SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported): June 19, 1996
VTX ELECTRONICS, CORP.
(exact name of registrant as specified in its charter)
Delaware 1-9263 11-2816128
(state or other jurisdiction (Commission File Number)
(IRS Employer I.D. No.)
of incorporation)
61 Executive Boulevard, Farmingdale, New York
11735
(Address of principal executive offices)
Registrant's telephone number, including area code (516) 293-1610
N/A
(former name or former address, if changed since last report)
ITEM 5. Other Events.
The Registrant has completed a private placement of Secured
Subordinated Debentures (the "Debentures") in the principal amount
of $1,290,000 and signed an additional mortgage note on its
corporate headquarters located at 61 Executive Boulevard,
Farmingdale, New York in return for $250,000 of additional
proceeds. The Debentures were placed with two groups of investors.
The first group of investors included a number of the same
investors who participated in the December 1, 1995 and March 20,
1996 private placements of debt and equity securities: Steel
Partners II, L.P., Quota Fund, N.V., Marshall Butler, Kenneth Rind,
Hiro Hiranandani, Albert Roth, Long Island Venture Fund, L.P. and
LEG Partners SBIC, L.P. This group also included Roland Catalano,
Stourbridge Investments, Ltd, Martin and Miriam Knecht, Tradewind
Fund, L.P. I and R. F. Lafferty & Co., Inc. Pension Profit Plan.
This group received Debentures in exchange for their aggregate
investment of $790,000. The second group of investors, led by
Fundex Capital Corp., included Sterling Commercial Capital, Inc.,
First Wall Street SBIC, L.P. and Tappan Zee Capital Corp. (the
"Fundex Group"). The Fundex Group invested a total of $750,000 and
received a Debenture in the principal amount of $500,000 and a
Mortgage Note for $250,000. The Debentures mature June 19, 2001
and earn interest at the prevailing prime rate plus two percentage
points. Further, the Debentures received by the investors in the
Registrant's December 1, 1995 and March 20, 1996 financing which
had maturity dates of December 1, 2000 and March 1, 2001,
respectively, were extended to mature on June 19, 2001. The
Debentures and Mortgage are subordinate to the Registrant's
indebtedness under its revolving credit facility with its existing
lending institutions. In addition to the Debentures, each investor
received, for each dollar in principal amount of Debentures,
warrants to purchase 20 shares of common stock of the Registrant.
The Fundex Group also received warrants to purchase an additional
1,250,000 shares of common stock of the Registrant in connection
with the Mortgage. The total number of shares issuable upon
exercise of such warrants is 27,050,000. The Warrants have an
exercise price of $.125 per share and are not exercisable until
April 1, 1999.
As part of the Fundex Group's investment in the Registrant,
Ivor Jacobson was elected to the Board of Directors.
ITEM 7. Exhibits
4.9 Form of Debenture
4.10 Form of Warrant
4.11 Form of Mortgage Note
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
VTX ELECTRONICS CORP.
By:/s/ Paul Snead, CFO
--------------------
Date: August 15, 1996
-------------------
SECURED SUBORDINATED DEBENTURE
$______ Farmingdale, New York
June 19, 1996
VTX Electronics Corp., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company"), for value received, hereby promises to pay to the order
of (---------Name---------) or registered assigns the principal
amount of (------Amount------) ($______) Dollars on June 19, 2001,
in such coin or currency of the United States of America as at the
time of payment shall be legal tender for public and private debts,
at the principal office of the Company in Farmingdale, New York,
and to pay interest (computed on the basis of a 360-day year of
twelve 30-day months) at said office, in like coin or currency, on
the unpaid portion of said principal amount from the date hereof,
quarterly on the first day of September, December, March and June
in each year, commencing on September 1, 1996, at the rate of
interest from time to time equal to the "prime rate" as publically
announced from time to time in the Wall Street Journal plus two
percent (2%) per annum adjusted monthly on the first business day
of each month until such unpaid portion of such principal amount
shall have become due and payable and thereafter at the greater of
the prime rate, plus six percent (6%) or eighteen percent (18%) per
annum thereafter and, so far as may be lawful, on any overdue
installment of interest at the rate of the greater of such prime
rate plus six percent (6%) per annum or eighteen percent (18%) per
annum. This Debenture may be prepaid at any time after one yar
from original issuance, in whole or in part, with no penalty, only
with the prior written consent of the Holder of this Debenture
Sec. 1.The Agreement;Exchanges and Transfers of the Debenture.
Sec. 1.1. The Agreement. This Debenture (herein called
the "Debenture") is one of several substantially identical
Debentures in the aggregate principal amount not to exceed
$3,975,000 (collectively called the "Debentures") issued on
November 30, 1995, March 20, 1996 and June 19, 1996.
Sec. 1.2. Register; Transfer or Exchange of Debentures.
The Company shall keep at its office or agency maintained in
Farmingdale, New York a register in which the Company shall provide
for the registration of Debentures and for the registration of
transfer of Debentures. The Holder of any Debenture may, at its
option and either in person or by duly authorized attorney,
surrender the same for registration of transfer or exchange at such
office and, without expense to such Holder (other than transfer
taxes, if any), receive in exchange therefor a new Debenture or
Debentures, dated as of the date to which interest has been paid on
the Debenture or Debentures so surrendered, each in the principal
amount of $10,000 or any integral multiple thereof, for the same
aggregate unpaid principal amount as the Debenture or Debentures so
surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Debenture
so made and delivered in exchange for any Debenture shall in all
other respects be in the same form and have the same terms as the
Debenture so surrendered for transfer or exchange.
Sec. 1.3. Loss, Theft, Destruction or Mutilation of
Debentures. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any
Debenture and, in the case of any such loss, theft or destruction,
upon receipt of an indemnity bond in such reasonable amount as the
Company may determine (or if such Debenture is held by the original
Holder, of an unsecured indemnity agreement reasonably satisfactory
to the Company) or, in the case of any such mutilation, upon
surrender and cancellation of such Debenture, the Company will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on
the Debenture so lost, stolen, destroyed or mutilated.
Sec. 1.4. Registered Holders. The Company may deem and
treat the person in whose name any Debenture is registered as the
absolute owner and holder of such Debenture for the purpose of
receiving payment of the principal of and interest on such
Debenture and for the purpose of any notices, waivers or consents
thereunder, whether or not such Debenture shall be overdue, and the
Company shall not be affected by notice to the contrary. Payments
with respect to any Debenture shall be made only to the registered
Holder thereof.
Sec. 2. Surrender of the Debenture.
Sec. 2.1. Surrender of Debentures. (a) The Company may,
as a condition of payment of all or any of the principal of, and
interest on, this Debenture, in whole or in part, require the
holder to present this Debenture for notation of such payment and,
if this Debenture be paid in full, require the surrender hereof.
(b) Anything herein to the contrary
notwithstanding, the entire principal plus accrued interest amount
of this Debenture, or any part hereof, may be surrendered to the
Company by the Holder for redemption and cancellation as payment of
the exercise price of any warrant to acquire common stock of the
Company. If less than the entire principal amount of this
Debenture is so surrendered and redeemed, a new Debenture in the
remaining outstanding principal amount shall be redelivered to the
Holder.
Sec. 3. Covenants.
Sec. 3.1. To Pay Principal and Interest. The Company
covenants and agrees to pay principal and interest on this
Debenture in accordance with the terms hereof.
Sec. 3.2. Maintenance of Company Office. The Company
will maintain an office in Farmingdale, New York in its current
facility where notices, presentations and demands to or upon the
Company in respect of the Debenture may be given or made or such
other place as a majority in principal amount of the Debentures
shall consent to in writing.
Sec. 3.3. To Keep Books. The Company will, and will
cause all subsidiaries, to keep proper books of record and account
in which full, true and correct entries will be made of its
transactions in accordance with generally accepted accounting
principles.
Sec. 3.4. Payment of Taxes; Corporate Existence;
Maintenance of Properties. The Company will, and will cause each
of its subsidiaries to,
A. pay and discharge promptly or cause to be paid and
discharged promptly all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might by
law become a lien or change upon its property; provided, however,
that neither the Company nor any subsidiary shall be required to
pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or such
subsidiary, as the case may be, shall have set aside on its books
reserves (provided for and segregated to the extent required by
generally accepted accounting principles) deemed by it adequate
with respect thereto;
B. maintain and keep or cause to be maintained and kept its
properties in good repair, working order and condition, and from
time to time make or cause to be made all needful and proper
repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
Sec. 3.5. To Insure. The Company will, and will cause
each of its subsidiaries to maintain insurance in such extent and
against such hazards and liabilities as is commonly maintained by
companies similarly situated.
Sec. 3.6. Sale, Merger or Consolidation by Company. The
Company will not sell, lease, transfer or otherwise dispose of any
substantial part of its properties and assets or consolidate with
or merge into any person or permit any person to merge into it.
