U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
X Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934.
For the fiscal year ended December 31, 1996
o Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the transition period from to
Commission file number 0-24886
ACRODYNE COMMUNICATIONS, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 11-3067564
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
516 Township Line Road, Blue Bell, PA 19422
(Address of Principal Executive Office) (Zip Code)
215-542-7000
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange
Title of Each Class on Which Registered
Securities registered under Section 12(g) of the Exchange Act:
Units
(Title of Class)
Common Stock
(Title of Class)
Warrants
(Title of Class)
<PAGE>
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $ 10,417,029
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $ 18,303,041, computed by reference to the average bid and asked
prices of such stock, as of March 20, 1997. This computation is based upon
the number of issued and outstanding shares held by persons other than
directors and officers of the Registrant.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. Common stock, par value
$0.01 per share: 4,434,270 outstanding at March 20, 1997.
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
FORM 10-KSB
FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Description of Business......................................................5
Item 2.
Description of
Property....................................................................14
Item 3.
Legal Proceedings.........................................................15
Item 4.
Submission of Matters to a Vote of Security-Holders.......................15
PART II
Item 5.
Market For Common Equity and Related Stockholder Matters..................15
Item 6.
Management's Discussion and
Analysis....................................................................17
Item 7.
Financial
Statements..................................................................19
Item 8.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.....................................................20
PART III
Item 9.
Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.........................21
Item 10.
Executive Compensation....................................................23
Item 11.
Security Ownership of Certain Beneficial Owners and Management............25
<PAGE>
Item 12.
Certain Relationships and Related Transactions............................25
Item 13.
Exhibits, List and Reports on Form 8-K....................................26
Signatures..................................................................28
<PAGE>
Part I
The Form 10-KSB for the fiscal year ended December 31, 1996 filed by Acrodyne
Communications, Inc. on March 31, 1997 is hereby amended to read in its
entirety as follows:
Item 1. Description of Business
THE COMPANY The business of Acrodyne Communications, Inc. (formerly
Acrodyne Holdings, Inc.), a Delaware corporation (the "Company"), is conducted
through its sole operating subsidiary Acrodyne Industries, Inc. ("Acrodyne").
Acrodyne was acquired by the Company on October 24, 1994 (the "Acquisition").
Prior thereto, the Company had no operations. The Company changed its name to
Acrodyne Communications, Inc. on June 9, 1995.
As used in this Form 10-KSB, the term "Company" refers to Acrodyne Holdings,
Inc. as of dates and periods prior to the, and refers to the combined
operations of Acrodyne Communications, Inc. and Acrodyne Industries, Inc.
subsequent to the Acquisition.
BUSINESS OF ACRODYNE. Acrodyne and its predecessor, has designed,
manufactured and marketed television transmitters and translators which have
been sold in the United States and internationally since 1971. The function of
a television transmitter is to broadcast on the air television signals to a
specific audience receiving such signals by regular antenna or by a local
cable company which then feeds the signal to its subscribers. Television
translators, which operate unattended, retransmit incoming signals from
primary stations on different channels within areas where direct reception
of the original signal may be limited by mountains or other geographic
considerations.
ACRODYNE PRODUCTS AND SERVICES
Overview
Acrodyne designs, manufactures and markets television broadcast transmitters
and translators for domestic and international television stations,
broadcasters, government agencies, not-for-profit organizations and educational
institutions. The useful life of a television transmitter or translator is
approximately 20 years. Acrodyne's television transmitters, which range in
transmission power levels from one watt for localized applications to tens of
thousands of watts for large television broadcasters, have a modularized
design which permits Acrodyne to respond to specific customer requirements.
Acrodyne classifies its transmitters into two categories based upon the power
output of such transmitters (discussed in more detail below). Lower power
transmitters and higher power transmitters transmit signals in both UHF and
VHF frequency bands. The VHF band covers channels two through thirteen and the
UHF band covers channels above thirteen. Each transmitter permits the sender to
broadcast over one channel. In addition, Acrodyne manufactures a full line of
MMDS (Multichannel Multipoint Distribution System) transmitters for the
wireless cable industry.
<PAGE>
All of Acrodyne's television transmitters feature enhanced linear amplifiers.
Such units feature easy to read diagnostic displays and meters which clearly
indicate a unit's operating condition. Units automatically shut down for self-
protection if out-of-tolerance conditions are encountered. Acrodyne's
television transmitters are relatively easy to maintain since they utilize
common modules and parts. Other operating features include full remote control,
telemetry and status functions, and a modular design which allows for cost-
effective expansion to higher output power levels.
Lower Power Television Transmitters
Lower power television transmitters with power outputs of up to 2 kilowatts and
translators account for approximately 30% of Acrodyne's sales. Such
transmitters are used by LPTV Stations, a United States classification, which
are limited by the Federal Communications Commission ("FCC") to power output
levels of 10 watts in the VHF band and 2 kilowatt in the UHF band. Although
virtually all of Acrodyne's lower power transmitters are solid state, Acrodyne
will produce some models using single tetrode tube final amplifiers for certain
customers. Solid-state refers to the physical make-up of the transmitter
components. Instead of vacuum tubes where electron flow takes place in a
vacuum, solid state transmitters utilize transistors, which have crystalline
structures. Tetrode and diacrode tubes are four electrode, vacuum tube
amplifying devices used in the final power stage of both lower and higher power
television transmitters. Acrodyne's solid-state television transmitters have
the advantage of long-life and compact size as compared to tube-based units,
and utilize high frequency "microstrip" designs to minimize the number of
components and provide reliability. Solid-state television transmitters also
have multiple amplifiers so that the loss of any one amplifier means only a
partial loss of power and not lost air time. Failure of a tube amplifier, on
the other hand, may cause the entire unit to go off line until a replacement
tube can be installed.
UHF solid state television transmitters are particularly well-suited for LPTV
Stations. In addition, there is a substantial market overseas for these UHF
transmitters. Acrodyne's translators in this area cover the power range up to
10 watts in VHF and up to 2 kilowatts in UHF frequency spectra for domestic and
international television formats. Substantially all of the translators sold by
Acrodyne have been solid state as compared to tetrode tube-based designs. List
prices for lower power transmitters range from approximately $10,000 to
$140,000.
Higher Power Television Transmitters
Higher power television transmitters range in power from above 2 kilowatts to
240 kilowatts and higher, and account for approximately 45% of Acrodyne's
sales. For television transmitters with power output levels of 10 kilowatts
and above, Acrodyne uses advanced tetrode and diacrode tubes which use water
vaporization cooling to prolong their useful lives. Such advanced design
features significantly reduce the operating costs of these transmitters. At
identical output power, the power consumption of an advanced tetrode or
diacrode transmitter is approximately 50% less than that of a transmitter using
klystron tubes, a high power vacuum tube amplifying device, which is the
predecessor of the current tube technology.
<PAGE>
Acrodyne's solid-state transmitters (mentioned above) can also be made at power
levels of 5 to 10 kilowatts.
Acrodyne also produces television transmitters standard to the industry which
have power ratings in multiples of 60 kilowatts. Acrodyne can produce a 60
kilowatt UHF transmitter by combining two 30 kilowatt advanced tetrode tube
transmitters. More notably, the Company's mainstay high power product is the
60 kilowatt diacrode tube transmitter. The Company won the New Technology
Award at the 1996 National Association of Broadcasters ("NAB") show for the
development of this product. This product provides Acrodyne access to a much
larger portion of the United States television transmitter market and to the
international television high power transmitter market. List prices for higher
power television transmitters range from approximately $150,000 to $2,000,000
for a 240 kilowatt transmitter. As of the date of this report, the Company has
sold eight diacrode transmitters that are equivalent to fifteen 60 kilowatt
sockets.
Auxiliary Products and Services
In addition to manufacturing and selling its transmitters and translators,
Acrodyne also offers television broadcasters a value-added complete "turn-key"
broadcast system which includes the procurement, systems integration and
installation of the television transmitter and antenna and related accessory
equipment. Such products and services, which are provided to both higher power
and lower power broadcasters, account for approximately 25% of Acrodyne's
sales. Upon request, Acrodyne technicians also supervise the installation of
television transmitters on-site, in the United States and abroad. Acrodyne
technicians perform additional testing after the transmitter has been connected
to the station's programming sources and the transmission antenna to assure
that the television transmitter operates as intended.
New Products
In 1989, Acrodyne was issued a United States patent for a digital amplitude
modulator-transmitter whose output is compatible with television sets currently
in use as well as for future high definition television broadcasting. Five
additional patents have been granted since (two in 1995) which cover
improvements and enhancements to the first. Company management believes that
its design significantly improves power efficiency and performance while
reducing the cost of the electronic components in the transmitter by
approximately 30%. In April 1993, Acrodyne demonstrated a 1 kilowatt prototype
solid-state UHF prototype solid-state television transmitter incorporating this
design at the NAB Show. Management expects to commercialize a 1 kilowatt
transmitter using this patented technology in 1997.
THE TELEVISION TRANSMISSION INDUSTRY
Approximately 10,500 translators and television transmitters with an output
power level of one watt or more are in operation in the United States, and
approximately 26,500 are in operation worldwide. Of these, more than 1,687
television transmitters in the United States have an output power level of 5
kilowatts or more, and more than 10,000 in operation worldwide have a power
level of 5 kilowatts or more. As of December 31, 1996, there were construction
permits for 90 new higher power stations and 900 new low power stations in the
United States. As of December 31, 1996, Acrodyne had sold and delivered, since
<PAGE>
its inception, 1,590 lower power transmitters and 60 higher power transmitters
in the United States and 1,535 lower power transmitters and 66 higher power
transmitters abroad.
