiscal 1993. Sales to a
relatively small number of major customers have typically comprised a
majority of the Company's revenues. This trend is expected to continue, and
there can be no assurance that the loss of one or more of these customers
would not have an adverse effect on the Company's operations.
SOURCES AND AVAILABILITY OF RAW MATERIALS. Raw materials consist of
passive electronic components, electronic circuit boards and fabricated sheet
metal. The Company purchases approximately one-half of its raw materials from
direct dealers and the other half is purchased from distributors. Passive
and active components include parts such as resistors, integrated circuits
and diodes. The Company uses approximately ten distributors to supply its
electronic components. Direct sources provide sheet metal, electronic
circuit boards and other materials built to specifications. The Company
maintains relationships with almost twenty direct dealers. Most of the
Company's materials are available from a number of different suppliers,
however, certain components used in existing and future products are
currently available from single or limited sources. Although the Company
believes that all single-source components currently are available in
adequate quantities, there can be no assurance that shortages or
unanticipated delivery interruptions will not develop in the future. Any
disruption or termination of supply of certain single-source components could
have an adverse effect on the Company's business and results of operations.
DEPENDENCE ON MANAGEMENT AND KEY EMPLOYEES. The Company's development,
management of its growth and other activities depend on the efforts of key
management and technical employees, and, in particular, Robert A. Placek and
C. Troy Woodbury, Jr., the President and Chief Executive Officer and
Treasurer and Chief Financial Officer, respectively. The Company does not
have an employment agreement with either Mr. Placek or Mr. Woodbury, but
carries key man life insurance on the life of Mr. Placek in the amount of $2
million. Competition for qualified personnel is intense. The Company uses
incentives, including competitive compensation and stock option plans, to
attract and retain well-qualified employees. There can be no assurance,
however, that the Company will continue to attract and retain personnel with
the requisite capabilities and experience. The loss of one or more of the
Company's key management or technical personnel also could adversely affect
the Company. The Company does not have employment agreements with its key
management personnel or technical employees. The Company's future success is
also dependent upon its ability to effectively attract, retain, train,
motivate and manage its employees. Failure to do so could have a material
adverse effect on the Company's business and operating results.
COMPETITION. The Company competes with companies which have substantially
greater resources and a larger number of products than the Company, as well
as with small specialized companies. Competition in the emerging distance
learning industry is comprised of both established firms as well as relative
newcomers. Through relationships with satellite service providers, the
Company has positioned itself to provide end-to-end solutions to its
customers. Competition in the market for the Company's MPEG-2 broadcast
television electronics products, including digital video equipment, is driven
by timelines, performance, and price. Although design improvements continue,
the Company has begun deliveries of its broadcast digital video products
which are aggressively priced, with unique, desirable features. These
products are physically smaller and priced below other equivalent products on
the market today. The competitive situation for data products is
significantly different than that of the markets for other WCI products. Due
to the large number of potential end users, both small and large competitors
continue to emerge. The Company believes it has positioned itself to
capitalize on the market trends in this business through careful development
of its product and market strategies, which have proven successful in
increasing revenues from this sector. In the cable television market the
Company believes that the
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competitive position for its products is dominant. Products for cable
television include proprietary cueing and network control devices.
Competition for radio network products, including the Company's digital audio
products, is very aggressive and pricing is very competitive. The Company
believes that its continued success in all of its markets will depend on
aggressive marketing and product development.
NO ASSURANCE OF CONTINUED TRADING MARKET IN COMPANY SECURITIES. The
Company's Common Stock is traded on the Nasdaq SmallCap Market. There is no
assurance that a public market for the Company's Common Stock will continue
to be made or that persons purchasing the Company's securities will be able
to avail themselves of a public trading market for the Common Shares in the
future. The requirements for continued listing on the Nasdaq SmallCap Market
include that the issuer have two active market makers, total assets of at
least $2 million, capital and surplus of at least $1 million, a minimum bid
price per share of $1.00, at least 300 shareholders, and at least 100,000
publicly held shares with a market value of at least $200,000, among other
requirements. The Company currently satisfies all requirements for continued
eligibility for trading on the Nasdaq SmallCap Market. There can be no
assurance that the Company will remain in compliance with Nasdaq's continued
listing requirements. If the Common Stock is delisted by Nasdaq, the trading
market for the Common Stock will be adversely affected, as price quotations
for the Common Stock will not be as readily obtainable, which would likely
have a material adverse effect on the market price of the Common Stock.
VOLATILITY OF STOCK PRICE. The Company's Common Stock has experienced
substantial price volatility and such volatility may occur in the future,
particularly as a result of quarter to quarter variations in the actual or
anticipated financial results of the Company or other companies in the
satellite communications industry or in the markets served by the Company.
These and other factors may adversely affect the market price of the Common
Stock.
NO DIVIDENDS. The Company has never paid cash dividends on its Common
Stock and has no plans to pay cash dividends in the foreseeable future. The
policy of the Company's Board of Directors is to retain all available
earnings for use in the operation and expansion of the Company's business.
SHARES ELIGIBLE FOR FUTURE SALE. The Company currently has 8,758,564
shares of Common Stock outstanding. Of these shares, a total of 6,394,705
are eligible for sale in the open market without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), except to the
extent any shares are purchased by "affiliates" (as that term is defined
under the Securities Act) of the Company. All of the remaining 2,363,859
shares of Common Stock are "restricted securities" as that term is defined in
Rule 144 promulgated under the Securities Act, none of which are currently
eligible for sale in the public market. Because the Debentures carry a
variable conversion rate that fluctuates with the market price of the
Company's Common Stock, it is not possible to currently quantify the precise
number of shares to be issued upon future conversion. Accordingly, the
Company has registered up to 1,000,000 for resale, which constitutes
management's estimate of the maximum number of shares to be issued upon
conversion, giving effect to possible fluctuations in the market price of the
Common Stock. All 1,000,000 of such shares, of which the 539,120 shares
offered hereby constitute a part, will be eligible for sale in the open market
without restriction upon completion of this offering. Additional shares of
Common Stock, including shares issuable upon exercise of options to purchase
Common Stock, will also become eligible for sale in the public market from
time to time. Following this offering, sales and potential sales of
substantial amounts of the Company's Common Stock in the public market
pursuant to Rule 144 or otherwise could adversely affect the prevailing
market prices for the Common Stock and impair the Company's ability to raise
additional capital through the sale of equity securities.
CONVERSION AT DISCOUNT TO MARKET PRICE OF COMMON STOCK. The 539,120 shares
of Common Stock offered hereby will be issued to the Selling Shareholders
upon conversion of the Debentures. Such conversion will be at a discount to
the market price of the Common Stock prevailing at the time of such
conversion. The shares will be resold by the Selling Sharehonders to the
public at the prevailing market price. See "Selling Shareholders."
5
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THE COMPANY
Wegener Corporation (the "Company"), was formed in 1977 and is a Delaware
corporation. The Company conducts its continuing business through Wegener
Communications, Inc. (WCI), its wholly-owned subsidiary, and Wegener
Communications International, Inc., a wholly-owned subsidiary of WCI. The
Company's principal executive offices are located at 11350 Technology Circle,
Duluth, Georgia 30136 and its telephone number is (770) 623-0096.
WCI was formed in April 1978 and is a Georgia corporation. Its
wholly-owned subsidiary, Wegener Communications International, Inc., is a
Small Foreign Sales Corporation. WCI manufacturers and distributes satellite
communications electronics to cable television operators, radio and
television broadcasters, the business music industry and to private network
systems. Products are sold in international and domestic markets.
SATELLITE COMMUNICATIONS ELECTRONICS. WCI manufacturers electronics for the
distance learning, broadcast television and radio, cable television, business
music, private network and data communications industries. WCI services all
of the products that it sells. The Company warrants its products for a
period of one year. There were no significant warranty claims outstanding as
of May 31, 1996.
WCI manufacturers primarily high volume standard products. During fiscal
1994, the Company divested its low volume custom products operations and
entered into a distributor agreement for the sale of these products.
Throughout fiscal 1995 and the first nine months of fiscal 1996, WCI
continued to produce and develop digital compression products. These
products are in use world wide in distance learning, radio, cable television,
and private business networks. In terms of new orders, compressed digital
products are the fastest growing product segment for the Company. Bookings
for the Company's digital video products are increasing and management
believes they will more than compensate for other areas which are being
impacted due to shifts in technology. As expected, demand for the Company's
analog products have begun to decline following market demand for, and the
Company's emphasis on, digital technology.
DIGITAL COMMUNICATIONS. The demand for digital products is being driven by
the high cost of satellite capacity. Satellite capacity is scarce due to
pressures on both the supply and demand side of the market. On the supply
side, satellites are extremely expensive to launch, build, and maintain. The
useful life of a satellite is limited by the amount of positioning fuel that
can be carried. Also, the placement of satellites is regulated by the FCC
and therefore the number of satellites within range of any given location is
limited. On the demand side, the cost of receive hardware is being steadily
reduced through advancing technology. The reduction in the cost of network
hardware increases the economic feasibility of a greater number of networks.