Sec. 3.7. Additional Debt. The Company shall not issue
or incur any debt senior to, or pari passu with, the Debentures.
Sec. 4. Representations and Warranties. The Company
represents and warrants to the Holder of this Debenture, on the
date of original issuance, as follows:
Sec. 4.1. Due Organization and Qualification; Business.
The Company is a duly organized and validly existing corporation in
good standing under the laws of the State of Delaware, has the
power and authority to own or hold under lease the properties it
purports to own or so hold and to carry on its business as now
being conducted and presently proposed to be conducted, and has the
power and authority to enter into this Debenture and to carry out
the transactions contemplated hereby. The Company is duly
qualified as a foreign corporation in each jurisdiction where the
nature of the business transacted by it or the properties owned or
leased by it requires the Company to be so qualified except for
jurisdictions wherein the failure to be so qualified will not have
a material adverse effect on the business, operations, properties
or assets or on the condition, financial or other, of the Company.
The Company has paid all corporation taxes and franchise taxes
payable to the State of Delaware and in each other jurisdiction
where it is qualified.
Sec. 4.2. Litigation; Compliance with Rules, Regulations,
Decrees, etc. Except as set forth on Schedule 4.2 attached hereto,
there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Company) pending or, to the knowledge
of the Company, threatened against the Company or any of its
subsidiaries, properties or assets at law, in equity or before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind; and neither the
Company nor any of its subsidiaries is in default with respect to
any judgment, order, writ, injunction, decree or award of any
court, arbitrator or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or in violation of any rule
or regulation of any thereof, or in violation of any law, which
violation would have a material adverse effect on the business or
properties of the Company. The Company has all permits, licenses
and franchises necessary or desirable in order to conduct its
business and to own and operate its property and assets.
Sec. 4.3. Compliance with Other Instruments. Neither the
execution and delivery of this Debenture, the consummation of the
transactions herein contemplated, nor compliance with the terms,
conditions and provisions hereof, will conflict with or result in
a breach or violation of the certificate of incorporation or by-
laws of the Company or of any material term, condition or provision
of any agreement or instrument to which the Company is now a party
or by which it or any of its properties or assets may be bound, or
constitute a default thereunder, nor result in the creation or
imposition of any lien upon any of the properties or assets of the
Company or any subsidiary.
Sec. 4.4. Financial Statements. The consolidated balance
sheet of the Company as at June 30 in each of the years 1990 to
1995, inclusive, and the related consolidated statements of
operations, stockholder' equity and cash flows for the fiscal years
then ended, accompanied in each case by the opinion of independent
public accountants previously delivered to the Holder of this
Debenture, as well as the unaudited financial statements as of
September 30, December 31, 1995 and 1994 and March 31, 1996 and
1995 (as set forth in the Form 10Q set forth below) previously
delivered to the Holder are complete and correct in all material
respects and fairly present the financial condition of the Company
and its subsidiaries and the results of the operations and changes
in financial position of the Company and its subsidiaries for the
respective fiscal periods ended on said dates, all in conformity
with generally accepted accounting principles applied on a
consistent basis (except as otherwise set forth therein or in the
notes thereto stated) throughout the fiscal periods involved.
Sec. 4.5. Business and Properties; No Misleading
Statement or Omissions. The annual report of the Company on Form
10-K for the fiscal year ended June 30, 1995 including all exhibits
and material incorporated by reference (the "Form 10-K") and the
Reports on Form 10-Q relating to the three-month periods ended
September 30 and December 31, 1995 and March 31, 1996 (collectively
with the Form 10-K, the "Reports"), as filed with the Securities
and Exchange Commission and copies of which have heretofore been
furnished to the Holder, correctly describe the general nature of
the business conducted by the Company during the fiscal year ended
June 30, 1995, the nine month period ended March 31, 1996,
respectively, and the information therein with respect to the
principal properties then owned or leased by the Company is correct
in all material respects. Since March 31, 1996, there has been no
material change in the general nature of the business conducted, or
in the principal properties owned or leased, by the Company. The
Reports are accurate as of their respective dates in all material
respects and do not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading. Except as set forth in Schedule 4.5 hereto,
there is no fact or circumstance now in existence and currently
known by the Company which does now, or with the passage of time,
would be reasonably anticipated to have a material adverse affect
on the Company, its business, prospects, financial condition or
operations.
Sec. 4.6. Subsidiaries; Due Organization and
Qualification. The Form 10-K correctly and completely sets forth
the name and jurisdiction of the incorporation of each subsidiary
of the Company. All outstanding shares of stock of all classes of
each subsidiary listed in the Form 10-K are owned by the Company
and have been validly issued, are fully paid and non-assessable,
and are owned free and clear of any lien, option, contractual
restriction on transfer or contractual right of any other person.
Each subsidiary listed in the Form 10-K is a duly organized and
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and
authority to own or hold under lease the properties it purports to
own or so hold and to carry on its business as now being conducted
and presently proposed to be conducted; each subsidiary listed in
the Form 10-K is duly qualified and is in good standing as a
foreign corporation in each jurisdiction wherein, in the judgment
of the Company, the nature of the business transacted by it or the
properties owned or leased by it makes such qualification
necessary, except for jurisdictions wherein the failure to be so
qualified will not have a material adverse effect on the business,
operations, properties or assets or on the condition, financial or
other, of the Company.
Sec. 4.7. Title to Properties. The Company and its
subsidiaries have good and marketable title to, or valid and
enforceable leasehold estates in, their respective real properties
and assets (including leasehold improvements) reflected in the
consolidated balance sheet as at March 31, 1996 referred to in Sec.4.4
above, subject only to such defects or irregularities of title
which do not in the aggregate interfere with the operation, value
or use of such properties and assets considered as a whole and
subject to a lien in favor of Congress Financial Corporation
("Congress") and a lien in favor of the Lender granted to secure a
prior loan made on March 31, 1994, and notice liens in favor of
equipment lessors, except for properties and assets sold or
otherwise disposed of subsequent to said date in the ordinary
course of business. The Company owns, or has a valid leasehold in,
all properties or assets reasonably necessary to operate and
conduct its business.
Sec. 4.8. Trademarks, Patents, etc. The Company and its
subsidiaries possess such trademarks, trade names, copyrights,
patents, licenses, or rights in any thereof as are adequate in the
opinion of the Company for the conduct of their respective
businesses as now conducted, without known conflict with the rights
of others except for conflicts which if adversely determined would
not, singly or in the aggregate, result in any material adverse
change in the business, operations, properties or assets or in the
condition, financial or other, of the Company.
Sec. 4.9. Tax Liability. The Company and its
subsidiaries have, to the knowledge of their respective officers,
properly prepared and filed all tax returns required to be filed
with taxing authorities prior to the date hereof or have duly
obtained extensions of time for the filing thereof and have paid
all taxes shown as due on such returns that were filed. The
Company has properly withheld all taxes required to be withheld,
including, without limitation all federal, state and local
withholding taxes and FICA payments, and, to the Company's
knowledge, there are no pending audits or investigations relating
to tax matters affecting the Company or any subsidiary. The
Company has been notified of a final assessment by City of Dayton,
Ohio in the amount of approximately $3,400.
Sec. 4.10. Governmental Action. Except as otherwise
contemplated by this Debenture and blue sky laws, no action,
authorization or approval of, or registration, declaration or
filing with, any governmental or public body or authority is
required to authorize, or is otherwise required in connection with,
the execution, delivery and performance by the Company of this
Debenture, other than any post event informational filing.
Sec. 4.11. ERISA. (a) The Company is in compliance in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
(b) No "employee benefit plan" as defined in
ERISA, maintained by the Company or any subsidiary, as from time to
time in effect (herein called "Benefit Plans" or, individually, a
"Benefit Plan") nor any trusts created thereunder, nor any trustee
or administrator thereof, has engaged in a "prohibited
transaction," as defined in ERISA, which could subject the Company
or any subsidiary, or any Benefit Plan or any such trust, or any
trustee or administrator thereof, or any party dealing with any
Benefit Plan, or any such trust to any tax or penalty on prohibited
transactions. Neither any of the Benefit Plans nor any such trusts
have been terminated, or are liable for the tax or penalty on
prohibited transactions, nor has there been any "reportable event"
as defined in ERISA or any "accumulated funding deficiency."
Neither the Company nor any of its subsidiaries has incurred any
liability to the Pension Benefit Guaranty Corporation.