DIGITAL TELEVISION (Formerly High Definition Television - "HDTV")
Digital Television ("DTV") encompasses higher fidelity video and audio
production, transmission and display technologies, and promises to provide
television viewers with greater picture resolution, improved color fidelity,
and higher fidelity surround sound audio. The Company's management believes
that DTV is the largest emerging market for the manufacturers of television
broadcasting equipment.
In December, 1996, the FCC announced its decision concerning the transmitted
format to be used for the transmission of DTV signals, relieving the
speculation that had taken place for several years. In the first quarter of
1997, the FCC will allocate DTV channels in the UHF band for each full service
television and low power station in the country. Based on the most recent FCC
pronouncements, those channels will co-exist with each station's existing VHF
or UHF channel for 15 years after the selection of a transmission standard and
adoption of a Table of Allotments, after which the pre-existing channel will
be abandoned. Each station will be required to apply for a construction
permit to install one DTV transmitter during the three-year phase-in period
and will have three years to construct such a facility. During the remainder
of the 15-year transition, each licensee may transmit on the assigned DTV
channel and its regular channel. At the end of the 15-year period, each
licensee must surrender the non-DTV channel. Each DTV channel will require
its own transmitter and antenna.
The Company's management believes that it can capitalize on the opportunities
afforded by this emerging market because its current product line, as well as
its planned digital amplitude modulator-transmitters, can be re-engineered to
be compatible with the DTV digital transmission format selected.
There can be no assurance that the FCC will meet its proposed spectrum
allocation schedule or that Acrodyne will be able to capitalize on these
opportunities. If fully adopted, DTV will completely transform the television
industry, in addition to requiring the installation of new DTV-compatible
transmitters, such a transformation will also require that consumers purchase
DTV-formatted television sets and DTV filming equipment.
GROWTH STRATEGY
Management of the Company believes that it can increase sales of its
transmitters and translators based on a growth strategy centered on the
following principles:
(i) Restructuring and expanding Acrodyne's sales and marketing activities;
(ii) Expanding and strengthening its network of agents and distributors;
(iii) Increasing work-in-progress inventory for expedited product delivery;
(iv) Selling its new product line of MMDS transmitters to the wireless cable
industry;
(v) Continuing to re-engineer existing product lines to meet the anticipated
demands of the DTV market; and
(vi) Commercializing the 1 kilowatt digital transmitter.
<PAGE>
To implement the Company's growth strategy, the Company expanded its annual
operating budget from $2.2 million in 1995 to approximately $4 million in 1996.
The Sales and Marketing department has grown from three to nine individuals
including sales management for the domestic high power, low power and
international markets. The network of sales representatives and dealers for
the international market has been upgraded to include exclusive representation
in China, the Philipines, Malaysia and Brazil. Strategic new hires have been
added to engineering, field service, testing, quality control and materials
management in support of anticipated growth from the domestic and international
markets.
RESEARCH AND DEVELOPMENT
Overview
Acrodyne's Engineering Department is responsible for new product design and
development, drafting and documentation, system testing, product support and
field service. Acrodyne devotes a significant amount of its engineering
resources to continually incorporating new technology to maintain its
competitive advantage. The Engineering Department also provides product support
to sales, manufacturing and quality assurance as required.
Digital Technology
As mentioned above, Acrodyne's Engineering Department has developed a 1
kilowatt digital amplitude modulator-television transmitter which is compatible
with currently existing television transmission formats, as well as any DTV and
wireless cable format. This digital transmitter, demonstrated in 1993 at the
NAB show, improves power efficiency over existing television transmitters.
Digital transmission involves sampling an analog video signal to create a
digital video signal which then drives the digital video signal through a
sequence of related solid state amplifiers, the outputs of which are then
combined to produce the desired signal. By using highly efficient but non-
linear solid state amplifiers, the power efficiency of a transmitter of this
design using Class C type amplifiers is expected to be more than 50% greater
than any television transmitter now in use. Although Class C amplifiers do not
preserve linearity, and thus, when used in combination with current
commercially available television transmission equipment cannot be used to
transmit television signals, when Class C amplifiers are used with Acrodyne's
patented digital technology, such Class C amplifiers can be combined to produce
a modulated output television signal. Moreover, a solid state configuration is
more reliable and will have lower maintenance costs. As part of the Company's
growth strategy, management intends to commercialize the 1 kilowatt prototype
digital transmitter and develop the 30 kilowatt digital transmitter. Company
management anticipates that expenses incurred in the research and development
of the 30 kilowatt digital transmitter will result in a significant increase
over its historic annual average expenses for research and development.
Research and Development costs, which approximated $133,000 and $65,000, during
the years ended December 31, 1996 and 1995, respectively were charged to
expense.
<PAGE>
MARKETING AND SALES
Marketing Strategy
Acrodyne's marketing strategy is based upon the cost and performance advantages
of its television transmitters. Its solid state designs have already been
extensively field-proven in the lower power television transmitter market.
Company management believes that Acrodyne's higher power advanced tetrode and
diacrode tube television transmitters are more reliable and efficient than
transmitters using klystron tubes or inductive output tubes, and that a
significant advanced opportunity exists for the Company to increase sales of
its solid-state lower power transmitters and tetrode and diacrode tube higher
power transmitters on the basis of the technical advantages inherent in these
designs. Longer term, Acrodyne's patented digital amplitude modulator-
transmitter design is expected to enhance the cost and performance advantages
of its current product line and permit Acrodyne's entry into other product
areas.
General
The sales department receives and evaluates bids for transmitter purchases. In
responding to proposed bids for lower power applications, Acrodyne is often
either in a sole source situation, or competing with one or two specialty firms
of similar size particularly with respect to domestic applications. When
Acrodyne pursues higher power opportunities it competes with major
international companies. The sales department organizes and presents the
proposal bid package to the potential customer based on the most cost effective
design, taking into account both the engineering and manufacturing
considerations. Customers normally do not place orders on a regular basis and
sometimes must rely on regulatory action over which they may have no control.
Domestic Sales
Domestic sales account for approximately 76% of the Company's net sales.
Transmitter and translator products and turnkey systems are sold directly to
television station operators. Domestic payment terms are normally 30% of the
purchase price payable upon order, 60% when the product is ready for shipment
and the remaining 10% due 30 days after shipment.
International Sales
International sales account for approximately 24% of net sales. Independent
manufacturers' representatives and distributors who normally have specific
account affiliations within a particular country, operate on an exclusive and
non-exclusive basis and receive a negotiated commission rate. In general,
Company management believes that sales to international customers have been
steadily growing in the past few years for United States-based television
transmitter manufacturers, and that market growth in these areas will
accelerate as a result of the recent ascendancy of democratic governments in
the former eastern bloc nations, the trend toward greater privatization of
broadcasting in general and the expansion of new communication services in
developing countries.
International payment terms are similar to domestic payment terms and rely on
an irrevocable letter of credit payable upon presentation for any balance
outstanding at the time of shipment. An increased portion of the Company's
present business is subject to performance bonds, "holdbacks" (a renegotiation
of profits) or contract termination credits against the purchase price.
<PAGE>
Customer Base
Acrodyne's customer base is large and diversified. Acrodyne's business has
historically been dependent upon a relatively small number of significant
transmitter sales with one-time customers. No single customer accounted for
more than 10% of total sales in 1996.
Although Acrodyne is not dependent upon military contracts or upon customers
who are dependent on military contracts, its largest recurring customer is the
United States General Services Administration which is primarily responsible
for United States Government procurement including, to some degree, military
procurement. Such customer has accounted for approximately 3% of net sales in
1996 and 1995.
GOVERNMENT REGULATION
Industry Regulation
Transmission characteristics are stringently regulated in the United States by
the Federal Communications Commission ("FCC") and abroad by local governments
and international treaties. United States television transmission is in either
the VHF band, covering the frequency ranges from 54 MHz (Channel 2) to 88 MHz
(Channel 6) and 174 MHz (Channel 7) to 216 MHz (Channel 13), or the UHF band,
covering the frequency range from 470 MHz (Channel 14) to 806 MHz (Channel
69). Users include governments, not-for-profit and privately owned and operated
commercial, educational, foreign language and religious broadcasters. United
States broadcasters are regulated by the FCC as to operating characteristics
and suitability of ownership. Acrodyne has registered all of its television
translators and transmitters with the FCC and believes that its products and
procedures satisfy all the criteria necessary to comply with the regulations of
the FCC.
In addition to the FCC, foreign governments regulate radio-frequency broadcast
equipment operating within their borders. However, the United States and almost
all foreign governments are parties to international treaties which adhere to
frequency allocation and interference criteria.
ENVIRONMENTAL REGULATION
The registrant believes it is in material compliance with applicable United
States, State and local laws and regulations relating to the protection of
the environment.
COMPETITION
Acrodyne competes, with respect to lower power applications, on the basis of
product features, quality, technology advantages, dependability, life cycle,
costs associated with acquiring and operating the equipment, and reputation.
Approximately 30% of Acrodyne's sales for fiscal 1996 were derived from lower
power applications, 45% were derived from higher power applications, and 25%
were derived from auxiliary products and services. Approximately one-fourth of
Acrodyne's sales for fiscal 1996 were from foreign customers.
The domestic lower power UHF market is dominated by a small number of American
companies. Acrodyne competes with specialty firms of similar size and
resources, such as EMCEE Broadcast Partners, LARCAN-Television Technology Corp.
(TTC) or Information Transmission Systems Corporation (ITS) in this market. The
VHF market represents an insignificant percentage of Acrodyne's sales.