This is evidenced by the trend in both television and radio towards
narrow-casting to well-defined market segments as opposed to broadcasting to
the general population. Digital compression technology allows a four to
ten-fold, or more, increase in the throughput of a satellite channel. For
the network it represents an opportunity to reduce the cost of satellite use.
For the satellite operator it represents an opportunity to increase the
revenue generated by an expensive asset. The market as a whole has built up
demand for digital technology which has finally arrived.
With ongoing breakthroughs in digital compression, digitized audio and
video products have become increasingly important. In 1995, WCI began
delivering its MPEG-1 digital video products under a multi-year,
multi-million dollar contract with Foundation Telecommunications, Inc. (FTI).
FTI is using the WCI products to deliver distance learning programming to
universities. Also in 1995 Dow Jones Investor
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Network and NBC Desktop Video installed WCI MEPG-1 digital video products for
use in subscription-based business information networks which deliver
compressed video to PCS.
WCI will manufacture MPEG-2 broadcast quality digital video products for
commercial program distribution. These products will be installed at video
programming origination points both at network studios and in satellite news
gathering trucks for on-location transmissions. Initial shipments of these
products began in the second and third quarters of fiscal 1996.
The Company's digital audio products employ MPEG digital audio compression
technology and are used to distribute radio and business music programming to
network affiliates. During fiscal 1995, orders for WCI's digital audio
receiver products came from new networks in Spain, France, Mexico, Colombia,
Brazil, Finland, Germany, Belgium, Switzerland, Singapore, and the United
States.
The Company manufactures specialized data communications products used in
satellite broadcast data applications. Bookings for these products were very
strong in fiscal 1995. WCI manufactures satellite data receivers for
Glenayre Technologies which are used to expand Glenayre's paging network.
Reuters also chose WCI data equipment to expand distribution for its
international news feed.
CABLE TELEVISION PRODUCTS. WCI's products are widely employed in the cable
industry to provide a variety of audio, data, and video services to cable
subscribers. These products deliver high quality video and stereo sound to
cable headends via satellite. This includes transmission of stereo sound
associated with cable television programming, discrete audio-only services
provided to cable systems, automated program delivery for regional sports
networks, and pay-per-view movies.
A wide variety of data transmission products are used to deliver
specialized data services to cable headends and subscribers. These
applications range from data to feed news services, weather and program guide
graphics, delivery to personal computers, and control of cable subscribers'
addressable converters.
Other cable products are cue and control equipment for cable television
networks. Cueing signals are used on advertising supported networks to
permit affiliated cable systems to insert local commercials at appropriate
times. Control equipment delivers switching commands from the network to
provide program routing and blackouts.
An additional product family of the cable television segment is graphic
generators. These products deliver custom data by satellite that is
graphically displayed on a subscriber's television. Products in this area
were among the first generated by WCI. WCI has continued to add new products
to this family to meet market demand.
RADIO AND TELEVISION BROADCASTING. Broadcasters use WCI equipment to
distribute digital audio, analog audio, video, and cue/network control
signals. Satellite based radio networks use WCI products to provide program
audio and remote control of affiliate stations. Television networks use WCI
products to deliver video, stereo sound, and data, as well as network
management. Television stations use audio and data products for terrestrial
microwave and fiber optic studio-to-transmitter links.
OPTICAL FIBER AND TERRESTRIAL MICROWAVE. Most of WCI's products used on
satellite communications links are easily used on existing microwave or fiber
circuits. Typical applications are voice and data circuits that accompany a
television signal.
7
<PAGE>
BUSINESS MUSIC. This market consists of suppliers of business music to
retail restaurants, offices and retail establishments. WCI manufactures the
equipment required to transmit audio and data from the business music
supplier to the end user via satellite circuits. The equipment is controlled
by the business music supplier using WCI's network control technology.
Potential users of this WCI equipment include any business purchasing
background music, foreground music or broadcast data.
USE OF PROCEEDS
All of the shares of the Common Stock registered for sale hereby will be
offered and sold by the Selling Shareholders. Accordingly, the Company will
not receive any of the proceeds from such sales.
8
<PAGE>
SELLING SHAREHOLDERS
This Prospectus covers offers from time to time by each Selling Shareholder
(after such person becomes a holder of Common Stock) of the Common Stock to
be owned by such person. The Selling Shareholders will hold shares of Common
Stock issued or issuable upon the conversion of the Debentures. The
Debentures were issued in a private placement conducted pursuant to
Regulation D promulgated pursuant to the Securities Act and consummated on
May 31, 1996. The registration of the shares of Common Stock offered for
resale hereby is pursuant to a Registration Rights Agreement dated May 31,
1996, entered into in connection with the original issuance of the Debentures
(the "Registration Rights Agreement"). The Debentures are convertible at the
option of the holder at any time through the close of business on May 31,
1999, into a number of shares of Common Stock at a price equal to the lesser
of (i) $12.25 per share or (ii) a percentage (currently 95%, decreasing to
82.5% on August 29, 1996) of the average of the lowest sale price of the
Company's Common Stock on each of the five trading days immediately preceding
the conversion date, subject to adjustment under certain circumstances. As
of July 1, 1996, the Debentures were convertible into an aggregate of 539,120
shares of Common Stock at a conversion price of $9.274375 per share. Because
the Debentures carry a variable conversion rate that fluctuates with the
market price of the Company's Common Stock, it is not possible to currently
quantify the precise number of shares to be issued upon future conversion.
Accordingly, the Company has registered up to 1,000,000 shares for resale,
which constitutes management's estimate of the maximum number of shares to be
issued upon conversion, giving effect to possible fluctuations in the market
price of the Common Stock.
The following table reflects the shares issuable to each Selling
Shareholder assuming conversion on July 1, 1996. The actual number of shares
to be sold by a Selling Shareholder upon conversion may be greater or less
than the number of shares shown in the table depending upon the market price
of the Company's Common Stock at the date of conversion. None of the Selling
Shareholders has held any position or office or had any other material
relationship with the Company or any of its predecessors or affiliates in the
last three years.
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES
NAME OF OWNED BEFORE BEING REGISTERED OWNED AFTER
SELLING SHAREHOLDER THIS OFFERING(1) FOR RESALE THIS OFFERING(2)
- ---------------------- ---------------- ---------------- ----------------
Halifax Fund, L.P. 269,560 269,560 -0-
Capital Ventures
International 215,648 215,648 -0-
Kleinwort Benson Ltd. 53,912 53,912 -0-
------- ------- -------
Total 539,120 539,120 -0-
------- ------- -------
------- ------- -------
____________________________
(1) The Debentures provide that conversions by a Selling Shareholder may only
be effected to the extent that the number of shares to be received upon
such conversion, together with any other shares of the Company's Common
Stock then owned by the Selling Shareholder (exclusive of shares issuable
upon conversion of the unconverted portion of the debentures), does not
exceed 4.9% of the Company's issued and outstanding Common Stock. At
May 31, 1996, the Company had 8,758,564 shares of Common Stock issued and
outstanding.
(2) Assumes that all shares held by such Selling Shareholder acquired upon
conversion of the Debentures will be offered and sold.
9
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby may be offered and sold from time
to time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made in the over-the-counter
market or otherwise, at market prices prevailing at the time of the sale, at
prices related to the then prevailing market price or in negotiated
transactions, including pursuant to an underwritten offering or pursuant to
one or more of the following methods: (i) purchases by a broker-dealer as
principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (ii) ordinary brokerage transactions and transactions in
which a broker solicits purchasers; (iii) block trades in which a
broker-dealer engaged by the Selling Shareholders may arrange for other
broker-dealers to participate; (iv) short sales; and (v) any combination of
the foregoing. Broker-dealers may receive commissions or discounts from the
Selling Shareholders in amounts to be negotiated immediately prior to the
sale.
In connection with the sale of shares of Common Stock covered hereby,
underwriters or agents may receive compensation from the Selling Shareholders
or from purchasers of the shares of Common Stock covered hereby for whom they
may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell shares of Common Stock to or through dealers and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they act as agents. Underwriters, dealers and agents that participate
in the distribution of shares of Common Stock covered hereby may be deemed to
be underwriters, and any discounts or commissions received by them from the
selling Shareholders and any profit on the resale of shares of Common Stock
by them may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Registration Rights Agreement provides that the Company will indemnify
the Selling Shareholders against certain liabilities, including liabilities
under the Securities Act.
This Offering will terminate on the earlier of (i) the date on which all
shares offered hereby have been sold by the Selling Shareholders or (ii) May
31, 1999.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Smith, Gambrell & Russell, Atlanta, Georgia.
EXPERTS
The financial statements and schedules incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, independent certified
public accountants, to the extent and for the periods set forth in their
reports incorporated herein by reference, and are incorporated herein in
reliance upon such reports given upon the authority of said firm as experts
in accounting and auditing.