Sec. 4.12. Environmental Issues. (a) The property owned
or leased by the Company or any of its subsidiaries ("Premises")
and the present and contemplated use and occupancy thereof are in
full compliance in all material respects with all applicable
federal, state and local laws, ordinances, building codes, rules
and regulations pertaining to zoning, parking, construction,
building, land use and environmental matters, including, without
limitation, the provisions of the Federal Occupation Safety and
Health Act and the Environmental Protection Act, and all applicable
rules and regulations thereunder and all similar state and local
laws, rules and regulations; there are no current citations,
notices or orders of non-compliance issued to the Company or any of
its subsidiaries or relating to its business, assets, property
(leased or owned), leaseholds or equipment under any such laws,
rules and regulations. The Company and each of its subsidiaries
has been issued all required federal, state and local licenses,
certificates and permits relating to the business, assets, property
(leased or owned) leaseholds and equipment, and are in compliance
in all material respects with all applicable federal, state and
local laws, rules and regulations relating to air emissions, water
discharge, noise emissions, solid or liquid disposal, hazardous
waste or materials, or other environmental, health or safety
matters.
(b) (i) No hazardous or toxic substance or material
or other waste ("Hazardous Substance") as defined in or regulated
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sec.9601, et. seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sec.6901, et. seq.),
The Oil Pollution Act of 1990 (33 U.S.C. Sec.2701 et. seq.) or any
other federal, state or local law, order or regulation pertaining
to health, safety, or the environment (the "Environmental Laws")
has ever been unlawfully disposed, released, discharged or spilled
on or under any part of the Premises, (ii) the Premises has never
been used as a dump or landfill, (iii) no litigation or
administrative action or proceeding has been commenced or, to the
Company's knowledge, threatened against the Company or any of its
subsidiaries alleging a violation of any Environmental Laws, and
(iv) no underground storage tank (other than fuel oil storage
tanks), equipment containing polycholorinated biphenyl, asbestos,
or urea formaldehyde is located on or under the Premises; the
Premises are free from any contamination by any Hazardous Substance
and the Company is in compliance in all material respects with all
Environmental Laws affecting the Company or the Premises.
(c) There is not present in the Premises any
friable asbestos or any substance containing asbestos and deemed
hazardous by federal, state or local laws, rules, regulations or
orders respecting such material.
Sec. 4.13. Due Authorization of Debenture. This Debenture
and the transactions herein contemplated, have been duly authorized
by the Company, and when this Debenture has been duly executed,
paid for and delivered by the Company, no shareholder approval is
required in connection therewith, this Debenture will be a valid
and legally binding obligation, enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally and that
the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought.
Sec. 4.14. No Defaults. The Company is presently, and at
all time in the past twelve (12) months has been, in compliance and
not in any violation or default under its lending agreements with
its lenders, including, without limitation, Congress and the
Sterling Group and has been in compliance with, and not it default
under, any material contract, leases, mortgages or agreement. No
event, fact or circumstance exists which, with the passage of time
or the giving of the notice, would create an event of default under
any of the above instruments. The Company is in compliance with
its certificate of incorporation and its by-laws.
Sec. 4.15. Capitalization. The authorized and outstanding
shares of capital stock, warrants or rights to convert into or
receive capital stock of the Company, are stated on Schedule 4.15
attached hereto. All of the issued and outstanding shares of
capital stock of the Company are duly and validly issued and
outstanding, are fully paid and non-assessable. Except as stated
on such Schedule 4.15, there are no outstanding, options, warrants,
or rights to convert into or receive capital stock of the Company
or securities exchangeable for, or convertible into, capital stock
of the Company. No person or entity has demand or "piggy-back"
registration rights as to any security issued or issuable by the
Company, except as set forth on Schedule 4.15.
Sec. 4.16. Undisclosed Liabilities; Material Changes.
Except for such claims, debts and liabilities as are reflected in
the financial statements referred to in Sec.4.4 hereto and borrowing
under the Company's revolving credit agreement with Congress, its
prior indebtedness under the Debentures issued on November 30,
1995, March 20, 1996 and June 19, 1996, the Company does not have
any outstanding indebtedness for money borrowed and is not subject
to any claims or liabilities (whether matured or unmatured,
liquidated or unliquidated, accrued, fixed, contingent or
otherwise), other than trade or business obligations incurred in
the ordinary course of business since the date of such financial
statements, in amounts usual and normal, both individually and in
the aggregate, for the Company, all accounting procedures and
methods have been maintained in a manner consistent with prior
periods, there has been no lease, sale (other than inventory in the
ordinary course of business), or abandonment of any property or
assets of the Company, nor has there been any labor strife, strike
or lock-out. Since the date of such financial statements, there
has not been any material increase in the compensation payable or
to become payable by the Company to any of its officers, employees
or agents, or any bonus payment or arrangement made to or with any
of them, other than in the ordinary course and consistent with past
practices. Since the date of such financial statements, there has
not been any payment by the Company of any dividends or any
distribution by the Company to any of its shareholders in
redemption or as a purchase price of any indebtedness (whether in
payment of principle, interest or otherwise) owing to any of them
nor has there been any mortgage, pledge or subjection to a lien,
charge or encumbrance of any material kind of any of the Company's
assets, tangible or intangible.
Sec. 4.17. Insurance. The Company maintains insurance
adequate and reasonable for its needs and consistent with industry
standards. All such insurance is in full force and effect and the
Company has received no notices of cancellation or indication of
any intention on the part of any insurance company not to renew.
Sec. 4.18. Employment Contracts. Except as set forth on
Schedule 4.18 attached hereto, the Company is not a party to, or
otherwise subject to, any oral or written (i) collective bargaining
agreement, (ii) contract or other agreement for the employment of
any officer or employee, (iii) profit-sharing, bonus, deferred
compensation, stock option, severance pay, pension, retirement or
similar plan or agreement (including individual agreements)
providing employee benefits.
Sec. 4.19. Future Agreements. The Company is not a party
to or otherwise subject to any oral or written (i) guarantee of any
obligations for the borrowing of money or otherwise, or any other
agreement or guarantee of the obligations of another person or
entity, (ii agreement or arrangement for the purchase or sale of
any assets of the Company other than in the ordinary course of
business or for the grant of any preferential rights to purchase
any of the Company's assets, properties or rights, (iii) agreement,
contract or commitment containing any covenant limiting the freedom
of the Company to engage in any line of business in any area of the
world or to compete with any person or entity, (iv) agreement,
contract or commitment relating to the acquisition of assets or
capital stock of any business enterprise, (v) contract, agreement
or other instrument not entered at arms length and in the ordinary
course of business.
Sec. 4.20. Market Price of Common Stock. Schedule 4.20
sets forth the high, low and closing prices for the Common Stock of
the Company for the trading days June 5, to June 11, 1996 as
prepared from information provided to the Company by Bloomberg
Financial Markets.
Sec. 5. Subordination. (a) "Senior Debt" means (i)
all indebtedness for principal and interest, including interest
accruing during the period of any bankruptcy and other amounts
payable under the terms of such Senior Debt, of the Company to
Congress Financial Corporation ("Congress") under that certain
Accounts Financing Agreement (Security Agreement) dated December
31, 1992 and the Covenant Supplement to Accounts Financing
Agreement (Security Agreement) dated December 31, 1992 and all
amounts owing to Sterling Commercial Capital, Inc., First Well
Street SBIC, L.P., Fundex Capital Corp. and Tappan Zee Capital
Corp. under that certain Loan Agreement dated March 31, 1994, Note
dated March 31, 1994, Mortgage dated March 31, 1994 and Security
Agreement dated March 31, 1994 and a certain Mortgage loan in the
principal sum of $250,000.00 made by Sterling Commercial Capital,
Inc., First Well Street SBIC, L.P., Fundex Capital Corp. and Tappan
Zee Capital Corp. to the Company pursuant to that certain Financing
Agreement dated June 19, 1996, Mortgage dated June 19, 1996 and
Security Agreement dated June 19, 1996.
(b) The Company covenants and agrees, and each
Holder of this Debenture, by his acceptance hereof likewise
covenants and agrees that the payment of the principal of, interest
and all other amounts payable on this Debenture shall be
subordinated in accordance with the provisions of this Sec. 5 and each
holder of any of the Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by
such provisions. This Debenture, shall, to the extent and in the
manner hereinafter in this Sec. 5 set forth, be subordinated and
subject in right of payment to the prior payment in full of all
Senior Debt of the Company.
(c) Upon any payment or distribution of assets or
securities of the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of the Company
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Debt of the Company
shall first be paid in cash or cash equivalents, before the holder
of this Debenture shall be entitled to receive any assets or
securities (other than shares of stock of the Company, as
reorganized or readjusted or securities of the Company, or of any
other corporation provided for by a plan of reorganization or
readjustment, junior to, or the payment of which is subordinated at
least to the extent provided in this Sec. 5 to the payment of, all
Senior Debt of the Company, which may at the time be outstanding or
any securities issued in respect thereof under any such plan of
reorganization or readjustment) in respect of the Debentures (for
principal, interest or other amounts); and upon any such
dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company, of
any kind or character, whether in cash, property or securities
(other than as aforesaid), to which the Holders of the Debentures
would be entitled, except for the provisions of this Sec. 5, shall be
made by the Company, or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of Senior Debt of the
Company, or their representatives to the extent necessary to pay
all such Senior Debt of the Company, after giving effect to any
concurrent payment or distribution to or for the holders of such
Senior Debt.