<PAGE>
Unlike the lower power domestic market, the higher power domestic market is
characterized by intense competition from companies that are much larger than
Acrodyne and which possess significantly greater resources. The high power
television transmitter market is currently dominated by larger companies with
older klystron technology or newer inductive output tubes ("IOT"). IOTs are
amplifying devices used in higher power television transmitters, which take
features from tetrode and klystron technology. The higher power transmitter
market is dominated by suppliers such as Comark, a subsidiary of Thomson-CSF
and Harris Corporation (Harris). Both Comark and Harris have access to
significant resources, both financial and otherwise.
The international markets are characterized by intense competition in both the
higher power and lower power segments. For lower power applications,
particularly in the third world and newly developing countries, price
considerations typically are the determining factor. Acrodyne has been very
competitive in this market and a significant portion of Acrodyne's business has
been derived from lower power solid state transmitters sold in these countries.
For higher power applications overseas, Acrodyne's primary competition comes
from companies that are much larger, have significantly greater resources, and
are willing to offer attractive financing terms in order to secure new
business. Acrodyne's major competition in this market comes from Thomson-CSF
(France), Nippon Electric Corporation (Japan), GEC-Marconi Communications
Limited (United Kingdom), and Rohde & Schwarz (Germany). The foregoing foreign
competitors have a dominant market position within their home countries.
Company management does not expect that the Company will be able to compete
with such companies in their respective home countries in the near future.
Harris Corporation, a U.S. company, is also a very strong competitor in most
international markets.
The primary competing technology to Acrodyne's higher power advanced tetrode
tube products are transmitters offering the IOT design. IOTs were developed as
an attempt to improve the linearity and efficiency of klystron tubes. However,
the IOT configuration is significantly more expensive to build. In addition,
another major drawback to IOT-based transmitters is that they are much more
complicated and difficult to service, with the time required to change a tube
averaging about one full day (during which time the transmitter must remain off
the air) whereas an advanced tetrode or diacrode tube can be changed on-site in
about 20 minutes. Company management believes that Acrodyne's advanced tetrode
or diacrode tube transmitter designs are more cost effective than competing
technologies, based upon initial capital expenditures, tube replacement,
maintenance and operating efficiency.
MANUFACTURING
Acrodyne's manufacturing department includes a machine shop, circuit board
assembly, assembly fabrication, wire and cable harness fabrication and final
systems assembly. Acrodyne does not utilize, and is not dependent upon, any
unusual raw materials or processes in the design of its products and, other
than the advanced tetrode tubes supplied by Thomson Components and specialized
transistors supplied by Thomson SGS and Ericsson, purchases from multiple
sources to the maximum extent practical. Acrodyne maintains limited inventory
quantities of materials in excess of its immediate requirements. Major
purchased parts include fabricated printed circuit boards, water cooling pumps
and specialized output filters, output power tubes and cavities and power
transformers.
<PAGE>
A machine shop fabricates heat sinks, metal cabinet parts and specialized
interior mounting panels. Chemical etching of circuit boards and painting of
cabinets is performed by outside suppliers to minimize the potential for
adverse environmental consequences at Acrodyne's facility. Assembly occurs in a
build-to-order job shop environment utilizing standard assembly modules
depending on the frequency and output power level of the transmitter. All
phases of assembly are carried out in a single open area comprising
approximately 15,000 square feet.
The first phase of the assembly process includes placing electronic and
electrical components on two-sided, single layer circuit boards. These circuit
boards are mated with a mechanical structure and are then built into modules.
The modules are assembled into cabinets along with other purchased components,
the electrical harness and, in the case of higher powered units, plumbing for
the water cooled tetrode tubes. Completed television transmitters, which may be
comprised of as many as seven six-foot high cabinets depending on the output
power level, then move from final assembly into system test. It normally takes
eight weeks for a television transmitter to complete the manufacturing cycle
and be ready for shipment. In some cases, customer education and training
sessions are conducted at Acrodyne's facility prior to shipment of a television
transmitter. A service manual is written for each product type sold, a copy of
which is maintained in Acrodyne's reference library.
Quality assurance reports are sent directly to the general manager. Quality
assurance procedures are in place during incoming parts inspection and
throughout the production process. Assemblies are thoroughly tested and
inspected in the manufacturing area for accuracy and workmanship prior to final
assembly and systems testing. Connected utility power is adequate to meet all
current test requirements for high power systems up to 30 kilowatts. After
systems testing, results are verified to be in accordance with specifications.
A final mechanical inspection is performed just prior to shipment. A permanent
record of all test results is maintained for future reference.
Acrodyne provides a limited one year warranty on its products with the
exception of vendor parts which are warranted by their manufacturer.
Testing, Product Support and Field Service
Module and full system testing is performed at the factory by technicians using
highly sophisticated television transmitter test equipment. A technical manual
for each product by serial number accompanies each television transmitter. A
duplicate manual is maintained at the factory to minimize field troubleshooting
time.
Acrodyne's Engineering Department provides technical information necessary to
complete requests for sales quotations, accompanies sales representatives in
visits to customer sites, prepares customer manuals and regularly publishes
promotional oriented articles in trade journals, and presents technical papers
at important conventions and exhibitions.
<PAGE>
PATENTS AND TRADEMARKS
Acrodyne is the owner of United States Patent 4,804,931, entitled Digital
Amplitude Modulator-Transmitter, issued on February 14, 1989, expiring in 2006.
Digital Amplitude Modulation is the process of converting an arbitrary video or
audio signal to successive binary words of sampled equivalent information which
control the presence or absence of power signal sources to synthesize such
information in a high power combiner, such as a television transmitter for
broadcasting the signal. The process offers less distortion and greater power
efficiency than any other method. Five additional patents based on the general
technology of the original patent have also been granted. For a key patent to
DTV and wireless cable, Acrodyne has filed for international patent protection.
Certain additional steps have been taken under the PCT (Patent Cooperation
Treaty) to apply for foreign protection on the other patents.
With the exception of the above-referenced patents, Acrodyne relies on
proprietary know-how and trade secrets and employs various methods to protect
its processes, concepts, ideas and documentation associated with its
proprietary products. However, such methods may not afford complete protection
and there can be no assurance that others will not independently develop such
processes, concepts, ideas and documentation. Although Acrodyne has
confidentiality agreements with all of its employees, there can be no assurance
that such arrangements will adequately protect its trade secrets. Acrodyne does
not use any trademarks in connection with the marketing of its products.
EMPLOYEES
Acrodyne currently employs approximately 95 individuals on a full-time basis,
none of whom are union members. Acrodyne believes it has a good relationship
with its employees.
Item 2. Description of Property
Acrodyne's headquarters and manufacturing facility is located at 516 Township
Line Road in Blue Bell, Pennsylvania, 19422. Its site includes a 30,000 square
foot single story building on approximately ten acres. The facility is rented
under a lease expiring July 31, 2000 and includes a five-year extension option
and the ability to terminate the current lease if a larger facility is needed.
The current rental rate is approximately $6.65 per square foot or $199,320
annually excluding taxes, insurance and maintenance which the Company is
responsible for paying. Total lease expense was $196,560 for the year ended
December 31, 1996.
The Company also operates a machine shop located at 704 Forman Rd, Souderton,
PA 18964. This facility consists of 5,000 square feet of warehouse and
manufacturing space. The facility is rented under a lease that commenced in
November, 1996 and expires in October, 2001. The current rental rate is
approximately $3.50 per square foot or $17,500 annually. Lease expense over
the five year term totals $87,499.80 excluding taxes, insurance and
maintenance.
Company management believes the facilities are sufficient to meet current and
future needs. Included at the Blue Bell facility are all office, engineering,
manufacturing and test operations.
<PAGE>
Item 3. Legal Proceedings
There are no legal proceedings pending to which the Company is party.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth quarter
of fiscal 1996.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
MARKET INFORMATION
Since October 1994 the principal market on which the Company's common stock,
units and warrants are quoted is the NASDAQ Small Cap over-the-counter market
under the symbols ACRO, ACROU and ACROW, respectively.
HOLDERS
As of February 29, 1996, there were 1,080 holders of record of the Company's
Common Stock.
DIVIDENDS
No dividends on the Company's Common Stock were declared during fiscal year
1996.
The Company anticipates that all of its earnings in the foreseeable future will
be retained to finance the growth of its business and does not intend to pay
cash dividends on its Common Stock in the foreseeable future.
The Company paid dividends of $60,661 during fiscal 1996 to the holders of 8%
Convertible Redeemable Preferred Stock as described further in the Liquidity
and Capital Resources section below. The next dividend payment of $19,667 is
expected to be made on April 1, 1997.
PRICE RANGE OF SECURITIES
The following table sets forth the high and low bid prices for shares of the
Company's Common Stock for the periods indicated, as supplied by NASDAQ. These
quotations reflect interdealer prices, without retail mark-up, mark-down or
commissions, and may not necessarily represent actual transactions. There has
been only limited and sporadic trading in the Company's securities.
QUARTER ENDING HIGH LOW
- -------------------------------------------- -------- --------
March 31, 1995.......................................$ 3 1/4 $ 1 7/8
June 30, 1995 .........................................5 1/8 1 7/8
September 30, 1995 ....................................5 3/8 4
December 31, 1995 .....................................4 3/4 4 1/8
March 31, 1996 ........................................5 5/8 3 15/16
June 30, 1996 .........................................7 5/8 5
September 30, 1996 ....................................7 4 1/8
December 31, 1996 .....................................6 7/8 3 5/8
<PAGE>
As of the close of business on March 20, 1997 the high and low bid price for
the Company's Common Stock was $5.125 and $4.625, respectively.
<PAGE>
Item 6. Management Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Acrodyne Communications, Inc.'s (the "Company's") business is conducted through
its sole operating subsidiary Acrodyne Industries, Inc. ("Acrodyne"). The
following discussion compares the Company's actual results for the years ended
December 31, 1996 and 1995.