10
<PAGE>
NO DEALER, REPRESENTATIVE OR
ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE INFORMATION
OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE
SELLING SHAREHOLDERS OR BY THE
UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS
OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE
PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO
DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
________________________
TABLE OF CONTENTS
________________________
PAGE
AVAILABLE INFORMATION. . . . . . . 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . . 2
RISK FACTORS . . . . . . . . . . . 3
THE COMPANY. . . . . . . . . . . . 6
USE OF PROCEEDS. . . . . . . . . . 8
SELLING SHAREHOLDERS . . . . . . . 9
PLAN OF DISTRIBUTION . . . . . . . 10
LEGAL MATTERS. . . . . . . . . . . 10
EXPERTS. . . . . . . . . . . . . . 10
539,120 Shares
WEGENER
CORPORATION
COMMON STOCK
_____________________
PROSPECTUS
_____________________
JULY ____, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are estimates of the fees and expenses payable by the
Registrant in connection with the offer and sale of the Common Stock:
SEC Registration Fee. . . . . . . . . . . . $ 3,169
Blue Sky Qualification Fees and Expenses. . 500
Transfer Agent Fees . . . . . . . . . . . . 500
Printing, Materials, and Postage. . . . . . 1,000
Legal Fees and Expenses . . . . . . . . . . 15,000
Accounting Fees and Expenses. . . . . . . . 12,000
Miscellaneous Expenses. . . . . . . . . . . 2,831
--------
TOTAL. . . . . . . . . . . . . . . . . $ 35,000
--------
--------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and By-laws provide for
indemnification of directors and officers of the Company to the full extent
permitted by Delaware law.
Section 145 of the General Corporation Law of the State of Delaware
provides generally that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at its
request in such capacity in another corporation or business association,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
In addition, pursuant to the authority of Delaware law, the Certificate of
Incorporation of the Company also eliminates the monetary liability of
directors to the fullest extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
Pursuant to Registration Rights Agreements with the Selling Shareholders,
the Company has agreed to indemnify such Selling Shareholders against certain
liabilities, including liabilities under the Securities Act or otherwise.
II-1
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement.
Exhibit No. Description of Exhibit
----------- ------------------------------------------------------------
4.1 Form of 8% Convertible Debenture issued to Halifax Fund, L.P.
($2,500,000), Capital Ventures International ($2,000,000) and
Kleinwort Benson, Ltd. ($500,000).
4.2 Form of Registration Rights Agreement
5.1 Opinion of Smith, Gambrell & Russell
23.1 Consent of BDO Seidman, LLP
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs
(i) and (ii) above do not apply if the information required to
be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at the time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referred to
in Item 15 above, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable ground to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Duluth, State of Georgia, on this 10th day of
July, 1996.
WEGENER CORPORATION
By: /s/ C. Troy Woodbury, Jr.
-----------------------------------
C. Troy Woodbury, Jr.
Treasurer and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert A. Placek and C. Troy Woodbury, Jr. and
each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
including a Registration Statement filed under Rule 462(b) of the Securities
Act of 1993, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Robert A. Placek President and Chief July 10, 1996
- ------------------------------ Executive Officer
ROBERT A. PLACEK (Principal Executive Officer)
/s/ C. Troy Woodbury, Jr. Treasurer and Chief July 10, 1996
- ------------------------------ Financial Officer
C. TROY WOODBURY, JR. (Principal Financial and
Accounting Officer)
/s/ James H. Morgan, Jr. Director July 8, 1996
- ------------------------------
JAMES H. MORGAN, JR.
/s/ Joe K. Parks Director July 10, 1996
- ------------------------------
JOE K. PARKS
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description of Exhibit Page No.
- ------- ------------------------------------- ----------
4.1 Form of 8% Convertible Debenture issued
to Halifax Fund, L.P. ($2,500,000),
Capital Ventures International ($2,000,000)
and Kleinwort Benson, Ltd. ($500,000).
4.2 Form of Registration Rights Agreement
5.1 Opinion of Smith, Gambrell & Russell
23.1 Consent of BDO Seidman, LLP
<PAGE>
EXHIBIT 4.1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
No.___ $________
WEGENER CORPORATION
8% CONVERTIBLE DEBENTURE DUE MAY 31, 1999
THIS DEBENTURE ("Debenture") is one of a duly authorized issue of
Debentures of Wegener Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (the "Company"), designated as its 8%
Convertible Debentures Due May 31, 1999, in an aggregate principal amount not
exceeding Five Million U.S. Dollars (U.S. $5,000,000) (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to __________________
the holder hereof, or its order (the "Holder"), the principal sum of _____
United States Dollars (U.S. $_______) on May 31, 1999 (subject to extension
as provided herein, the "Maturity Date") and to pay interest on the principal
sum outstanding under this Debenture ("Outstanding Principal Amount"), at the
rate of 8% per annum due and payable quarterly in arrears on the first day of
January, April, July and October of each year (each an "Interest Payment
Date"), with the first such payment due on July 1, 1996. Accrual of interest
shall commence on the first business day to occur after the date hereof and
shall continue until payment in full of the principal sum has been made. The
interest so payable will be paid to the person in whose name this Debenture
(or one or more predecessor Debentures) is registered on the records of the
Company regarding registration and transfers of the Debentures (the
"Debenture Register"); provided, however, that the Company's obligation to a
transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions of the
Convertible Securities Subscription Agreement dated as of May 30, 1996
between the Company and __________________(the "Subscription Agreement").
The principal of, and interest on, this Debenture are payable in such coin or
currency of the United States of America as of the time of payment is legal
tender for payment of public and private debts, at the address last appearing
on the Debenture Registrar of the Company as designated in writing by the
Holder hereof from time to time; provided, however, that, in lieu of paying
such interest in coin or currency, the Company may, at its option, pay
interest on this Debenture for any Interest Payment Date by adding the amount
of such interest to the Outstanding Principal Amount due under this Debenture
("PIK Interest") pursuant to a statement in the form of Exhibit 2 hereto
("PIK Statement") delivered by the Company to the Holder on or prior to the
applicable Interest Payment Date. If neither the cash interest due hereunder
is paid, nor the PIK Statement delivered, to the Holder by the applicable
Interest Payment Date, the Company shall no longer have the right to choose
the PIK Interest option and the Holder may elect either cash interest or PIK
Interest hereunder at its option.
<PAGE>
Any PIK Interest when so added to the Outstanding Principal Amount
due under this Debenture shall, for all purposes of this Debenture, be deemed
to have been part of the principal indebtedness originally evidenced by this
Debenture including, without limitation, for purposes of determining interest
thereafter payable hereunder and amounts thereafter convertible into Common
Stock hereunder. The Company will pay any principal due and all accrued and
unpaid interest due upon this Debenture to the person that is the Holder of
this Debenture on the records of the Company as of the tenth (10th) day prior
to the applicable payment date and addressed to such Holder at the last
address appearing on the Debenture Register. Except as otherwise provided
herein, the Outstanding Principal Amount and interest due hereunder shall
bear interest, from and after the occurrence and during the continuance of a
default hereunder, at the rate equal to the lower of twenty percent (20%) per
annum or the highest rate permitted by law.
This Debenture is subject to the following additional provisions:
1. EXCHANGE. The Debentures in minimum principal amount of $200,000,
are exchangeable for an equal aggregate principal amount of Debentures of
different denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration or transfer or exchange.
2. [Intentionally Omitted]
3. TRANSFERS. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred or
exchanged in the United States only in compliance with the Securities Act of
1933, as amended (the "Act") and applicable state securities laws. Prior to
due presentment for transfer of this Debenture, the Company may treat the
person in whose name this Debenture is duly registered on the Company's
Debenture Register as the owner hereof for the purpose of receiving payment
as herein provided and all other purposes, whether or not this Debenture be
overdue, and the Company shall not be affected by notice to the contrary.
4. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"CLOSING DATE" shall mean the date of original issuance of the
Debenture.
"COMMON STOCK" shall mean the Common Stock, par value $0.01, of the
Company.
"CONVERSION DATE MARKET PRICE" shall mean an amount that is equal to
the lesser of (a) the Maximum Conversion Price or (b) X% (as set forth in the
schedule below) of the average of the Market Price for Shares of Common Stock
on each of the five (5) trading days immediately preceding the Holder
Conversion Date, subject to adjustment from time to time as set forth in
Paragraph 8 hereof and/or in the Subscription Agreement and/or Registration
Rights Agreement (as defined in the Subscription Agreement):
HOLDER CONVERSION DATE
(DAYS FROM CLOSING DATE) X%
------------------------ --
0 to 45 95%
46 to 90 90%
90 and thereafter 82.5%
-2-
<PAGE>
"CONVERSION DEFAULT" shall have the meaning set forth in
Paragraph 10(b).
"CONVERSION NOTICE" shall have the meaning set forth in
Paragraph 6(c).
"CONVERSION RATE" shall have the meaning set forth in
Paragraph 6(b).
"HOLDER CONVERSION DATE" shall have the meaning set forth in
Paragraph 6(c).