(d) No demand, declaration, acceleration or direct
or indirect payment, prepayment or enforcement of principal of this
Debenture may be made or done until the Senior Debt is finally paid
in full, provided, however, demand for payment and acceleration may
be made after 180 days following an Event of Default. Also, no
direct or indirect payment of or on account of this Debenture
(including without limitation principal, interest and premiums)
shall be made if, at the time of such payment or immediately after
giving effect thereto, (i) there shall exist a default in the
payment of any amount (including without limitation principal,
interest and premiums) payable by the Company in respect of any
Senior Debt (any default referred to in this clause (i) herein
called a "Monetary Default"), or (ii) the Company receives a notice
from a holder of any Senior Debt that there exists a default or an
Event of Default other than a Monetary Default in respect of any
Senior Debt (any default or Event of Default specified in this
clause (ii) herein called a "Non-Monetary Default"). If the
Company receives any notice of a Non-Monetary Default, a subsequent
notice given within 360 days from the date of the giving of the
first notice relating to the same Non-Monetary Default on the same
issue of Senior Debt shall not be effective for the purposes of
this paragraph. Notwithstanding the occurrence of a Non-Monetary
Default (but subject to the provisions of Section 5(c) above and
clause (i) of the second sentence of this Section 5(d)), the
Company shall resume payments on and distribution in respect of
interest and other amounts (but not principal) on this Debenture
when: (1) the Non-Monetary Default is cured or waived, or (2) 180
days after the giving of the aforementioned notice of the
occurrence of such Non-Monetary Default (unless during such 180 day
period the maturity of the Senior Debt is accelerated, or such
indebtedness otherwise comes due, and is not paid in full), but in
any event only if this Sec. 5 otherwise permits the payments or
acquisition at the time of such payment.
(e) In the event that, notwithstanding the
foregoing, the holder of any Debenture shall have received any
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities
(other than as expressly permitted by this Sec. 5) in contravention of
the terms of the subordination contained herein before all Senior
Debt of the Company is paid in full, then and in such event, such
payment or distribution of assets or securities of the Company
shall be held in trust for and paid over or delivered to the holder
of Senior Debt of the Company, for application to the payment of
all Senior Debt of the Company, remaining unpaid to the extent
necessary to pay in full in cash the principal of and the premium
(if any) and interest and such other amounts on such Senior Debt of
the Company, in accordance with its terms, after giving effect to
any concurrent payment or distribution to holders of such Senior
Debt of the Company.
(f) If any Event of Default occurs (under
circumstances when the provisions of Sec. 5(c) shall not be
aapplicable) with respect to the Company and as a result this
Debenture is declared due and payable, and such declaration has not
been rescinded or annulled, all principal and premium, if any, of
all Senior Debt of the Company then due, or thereafter declared to
be due, pursuant to the terms of such Senior Debt at such time, and
all interest and such other amounts then due upon such Senior Debt
shall first be paid in full before any payment is made on account
of principal or interest or other amounts on any Debenture.
(g) Subject to the prior payment in full of all
Senior Debt of the Company, the Holder of this Debenture shall be
subrogated to the rights of the holders of such Senior Debt to
receive payments or distributions of assets or securities of the
Company with respect to payments or distributions to the holders of
Senior Debt by or on behalf of the Company to which the Holder of
this Debenture would be entitled except for the provisions of this
Sec. 5, applicable to Senior Debt until the principal of and interest
on the Debenture shall be paid in full; provided, however, that all
payments of principal and interest on this Debenture which were
permitted under the provisions of this Sec. 5 at the time made shall
remain the property of the Holder of this Debenture and shall not
be subject to recapture by the holders of the Senior Debt. For
purposes of such subrogation, no such payments or distributions to
the holders of Senior Debt by or on behalf of the Company, to which
the Holder of this Debenture would be entitled, except for the
provisions of this Sec. 5, and no such payments or distributions
pursuant to the provisions of this Sec. 5 to or for the benefit of the
holders of Senior Debt of the Company, by the Holder of Debenture,
shall, as between the Company, its creditors other than the holders
of their respective Senior Debt, as the case may be, and the
Holders of this Debenture, be deemed to be a payment by the
Company, to or on account of Senior Debt and no such payments or
distribution to the Holders of Debentures by virtue of the
subrogation herein provided for shall, as between the Company, its
creditors other than the Holders of their respective Senior Debt
and the Holders of the Debentures, be deemed to be a payment by the
Company, on account of such Senior Debt, it being understood that
the provisions of this Sec. 5 are solely for the purpose of defining
the relative rights of the Holders of the Debentures, on the one
hand, and the holders of Senior Debt of the Company, on the other
hand. Nothing contained in this is intended to or shall impair, as
between the Company and the Holders of Debentures, the obligation
of the Company, which is unconditional and absolute, to pay to the
Holders of the Debentures the principal of and interest on the
Debentures, as and when the same shall become due and payable in
accordance with their terms, or to affect (except to the extent
specifically provided above in this paragraph) the relative rights
of the Holders of the Debentures and creditors of the Company,
other than the Holders of Senior Debt of the Company, nor shall
anything herein prevent the Holder of any Debentures from
exercising all remedies otherwise permitted by applicable law upon
default under this Debenture, subject to the rights, if any, under
this Par5, of the Holders of Senior Debt of the Company, in respect
of assets or securities of the Company, of any kind or character,
whether cash, property or securities, received upon the exercise of
any such remedy.
(h) Upon any payment or distribution of assets or
securities of the Company referred to in this Par5, the Holders of
this Debenture shall be entitled to rely upon any order or decree
of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending,
and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment
or distribution, delivered to the Holders of the Debentures for
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Debt and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto or to this Sec. 5.
(i) No right of any present or future holder of any
Senior Debt of the Company, to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company, or by any act
or failure to act, in good faith, by any Holder, or by any
noncompliance by the Company, with the terms, provisions and
covenants of this Debenture regardless of any knowledge thereof any
such Holder may have or otherwise be charged with.
(j) The provisions of this Sec. 5 are intended to be
for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt of the Company.
Sec. 6. Events of Default.
Sec. 6.1. Events of Default. If one or more of the
following events, herein called Events of Default, shall happen for
any reason whatsoever and whether such happening shall be voluntary
or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of
any court of any order, rule or regulation of any administrative or
governmental body) and be continuing:
(a) Default shall be made in the payment of the
principal of any Debenture, when and as the same shall become due
and payable,whether at maturity or at a date fixed for prepayment
or by acceleration or otherwise; or
(b) Default shall be made in the payment of any
installment of interest on any Debenture according to its tenor
when and as the same shall become due and payable and such default
shall continue for a period of 10 days; or
(c) Default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of
the Company contained in this Debenture; or
(d) The Company shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver,
trustee or liquidator of itself or of any material part of its
property, or shall admit in writing its inability to pay its debts
generally as they come due, or shall make a general assignment for
the benefit of creditors, or shall file a voluntary petition or an
answer seeking reorganization or arrangement in a proceeding under
any bankruptcy law (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against the
Company in any such proceeding, or shall, by voluntary petition,
answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law providing
for the reorganization or winding up of corporations, or the
Company or its directors or majority stockholders shall take action
looking to the dissolution or liquidation of the Company; or
(e) An order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the
by any court of competent jurisdiction appointing, without the
consent of the Company, a receiver, trustee or liquidator of the
Company, a receiver, trustee or liquidator of the
of Senior Debt of the Company, for application to the payment of
all Senior Debt of the Company, remaining unpaid to the extent
m
(if any) and interest and such other amounts on such Senior Debt of
the Company, in accordance with its terms, after giving effect to
any concurrent payment or distribution to holders of such Senior
Debt of the Company.
(f) If any Event of Default occurs (under
circumstances when the provisions of Sec. 5(c) shall not be
uch petition by a court of competent
jurisdiction is required, shall be filed and approved by such a
court as properly filed and such approval shall not be withdrawn or
the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for
reorganization or winding up of corporations and which may apply to
the Company, any court of competent jurisdiction, custody or
control of the Company or of any material part of its property and
such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
(g) The Company shall (x) be declared in default in
the payment of principal or interest on any evidence of
indebtedness for money borrowed (other than the Debentures) or
other material obligations and such default shall continue for more
than the period of grace, if any, therein specified, unless such
default shall have been cured or waived prior to such indebtedness
becoming or being declared to be due and payable prior to its
stated maturity, or (y) default shall continue for more than the
period of grace, if any, therein specified, or (z) default in the
performance or observance of any other term, condition or agreement
contained in any such evidence of indebtedness for money borrowed
or in any agreement relating thereto if as a result of such default
such evidence of indebtedness is declared to be due and payable
prior to its stated maturity;
then, in any such event, any registered Holder or Holders of the
Debentures may declare the Debenture or Debentures held by it or
them to be due and payable, together with accrued interest thereon,
thirty (30) days after such declaration, unless, prior do the
expiration of such thirty (30) day period the registered Holders of
a majority of the then outstanding principal amount of the
Debentures dated June 19, 1996 at such time outstanding, together
with the concurrence of each registered holder owning originally
and at such time a principal amount of $150,000 or greater of
debentures dated June 19, 1996, and the concurrence of each
registered Holder owning originally and at such time a principal
amount of $150,000 or greater of the Debentures, dated March 20,
1996, shall waive, suspend, cancel or annul such declaration.