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
1996 1995
Net Sales...................................$ 10,417,029 $ 10,332,718
Cost of Sales............................... 7,371,857 6,782,113
------------ ------------
Gross Profit........................ 3,045,172 3,550,605
------------ ------------
Operating expenses:
Engineering, research and development...... 807,287 661,979
Selling.................................... 1,359,013 1,018,155
Administration............................. 1,550,686 1,474,784
Amortization:
Goodwill and intangibles................ 156,496 156,496
Noncompete agreement.................... 75,000 75,000
---------- -----------
Total operating expenses.................... 3,948,482 3,386,414
Operating profit (loss)..................... (903,310) 164,191
Other income (expense):
Interest income (expense), net............ (70,845) (185,361)
Other income (expense), net................ (247,255) 30,837
------------ ------------
Net profit (loss)........................... ($1,221,410) $ 9,667
Dividend on 8% Convertible Redeemable
Preferred Stock ( 60,661) -
Net income (loss) applicable to common shares($1,282,071) $ 9,667
Net income (loss) loss per common share ($0.36) -
Weighted average number of 3,558,856 2,444,118
common shares outstanding
<PAGE>
Net sales for the year ended December 31, 1996 increased approximately $84,000
over net sales for the year ended December 31, 1995. Management believes that
sales in the domestic market were short of expectations primarily because of
the broadcasting industry postponed purchase decisions pending a clearer plan
for the emergence of Digital Television. Additionally, international sales
decreased 23% compared to the prior year due to stiffer competition from
competitors with larger financial resources than Acrodyne. Accordingly, in
order to generate sales volume and meet the demands of an increasingly
competitive market, the Company's margin on sales experienced a decrease to 29%
for the year ended December 31, 1996 as compared to approximately 34% for the
year ended December 31, 1995.
Continuing to focus on the Company's strategic plan, total operating
expenses increased approximately 17% over the year ended December 31, 1995.
Engineering expenses increased approximately 22% due to staff additions,
continued re-engineering of the existing product lines to meet the anticipated
demands of the DTV market and development efforts for the MMDS product line.
Selling expenses increased significantly by approximately 33% due to increased
marketing efforts to expand domestic and international networks of agents and
distributors, increased presence in international trade shows, and the addition
of a customer service group.
Interest expense decreased approximately 62% as a result of the Company paying
off several bank and capital lease debts due to a strong operating cash
position. Additionally, interest income increased significantly due to the
investment of cash primarily obtained from the warrant exercise.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Acrodyne has financed its activities primarily from customer
deposits, internally generated funds, and use of its credit facility. At
December 31, 1996, the Company's working capital increased 288% to
approximately $8,236,000 compared to December 31, 1995 primarily due to
proceeds received from the issuance of Common Shares pursuant to the exercise
of warrants and the issuance of Convertible Preferred Stock.
Accounts receivable at December 31, 1996 increased significantly compared to
December 31, 1995 primarily as a result of extended credit terms on more
significant sales of 30 kilowatt and above transmitters. Company credit terms
were changed due to an expanded product line into high power transmitters,
strong financial competition in the high power and international markets and
slower demand due to delayed purchasing decisions as the market anticipates
Digital Television. Sales of transmitters up to 10 kilowatts continue to be
made with credit terms of 30% as a deposit at the time of placing the order,
60% prior to shipment, and 10% net thirty days. The Company continues to
require an irrevocable letter of credit on international orders.
<PAGE>
The significant increase in raw materials and work-in-process inventories at
December 31, 1996 compared to December 31, 1995 is due to the Company's recent
strategy to improve turnaround time to the customer on low power systems to
strengthen market position and meet competitive demands. Raw materials also
increased significantly as a result of the Company obtaining additional
discounts for higher volume purchasing.
The Company and Acrodyne, as co-borrowers, have a $1,200,000 credit facility
with a bank for working capital purposes, of which $500,000 is reserved for an
irrevocable standby letter of credit to partially secure the Senior
Subordinated Note (see below). At December 31, 1996 there was no balance
outstanding under such credit facility. The interest rate on this facility is
based on prime plus 1% and was 9.25% on December 31, 1996. The credit facility
and the standby letter of credit are secured by substantially all the assets of
the Company and Acrodyne and contain certain restrictive covenants. In
October, 1996, the bank amended the credit facility, as it pertains to the
formal Borrowing Base Certificate requirement, to permit borrowing up to
$1,200,000 (less any outstanding Letters of Credit) without being limited by a
formal borrowing formula. At December 31, 1996, there was approximately
$700,000 available to be borrowed by the Company under the credit facility.
The Company is obligated to pay the former majority shareholder of Acrodyne
quarterly installments of principal and interest over a five-year period under
the terms of the Senior Subordinated Note. Interest on such note is
payable at the rate of 9% per annum. Such note is partially secured by the
irrevocable standby letter of credit in the principal amount of $500,000
mentioned above. The first nine quarterly payments totaling $923,726
(including interest) under such note have been made through January 23, 1997
according to the agreement. The next quarterly payment of $84,206 (including
interest) is due on April 23, 1997.
In the three months ended March 31, 1996, the Company privately placed,
pursuant to Rule 505 ("Rule 505") under the Securities Act of 1933, as
amended, an aggregate of 7,900 shares of its then newly created class of
8% Convertible Redeemable Preferred Stock, par value $1.00 per share (the
"8% Preferred Stock") for which the company received aggregate proceeds of
790,000. During the second quarter of 1996, the Company privately placed
pursuant to Rule 505, an additional 2,600 shares of 8% Preferred Stock,
for which the Company received aggregate proceeds of $260,000.
As of March 21, 1997, the Company had approximately $3,326,595 of available
cash and cash equivalents on hand. The significant increase from the December
31, 1995 balance is primarily due to the receipt of proceeds from the issuance
of Common Stock pursuant to the exercise of warrants and units in the year
ended December 31, 1996 yielding proceeds of $6,336,944, net of related
attorney and issuance fees.
Available cash on hand combined with cash flow from operations and available
funds under the line of credit and other financing sources are anticipated to
be sufficient to finance the foreseeable operations and obligations of the
Company through 1997.
Item 7. Financial Statements
See pages 29 to 42 of this report for the financial statements required by this
item.
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There is no information relevant to the Registrant which must be disclosed
under this item.
<PAGE>
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The directors, officers and significant employees of the Company are as
follows:
NAME AGE POSITION
- ---------------------------------- ------ ------------------------------
A. Robert Mancuso....................59 Chairman of the Board and President
of the Company and Acrodyne
Martin J. Hermann....................58 Director, Secretary and General
Counsel
Dr. Elmer M. Lipsey..................72 Director
Daniel D. Traynor....................54 General Manager and Vice President
of Acrodyne and Director of the
Company
Dr. Timothy P. Hulick................54 Vice President-Engineering of
Acrodyne
A. ROBERT MANCUSO has been Chairman of the Board and President of the
Company since its inception in May 1991. Since July 1991, he has been president
of R.M. Hudson Co., Inc., financial consultants for mergers and acquisitions.
From January 1987 to June 1991, he served as vice president of Reichhold
Chemicals, a specialty chemical company. From January 1987 to June 1991, he
also served as president of RBH Dispersions, another specialty chemical
company. From July 1986 to December 1989, he was senior vice president of
Polychrome Corporation, a manufacturer of film and printing plates for the ink
industry, and president and chief executive officer of Polychrome Chemicals, a
specialty chemical manufacturer. Reichhold Chemicals, RBH Dispersions,
Polychrome Corporation and Polychrome Chemicals are owned by Dainippon Ink &
Chemicals, Inc., a Japanese chemical conglomerate. Prior to joining the
Polychrome companies in 1986, he was employed by Union Carbide Corporation for
26 years. Since February 1989, Mr. Mancuso has served on the Board of Directors
of SilentRadio, Inc. (formerly LaSalle Capital Corp.).
MARTIN J. HERMANN has served as a Director, Secretary and General Counsel
of the Company since the Company's inception. Mr. Hermann has been secretary of
SilentRadio, Inc. since February 1991. Mr. Hermann has been engaged in the
private practice of law since 1963.
DR. ELMER M. LIPSEY, has been a Director of the Company since December 24,
1993. Since 1984 he has been the President and Chief Executive Officer of E.M.
Lipsey Associates, Inc., a company which he founded to design and manufacture
digital communications and navigation equipment and systems. Since 1991 he has
been the Chief Scientist and a Director of The LuxCel Group, Inc., a cellular
communications company. He has specific expertise on the propagation of radio
signals, holds several patents, has published numerous scientific and
engineering papers, and was an engineering consultant to the U.S. Air Force and
Navy.
<PAGE>
DANIEL D. TRAYNOR has been employed by Acrodyne since 1970, has been the
Vice President since 1985 and the General Manager since 1990, and has the
responsibility for overall day to day management of Acrodyne, including
supervision of production, sales and marketing. Prior to 1970 he held
engineering management positions with American Electronics Laboratories.
DR. TIMOTHY P. HULICK has been Vice President--Engineering of Acrodyne
since 1985, with responsibility for product concept, design, and development as
well as final test and field service. Dr. Hulick authored Acrodyne's 1989
United States patent for the digital amplitude modulator design concept. Prior
to 1985, Dr. Hulick was director of transmitter products development at the
Broadcast Products Division of Harris Corporation and President of Electronic
Research Corporation.
Directors will serve in such capacity until the next annual meeting of the
stockholders and thereafter or until their successors have been duly elected
and qualified. Executive officers are elected by the Board of Directors on an
annual basis and serve at the discretion of the Board or pursuant to an
employment agreement.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the officers,
Directors and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the NASD. Officers,
Directors and greater than ten-percent shareholders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
such reports they file.