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of
one share of Common Stock determined as follows:
(i) If the Common Stock is listed on NASDAQ, the lowest
reported sales price on the date of valuation;
(ii) If the Common Stock is listed on a national securities
exchange, the lowest reported sales price on such exchange on the date of
valuation;
(iii) If neither (i) nor (ii) apply but the Common Stock is
quoted in the over-the-counter market on the pink sheets or bulletin board,
the lesser of (A) the lowest sales price or (B) the mean between the last
reported "bid" and "asked" prices thereof on the date of valuation; and
(iv) If neither clause (i), (ii) or (iii) above applies, the
market value as determined by a nationally recognized investment banking firm
or other nationally recognized financial advisor retained by the Company for
such purpose, taking into consideration, among other factors, the earnings
history, book value and prospects for the Company, and the prices at which
shares of Common Stock recently have been traded. Such determination shall
be conclusive and binding on all persons.
"MAXIMUM CONVERSION PRICE" shall mean the amount of $12.25,
provided, however, that in the event that during the period expiring ninety
(90) days following the Closing, the Company offers, sells, contracts to sell
or otherwise issues or agrees to issue any securities of the Company,
convertible or otherwise, in a private placement transaction, with a maximum
conversion price per share of Common Stock of, or in the case of a Common
Stock offering a purchase price per share equal to, an amount less than
$12.25, then the "Maximum Conversion Price" shall mean such lower conversion
price or offer price per share for the Debentures not yet converted, and
provided further that in the event of any stock split, subdivision,
combination, reorganization, exchange, substitution or reclassification, the
Maximum Conversion Price shall be equitably and appropriately adjusted to
reflect such change.
"PARAGRAPH 5 TRANSACTION" shall mean a merger, consolidation, or
other transaction referred to in Paragraph 5.
"POST-DEFAULT CONVERSION" shall have the meaning set forth in
Paragraph 10(b).
"THE REGISTRATION RIGHTS AGREEMENT" shall have the meaning set forth
for such agreement in the Subscription Agreement.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Paragraph 5.
-3-
<PAGE>
"SUBSCRIPTION AGREEMENT" shall have the meaning set forth on page 1
of this Debenture.
"UNDERLYING SHARES" shall have the meaning set forth in Paragraph 5.
5. MERGER, CONSOLIDATION. If at any time there occurs any
consolidation or merger of the Company with or into any other corporation or
other entity or person (whether or not the Company is the surviving
corporation), or any other corporate reorganization or transaction or series
of related transactions in which in excess of 50% of the Company's voting
power is transferred (a "Paragraph 5 Transaction"), the Holders of this
Debenture then outstanding may participate in any such transaction as a class
with common stockholders on the same basis as if this Debenture had been
converted one day prior to the effective date of such transaction; provided,
however, that at the option of the Holder of this Debenture, the Company
shall redeem the Debentures effective as of the effective date of any
Paragraph 5 Transaction that occurs prior to the earlier of (i) 180 days
after the date hereof or (ii) 60 days after the date the registration
statement ("Registration Statement") covering the Common Stock issuable upon
conversion of the Debentures ("Underlying Shares") becomes effective, and the
Holder shall be entitled to receive a redemption price equal to 115% of the
outstanding principal amount of this Debenture, plus accrued but unpaid
interest on this Debenture. Such Holder shall be entitled to make such
election at any time up to 10 days after the effective date of the Paragraph
5 Transaction.
6. CONVERSION AT THE OPTION OF THE HOLDER. The Holder of this
Debenture shall have the following conversion rights.
(a) HOLDER'S RIGHT TO CONVERT. This Debenture shall be convertible
at any time, in whole or in part, at the option of the Holder hereof, into
fully paid, validly issued and nonassessable shares of Common Stock. If this
Debenture is converted in part, the remaining portion of this Debenture not
so converted shall remain entitled to the conversion rights provided herein.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. The principal
amount of this Debenture that is converted into shares of Common Stock at the
option of the Holder shall be convertible into the number of shares of Common
Stock which results from application of the following formula:
P + I
______________________________
Conversion Date Market Price
P = principal amount of this Debenture submitted for conversion
I = accrued but unpaid interest (not previously added to
principal on a PIK Statement)
on P as of the Holder Conversion Date
The number of shares of Common Stock into which each $1,000
principal amount of this Debenture hereto may be converted pursuant to this
paragraph hereof is hereafter referred to as the "Conversion Rate."
(c) MECHANICS OF CONVERSION. In order to convert this Debenture
(in whole or in part) into full shares of Common Stock, the Holder shall
surrender this Debenture, duly endorsed, by either
-4-
<PAGE>
overnight courier or 2-day courier, to the principal office of the Company,
and shall give written notice in the form of EXHIBIT 1 hereto (the
"Conversion Notice") by facsimile (with the original of such notice forwarded
with the foregoing courier) to the Company at such office that the Holder
elects to convert the principal amount (plus accrued but unpaid interest)
specified therein, which such notice and election shall be irrevocable by the
Holder; PROVIDED, HOWEVER, that the Company shall not be obligated to issue
certificates evidencing the shares of the Common Stock issuable upon such
conversion unless either the Debenture evidencing the principal amount is
delivered to the Company as provided above, or the Holder notifies the
Company that such Debenture(s) have been lost, stolen or destroyed and
promptly executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection with such
Debentures.
The Company shall use its best efforts to issue and deliver within
three business days after delivery to the Company of such Debenture(s), or
after receipt of such agreement and indemnification, to such Holder of
Debenture(s) at the address of the Holder, or to its designee, a certificate
or certificates for the number of shares of Common Stock to which the Holder
shall be entitled as aforesaid, together with a calculation of the Conversion
Rate and a Debenture or Debentures for the principal amount of Debentures not
submitted for conversion. The date on which the Conversion Notice is given
(the "Holder Conversion Date") shall be deemed to be the date the Company
received by facsimile the Conversion Notice, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.
7. CONVERSION UPON MATURITY. At the Maturity Date, all Debentures
outstanding at such time shall be automatically converted into Common Stock
of the Company in accordance with the terms of this Debenture, the
Subscription Agreement and the Registration Rights Agreement, without notice.
The Company shall use its best efforts to issue and deliver within three
business days after delivery to the Company of this Debenture, or after
receipt of the agreement and indemnification described in paragraph 6(c)
above, to the Holder of the Debenture at the address of the Holder, or to its
designee, a certificate or certificates for the number of shares of Common
Stock to which the Holder shall be entitled hereunder, together with a
calculation of the Conversion Rate. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Maturity Date. The Maturity Date shall be a "Holder
Conversion Date" for purposes of this Debenture.
8. STOCK SPLITS; DIVIDENDS; ADJUSTMENTS; REORGANIZATIONS.
(a) STOCK SPLITS AND COMBINATIONS. The Company shall not effect
any stock split, subdivision or combination with an effective date within
five (5) trading days of the Maturity Date.
(b) CERTAIN DIVIDENDS AND DISTRIBUTIONS. The Company shall not
make, or fix a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, with an effective date within five (5) trading days
of the Maturity Date.
(c) ADJUSTMENT FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In
the event the Company at any time or from time to time after the Closing Date
makes, or fixes a record date for the determination
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<PAGE>
of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, then and in each such event provision shall be made so that the
Holders of Debentures shall receive upon conversion thereof pursuant to
Paragraph 6 hereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of such other securities of the Company to
which a Holder on the relevant record or payment date, as applicable, of the
number of shares of Common Stock so receivable upon conversion would have
been entitled, plus any dividends or other distributions which would have
been received with respect to such securities had such Holder thereafter,
during the period from the date of such event to and including the Holder
Conversion Date retained such securities, subject to all other adjustments
called for during such period under this Paragraph 8 with respect to the
rights of the Holders of the Debentures. For purposes of this Paragraph
8(c), the number of shares of Common Stock so receivable upon conversion by
the Holder shall be deemed to be that number which the Holder would have
received upon conversion of the entire Outstanding Principal Amount hereof if
the Holder Conversion Date had been the day preceding the date upon which the
Company announced the making of such dividend or other distribution.
(d) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Debentures is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or reorganization
provided for elsewhere in this Paragraph 8 or a merger or consolidation,
provided for in Paragraph 5), then and in each such event each Holder of
Debentures shall have the right thereafter to convert such Debenture into the
kind of stock receivable upon such recapitalization, reclassification or
other change by holders of shares of Common Stock, all subject to further
adjustment as provided herein. In such event, the formulae set forth herein
for conversion and redemption shall be equitably adjusted to reflect such
change in number of shares or, if shares of a new class of stock are issued,
to reflect the market price of the class or classes of stock (applying the
same factors used in determining the Market Price for Shares of Common Stock)
issued in connection with the above described transaction.
(e) REORGANIZATIONS. If at any time or from time to time after the
Closing Date there is a capital reorganization of the Common Stock (other
than a recapitalization, subdivision, combination, reclassification or
exchange of shares provided for elsewhere in this Paragraph 8) then, as a
part of such reorganization, provision shall be made so that the Holders of
the Debentures shall thereafter be entitled to receive upon conversion of the
Debentures the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Paragraph 8 with respect to the rights of the Holders of
the Debentures after the reorganization to the end that the provisions of
this Paragraph 8 shall be applicable after that event and be as nearly
equivalent as may be practicable, including, by way of illustration and not
limitation, by equitably adjusting the formulae set forth herein for
conversion and redemption to reflect the market price of the securities or
property (applying the same factors used in determining the Market Price for
Shares of Common Stock) issued in connection with the above described
transaction.