Sec. 6.2. Suits for Enforcement. In case any one or more
of the Events of Default specified in Sec. 6.1 shall happen and be
continuing, each Holder of a Debenture which may, pursuant to the
provisions of Sec. 6.1, declare the Debenture or Debentures held by it
to be immediately due and payable, may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained
in this Debenture, such Debenture or in aid of the exercise of any
power granted in this Debenture, such Debenture, or may proceed to
enforce the payment of such Debenture or to enforce any other legal
or equitable right of holder of such Debenture. If, pursuant to
the provisions of Sec. 6.1 or of this Sec. 6.2, the holder of any Debenture
shall demand payment thereof or take any action in respect of a
default or an Event of Default, the Company will forthwith give
written notice, addressed as provided in Sec. 6.4, to the other Holders
of Debentures, specifying such action and the nature of the default
or Event of Default. Nothing contained in this Sec. 6.2 or in Sec. 6.1
shall in any manner impair that absolute and unconditional right of
each holder of a Debenture to receive payment of the principal of
and interest, on such Debenture when the same shall become due and
payable in accordance with the terms thereof, and to institute suit
for the enforcement of such payment.
Sec.6.3. Remedies Cumulative. No remedy herein
conferred upon the Holder of any Debenture is intended to be
exclusive of any other remedy, and each and every such remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
Sec. 6.4. Remedies Not Waived. No course of dealing
between the Company and any Holder of a Debenture shall operate as
a waiver of any right of such Holder hereunder or under such
Debenture, and no delay on the part of such Holder in exercising
any right hereunder or thereunder shall so operate.
Sec. 7. Waivers. Anything in this Debenture to the
contrary notwithstanding, upon the affirmative written consent of
the registered Holders of a majority of the then outstanding
principal amount of Debentures, dated June 19, 1996, and the
affirmative written consent of each registered holder owning
originally and at such time a principal amount of $150,000 or
greater of debentures dated June 19, 1996, together with the
affirmative consent of each registered Holder owning originally and
at such time a principal amount of $150,000 or greater of
Debentures dated March 20, 1996, any provision, covenant,
requirement, agreement or condition of the Company under this
Debenture may be waived or amended at any time or from time to time
and such waiver or amendment shall be binding upon all Holders and
all Debentures.
Sec. 8. Security. This Debenture is secured by that
certain Security Agreement dated as of June 19, 1996 made by the
Company for the benefit of the holders of the Debentures.
Sec. 9. Costs of Collection. In case of a default in
the payment of any principal of or interest on this Debenture, the
Company will pay to the Holder hereof such further amount as shall
be sufficient to cover the costs and expenses of collection,
including (without limitation) reasonable attorneys' fees.
Sec. 10. Legend. Each Debenture shall bear the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR REGISTERED OR QUALIFIED UNDER THE "BLUE SKY" LAWS OF ANY STATE.
THE SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED, ASSIGNED, SOLD OR
TRANSFERRED UNLESS REGISTERED UNDER THAT ACT AND REGISTERED OR
QUALIFIED UNDER THE BLUE SKY LAWS AS MAY BE APPLICABLE OR UNLESS,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY,
EXEMPTIONS FROM SUCH LAWS ARE AVAILABLE.
Sec. 11. Covenants Bind Successors and Assigns. All the
covenants, stipulations, promises and agreements in this Debenture
contained by or on behalf of the Company shall bind its successors
and assigns, whether so expressed or not.
Sec. 12. Governing Law. This Debenture shall be
governed by and construed in accordance with the laws of the State
of New York.
Sec. 13. Notice. Any notice pursuant to this Debenture
shall be effected on the day delivered by hand and receipted, the
second business day after delivery to a recognized overnight
courier service or seven days after delivery to the United States
Post Office, proper postage prepaid sent registered or certified
mail, return receipt requested, addressed as follows:
If to the holder at the address shown on the register
maintained by the Company pursuant to Sec. 1.2 of this Debenture.
If to the Company:
61 Executive Boulevard
Farmingdale, New York 11735
Sec. 14. Waiver of Jury Trial. THE COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS DEBENTURE AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
Sec. 15. Headings. The headings of the sections and
subsections of this Debenture are inserted for convenience only and
do not constitute a part of this Debenture.<PAGE>
IN WITNESS WHEREOF, VTX Electronics
Corp. has caused this Debenture to be signed in its corporate name by one of its
officers thereunto duly authorized and this Debenture to be dated as of the
day and year first above written.
VTX ELECTRONICS CORP.
By:________________________
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
STOCK SUBSCRIPTION WARRANT
To Purchase _________ Shares of Common Stock of
VTX Electronics Corp, a Delaware Corporation
(the "Company")
DATE OF INITIAL ISSUANCE: June 19, 1996
THIS CERTIFIES THAT, for value received, (----Name----) or
registered assigns (hereinafter called the "Holder") is entitled to
purchase from the Company during the Term of this Warrant at the
times provided for herein, the number of shares of Common Stock,
par value $.10 per share, of the Company (the "Common Stock") as
specified herein, at the Warrant Price (as hereinafter defined),
payable in the manner specified herein. The exercise of this
Warrant shall be subject to the provisions, limitations and
restrictions herein contained.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall
have the meanings indicated
1.1. Common Stock - shall mean and include the Company's
authorized Common Stock, par value $.10 per share, as constituted
at the date hereof, and shall also include any capital stock of any
class of the Company hereafter authorized which has the right to
participate in the distribution of earnings and assets of the
Company without limit to amount or percentage.
1.2. Securities Act - the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.3. Term of this Warrant - shall mean the period beginning on
April 1, 1999 and ending on March 31, 2009.
1.4. Warrant Price - is defined in Section 2.1 hereof.
1.5. Warrant Rights - the rights of the Holder to purchase
shares of Common Stock upon exercise of this Warrant, which rights
shall not relate to shares of Common Stock already purchased
pursuant to this Warrant.
1.6. Warrant Shares - shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Right to Exercise. At any time and from time to time
during the Term of this Warrant, the Holder may exercise this
Warrant, in whole or part(s) to purchase the number of shares of
Common Stock set forth on the cover page hereof, subject to
adjustment as provided in Section 5. The Warrant Price shall be
$.125 per share subject to adjustment as provided in Section 5 and
may be paid either in cash or by presentation for surrender,
cancellation and redemption of a principal and accrued interest
amount of a Secured Subordinated Debenture of the Company equal to
the aggregate Warrant Price.
2.2. Procedure for Exercise of Warrant. To exercise this
Warrant the Holder shall deliver to the Company at its office
referred to in Section 9 hereof at any time and from time to time
during the Term of this Warrant: the Notice of Exercise in the
form attached hereto and the payment of the aggregate Warrant Price
with respect to the Warrants exercised. In the event of any
exercise of these rights represented by this Warrant, a certificate
or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as
may be designated by the Holder, shall be delivered to the Holder
hereof within a reasonable time, not exceeding fifteen (15) days,
after the rights represented by this Warrant shall have been so
exercised. The person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such
shares on the date on which the Notice of Exercise was delivered
and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except
that, if the date of such delivery and payment is a date when the
stock transfer books of the Company are closed, such person shall
be deemed to have become the holder of such shares at the close of
business on the next succeeding date on which the stock transfer
books are open.
2.3. Transfer Restriction Legend. Each certificate for
Warrant Shares shall bear the following legend (and any additional
legend required by (i) any applicable state securities laws and
(ii) any securities exchange upon which such Warrant Shares may, at
the time of such exercise, be listed) on the face thereof unless at
the time of exercise such Warrant Shares shall be registered under
the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR THE AVAILABILITY OF
AN EXEMPTION FROM REGISTRATION UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend (except a new certificate
issued upon completion of a public distribution under a
registration statement of the securities represented thereby) shall
also bear such legend unless, in the opinion of counsel for the
holder thereof (which counsel shall be reasonably satisfactory to
counsel for the Company) the securities represented thereby are
not, at such time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company
covenants and agrees that all shares of Common Stock that may be
issued upon the exercise of the rights represented by this Warrant
will, upon issuance and receipt by the Company of the Warrant
Price, be validly issued, fully paid and nonassessable, and free
from all taxes, liens and charges with respect to the issue
thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may
be payable in respect of the issue of this Warrant, or any Common
Stock or certificates therefor issuable upon the exercise of this
Warrant. The Company further covenants and agrees that the Company
will at all times have authorized and reserved, free from
preemptive rights, a sufficient number of shares of Common Stock to
provide for the exercise of the rights represented by this Warrant,
provided, however, that of the time of issuance of this Warrant the
Company does not have sufficient authorized common stock for all
outstanding securities or options convertible into common stock.