Based solely on a review of the copies of such reports furnished to the
Company, or written representations that no Form 5 was required, the Company
believes that all Section 16(a) filing requirements applicable to its officers,
Directors and greater than ten-percent beneficial owners were complied with
through December 31, 1996.
<PAGE>
Item 10. Executive Compensation
EXECUTIVE COMPENSATION The following table summarizes the compensation
earned by the Company's executive officers, for services provided during fiscal
years 1995-1996.
SUMMARY COMPENSATION TABLE
Name & Principal Position Year Salary Bonus
A. Robert Mancuso
Chairman of the Board and
Chief Executive Officer..........................1996 $150,000
1995 $150,000 $104,000
Daniel Traynor
General Manager and Vice President...............1996 $126,500
1995 $126,500
Dr. Tim Hulick
Vice President--Engineering......................1996 $113,000
1995 $113,000
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR - NONE
(Individual Grants)
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options Options
Name at 12-31-96 at 12-31-96
A. Robert Mancuso Exercisable 237,500 $658,713
Unexercisable 0 $ 0
Daniel Traynor Exercisable 37,500 $ 96,113
Unexercisable 0 $ 0
Timothy Hulick Exercisable 37,500 $ 96,113
Unexercisable 0 $ 0
David Meister* Exercisable 37,500 $ 96,113
Unexercisable 0 $ 0
* Former consulting CFO
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
PRINCIPAL SHAREHOLDERS The following table sets forth information with
respect to the beneficial ownership of shares of Common Stock by (i) each
person known by the Company to be the owner of more than 5% of the outstanding
shares of Common Stock, (ii) each director, and (iii) all directors and
officers as a group:
(1) (2) (3) (4)
Title of Name & Address Amount & Nature Percent of
Class of Beneficial Owner of Beneficial Owner Class
____________ ___________________ ___________________ __________
(a)
Common Stock Daniel Traynor 192,460 shares 4.4%
Common Stock A. Robert Mancuso 292,500 shares(b) 6.4%
Common Stock Martin J. Hermann 43,000 shares 1.0%
Common Stock Dr. Elmer M. Lipsey -0- shares 0%
All officers and directors as a group (6 persons)679,800 shares 14.6%
- ------------------
(a) The address of Messrs. Traynor and Mancuso is c/o the Company, 516 Township
Line Road, Blue Bell, Pennsylvania 19422. The address of Dr. Lipsey is 6719
Wemberly Way, McLean, Virginia 22101. The address of Mr. Hermann is 725 Glen
Cove Avenue, Glen Head, New York 11545.
(b) Includes 237,500 shares of Common Stock issuable upon the exercise of stock
options granted to Mr. Mancuso consisting of (i) 137,500 shares of Common
Stock issuable pursuant to the Company's 1993 Plan of which 100,000 and
37,500 shares vested on October 14, 1995 and June 9, 1996, respectively,
(ii) 100,000 shares of Common Stock issuable pursuant to the terms of his
employment agreement of which 33,333 vested on January 1, 1995 and 1996 and
33,334 vested on January 1, 1997.
Item 12. Certain Relationships and Related Transactions
There is no information relevant to the Registrant which must be disclosed
under this item
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) The following constitutes an Exhibit Index of the applicable Exhibits to
this report:
DESCRIPTION OF EXHIBIT
- -----------------------------------------------------------------------------
3.1* Certificate of Incorporation of Acrodyne Communications, Inc.
3.2* By-Laws of Acrodyne Communications, Inc., as amended to date
3.3* Certificate of Incorporation of Acrodyne Industries, Inc.
3.4* By-Laws of Acrodyne Industries, Inc., as amended to date
3.5 Certificate of Amendment to Certificate of Incorporation of Registrant
Changing its Name from Acrodyne Holdings, Inc. to Acrodyne
Communications, Inc.
3.6 Form of Certificate of Designation Preferences and Relative,
Participating, Optional or Other Special Rights, and Qualifications,
Limitations, Restrictions, of the 8% Convertible Redeemable Preferred
Stock of Acrodyne Communications, Inc.
4.1* Specimen Share Certificate
4.2* Form of Redeemable Common Stock Purchase Warrant
4.3* Form of Unit Certificate
10.1* Stock Acquisition Agreement, dated May 16, 1994, by and among Acrodyne
Holdings, Inc., Marshall Smith and Acrodyne Industries, Inc. (without
exhibits), as amended
10.1A*Amendment No. 3, dated September 21, 1994, to the Stock Acquisition
Agreement, dated May 16, 1994, by and among Acrodyne Holdings, Inc.,
Marshall Smith and Acrodyne Industries, Inc.
10.2* Form of Senior Subordinated Installment Promissory Note
10.3* Hulick and Traynor Stock Contribution Agreement, dated May 16, 1994, by
and among Acrodyne Holdings, Inc., Dr. Timothy Hulick, Daniel Traynor and
Acrodyne Industries, Inc. (without exhibits), as amended
10.3A*Amendment No. 2, dated September 21, 1994, to the Hulick and Traynor
Stock Contribution Agreement, dated May 16, 1994, by and among Acrodyne
Holdings, Inc., Dr. Timothy Hulick, Daniel Traynor and Acrodyne
Industries, Inc.
10.4* Minority Shareholders' Stock Contribution Agreement, dated May 16, 1994,
by and among Acrodyne Holdings, Inc. and certain minority shareholders of
Acrodyne Industries, Inc. (without exhibits), as amended
10.4A*Amendment No. 2, dated September 21, 1994, to the Minority Shareholders'
Stock Contribution Agreement, dated May 16, 1994, by and among Acrodyne
Holdings, Inc. and certain minority shareholders of Acrodyne Industries,
Inc.
10.5* Form of Non-Compete Agreement by and among the Company and Marshall
Smith
10.6* Form of Consulting Agreement by and among the Company and Marshall Smith
10.7* Form of Promissory Note
10.8* Form of Mancuso Employment Agreement
10.9* Form of Hulick Employment Agreement
<PAGE>
10.10*Form of Traynor Employment Agreement
10.11*1993 Stock Option Plan of the Company
10.12*Form of Warrant Agreement
10.13*Confirmation Letter, dated September 13, 1994, from CoreStates Bank, N.A.
regarding a line of credit of up to $1,200,000
10.14*Financial Advisory Agreement, dated as of September 14, 1993, by and
between Alchemy Capital Corp. and Acrodyne Holdings, Inc., as amended to
date.
10.15** Financial consulting agreement dated July 1, 1995 between the Company
and Colin Winthrop & Co., Inc. and form of warrant given to Colin
Winthrop & Co., Inc.
10.16** Financial consulting agreement dated January 1, 1996 between the Company
and Colin Winthrop & Co., Inc. and form of warrant given to Colin
Winthrop & Co.,Inc.
10.17 Form of Subscription Agreement, dated March 29, 1996, between Acrodyne
Communications, Inc. and (i) Furst Associates and (ii) Eagle Partners.
10.18 Form of Subscription Agreement, dated May 7, 1996, between Acrodyne
Communications, Inc. and (i) FM Partners and (ii) Dynamic Value
Partners.
21.0 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27.0 Financial Data Schedule
- ------------------
* Incorporated by reference to the Form SB-2 filed by the Registrant (file
number 0-24886) with the U.S. Securities and Exchange Commission ("SEC") on
October 11, 1994.
** Incorporated by reference to the Form 10-KSB filed by the Registrant (file
number 0-24886) with the SEC for its fiscal year ended December 31, 1995.
(b) Form 8-K filings: The Registrant did not file a Form 8-K during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Acrodyne Communications, Inc.
(Registrant)
By \s\ A. Robert Mancuso
---------------------
By \s\
---------------------
Date
---------------------
In accordance with the Exchange Act, this report has been signed
below by the following persons on and behalf of the registrant and in the
capacities and on the dates indicated.
By \s\ Daniel D. Traynor
-----------------------------
Daniel D. Traynor
Date
-----------------------------
By \s\ Martin J. Hermann
-----------------------------
Martin J. Hermann, Director
Date
-----------------------------
By \s\ Dr. Elmer M. Lipsey
-----------------------------
Dr. Elmer M. Lipsey, Director
Date
-----------------------------
<PAGE>
Acrodyne Communications, Inc.
Consolidated Financial Statements
December 31, 1996
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Acrodyne Communications, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Acrodyne Communications, Inc. and its subsidiary at December 31, 1996 and 1995,
and the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Philadelphia, PA
March 18, 1997
<PAGE>
<PAGE>
Acrodyne Communications, Inc.
Consolidated Balance Sheet
December 31, 1996 and 1995
1996 1995
Assets
Current assets:
Cash and cash equivalents $ 3,921,544 $ 918,747
Accounts receivable, net of
allowance for doubtful accounts
of $24,327 at December 31, 1996 and 1995 2,157,108 1,150,000
Inventories 4,487,887 2,323,787
Prepaid expenses and deposits 63,957 91,470
------------ ------------
Total current assets 10,630,496 4,484,004
Property and equipment, net 574,311 455,023
Note receivable 79,935 73,905
Non-compete agreement, net 585,822 660,822
Goodwill, net 4,368,698 4,525,194
----------- ------------
Total assets $16,239,262 $10,198,948
=========== ============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 336,147 $ 386,660
Borrowings under line of credit 200,000
Accounts payable 1,425,149 1,180,811
Accrued expenses 383,822 439,863
Customer advances 249,266 155,736
---------- -----------
Total current liabilities 2,394,384 2,363,070
Long-term debt 573,406 912,761
Non-compete liability 731,834 732,220
----------- -----------
Total liabilities 3,699,624 4,008,051
----------- -----------
Commitments and contingencies (Notes 7 and 12)
Shareholders' equity:
Preferred stock, par value $1.00;
1,000,000 shares authorized, 10,500
shares issued and outstanding 10,500
Common stock, par value $.01; 10,000,000
shares authorized, 4,384,270 and
2,560,530 shares issued and outstanding
in 1996 and 1995, respectively 43,843 25,606
Additional paid-in capital 14,712,655 7,110,580
Accumulated deficit (2,227,360) (945,289)
----------- ------------
12,539,638 6,190,897
Total liabilities and shareholders' ----------- ------------
equity $ 16,239,262 $10,198,948
=========== ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
Acrodyne Communications, Inc.