(f) In the event of a dispute between a Holder of Debentures and
the Company with respect to the adjustment required by Paragraph 8(d) or
8(e), then, at such Holder's option, such Holder shall be entitled to treat
the effective date of an event covered by Paragraph 8(d) or 8(e) as a
Redemption
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<PAGE>
Date, and in such event such Holder shall be entitled to receive the
redemption price for his shares pursuant to Paragraph 7(b).
9. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder.
The number of shares of Common Stock that are issuable upon any conversion
shall be rounded up or down to the nearest whole share.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
(a) RESERVATION REQUIREMENT. The Company shall reserve and keep
available at all times, free of preemptive rights shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue shares
of its Common Stock upon conversion of all of the Debentures pursuant hereto.
(b) DEFAULT. If the Company does not have a sufficient number of
shares of Common Stock available to satisfy the Company's obligations to a
Holder of Debentures upon receipt of a Conversion Notice or is otherwise
unable to issue such shares of Common Stock in accordance with the terms of
this Agreement and such condition shall remain unremedied for a period of
thirty (30) days after the Company's receipt of a Conversion Notice (a
"CONVERSION DEFAULT"), then from and after the fifth (5th) day following a
Conversion Default (which for all purposes shall be deemed to have occurred
upon the expiration of the applicable cure period following the Company's
receipt of the applicable Conversion Notice), each Holder of the Debentures
shall have the right to demand from the Company immediate redemption of the
Debentures in cash at a redemption price per Debenture equal to 120% of the
Outstanding Principal Amount of the Debenture not convertible by reason of
the Conversion Default (including Debentures for which a Conversion Notice
has not yet been sent), plus accrued but unpaid interest on the Debenture;
PROVIDED, HOWEVER, that no notice of redemption may be delivered by a Holder
subsequent to receipt by such holder of notice from the Company (sent by
overnight or 2-day courier with a copy sent by facsimile) of availability of
sufficient shares of Common Stock to perfect conversion (a "POST-DEFAULT
CONVERSION") of all the Debentures; provided further that such right shall be
reinstated if the Company shall thereafter fail to perfect such Post-Default
Conversion by delivery of Common Stock certificates in accordance with the
applicable provisions of Paragraph 6(b) hereof and payment of all accrued and
unpaid interest in cash with respect thereto within five business days of
delivery of the notice of Post-Default Conversion. In addition to the
foregoing, upon a Conversion Default, the rate of interest on all of the
Debentures (including Debentures for which a Conversion Notice has not yet
been sent), shall, to the maximum extent of the law, be increased by two
percent (2%) (I.E., from 8% to 10%) commencing on the first day of the thirty
(30) day period (or part thereof) following a Conversion Default; an
additional two percent (2%) commencing on the first day of each of the second
and third such thirty (30) day periods (or part thereof); and an additional
one percent (1%) on the first day of each consecutive thirty (30) day period
(or part thereof) thereafter until such securities have been duly converted
or redeemed as herein provided. Any such interest which is not paid when due
shall, to the maximum extent permitted by law, accrue interest until paid at
the rate from time to time applicable to interest on the Debentures as to
which the Conversion Default has occurred.
11. NO REISSUANCE OF DEBENTURES. No Debentures acquired by the Company
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such Debentures shall be retired. No additional Debentures shall be
authorized or issued without the consent of at least 66 2/3% in interest of
the Holders of Debentures outstanding immediately prior thereto.
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<PAGE>
12. NO IMPAIRMENT. The Company shall not intentionally take any action
which would impair the rights and privileges of the Debentures set forth
herein or the Holders thereof.
13. HOLDER'S RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON
STOCK IS SUSPENDED. In the event that at any time on or after the date
hereof and prior to the third anniversary of the Closing Date, trading in the
shares of the Company's Common Stock is suspended on the principal market or
exchange for such shares (including the NASDAQ Stock Market), for a period of
five consecutive trading days, other than as a result of the suspension of
trading in securities in general, or if such Shares are delisted, then, at a
Holder's option, the Company shall redeem such Holder's Debentures at a
redemption date designated by such Holder, and at the redemption price equal
to 120% of the outstanding principal amount of this Debenture, plus accrued
but unpaid interest on this Debenture.
14. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT. Notwithstanding anything
to the contrary contained herein, each Conversion Notice shall contain a
representation that, after giving effect to the shares of the Company's
Common Stock to be issued pursuant to such conversion notice, the total
number of shares of the Company's Common Stock deemed beneficially owned by
the Holder (excluding shares that might otherwise be deemed beneficially
owned by reason of the conversion right in the Debentures owned by the
Holder), together with all shares of the Company's Common Stock deemed
beneficially owned by the Holder's "affiliates" as defined in Rule 144 of the
Act, will not exceed 4.9% of the total issued and outstanding shares of the
Company's Common Stock.
15. REGISTRATION SUSPENSION. In the event that at any time or from
time to time any registration statement with respect to the Common Stock
issued pursuant to conversion hereunder is suspended or trading in the Common
Stock on the Exchange is suspended for a period of time ("Blackout Period"),
the Maturity Date hereunder shall be extended for a period equal to 1.5 times
the number of days in such Blackout Period.
16. OBLIGATIONS ABSOLUTE. No provision of this Debenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of, and interest on, this Debenture at the time, place
and rate, and in the manner, herein prescribed.
17. WAIVERS OF DEMAND, ETC. The Company hereby expressly waives demand
and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payment of
all sums owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
18. REPLACEMENT DEBENTURES. In the event that any Holder notifies the
Company that its Debenture(s) have been lost, stolen or destroyed,
replacement Debenture(s) identical in all respects to the original
Debenture(s) (except for registration number and Outstanding Principal
Amount, if different than that shown on the original Debenture(s)), provided
that the Holder executes and delivers to the Company an agreement reasonably
satisfactory to the Company to indemnify the Company from any loss incurred
by it in connection with such Debenture(s).
19. PAYMENT OF EXPENSES. The Company agrees to pay all reasonable
debts and expenses, including reasonable attorneys' fees, which may be
incurred by the Holder in enforcing the provisions of
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<PAGE>
this Debenture and/or collecting any amount due under this Debenture, the
Subscription Agreement or the Registration Rights Agreement (as defined in
the Subscription Agreement).
20. DEFAULTS. If one or more of the following described "Events of
Default" shall occur:
(a) The Company shall default in the payment of (i) interest on
this Debenture, and such default shall continue for three (3)
business days after the due date thereof, or (ii) the principal
of this Debenture; or
(b) Any of the representations or warranties made by the Company
herein, in the Subscription Agreement, or in any certificate or
financial or other statements heretofore or hereafter furnished
by or on behalf of the Company in connection with the execution
and delivery of this Debenture or the Subscription Agreement
shall be false or misleading in any material respect at the
time made; or
(c) The Company shall fail to perform or observe any covenant or
agreement in the Subscription Agreement, or any other covenant,
term, provision, condition, agreement or obligation of the
Company under this Debenture and such failure shall continue
uncured for a period of ten (10) business days after notice
from the Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in writing
its inability to pay its debts generally as they mature; (3)
make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (4) apply for or consent to
the appointment of a trustee, liquidator or receiver for it or
for a substantial part of its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty
(30) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the
properties or assets of the Company and shall not be dismissed
within thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or similar
process in excess of One Hundred Thousand Dollars ($100,000) in
the aggregate shall be entered or filed against the Company or
any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of thirty (30)
days or in any event later than ten (10) days prior to the date
of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any
bankruptcy law or any law for the relief of debt shall be
instituted by or against the Company and, if instituted against
the Company, shall not be dismissed within sixty (60) days
after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any
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<PAGE>
such proceedings or admit to any material allegations of, or
default in answering a petition filed in any such proceeding;
then, or at any time thereafter, and in each and every such case, unless such
Event or Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the
option of and (except in the case of clause (h) above) on notice by the
Holder and in the Holder's sole discretion, the Holder may consider the
Debenture immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived, anything
herein or in any other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and without expiration of
any period of grace, enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law. In such
event, the Debenture shall be redeemed at a redemption price per Debenture
equal to 120% of the Outstanding Principal Amount of the Debenture, plus
accrued but unpaid interest on the Debenture.
21. SAVINGS CLAUSE. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or otherwise
invalid or unenforceable, such provision shall be adjusted rather than
voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions of
this Debenture will not in any way be affected or impaired thereby.
22. ENTIRE AGREEMENT. This Debenture and the agreements referred to in
this Debenture constitute the full and entire understanding and agreement
between the Company and the Holder with respect to the subject hereof.
Neither this Debenture nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the Company and
the Holder.