The Company covenants to seek approval for an increase in
authorized common stock for the shareholders of the Company at its
next Annual Meeting. The Company further covenants and agrees that
if any shares of capital stock to be reserved for the purpose of
the issuance of shares upon the exercise of this Warrant require
registration with or approval of any governmental authority under
any federal or state law before such shares may be validly issued
or delivered upon exercise, then the Company will in good faith and
as expeditiously as possible endeavor to secure such registration
or approval, as the case may be. If and so long as the Common
Stock issuable upon the exercise of this Warrant is listed on any
national securities exchange, the Company will, if permitted by the
rules of such exchange, list and keep listed on such exchange, upon
official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Ownership.
4.1 Register; Transfer or Exchange of Warrants. The Company
shall keep at its office maintained in Farmingdale, New York a
register in which the Company shall provide for the registration of
Warrants and for the registration of transfer of Warrants. The
Holder of any Warrant may, at its option and either in person or by
duly authorized attorney, surrender the same for registration of
transfer or exchange at such office and, without expense to such
Holder (other than transfer taxes, if any), receive in exchange
therefor a new Warrant or Warrants, dated as of the date to which
transfer is effectuated, for the same aggregate amount of shares as
the Warrant or Warrants so surrendered for transfer or exchange and
each registered in such name or names as may be designated by such
Holder. Every Warrant so made and delivered in exchange for any
Warrant shall in all other respects be in the same form and have
the same terms as the Warrant so surrendered for transfer or
exchange.
4.2. Ownership of This Warrant. The Company may deem and
treat the person in whose name this Warrant is registered as the
holder and owner hereof (notwithstanding any notations of ownership
or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary
until presentation of this Warrant for registration of transfer as
provided in this Section 4.
4.3. Transfer and Replacement. This Warrant and all rights
hereunder are subject to applicable federal and state securities
laws, transferable in whole or in part upon the books of the
Company by the Holder hereof in person or by duly authorized
attorney, and a new Warrant or Warrants, of the same tenor as this
Warrant but registered in the name of the transferee or transferees
shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction,
and, in such case, of indemnity or security reasonably satisfactory
to it, and upon surrender of this Warrant if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality
of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder, an
irrevocable agreement of indemnity by such Holder shall be
sufficient for all purposes of this Section 4, and no evidence of
loss or theft or destruction shall be necessary. This Warrant
shall be promptly canceled by the Company upon the surrender hereof
in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or
destruction of a Warrant, the Company shall pay all expenses, taxes
and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if
any) payable in connection with a transfer of this Warrant, which
shall be payable by the Holder.
SECTION 5 Adjustment of Exercise Price and Number of Shares
of Common Stock or Warrants.
(a) In case the Company shall (i) pay a dividend or make
a distribution in shares of its capital stock (whether shares of
Common Stock or of capital stock of any other class) or distribute
evidences of indebtedness or assets, (ii) sub-divide its
outstanding shares of Common Stock (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares
of capital stock of the Company, the conversion privilege and
Warrant Price in effect immediately prior to such action shall be
adjusted so that the holders of any Warrants thereafter surrendered
for exercise shall be entitled to receive the number of shares of
capital stock of the Company which he or she would have owned
immediately following such action had such Warrant been exercised
immediately prior thereto. An adjustment made pursuant to this
subsection (a) shall become effective retroactively immediately
after the record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in the
case of a subdivision, combination or reclassification. If, as a
result of an adjustment made pursuant to this subsection (a), the
holder of any shares of this Warrant thereafter surrendered for
exercise shall become entitled to receive shares of two or more
classes of capital stock of the Company, the Board of Directors
(whose reasonable determination shall be made in good faith) shall
determine the allocation of the adjusted conversion price between
or among shares of such classes of capital stock.
In the event the Company shall at any time, issue or sell
any shares of Common Stock or rights, warrants or securities
convertible into Common Stock (any such sale or issuance, being
herein called a "Change of Shares"), then, and thereafter upon each
further Change of Shares, the Warrant Price in effect immediately
prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent) equal to the lowest
of (i) the per share consideration receivable by the Company on
account of such Change of Shares, (ii) the lowest then current
exercise or conversion price on any Warrants or convertible
securities, or (iii) the Warrant Price determined by multiplying
the Warrant Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the denominator of which
shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional
shares (assuming full exercise, conversion or subscription of all
rights, warrants or securities convertible into Common Stock). In
addition, the number of shares of common stock into which this
Warrant is convertible into shall be adjusted by multiplying the
number of shares this Warrant is convertible into by a fraction,
the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately after the issuance of such
additional shares and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately prior
to the issuance of such additional shares (assuming full exercise,
conversion or subscription of all rights, warrants or securities
convertible into Common Stock). Such adjustments (both price and
number of shares) shall be made successively whenever such and
issuance is made.
In case the Corporation shall at any time issue or sell shares
of capital stock (other than Common Stock), or warrants, rights to
subscribe or securities convertible into capital stock (excluding
those referred to above), then in each such case the Warrant Price
shall be adjusted so the same shall equal the lowest of (i) the per
share consideration receivable by the Company on account of such
issuance or sale, (ii) the lowest then current exercise or
conversion price on any Warrants or convertible securities, or
(iii) the price determined by multiplying the Warrant Price in
effect immediately prior to the date of such distribution by a
fraction the numerator of which shall be the current market price
per share (determined pursuant to Section 5(g) below) of the Common
Stock on the record date mentioned below multiplied by the total
number of shares of Common Stock then outstanding, less than the
fair market value (as determined by the Board of Directors of the
Company in good faith) of the capital stock, subscription rights,
assets or evidence of indebtedness so distributed and the
denominator shall be such current market price per share of Common
Stock multiplied by the total number of shares of Common Stock then
outstanding. In addition, the number of share of common stock into
which this Warrant is convertible into shall be adjusted by
multiplying the number of shares this Warrant is convertible into
by fraction, the numerator of which shall be current market price
per share (determined pursuant to Section 5(g) below) of the Common
Stock on the record date mentioned below multiplied by the total
number of shares of Common Stock then outstanding and the
denominator of which shall be the current market price per share of
Common Stock multiplied by the total number of shares of Common
Stock then outstanding, less the fair market value (as determined
by the Board of Directors of the Company in good faith) of the
capital stock, subscription rights, assets or evidence of
indebtedness so distributed. Such adjustments (both price and
number of shares) shall become effective retroactively immediately
after the record date for the determination of stockholders
entitled to receive such distribution.
The provisions of this Section 5 shall not operate to increase
the Warrant Price or reduce the number of shares of Common Stock
purchasable upon the exercise of any Warrant.
(b) The Company may elect, upon any adjustment of the
Warrant Price hereunder, to adjust the number of Warrants
outstanding, in lieu of the adjustment in the number of shares of
Common Stock purchasable upon the exercise of each Warrant as
hereinabove provided, so that each Warrant outstanding after such
adjustment shall represent the right to purchase one share of
Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants
(calculated to the nearest tenth) determined by multiplying the
number one by a fraction, the numerator of which shall be the
Warrant Price in effect immediately prior to such adjustment and
the denominator of which shall be the Warrant Price in effect
immediately after such adjustment.
(c) In case of any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or
other change of outstanding shares of Common Stock), or in case of
any sale or conveyance to another corporation of the property of
the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the
Company shall cause effective provision to be made so that each
holder of a Warrant then outstanding shall have the right
thereafter, by exercising such Warrant, to purchase the kind and
number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock that
might have been purchased upon exercise of such Warrant immediately
prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided
for in this Section 5. The Company shall not effect any such
consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof the successor (if other than the
Company) resulting from such consolidation or merger of the
corporation purchasing assets or other appropriate corporation or
entity shall assume, by written instrument executed and delivered
to the Company, the obligation to deliver to the holder of each
Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Warrant.
The foregoing provisions shall similarly apply to successive
reclassification, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(d) After each adjustment of the Warrant Price pursuant
to this Section 5, the Company will promptly prepare a certificate
signed by the President, and by the Treasurer or an Assistant
Treasurer or the Secretary or any Assistant Secretary, of the
Company setting forth: (i) the Warrant Price as so adjusted, (ii)
the number of shares of Common Stock purchasable upon exercise of
each Warrant after such adjustment, and, if the Company shall have
elected to adjust the number of Warrants, the number of Warrants to
which the registered holder of each Warrant shall then be entitled.