Consolidated Statement of Operations
For the Years Ended December 31, 1996 and 1995
1996 1995
Net sales $10,417,029 $10,332,718
Cost of sales 7,371,857 6,782,113
----------- -----------
Gross profit 3,045,172 3,550,605
Operating expenses: ----------- -----------
Engineering, research and development 807,287 661,979
Selling 1,359,013 1,018,155
Administration 1,550,686 1,474,784
Amortization 231,496 231,496
----------- -----------
Total operating expenses 3,948,482 3,386,414
----------- -----------
Operating income (loss) (903,310) 164,191
Other income (expense):
Interest expense, net (70,845) (185,361)
Other income (expense), net (See Note 9) (247,255) 30,837
----------- -----------
Income (loss) before income tax benefit (1,221,410) 9,667
Income tax benefit - -
----------- -----------
Net income (loss) $(1,221,410) $ 9,667
=========== ===========
Dividend on 8% Convertible Redeemable
Preferred Stock (60,661) -
----------- -----------
Net income (loss) available to common shares (1,282,071) 9,667
=========== ===========
Net income (loss) per share $ (0.36) $ -
=========== ===========
Weighted average common shares outstanding 3,558,856 2,444,118
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Acrodyne Communications, Inc.
Consolidated Statement of Shareholders' Equity
For the Years Ended December 31, 1996 and 1995
<CAPTION>
Add'l
Preferred Stock Common Stock paid-in Accum. Shareholders'
Shares Amount Shares Amount capital deficit equity
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1994 2,385,280 $23,853 $6,432,291 $(954,956) $5,501,188
Issuance of warrants
for services 50,000 50,000
Issuance of shares in
connection with warrant
exercise 175,250 1,753 611,623 613,376
Stock option accrual 16,666 16,666
Net income 9,667 9,667
-------- -------- --------- ------- --------- -------- ----------
December 31, 1995 2,560,530 25,606 7,110,580 (945,289) 6,190,897
Issuance of warrants for
services 250,000 250,000
Issuance of shares in
connection with warrant
exercise 1,695,040 16,950 5,835,898 5,852,848
Issuance of shares in
connection with
underwriters option 128,700 1,287 482,809 484,096
Issuance of preferred
shares 10,500 $10,500 1,016,702 1,027,202
Stock option accrual 16,666 16,666
Dividends paid on preferred
stock (60,661) (60,661)
Net loss (1,221,410) (1,221,410)
------ ------- --------- ------- ----------- ---------- -----------
December 31, 1996 10,500 $10,500 4,384,270 $43,843 $14,712,655 $(2,227,360) $12,539,638
====== ======= ========= ======= =========== ============ ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
Acrodyne Communications, Inc.
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net income (loss) $(1,221,410) $ 9,667
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 339,508 289,327
Stock option accrual 16,666 16,666
Issuance of warrants for services 250,000 50,000
Changes in assets and liabilities:
Accounts receivable (1,007,108) (876,386)
Inventories (2,164,100) (365,241)
Note receivable (6,030) (6,017)
Prepaids and deposits 27,513 (57,165)
Accounts payable 244,338 608,808
Accrued expenses (56,041) 219,400
Customer advances 93,530 (629,867)
---------- ---------
Net cash used in operating activities (3,483,134) (740,808)
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment (227,695) (94,913)
---------- ---------
Net cash used in investing activities (227,695) (94,913)
---------- ---------
Cash flows from financing activities:
Proceeds from the issuance of common stock,
net 484,096 613,376
Proceeds from issuance of preferred stock,
net 1,027,202
Proceeds from warrant exercise, net 5,852,848
Payments on promissory notes (270,000) (387,041)
Net borrowings (repayments) under line
of credit (200,000) 200,000
Capital lease repayments (95,015) (45,674)
Repayments on other borrowings and
non-compete liability (24,844) (26,724)
Dividends to stockholders (60,661) _______
--------- ---------
Net cash flows provided by
financing activities 6,713,626 353,937
--------- ---------
Net (decrease) increase in cash and
cash equivalents 3,002,797 (481,784)
Cash and cash equivalents at beginning of year 918,747 1,400,531
--------- -----------
Cash and cash equivalents at end of year $ 3,921,544 $ 918,747
========= ===========
Supplemental cash flow information:
Cash paid for interest $ 211,454 $ 231,250
Disclosure of non-cash financing and investing activities:
Acquisition of property and equipment by assumption of capital leases of
$213,011 during the year ended December 31, 1995.
The accompanying notes are an integral part of these financial statements.
<PAGE>
1. Business and Organization
Organization
Acrodyne Holdings, Inc. (the "Company"), a Delaware corporation, was formed
in May 1991 for the purpose of acquiring an operating company. During 1995,
the Company changed its name to Acrodyne Communications, Inc.
On May 16, 1994, the Company entered into agreements to acquire all of the
outstanding stock of Acrodyne Industries, Inc., a company engaged in the
manufacture and sale of TV transmitters, LPTV transmitters and TV
translators, which are produced to customer specification. The Acrodyne
Acquisition was consummated on October 24, 1994 with proceeds obtained from
a public offering (see Note 8).
2. Summary of Significant Accounting Policies
The following summarizes the significant accounting policies employed by the
Company in preparation of its financial statements:
Consolidation
The financial statements include the accounts of the Company and its wholly-
owned subsidiary, Acrodyne Industries, Inc. All significant intercompany
transactions and balances are eliminated in consolidation.
Cash and cash equivalents
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. Cash and cash equivalents
amounted to $3,875,952 and $986,073 at December 31, 1996 and 1995,
respectively.
Inventory
Inventory is valued at the lower of cost (first-in, first-out) or market.
Property and equipment
Property and equipment are carried at cost. The cost of additions and
improvements are capitalized, while maintenance and repairs are charged to
operations when incurred. Depreciation is recorded using the straight-line
method over the estimated useful lives of the assets (three to seven years).
Leasehold improvements are amortized over the shorter of their useful lives
or the remaining lease terms. Capital leases are depreciated over their
useful lives or lease term, as applicable.
Customer advances
Customer deposits received prior to completion of the contract between the
Company and its customers are recorded as a liability.
<PAGE>
Revenue recognition and accounts receivable
The Company recognizes revenue from the sale of transmitters when title and
risks of ownership are transferred to the customer, which generally is upon
shipment or customer pick-up. A customer may be invoiced for and receive
title to transmitters prior to taking physical possession when the customer
has made a fixed, written commitment to purchase, the transmitters have been
completed and are available for pick-up or delivery, and the customer has
requested the Company to hold the transmitters until the customer determines
the most economical means of taking physical possession. Upon such a
request, the Company has no further obligation except to segregate the
transmitters, invoice them under normal billing and credit terms, and hold
them for a short period of time as is customary in the industry, until pick-
up or delivery. Transmitters are built to customer specification and no
right of return or exchange privileges are granted. Accordingly, no
provision for sales allowances or returns is recorded.
Income taxes
The provision for income taxes is determined in accordance with Statement of
Financial Accounting Standards No. 109 (FAS 109). FAS 109 uses the asset and
liability approach which recognizes deferred tax assets and liabilities for
the expected future tax consequences attributable to the differences between
the recorded amounts of assets and liabilities in the financial statements
and their respective tax bases.
Concentration of credit risk
The Company's customers are primarily domestic and international television
stations, broadcasters, government entities, not-for-profit organizations
and educational institutions. International sales approximated $2,503,000
and $3,265,000 for the years ended December 31, 1996 and 1995, respectively.
No individual customer represented more than 10% of sales in either 1996 or
1995.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make reasonable
estimates and assumptions, based upon all known facts and circumstances,
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.
Research and development
Research and development expenditures related to the design and development
of new products are expensed as incurred and as such are included in
engineering, research and development in the accompanying financial
statements. Research and development costs, which approximated $133,000 and
$65,000, during the years ended December 31, 1996 and 1995, respectively,
were charged to expense.
<PAGE>
Earnings per share
Earnings per share are based on the weighted average number of common and
common equivalent shares outstanding during the period.
3. Inventories
Inventories comprise:
December 31,
1996 1995
Raw materials $ 2,824,652 $ 1,590,022
Work in process 1,416,644 591,320
Finished goods 246,591 142,445
----------- -----------
$ 4,487,887 $ 2,323,787
4. Property and Equipment
Property and equipment consists of:
December 31,
1996 1995
Test equipment $ 467,138 $ 384,230
Machinery and equipment 29,046 19,537
Office equipment 135,224 26,696
Automobile 11,043 11,043
Leasehold improvements 76,205 76,205
Computer software 7,328 7,328
--------- ---------
725,984 525,039
Less: Accumulated depreciation
and amortization (151,673) (70,016)
--------- ---------
$ 574,311 $ 455,023
========= =========
Depreciation and amortization expense amounted to $108,012 and $57,831 for the
years ended December 31, 1996 and 1995, respectively.
Property and equipment at December 31, 1996 and 1995 includes assets (primarily
test equipment) under capital leases of $180,509 and $280,779, net of
accumulated amortization of $64,411 and $23,852 at December 31, 1996 and 1995,
respectively. Amortization expense related to these assets was $34,392 and
$19,164 for the years ended December 31, 1996 and 1995, respectively.