23. ASSIGNMENT, ETC. The Holder may, subject to compliance with the
Subscription Agreement, without notice, transfer or assign this Debenture or
any interest herein and may mortgage, encumber or transfer any of its rights
or interest in and to this Debenture or any part hereof and, without
limitation, each assignee, transferee and mortgagee (which may include any
affiliate of the Holder) shall have the right to transfer or assign its
interest. Each such assignment shall be in the minimum principal amount of
$500,000, or shall be all of the Holder's interest in the Debenture. Each
such assignee, transferee and mortgagee shall have all of the rights of the
Holder under this Debenture. The Company agrees that, subject to compliance
with the Subscription Agreement, after receipt by the Company of written
notice of assignment from the Holder or from the Holder's assignee, all
principal, interest and other amounts which are then and thereafter become
due under this Debenture shall be paid to such assignee at the place of
payment designated in such notice. This Debenture shall be binding upon the
Company and its successors and shall inure to the benefit of the Holder and
its successors and assigns.
24. NO WAIVER. No failure on the part of the Holder to exercise, and
no delay in exercising any right, remedy or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise by the Holder of
any right, remedy or power hereunder preclude any other or future exercise of
any other right, remedy or power. Each and every right, remedy or power
hereby granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
25. MISCELLANEOUS. Unless otherwise provided herein, any notice or
other communication to a party hereunder shall be sufficiently given if in
writing and personally delivered or mailed to said party
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<PAGE>
by certified mail, return receipt requested, at its address set forth herein
or such other address as either may designate for itself in such notice to
the other and communications shall be deemed to have been received when
delivered personally or, if sent by mail or facsimile, then when actually
received by the party to whom it is addressed. Whenever the sense of this
Debenture requires, words in the singular shall be deemed to include the
plural and words in the plural shall be deemed to include the singular. If
more than one Company is named herein, the liability of each shall be joint
and several. Paragraph headings are for convenience only and shall not
affect the meaning of this document.
26. CHOICE OF LAW AND VENUE; WAIVER OF JURY TRIAL. THIS DEBENTURE
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. The Company hereby agrees
that all actions or proceedings arising directly or indirectly from or in
connection with this Debenture shall, at the Holder's sole option, be
litigated only in the Supreme Court of the State of New York or the United
States District Court for the Southern District of New York located in New
York County, New York. The Company consents to the jurisdiction and venue of
the foregoing courts and consents that any process or notice of motion or
other application to either of said courts or a judge thereof may be served
inside or outside the State of New York or the Southern District of New York
by registered mail, return receipt requested, directed to the Company at its
address set forth in this Debenture (and service so made shall be deemed
complete five (5) days after the same has been posted as aforesaid) or by
personal service or in such other manner as may be permissible under the
rules of said courts. The Company hereby waives any right to a jury trial in
connection with any litigation pursuant to this Debenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
DATED: MAY ___, 1996
WEGENER CORPORATION
By:________________________________________
Print Name:________________________________
Print Title:_______________________________
Print Address:
ATTEST
___________________________________________
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<PAGE>
EXHIBIT 1
(To be Executed by Registered Holder
in order to Convert Debenture)
CONVERSION NOTICE
FOR
8% CONVERTIBLE DEBENTURE DUE May 31, 1999
The undersigned, as Holder of the 8% Convertible Debenture Due May 31, 1999
of Wegener Corporation (the "Company"), No. _______, in the outstanding
principal amount of U.S.$_____________ (the "Debenture"), hereby irrevocably
elects to convert U.S.$_____________ of the outstanding principal amount of
the Debenture into shares of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company according to the conditions of the Debenture,
as of the date written below. The undersigned hereby requests that share
certificates for the Common Stock to be issued to the undersigned pursuant to
this Conversion Notice be issued in the name of, and delivered to, the
undersigned or its designee as indicated below. If shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
The undersigned represents that, after giving effect to the shares of the
Company's Common Stock to be issued pursuant to such conversion notice, the
total number of shares of the Company's Common Stock deemed beneficially
owned by the undersigned, together with all shares of the Company's Common
Stock deemed beneficially owned by the undersigned's "affiliates" as defined
in Rule 144 of the Act, will not exceed 4.9% of the total issued and
outstanding shares of the Company's Common Stock.
Conversion Information: NAME OF HOLDER:______________________________
By:__________________________________________
Print Name:
Print Title:
Print Address of Holder:
____________________________________________
____________________________________________
Issue Common Stock to:_______________________
at:__________________________________________
____________________________________________
Date of Conversion
____________________________________________
Applicable Conversion Rate
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EXHIBIT 2
PIK STATEMENT
Date:______________
To: [Name of Holder of Debenture] ("Holder")
RE: 8% CONVERTIBLE DEBENTURE DUE MAY 31, 1999 ("DEBENTURE") OF
WEGENER CORPORATION (THE "COMPANY") NO. ________, IN THE FACE
PRINCIPAL AMOUNT OF US$_________________.
In lieu of paying interest on the above-referenced Debenture in coin or
currency, the Company hereby elects to pay interest on the Debenture, for the
Interest Payment Date indicated below, by having the amount of such interest
added to the Outstanding Principal Amount due under the Debenture. The
Company hereby certifies to the Holder, its successors and assigns that the
Outstanding Principal Amount due under the Debenture after delivery of this
PIK Statement equals the amount indicated below. Capitalized terms used in
this PIK Statement and not otherwise defined shall have the meaning ascribed
thereto in the Debenture.
Interest Payment Date: _______________
Outstanding Principal Amount prior
to issuance of this PIK Statement: US$_____________
PIK Interest: US$_____________
Outstanding Principal Amount after
issuance of this PIK Statement: US$_____________
IN WITNESS WHEREOF, this PIK Statement has been duly executed and
delivered on the date first written above.
WEGENER CORPORATION
By:_________________________________
Print Name:
Print Title:
<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Registration Rights
Agreement"), entered into as of May 30, 1996, between ___________________
with offices at _______________________ (the "Purchaser"), and WEGENER
CORPORATION, a Delaware corporation with offices at 11350 Technology Circle,
Duluth, Georgia 30136 (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to a Convertible Securities Subscription
Agreement, dated as of May 30, 1996 (the "Agreement"), by and between the
Company and the Purchaser, the Company has agreed to sell and the Purchaser
has agreed to purchase U.S. ____________ of the Company's 8% Convertible
Debentures due May 31, 1999 (the "Debentures") convertible into shares of the
Company's Common Stock, $0.01 par value (the "Shares");
WHEREAS, pursuant to the terms of, and in partial consideration
for, the Purchaser's agreement to enter into the Agreement, the Company has
agreed to provide the Purchaser with certain registration rights with respect
to the Shares as set forth in this Registration Rights Agreement;
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the
Agreement and this Registration Rights Agreement, the Company and the
Purchaser agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean: (i) the Shares issued to
Purchaser or its designee upon conversion of the Debentures or upon any stock
split, stock dividend, recapitalization or similar event with respect to such
Shares; and (ii) any securities issued or issuable to Purchaser or any Holder
upon the conversion or exercise or exchange of any Debentures or Shares.
The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement
in compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses to be incurred by
the Company in connection with Purchaser's exercise of its registration
rights under this Agreement, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the
Company, blue sky fees and expenses, reasonable fees and disbursements of
<PAGE>
counsel to Holder for a "due diligence" examination of the Company and review
of the Registration Statement and related documents, and the expense of any
special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company). With respect to the "due diligence"
examination of the Company, the Registration Expenses shall include only fees
and disbursements for one (1) designated counsel for all the Holders of
Debentures.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for Holder not included with "Registration
Expenses".
"Holder" shall include the Purchaser and any transferee of
Debentures, Shares or Registrable Securities which have not been sold to the
public to whom the registration rights conferred by this Agreement have been
transferred in compliance with Section 10 of this Agreement.
"Registration Statement" shall have the meaning set forth in
Section 2(a) herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to
the Securities Act, and as subsequently amended.
"Securities Act" shall mean the Securities Act of 1933, as amended.
2. REGISTRATION REQUIREMENTS. The Company shall use its diligent
best efforts to effect the registration of the Registrable Securities
contemplated by the Agreement (including, without limitation, the execution
of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in
all states reasonably requested by the Holder for purposes of maximizing the
proceeds realizable by the Holder from such sale or distribution. Such best
efforts by the Company shall include without limitation the following:
(a) The Company shall, as soon as practicable after the date
hereof but in no event later than forty-five (45) days after the date hereof,
file (i) a registration statement with the Commission pursuant to Rule 415
under the Securities Act on Form S-3 under the Securities Act (or in the
event that the Company in ineligible to use such form, such other form as the
Company is eligible to use under the Securities Act) covering the Registrable
Securities so requested to be registered ("Registration Statement"); (ii)
such blue sky filings as shall have been requested by the Holder; and (iii)
any required filings with the National Association of Securities Dealers,
Inc. or exchange or market where the Shares are traded. Thereafter the
Company shall use its best efforts to have such Registration Statement and
other filings declared effective.
(b) (i) If the Company fails to file a Registration
Statement complying with the requirements of this Registration Rights
Agreement within 45 days from the date hereof or if such Registration
Statement has not become effective within 90 days from the date of filing
thereof the Holder shall have, in addition to and without
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limiting any other rights it may have at law, in equity or under the
Debentures, the Agreement, or this Registration Rights Agreement (including
the right to specific performance), the right to receive, as liquidated
damages, the payments as provided in subparagraph (ii) of this section.