(e) For purposes of Section 5(a) and 5(b) hereof, the
following shall also be applicable:
(A) The number of shares of Common Stock
outstanding at any given time shall include shares of Common
Stock owned or held by or for the account of the Company and
the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be
considered a Change of Shares for purposes of said sections.
(B) No adjustment of the Warrant Price shall be
made unless such adjustment would require a decrease of a
least $.0001 in such price; provided that any adjustments
which by reason of this clause (B) are not required to be made
at the time of and together with the next subsequent
adjustment which, together with any adjustment(s) so carried
forward, shall require an increase or decrease of at least
$.0001 in the Warrant Price then in effect hereunder.
(f) If and whenever the Company shall grant to all
holders of Common Stock, as such, rights or warrants to subscribe
for or to purchase, or any options for the purchase of, Common
Stock or securities convertible into or exchangeable for carrying
a right, warrant or option to purchase Common Stock, the Company
shall concurrently therewith grant to each Registered Holder as of
the record date for such transaction of the Warrants then
outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date
used to determine the stockholders entitled to the rights, warrants
or options being granted by the Company, the Registered Holder were
the holder of record of the number or whole shares of Common Stock
then issuable upon exercise (assuming, for purposes of this section
5 (f), that exercise of Warrants is permissible during periods
prior to the Warrant Exercise Date) of his Warrants. Such grant by
the Company to the holders of the Warrants shall be in lieu of any
adjustment which otherwise might be called for pursuant to this
Section 5.
(g) For the purpose of any computation under this
Section 5 the current market price per share of Common Stock on any
date shall be deemed to be the lower of (i) the closing price on
the record date for determining the holders of Warrants entitled to
receive any adjustment or any computation or (ii) average of the
daily closing prices for 30 consecutive business days commencing 45
business days before the day in question. The closing price for
each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in either
case on the American Stock Exchange or, if the Common Stock is not
listed or admitted to trading on such exchange, on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any
national securities and exchange, the average of the closing bid
and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System, or if not so
reported, the average of the closing bid and asked prices as
furnished by any firm acting at that time as a market maker in the
Common Stock selected from time to time by the Company for this
purpose.
SECTION 6. Notice of Extraordinary Dividends. If the Board
of Directors of the Company shall declare any dividend or other
distribution on its Common Stock except out of earned surplus or by
way of a stock dividend payable in shares of its Common Stock, the
Company shall mail notice thereof to the Holder hereof not less
than fifteen (15) days prior to the record date fixed for
determining shareholders entitled to participate in such dividend
or other distribution, and the Holder hereof shall not participate
in such dividend or other distribution unless this Warrant may be
exercised, in whole or in part, pursuant to Section 2.1 of this
Warrant, and is exercised prior to such record date. The
provisions of this Section 6 shall not apply to distributions made
in connection with transactions covered by Section 5.
SECTION 7. Fractional Shares. Fractional shares shall not be
issued upon the exercise of this Warrant but in any case where the
Holder would, except for the provisions of this Section 7, be
entitled under the terms hereof to receive a fractional share upon
the exercise of this Warrant, the Company shall, upon the exercise
of this Warrant, pay a sum in cash equal to the excess of the value
of such fractional share (determined in such reasonable manner as
may be prescribed in good faith by the Board of Directors of the
Company).
SECTION 8. Registration Rights; Etc.
8.1. Certain Definitions. As used in this Section 8, the
following terms shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
(b) "Registrable Securities" shall mean this Warrant or the
Warrant Shares issued or issuable upon exercise of this Warrant.
(c) "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 effectiveness of such
registration statement.
(d) "Registration Expenses" shall mean all expenses incurred
by the Company in compliance with Section 8.2 hereof other than
Selling Expenses, including, without limitation, all registration
and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, 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).
(e) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable
Securities, all fees and disbursements of counsel for any Holder
and any blue sky fees and expenses excluded from the definition of
"Registration Expenses".
(f) "Holder" shall mean any holder of outstanding Warrant
Shares or Registrable Securities which (except for purposes of
determining "Holders" under Section 8.6 hereof) have not been sold
to the public.
(g) "Other Shareholders" shall mean holders of securities of
the Company who are entitled by contract with the Company to have
securities included in a registration of the Company's securities.
8.2. Company Registration; Demand Registration.
(a) Notice of Registration. If the Company shall determine
to register any of its securities either for its own account or the
account of a security holder or holders exercising their respective
demand registration rights, other than a registration relating
solely to employee benefit plans, or a registration relating solely
to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the
Company will:
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by
any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above,
except as set forth in Section 8.2(b) below.
(b) Underwriting. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of
the written notice given pursuant to Section 8.2(a)(i). In such
event, the right of any Holder to registration pursuant to Section
8.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company, directors and
officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for
underwriting by the Company.
Notwithstanding any other provision of this Section 8.2, if
the underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, the
underwriter may (subject to the allocation priority set forth
below) exclude from such registration and underwriting some of the
Registrable Securities which would otherwise be underwritten
pursuant hereto provided, however, that in no event shall the
Registrable Securities underwritten pursuant hereto constitute less
than one-third of such offering. The Company shall so advise all
holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following
manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors
and officers and Other Shareholders shall be allocated among such
Holders, directors and officers and other Shareholders in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing
the registration statement.
If any Holder of Registrable Securities or any officer,
director or Other Shareholder disapproves of the terms of any such
underwriting, such person may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) Notwithstanding anything to the contrary set forth above,
each Holder shall also have the unqualified and unconditional right
at any time and from time to time subsequent to December 1, 1997 to
demand the registration of Registrable Securities, in which case
the Company shall proceed with such registration as provided in
this Section 8.
8.3 Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification and compliance by the Company pursuant to Section 8.2
hereof. All Selling Expenses shall be borne by the holders of the
securities so registered pro rata on the basis of the number of
their shares so registered.
8.4 Registration Procedures. In the case of each
registration effected by the Company pursuant to this Section 8,
the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof.
The Company will, at its expense:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have
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 a Holder from time to time may reasonably
request; and
(c) use its best efforts to register or qualify the
Registrable Securities under the securities laws or blue-sky laws
of such jurisdictions as any Holder may request; provided, however,
that the Company shall not be obligated to register or qualify such
Registrable Securities in any particular jurisdiction in which the
Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or
compliance unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
8.5 Indemnification.
(a) The Company, with respect to each registration,
qualification and compliance effected pursuant to this Section 8,
will indemnify and hold harmless each Holder, each of its officers,
directors and partners, and each party controlling such Holder, and
each underwriter, if any, and each party who controls 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 rule or regulation
thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors and partners, and each
party controlling such Holder, each such underwriter and each party
who controls any such underwriter, for any legal and any other
expenses incurred in connection with investigating or 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 based solely upon written
information furnished to the Company by such Holder or underwriter,
as the case may be, and stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by such person are included in the securities as to
which such registration, qualification or compliance is being
effected, indemnify and hold harmless the Company, each of its
directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each
party who controls the Company or such underwriter, each other such
Holder and Other Shareholder and each of their respective officers,
directors and partners, and each party controlling such Holder or
Other Shareholder, 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 made by the indemnifying Holder or Other Shareholder, as the
case may be, 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 statements therein not
misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters
or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or 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 solely in reliance upon and in conformity with
written information furnished to the Company by such indemnifying
Holder or Other Shareholder and stated to be specifically for use
therein; provided, however, that the obligations of such
indemnifying Holders and Other Shareholders hereunder shall be
limited to an amount equal to the proceeds to each such Holder or
Other Shareholder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section
8.5 (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 or 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 unreasonably be
withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall
have been advised by counsel that actual or potential differing
interests or defenses exist or may exist between the Indemnifying
Party and the Indemnified Party, in which case such expense shall
be paid by the Indemnifying Party), 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 Section 8. 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.
8.6 Information by Holder. Each Holder of Registrable
Securities, and each Other Shareholder holding securities included
in any registration, shall furnish to the Company such information
regarding such Holder or Other Shareholder 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 Section 8.
8.7 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which
may permit the sale of the Registrable Securities to the public
without registration, the Company agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities
Act, at all times from and after ninety (90) days following the
effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the
general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under
the Securities Act and the Securities Exchange Act of 1934, as amended, at
any time after it has become subject to such reporting requirements; and
(c) So long as the Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of Rule
144 (at any time from and after ninety (90) days following the
effective date of the first registration statement in connection with
an offering of its Securities to the general public), and of the
Securities Act and the Securities Exchange Act of 1934, as amended (at
any time after it has become subject to such reporting requirements),
a copy of the most recent annual or quarterly report of the Company,
and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without
registration.
SECTION 9. Notices. Any notice or other document required or
permitted to be given or delivered to the Holder or the Company shall
be effected on the seventh day following delivery to the United States
Post Office, proper postage prepaid, sent by certified or registered
mail return receipt requested, or on the day delivered by hand and
receipted, or on the second business day after delivery to a recognized
overnight courier service, addressed to the Holder at the address
thereof specified in the Capitalization Agreement or to such other
address as shall have been furnished to the Company in writing by the
Holder or the Company at 61 Executive Boulevard, Farmingdale, New York
11735 or to such other address as shall have been furnished in writing
to the Holder by the Company.