<PAGE>
5. Non-Compete Agreement
Simultaneously with the Acrodyne Acquisition, the Company and the former
majority shareholder entered into a non-compete agreement. In consideration for
this agreement not to compete, the Company is obligated to make annual payments
to this former shareholder equal to $65,000 and provide certain benefits at no
cost to him for the remainder of his life. The Company recorded the estimated
actuarial present value of $750,000 related to this agreement as an asset and
established a corresponding liability.
The non-compete agreement is being amortized on a straight-line basis over a
ten-year period. Approximately $75,000 of amortization was charged to expense
during each of the years ended December 31, 1996 and 1995.
6. Goodwill
The Company recorded goodwill totaling $4,711,274, representing the excess of
purchase cost over the fair value of net assets acquired of Acrodyne
Industries, Inc. Goodwill is being amortized on a straight line basis over 30
years. Amortization charged to expense during the years ended December 31, 1996
and 1995 amounted to $156,496. The Company periodically reviews goodwill to
assess recoverability through a non-discounted cash flow analysis and any
perceived impairment would be charged to operations in the period in which such
impairment becomes evident.
7. Debt
Long-term debt consists of the following:
December 31,
1996 1995
Senior Subordinated Installment
Promissory Note $ 810,000 $ 1,080,000
Capital lease obligations 99,553 194,577
Promissory Notes 24,844
--------- -----------
909,553 1,299,421
Less: Current portion (336,147) (386,660)
--------- -----------
$ 573,406 $ 912,761
========= ===========
Pursuant to the Acrodyne Acquisition agreement, the Company issued promissory
notes to both the former majority shareholder and the former minority
shareholders, totaling $1,450,000 and $41,885, respectively.
<PAGE>
The Senior Subordinated Installment Promissory Note payable to the former
majority shareholder bears interest at 9% and is payable in 20 unequal
quarterly installments of principal and interest, commencing January 1995. As
partial security for payment of this note, the Company has issued a $500,000
irrevocable standby letter of credit in favor of the former majority
shareholder.
The Promissory Notes payable to the former minority shareholders bear interest
at 10% and were paid in 2 equal installments of principal and interest due
on October 24, 1995 and 1996.
Principal payments on long-term debt are as follows:
1997 $ 336,147
1998 299,369
1999 274,037
---------
$ 909,553
=========
The Company also has a $1,200,000 line of credit facility with a bank. This
facility provides for interest at prime plus 1.0% (9.25% at December 31, 1996)
and is payable on demand. Availability has been reduced by the value of the
irrevocable standby letter of credit issued as partial security on the Senior
Subordinated Installment Promissory Note. Amounts outstanding under the
facility were $0 and $200,000 at December 31, 1996 and 1995, respectively.
The fair value of the Company's debt, estimated based upon prevailing interest
rates, approximates its carrying value.
8. Shareholders' Equity
Preferred stock
Preferred stock consists of 1,000,000 shares, par value $1 per share, which may
be issued in series from time to time with such designation, rights,
preferences and limitations as the Board of Directors of the Company may
determine by resolution. Any and all such rights that may be granted to
preferred stockholders may be in preference to common stockholders.
During 1996, the Company sold 10,500 shares of 8% Convertible Redeemable
Preferred Stock (the "8% Preferred Stock") in a private placement. Proceeds
from this sale, net of related expenses, were $1,027,202. The 8% Preferred
Stock has a liquidation preference of $100 per share plus all outstanding and
unpaid dividends and is redeemable at the discretion of the Company for the
amount of the liquidation value after one year from issuance date provided
certain stipulations are met. The 8% Preferred Stock is convertible into the
number of common shares obtained by dividing the liquidation value by the $4.00
per share conversion price subject to adjustment at the option of the holder.
Holders of the 8% Preferred Stock vote, on a fully converted basis, together
with the holders of common stock and, in the event of certain dividend
arrearages, have the right to elect a director to the Company Board.
<PAGE>
Common stock
On October 24, 1994, the Company completed a public offering of 1,495,000 units
consisting of one share of common stock and one redeemable common stock
purchase warrant. The proceeds of this offering were utilized principally to
finance the acquisition of Acrodyne Industries, Inc. and to repay bank
indebtedness of the acquired company. In connection with the public offering,
the Company sold to the underwriter, GKN Securities Corp. ("GKN") for nominal
consideration the right to purchase up to an aggregate of 130,000 units at an
exercise price of $3.85 per unit. The units issuable upon exercise of
the unit purchase option are identical to those issued in the public offering.
This unit purchase option is exercisable for a period of four years beginning
one year from the date of the offering. In July 1996, the underwriter purchased
128,700 units yielding net proceed of $484,096 and subsequently exercised the
attached warrants.
Each warrant entitled the holder to purchase one share of common stock for
$3.50 per share during a four-year period commencing one year after the date of
this offering. The warrant agreement allowed the Company to redeem the
warrants if the stock traded above $6 for 20 consecutive trading days. As of
December 31, 1995, 250 additional shares of common stock were issued as a
result of the exercise of warrants. In 1996, the Company exercised its
redemption right and the remaining warrants, including warrants described in
Note 9, were exercised yielding net proceeds of $5,852,848.
9. Stock Options and Warrants
Stock options
In December 1993, the Company adopted the 1993 Stock Option Plan. A total of
250,000 shares of common stock may be subject to options granted under the 1993
Plan. The options may be incentive stock options or non-qualified stock
options. The maximum term of each option under the 1993 Plan is 10 years. The
President of the Company has also been granted an option to purchase an
additional 100,000 shares of common stock at an exercise price of $3.00 per
share pursuant to his employment agreement. Compensation expense relative to
these options is being charged over the term of the agreement.
The exercise price of each option is as follows:
Total Exercise Vested Vested
Shares Price Shares Dates
October 14, 1994 100,000 $3.50 100,000 10/14/95
(Employment agreement -
President)
October 24, 1994 100,000 $3.00 33,333 01/01/95
33,333 01/01/96
33,334 01/01/97
June 9, 1995 150,000 $3.50 150,000 06/09/96
<PAGE>
The Company applies APB Opinion 25 and related interpretations in accounting
for its plan. Through the year ended December 31, 1996, $37,481 has been
recorded as compensation expense related to these options. For all other
options granted, no compensation cost has been recognized for its stock option
plan. Had compensation cost for the Company's stock-based compensation
plan been determined based on the fair value at the grant date for awards under
that plan consistent with the method of FASB Statement 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
December 31,
1996 1995
Net income:
As reported $(1,282,071) $ 9,667
Pro forma (1,402,031) (289,019)
EPS:
As reported (0.36) -
Pro forma (0.39) (0.12)
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in both 1996 and 1995: expected volatility of 61%, weighted average
risk-free interest rate of 7.05% and expected life of 5 years.
A summary of the Company's stock option plan as of December 31, 1996 and 1995
and changes during the years ending on those dates is presented below:
December 31, 1996 December 31, 1995
Weighted Weighted
Shares Average Price Shares Average Price
Outstanding at
beginning of year 350,000 3.36 200,000 3.25
Granted - 150,000 3.50
Exercised - -
Forfeited - -
-------- --------
Outstanding at
end of year 350,000 3.36 350,000 3.36
======== ========
Options exercisable
at year end 316,666 133,333
Weighted average
fair value of
options granted
during the year - 1.92
<PAGE>
Warrants
On January 13, 1993, the Company completed its initial public offering. In
connection with this offering, the underwriter received a warrant to purchase
up to 16,120 shares of common stock at $6.30 per share for a three-year period
which commenced on September 1, 1993. The exercise period was extended to
December 31, 1997. No warrants were exercised.
In connection with the Acrodyne Acquisition, the Company sold to the former
majority shareholder warrants to purchase up to 50,000 shares of common stock
at an exercise price of $3.00 per share. These warrants are exercisable
during a period 18 months subsequent, but no later than five years, from the
date of the Acquisition. As of December 31, 1996, no warrants have been
exercised.
In consideration for advisory service related to the Acrodyne Acquisition, the
Company sold warrants to purchase 170,000 shares of common stock at an exercise
price of $3.00 per share on October 24, 1994. As of December 31, 1996, no
warrants have been exercised.
The Company granted warrants to purchase 250,000 shares of common stock at an
exercise price of $3.50 per share during 1995 in conjunction with a financial
advisory agreement. The warrants were valued at $50,000. During the years ended
December 31, 1996 and 1995, 75,000 and 175,000, respectively, of these warrants
were exercised.
During 1996, the Comany paid $125,200 and issued an aggregate of 465,000
warrants to a financial consulting firm for advisory services performed during
the year. The warrants are exercisable over a three year period at prices
ranging from 4.00 to 5.00. The common stock underlying these warrants has not
been registered. In the fourth quarter, the Comany charged $250,000 to other
expenses in connection with these warrant issuances.
On May 24, 1996, the Company entered into an agreement with GKN to issue to GKN
and its designees certain warrants to purchase an aggregate of 200,000 shares
of the Company's common shares at $6.00 per share in consideration of GKN
waiving solicitation rights and costs as indicated in the underwriting
agreement, dated October 14, 1994. No warrants have been exercised as of
December 31, 1996.