(ii) If after ninety (90) days from the date of filing of
the Registration Statement, the Registration Statement has not been
declared effective by the Commission because the Company (A) has been
negligent in timely responding to any comments from the Commission on the
Registration Statement; (B) has failed to use its commercially reasonable
efforts to cause the Registration Statement to be declared effective by the
Commission; (C) has otherwise acted in bad faith in honoring its commitment
to cause the Registration Statement to be declared effective; (D) has been
forced to restate its current or previous financial statements; (E) has
commenced a corporate action such as an acquisition, merger divestiture,
asset sale, reorganization or similar transaction; or (F) has filed a
Registration Statement with the Commission to issue public securities in
accordance with the Securities Act, then the Company shall pay to the
Purchaser an amount equal to 3% of the Outstanding Principal Amount (as
defined in the Debenture) of the Debenture, in cash, for each 30-day period
after such 90-day period that such Registration Statement is not effective
(which payment shall be pro rata for any period of less than 30 days). In
addition to the foregoing, if after 180 days from the date hereof the
Registration Statement has not been declared effective by the Commission
due to any of the causes described in clauses (A) through (F) of this
paragraph 2(b)(ii), then at the option of such Holder, the Company shall be
required to redeem all the Debentures held by such Holder at a redemption
price equal to 140% of the Outstanding Principal Amount of the Debenture
plus accrued interest thereon, together with all other payments due under
this paragraph and under the Debenture and the Agreement.
(iii) The Company acknowledges that its failure to
register the Registrable Securities in accordance with this Registration
Rights Agreement will cause the Holder to suffer damages in an amount that
will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Registration Rights Agreement a provision
for liquidated damages. The parties acknowledge and agree that the
liquidated damages provisions set forth above represent the parties' good
faith effort to quantify such damages and, as such, agree that the form and
amount of such liquidated damages are reasonable and will not constitute a
penalty.
(c) If the Holder intends to distribute the Registrable
Securities covered by its request by means of an underwriting, the Holder
shall so advise the Company within thirty (30) days from the date hereof.
Any such underwriting may only be administered by investment bankers
reasonably satisfactory to the Company.
(d) The Company shall enter into such customary agreements
(including a customary underwriting agreement with the underwriter or
underwriters, if any) and take all such other reasonable actions in
connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the Registrable
Securities are to be sold in an underwritten offering:
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<PAGE>
(i) make such representations and warranties to the Holder
and the underwriter or underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in secondary
underwritten offerings;
(ii) cause to be delivered to the sellers of Registrable
Securities and the underwriter or underwriters, if any, opinions of counsel
to the Company, dated the effective day (or in the case of an underwritten
offering, dated the date of delivery of any Registrable Securities sold
pursuant thereto) of the Registration Statement (which counsel, and
opinions (in form, scope and substance), shall be reasonably satisfactory
to the managing underwriter or underwriters, if any, and the appointed
representative or counsel of the Holder), addressed to the Holder and each
underwriter, if any, covering the matters customarily covered in opinions
requested in secondary underwritten offerings and, in the case of an
underwritten offering, such other matters as may be reasonably requested by
the Holder;
(iii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable
Securities sold pursuant thereto), a "comfort" letter from the Company's
independent certified public accountants addressed to the Holder and each
underwriter, if any, stating that such accountants are independent public
accountants within the meaning of the Securities Act and the applicable
published rules and regulations thereunder, and otherwise in customary form
and covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary underwritten public offerings;
(iv) if an underwriting agreement is entered into, the same
shall set forth in full the indemnification and contribution provisions and
procedures of sections 6 and 7 with respect to all parties to be
indemnified pursuant to such sections; and
(v) the Company shall deliver such documents and
certificates as may be reasonably requested by the Holder being sold or the
managing underwriter or underwriters, if any, to evidence compliance with
clause (i) above and with any customary conditions contained in the
underwriting agreement, if any, or other agreement entered into by the
Company;
the foregoing in this paragraph 2(d) shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
thereunder; provided, however, the foregoing in paragraph 2(d) shall not be
required on more than two (2) occasions.
(e) The Company shall make available for inspection by a
representative or representatives of the Holder, any underwriter
participating in any disposition pursuant to a Registration Statement, and
any attorney or accountant retained by such Holder or underwriter, all
financial and other records customary for such purposes, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in connection with
such Registration Statement. The Holder
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<PAGE>
will agree to keep all non-public information supplied to it confidential
until such information is included in the Registration Statement.
3. EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance with
registration pursuant to this Agreement shall be borne by the Company, and
all Selling Expenses shall be borne by the Holder.
4. REGISTRATION ON FORM S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms, or in the event that the Company is ineligible to
use such form, such form as the Company is eligible to use under the
Securities Act. The foregoing is not intended to require the Company to pay
dividends in order to use Form S-3.
5. REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Agreement, the Company will keep the
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will use its best
efforts to:
(a) Keep such registration effective for the period ending
thirty-six (36) months after initial issuance of the Debentures or until the
Holder has completed the distribution described in the Registration Statement
relating thereto, whichever first occurs.
(b) Furnish such number of prospectuses and other documents
incident thereto as the Holder from time to time may reasonably request.
5A. SUSPENSIONS OF EFFECTIVENESS. At least three (3) days prior
to any disposition of Registrable Securities, Holder shall advise the Company
of such disposition or contemplated disposition. The Company may suspend
dispositions under the Registration Statement and notify the Holder that it
may not sell the Registrable Securities pursuant to any Registration
Statement or Prospectus (a "Blocking Notice") if the Company's management
determines in its reasonable good faith judgment that the Company's
obligation to ensure that such Registration Statement and Prospectus are
current and complete would require the Company to take actions that might
reasonably be expected to have a materially adverse (to the Company as a
whole) detrimental effect on any proposal, negotiations or plan by the
Company or any of its subsidiaries to engage in any material acquisition of
assets (other than in the ordinary course of business) or any material
merger, consolidation, tender offer, reorganization or similar transaction;
PROVIDED that such suspension pursuant to a Blocking Notice or the Notice
described below may not exceed sixty (60) consecutive days or an aggregate of
one hundred twenty (120) days in any twelve (12) month period. The Holder
agrees by acquisition of the Registrable Securities that, upon receipt of a
Blocking Notice or "Notice" from the Company of the existence of any fact of
the kind described in the following sentence, such Holder shall not dispose
of, sell or offer for sale the Registrable Securities pursuant to the
Registration Statement until such Holder receives (i) copies of the
supplemented or amended Prospectus, or until counsel for the Company shall
have determined that such disclosure is not required due to subsequent
events, (ii) notice in writing (the "Advice") from the Company that the use
of the Prospectus may be resumed and (iii) copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus.
Pursuant to the immediately preceding sentence,
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<PAGE>
the Company may provide such Notice to the Holder upon the determination by
the Company of the existence of any fact or the happening or any event that
makes any statement of a material fact made in the Registration Statement,
the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue in any material respect, or that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus, in order to make the statements therein not
misleading in any material respect. If so directed by the Company in
connection with any such notice, each Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable
Securities that was current immediately prior to the time of receipt of such
notice. In the event the Company shall give any such Blocking Notice or
Notice, the time regarding the effectiveness of such Registration Statement
set forth in Section 5(a) and the remaining term of the Debenture shall be
extended by one and one-half (1-1/2) times the number of days during the
period from and including the date of the giving of such Blocking Notice or
Notice to and including the date when the Holder shall have received the
copies of the supplemented or amended Prospectus, the Advice and any
additional or supplemental filings that are incorporated by reference in the
Prospectus. Delivery of a Blocking Notice or Notice and the related
suspension of any Registration Statement shall not constitute a default under
this Agreement and shall not create any obligation to pay liquidated damages
under Section 2 hereof. However, if the Holder's ability to sell under the
Registration Statement is suspended for more than the 60 or 120 day periods
described above (an "Excess Blocking Period"), then the rate of interest on
all of the Debentures shall, to the maximum extent permitted by law, be
increased by two percent (2%) (I.E., from 8% to 10%) commencing on the first
day of the thirty (30) day period (or part thereof) following the beginning
of an Excess Blocking Period; an additional two percent (2%) commencing on
the first day of each of the second and third such thirty (30) day periods
(or part thereof) thereafter; and an additional one (1%) percent on the first
day of each consecutive thirty (30) day period (or part thereof) thereafter
until the Excess Blocking Period terminates. In addition, if the Excess
Blocking Period continues for more than 180 days, then at Holder's option,
the Company shall be obligated to redeem Holder's Debentures at a redemption
price equal to 140% of the Outstanding Principal Amount of the Debentures
plus accrued interest thereon, together with all payments due under this
paragraph and under the Debenture and the Agreement.