SECTION 10. No Rights as Stockholder; Limitation of Liability.
This Warrant shall not entitle the Holder to any of the rights of a
shareholder of the Company. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock,
and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant
Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 11. Law Governing. This Warrant shall be governed by,
and construed and enforced in accordance with, the laws of the State of
New York.
SECTION 12. Miscellaneous. This Warrant and any provision
hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party (or any predecessor in
interest thereof) against which enforcement of the same is sought. The
headings in this Warrant are for purposes of reference only and shall
not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer this 19th day of June 1996.
VTX ELECTRONICS CORP.
By:
----------------------------
Paul Snead, Vice President
[FORM OF ELECTION TO EXERCISE]
To be executed by the registered holder if
such holder desires to exercise the Warrant
To____________:
The undersigned hereby irrevocably elects to exercise the Warrant
to purchase _______ shares of Common Stock issuable upon the exercise
of such Warrant and requests that Certificate for such shares be issued
in the name of:
___________________________________________________________________
(Please print name and address)
___________________________________________________________________
(Please insert social security or other identifying number)
___________________________________________________________________
(Please insert number of shares exercised)
___________________________________________________________________
Please insert Warrant Price Paid
___________________________________________________________________
(Please specify whether payment is in cash or Debentures)
If such number of Warrant shall not be all the Warrant evidenced by the
accompanying Warrant, a new Warrant for the balance remaining of such
Warrant shall be registered in the name of and delivered to:
__________________________________________________________________
(Please print name and address)
____________________________________________________________
(Please insert social security or other identifying number)
Dated:August 15, 1996.
-----------------
[HOLDER]
By:
___________________________
MORTGAGE NOTE
$250,000.00 Hempstead, New York
June 19, 1996
FOR VALUE RECEIVED, the undersigned, VTX ELECTRONICS
CORP., a Delaware corporation and VERTEX TECHNOLOGIES, INC., a New
York corporation, both having their respective principal places of
business at 61 Executive Boulevard, Farmingdale, New York 11735
(VTX and Vertex hereinafter collectively referred to as the
"Borrower"), hereby, jointly and severally, promise to pay to the
order of FUNDEX CAPITAL CORPORATION ("Fundex"), a New York
corporation, having its principal place of business at 555 Theodore
Fremd Avenue, Suite C-200, Rye, New York 10580, STERLING COMMERCIAL
CAPITAL, INC. ("Sterling"), a New York corporation, having its
principal place of business at 26 Broadway, New York, New York
10004, and TAPPAN ZEE CAPITAL CORP. ("Tappan Zee"), a New Jersey
corporation, having its principal place of business at 201 Lower
Notch Road, Little Falls, New Jersey 07424 (Fundex, Sterling, First
Wall, and Tappan Zee hereinafter collectively referred to as the
"Lender"), in lawful money of the United States, the principal sum
of TWO HUNDRED FIFTY THOUSAND AND 00/100 ($250,000.00) DOLLARS,
with interest thereon at the rate of fourteen and seven-eighths
(14.875%) percent per annum, computed on the basis of the actual
number of days elapsed in a year of 360 days (the "Interest Rate"),
as follows:
(a) A first installment of interest only on
the principal sum of $250,000.00 for the period from the
Closing Date through the last day of June, 1996, payable
on the Closing Date.
(b) Thereafter, fifty-nine (59) equal
consecutive monthly installments of principal and
interest in the amount of $3,630.18 each, based upon a
one hundred fifty six (156) month amortization schedule,
commencing August 1, 1996, and payable on the 1st day of
each succeeding month thereafter to and including June 1,
2001; and
(c) a final sixtieth (60th) installment in the
principal amount of $206,737.81, or such other amount as
shall comprise the entire outstanding principal balance
of the Loan, together with accrued interest thereon
payable on July 1, 2001.
All payments to be made to Lender hereunder shall be made
to the order of Fundex Capital Corporation, 555 Theodore Fremd
Avenue, Suite C-200, Rye, New York 10580.
The payment in full of the indebtedness evidenced by this
Note is secured by a mortgage and security agreement (the
"Mortgage") of even date herewith, made by VTX, as Mortgagor, to
the Lender, as Mortgagee, granting a second mortgage lien on the
real property located at 61 Executive Boulevard, Farmingdale, New
York, and by other valuable security.
This Note may be prepaid in whole or in part at any time
with interest to the date of prepayment upon not less than ten (10)
days' prior written notice to the Lender, provided, however, that:
(i) any partial prepayment shall be applied in inverse order of
maturity to the installments payable under this Note; (ii) the
Borrower shall pay any and all outstanding late charges; and (iii)
the Borrower shall pay a prepayment charge equal to a percentage of
the principal amount being prepaid, as follows:
Prepayment Charge
as Percentage of
If Prepaid: Principal Prepaid
Prior to the first anniversary
of the Closing Date 5%
On or after the first anniversary
but prior to the second anniversary
of the Closing Date 4%
On or after the second anniversary
but prior to the third anniversary
of the Closing Date 3%
On or after the third anniversary
but prior to the fourth anniversary
of the Closing Date 2%
On or after the fourth anniversary
but prior to the fifth anniversary
of the Closing Date 1%
In the event the Borrower shall default in the payment of any
installment required to be paid hereunder, and such default shall
continue for a period of ten (10) days (the "Grace Period"), then
at the option of the Lender or the holder hereof, the entire
principal balance of this Note, together with accrued interest,
shall become immediately due and payable.
All payments made hereunder shall be applied first to
satisfy any late charges or penalties, then to interest accrued
through the date of such payment, and then in satisfaction of
outstanding principal. Any payment of principal or interest that
is due on a Saturday, Sunday or any day on which banks in the State
of New York are authorized or required to be closed shall be
payable on the next succeeding day that banks are open for the
transaction of business and such case be included in computing
interest, if any, in connection with such payment.
If any installment due hereunder is not paid within the
Grace Period, the Borrower shall pay the Lender a late charge, to
reimburse the Lender for administrative costs and expenses and not
as a penalty, in the amount of $300.00. The Borrower further
agrees that in the event any check given by the Borrower to the
lender is dishonored, the Borrower shall pay to the Lender, in
addition to the aforesaid late charge, an administrative fee of
$25,00.
If any installment due hereunder is not paid within the
Grace Period, the Borrower shall pay the Lender a late charge, to
reimburse the Lender for administrative costs and expenses and not
as a penalty, in the amount of $300.00. The Borrower further
agrees that in the event any check given by the Borrower to the
Lender is dishonored, the Borrower shall pay to the Lender, in
addition to the aforesaid late charge, an administrative fee of
$25.00.
If any installment due hereunder is not paid within the
Grace Period, such unpaid amounts shall bear interest from the date
following the applicable due date of such installment at the
Interest Rate plus seven (7%) percent per annum, or the maximum
rate permitted by applicable laws and governmental regulations,
whichever is less (the "Default Rate"), until paid to the Lender.
In the event of a default hereunder as a result of non-payment or
otherwise, and the Lender elects to accelerate the principal
indebtedness due under this Note, the entire outstanding principal
balance due hereunder shall bear interest from the date of
acceleration until paid in full at the Default Rate.
The occurrence of an Event of Default Article 10.0 of a
certain Financing Agreement of even dated herewith, by and between
the Lender and the Borrower (the "Financing Agreement"), after
expiration of any notice and cure period set forth in the Financing
Agreement shall constitute a default hereunder.
The Borrower hereby waives presentment, demand for
payment, notice of dishonor and any and all other notices and
demands, and consents to any and all extensions of time, renewals
and any waivers or modifications that may be granted or consented
to by the Lender with regard to any other provisions of this Note,
and agrees that no such action or failure to act on the part of the
Lender shall in any way affect or impair the obligations of the
Borrower arising hereunder or be construed as a waiver of this Note
or the Lender's right to avail itself of any remedy hereunder, with
the same force and effect as if the Borrower expressly consented to
such action or inaction.
This Note has been executed and delivered and shall be
construed and enforced in accordance with the laws of the State of
New York, including, but not limited to, matters of construction,
validity and performance.
In the event the Lender or the holder of this Note shall
retain an attorney for the enforcement or the collection of this
Note, the Borrower agrees to pay all costs and expenses of such
collection, including reasonable attorney's fees, and any judgment
recovered may include such additional amounts.
IN WITNESS WHEREOF, the Borrower has caused this Note to
be executed by its duly authorized officers and to be dated as of
the day and year first above written.
VTX ELECTRONICS CORP.
ATTEST:
By:
Paul Snead, Vice President
VERTEX TECHNOLOGIES, INC.
ATTEST:
By:
Paul Snead, Vice President