6. INDEMNIFICATION.
(a) COMPANY INDEMNITY. The Company will indemnify the
Holder, each of its officers, directors and partners, and each person
controlling Holder, within the meaning of Section 15 of the Securities Act
and the rules and regulations thereunder with respect to which registration,
qualification or compliance has been effected pursuant to this Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder,
any underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any state securities law or in either case,
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any
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<PAGE>
such registration, qualification or compliance, and will reimburse the
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense arises out of or is based on any untrue statement or omission (or
alleged untrue statement or omission) that is made in reliance upon and in
conformity with written information furnished to the Company by Holder or the
underwriter and stated to be specifically for use therein. In addition to
any other information furnished in writing to the Company by the Holder, the
information in the Registration Statement concerning the Holder under the
captions "Selling Shareholders" (or any similarly captioned section
containing the information required pursuant to Item 507 of Regulation S-K
promulgated pursuant to the Securities Act) and "Plan of Distribution" (or
any similarly captioned section containing information required pursuant to
Item 508 of Regulation S-K) shall be deemed information furnished in writing
to the Company by the Holder to the extent it conforms to information
actually supplied in writing by the Holder. The indemnity agreement contained
in this Section 6(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent will not be unreasonably
withheld).
(b) HOLDER INDEMNITY. The Holder will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement,
each person who controls the Company or such underwriter within the meaning
of Section 15 of the Securities Act and the rules and regulations thereunder,
each other Holder (if any), and each of their officers, directors and
partners, and each person controlling such other Holder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading, and will reimburse the Company and
such other Holders and their directors, officers and partners, underwriters
or control persons for any legal or any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company by Holder and stated to be specifically
for use therein, and provided that the maximum amount for which the Holder
shall be liable under this indemnity shall not exceed the proceeds received
by the Holder from the sale of the Registrable Securities. In addition to
any other information furnished in writing to the Company by the Holder, the
information in the Registration Statement concerning the Holder under the
captions "Selling Shareholders" (or any similarly captioned section
containing the information required pursuant to Item 507 of Regulation S-K
promulgated pursuant to the Securities Act) and "Plan of Distribution" (or
any similarly captioned section containing information required pursuant to
Item 508 of Regulation S-K) shall be deemed information furnished in writing
to the Company by the Holder to the extent it conforms to information
actually supplied in writing by the Holder. The indemnity agreement
contained in this Section
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<PAGE>
6(b) shall not apply to amounts paid in settlement of any such claims,
losses, damages or liabilities if such settlement is effected without the
consent of Holder (which consent shall not be unreasonably withheld).
(c) PROCEDURE. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim in any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and
the Indemnified Party may participate in such defense at such party's
expense, and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article except to the extent that the Indemnifying
Party is materially and adversely affected by such failure to provide notice.
The indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses
of more than one separate firm of attorneys (in addition to any local
counsel) at any time for such indemnified party, provided, however, that if
separate firm(s) of attorneys are required due to a conflict of interest,
then the indemnifying party shall be liable for the reasonable fees and
expenses of each such separate firm. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as
an Indemnifying Party may reasonably request in writing and as shall be
reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
7. CONTRIBUTION. If the indemnification provided for in Section
6 herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of
the exceptions provided therein), then each such 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 or liabilities (i) as between the Company and the Holder on the one
hand and the underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Holder on
the one hand or underwriters, as the case may be, on the other from the
offering of the Registrable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only such relative benefits but also the relative fault of the Company on
the one hand and of the Holder or underwriters, as the case may be, on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand and
the Holder on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of the Holder in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
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<PAGE>
The relative benefits received by the Company on the one hand
and the Holder or the underwriters, as the case may be, on the other shall be
deemed to be in the same proportion as the proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses)
received by the Company from the initial sale of the Registrable Securities
by the Company to the Holder pursuant to this Registration Rights Agreement
bear to the gain realized by such Holder or the total underwriting discounts
and commissions received by the underwriters as set forth in the table on the
cover page of the prospectus, as the case may be. The relative fault of the
Company on the one hand and of the Holder or underwriters, as the case may
be, on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact relates to information supplied
by the Company, by the Holder or by the underwriters.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO
RATA allocation (even if the Holder or the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as
a result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this section, no
Holder or underwriter shall be required to contribute any amount in excess of
the amount by which (i) in the case of the Holder, the net proceeds received
by the Holder from the sale of Registrable Securities or (ii) in the case of
an underwriter, the total price at which the Registrable Securities purchased
by it and distributed to the public were offered to the public exceeds, in
any such case, the amount of any damages that the Holder or underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. 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.
8. SURVIVAL. The indemnity and contribution agreements contained
in Sections 6 and 7 and the representations and warranties of the Company
referred to in Section 2(e)(i) shall remain operative and in full force and
effect regardless of (i) any termination of the Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company and (iii) the consummation of the
sale or successive resales of the Registrable Securities.
9. INFORMATION BY HOLDER. The Holder shall promptly furnish to
the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably request in writing and
as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement. All
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<PAGE>
information provided to the Company by Holder shall be accurate and complete
in all material respects and Holder shall promptly notify the Company if any
such information becomes incorrect or incomplete. If the Holder does not
timely provide all such reasonably requested information, the Holder shall
not be entitled to the liquidated damages contemplated by paragraph 2(b)(ii)
to the extent that such delay in the Registration Statement becoming
effective is caused by such failure to timely provide information unless such
Holder shall be able to demonstrate to the Company's satisfaction that such
failure to timely provide did not proportionately contribute to the event
giving rise to the indemnity obligation.
10. TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights,
granted to Purchaser by the Company under this Registration Rights Agreement,
to cause the Company to register Registrable Securities, may be transferred
or assigned to a transferee or assignee of any of not less than $100,000 in
principal amount of Debentures, provided that the Company is given written
notice by Holder at the time of or within a reasonable time after said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and provided further
that the transferee or assignee of such rights is not deemed by the board of
directors of the Company, in its reasonable judgment, to be a competitor of
the Company; and provided further that the transferee or assignee of such
rights agrees to be bound by this Registration Rights Agreement.
11. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Registration Rights Agreement
contains the entire understanding and agreement of the parties, and may not
be modified or terminated except by a written agreement signed by both
parties.
(b) NOTICES. Any notice or other communication given or
permitted under this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered or sent by registered or
certified mail, return receipt requested, postage prepaid or by air courier,
(a) if to Purchaser, at its address hereinabove set forth, (b) if to the
Company, to Wegener Corporation, at its address hereinabove set forth, and
(c) if to a Holder other than Purchaser, at the address thereof furnished by
like notice to the Company, or (d) to any such addresses at such other
address or addresses as shall be so furnished to the other parties by like
notice.
(c) GENDER OF TERMS. All terms used herein shall be deemed
to include the feminine and the neuter, and the singular and the plural, as
the context requires.
(d) GOVERNING LAW; CONSENT OF JURISDICTION. This
Registration Rights Agreement and the validity and performance of the terms
hereof shall be governed by and construed in accordance with the laws of the
State of New York, except to the extent that the law of Delaware regulates
the Company's issuance of securities. The parties hereto hereby consent to,
and waive any objection to the exercise of, personal jurisdiction in the
State of New York with respect to any action or proceeding arising out of
this Registration Rights Agreement.
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<PAGE>
(e) TITLES. The titles used in this Registration Rights
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Registration Rights Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
Purchaser
By:
------------------------------------------
WEGENER CORPORATION,
a Delaware Corporation
By: _________________________
Name: _______________________
Title: ______________________
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EXHIBIT 5.1
[LETTERHEAD]
July 10, 1996
Board of Directors
Wegener Corporation
11350 Technology Circle
Duluth, Georgia 30155
RE: Wegener Corporation
Registration Statement on Form S-3
1,000,000 Shares of Common Stock
--------------------------------
Gentlemen:
We have acted as counsel for Wegener Corporation (the "Company") in
connection with the proposed public offering by certain shareholders of the
Company of the shares of the Company's $.01 par value Common Stock (the
"Common Stock") covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Certificate of Incorporation of the Company, as
amended, certified by the Secretary of State of the State
of Delaware;
(2) The By-Laws of the Company, certified as complete and correct by
the Secretary of the Company;
(3) The minute book of the Company, certified as correct and
complete by the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued
by the Secretary of State of the State of Delaware; and
(5) The Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended (the "Registration Statement").
<PAGE>
Board of Directors
Wegener Corporation
July 10, 1996
Page 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion
that:
(A) The Company has been duly incorporated under the laws of the
State of Delaware and is validly existing and in good standing
under the laws of that state.
(B) The 1,000,000 shares of Common Stock covered by the Registration
Statement have been legally authorized by the Company and when
sold in accordance with the terms described in said Registration
Statement, will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations
of the Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL
/s/ TERRY FERRARO
Helen T. Ferraro
HTF/dkaw
<PAGE>
EXHIBIT 23-1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Wegener Corporation
Duluth. Georgia
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our reports dated
November 20, 1995, relating to the consolidated financial statements and
schedules of Wegener Corporation appearing in the Company's Annual Report on
Form 10-K for the year ended September 1, 1995.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
Atlanta, Georgia
July 11, 1996