10. Income Taxes
The provision for income taxes differs from the amount computed using the
federal income tax rate as follows:
Year Ended
December 31,
1996 1995
Income tax at statutory federal rate $(415,279) $ 3,000
Permanent differences (30,344) 63,000
Change in valuation allowance 445,623 45,000
Utilization of net operating loss
carryforwards - (111,000)
---------- ---------
Effective tax amount $ - $ -
========== =========
<PAGE>
The components of the net deferred income tax asset (liability) are as follows:
December 31,
1996 1995
Tax loss carryforwards and
miscellaneous accruals $560,763 $ 93,000
-------- --------
Deferred tax asset 560,763 93,000
Valuation allowance (527,623) (82,000)
-------- --------
Net deferred tax asset 33,140 11,000
-------- --------
Deferred tax liability (33,140) (11,000)
-------- --------
$ - $ -
======== ========
11. Note Receivable
The Company has a note receivable outstanding from the former majority
shareholder in the amount of $66,850 plus accrued interest of $13,071 as of
December 31, 1996. This note bears interest at 9% and is repayable in full
(including all accrued interest) upon full satisfaction of amounts due to this
former majority shareholder under the Senior Subordinated Installment
Promissory Note issued in connection with the Acrodyne Acquisition (see Note
7.)
12. Commitments and Contingencies
The Company has an operating lease for its manufacturing facility and office
space which expires July 31, 2000 and includes a five-year extension option as
well as an option to terminate the current lease if a larger facility is
needed. Rental expense was approximately $196,560 and $193,800 for the years
ended December 31, 1996 and 1995, respectively.
The Company also leases certain test equipment under capital leases. These
leases are secured by the related equipment. Future minimum lease payments
under noncancelable leases are as follows:
Operating Capital
Fiscal year leases leases
1997 $ 216,820 $ 76,994
1998 216,820 31,818
1999 216,820 4,212
2000 117,160 -
2001 14,583 -
--------- --------
$ 782,203 113,024
Less: interest portion (13,471)
--------
Present value of capital lease obligations $ 99,553
========
The Company is involved in several claims in the ordinary course of business.
Management believes the resolution of these outstanding claims will not have a
material impact on its financial position, results of operations or cash flows.
13. Subsequent Events
On February 28, 1997, 2,000 shares of the Company's 8% Preferred Stock was
converted into 50,000 shares of common stock in accordance with the conversion
provisions described in Note 8.
Exhibit 3.5
State of Delaware
Office of the Secretary of State
I, Edward J. Freel, Secretary of State of the State of Delaware, do hereby
certify the attached is a true and correct copy of the Certificate of Amendment
of "Acrodyne Holdings, Inc.", changing its name from "Acrodyne Holdings, Inc."
to "Acrodyne Communications, Inc.", filed in this office on the thirteenth
day of June, A.D. 1995 at 4 o'clock P.M.
Edward J. Freel, Secretary of State
Authentication: 7931734
Date: 05-02-96
Exhibit 3.6
CERTIFICATE OF DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS, OF THE
8% CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF ACRODYNE COMMUNICATIONS, INC.
__________________
(Under Section 151 of the Delaware General Corporation Law)
__________________
We, A. Robert Mancuso, Chairman of the Board and President,
and Martin J. Hermann, Secretary, of Acrodyne Communications,
Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 151
of the General Corporation Law of the State of Delaware, DO
HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation of said
Corporation which was filed in the office of the Secretary of
State of the State of Delaware on May 3, 1991, said Board of
Directors, acting by unanimous written consent, adopted a
resolution providing for the authorization of a series of
Preferred Stock consisting of 25,000 shares designated 8%
Convertible Redeemable Preferred Stock, which resolution is as
follows:
"RESOLVED that, pursuant to Article FOURTH of the
Certificate of Incorporation of the Corporation, there be and
hereby is authorized and created a series of Preferred Stock,
hereby designated as the 8% Convertible Redeemable Preferred
Stock, to consist of up to 25,000 shares, par value of $1.00 per
share, having the designations, preferences and relative,
participating, optional and other special rights,
qualifications, limitations and restrictions as hereinafter set
forth:
I. Designation. The designation of the series of
Preferred Stock created hereby is 8% Convertible Redeemable
Preferred Stock and the number of shares constituting such
series is 25,000 (the "Preferred Stock").
2. Rank. The Preferred Stock shall, with respect to
dividend rights, rights on redemption and rights on liquidation,
winding up and dissolution, rank prior to all classes of Common
Stock of the Corporation and to each other class of capital
stock or series of preferred stock of the Corporation hereafter
created which does not expressly provide that it ranks senior to
or on a parity with the Preferred Stock. All of such equity
securities of the Corporation to which the Preferred Stock ranks
<PAGE>
prior are collectively referred to herein as the "Junior Stock."
The Preferred Stock shall, with respect to dividend rights,
rights on redemption and rights on liquidation, winding up and
dissolution, rank on a parity with any class of capital stock or
series of preferred stock of the Corporation hereafter created
which expressly provides that it ranks on a parity with the
Preferred Stock. All of such equity securities of the
Corporation with which the Preferred Stock ranks on a parity are
collectively referred to herein as the "Parity Stock." The
Preferred Stock shall, with respect to dividend rights, rights
on redemption and rights on liquidation, winding up and
dissolution, rank junior to each class of capital stock or
series of preferred stock of the Corporation hereafter created
which expressly provides that it ranks senior to the Preferred
Stock. All of such equity securities of the Corporation to
which the Preferred Stock ranks junior are collectively referred
to herein as the "Senior Stock."
3. Dividends.
(i) The holders of Preferred Stock shall be entitled
to receive in preference to the holders of any Junior
Stock, when, as and if declared by the Board of Directors,
out of funds legally available for the payment thereof,
dividends at the annual rate of 8% of Liquidation Value (as
defined below). Such dividends shall be cumulative, shall
accumulate (whether or not declared) from March 29, 1996
(the "Issue Date") and shall be payable on the last day of
each calendar quarter (each such date being a "dividend
payment date" and each such quarterly period being a
"dividend period"), commencing June 30, 1996. The dividend
amount payable in respect of each share of Preferred Stock
on each dividend payment date (the "Dividend Amount") shall
be computed by multiplying the applicable annual percentage
rate set forth above by a fraction the numerator of which
shall be the number of days in the applicable dividend
period and the denominator of which shall be 365 and
multiplying the amount so obtained by the Liquidation
Value.
(ii) All dividends paid with respect to shares of the
Preferred Stock pursuant to paragraph 3(i) hereof shall be
paid pro rata to the holders entitled thereto.
(iii) Holders of shares of the Preferred Stock shall
be entitled to receive the dividends provided for in
paragraph 3(i) hereof in preference to and in priority over
any dividends upon any of the Junior Stock.
(iv) Each fractional share of Preferred Stock
outstanding (if any) shall be entitled to a ratably
proportionate amount of all dividends accruing with respect
to each outstanding share of Preferred Stock pursuant to
paragraph 3(i) hereof.
4. Liquidation Preference. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, the holders of shares of Preferred
Stock then outstanding shall be entitled to be paid out of the
assets of the Corporation available for distribution to its
stockholders an amount equal to $100.00 for each share of
Preferred Stock outstanding (such amount, as it may be adjusted
<PAGE>
from time to time to give effect to any stock splits or
combinations, recapitalizations or other similar events, the
"Liquidation Value") plus an amount equal to all accumulated but
unpaid dividends thereon to the date fixed for the liquidation,
dissolution or winding up, before any payment shall be made or
any assets distributed to the holders of any of the Junior
Stock. Except as provided in the preceding sentence, holders of
Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs
of the Corporation. If the assets of the Corporation are not
sufficient to pay in full the liquidation payments payable to
the holders of outstanding shares of Preferred Stock and any
shares of Parity Stock, then the holders of all such shares
shall share ratably in accordance with the respective amounts to
which the holders of outstanding shares of Preferred Stock and
any Parity Stock would be entitled if all amounts payable
thereon were paid in full.
The liquidation payment with respect to each outstanding
fractional share of Preferred Stock (if any) shall be equal to a
ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Preferred Stock.
5. Redemption. After the first anniversary of the Issue
Date, the Preferred Stock shall be redeemable, at the option of
the Corporation, in whole but not in part, at any time, at a per
share redemption price equal to the Liquidation Value thereof,
plus an amount equal to all accumulated but unpaid dividends
thereon to the date fixed for redemption, provided that (i) the
"Current Market Price" (as defined in Section 8.2 below) shall
have been at least $6.00 per share for the period of 20
consecutive trading days ending on the third day preceding the
date of mailing of notice of redemption and (ii) the Corporation
shall have registered with the Securities and Exchange
Commission under the Securities Act of 1933 any shares of its
Common Stock, $.01 par value (the "Common Stock") into which the
Preferred Stock is convertible, the holders of which have
requested such registration to permit sale or other disposition
of such Common Stock by such holders.
In the event the Corporation shall redeem shares of
Preferred Stock, the following procedures shall apply:
(i) Notice of redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 days
nor more than 60 days prior to the date on which shares of
the Preferred Stock are to be redeemed (any such date, a
"redemption date"), to all holders of record of the shares
to be redeemed at such holder's address as the same appears
on the stock register of the Corporation. Each such notice
shall state: (a) the redemption date; (b) the redemption
price; and (c) the place or places where certificates for
such shares are to be surrendered for payment of the
redemption price.
(ii) Notice having been mailed as aforesaid, from and
after the redemption date (unless default shall be made by
the Corporation in providing money for the payment of the
redemption price of the shares called for redemption) said
shares shall no longer be deemed to be outstanding and
shall have the status of authorized but unissued shares of
Preferred Stock, and shall not be reissued as shares of
Preferred Stock, and all rights of the holders thereof as
<PAGE>
stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall
cease. Upon surrender in accordance with said notice of
the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the
notice shall so state), such shares shall be redeemed by
the Corporation at the redemption price aforesaid.
6. Conversion.
6.1 Each share of the Preferred Stock shall be
convertible at the option of the holder thereof, at any
time, into fully paid and non-assessable shares of Common
Stock at the conversion price of $4.00 per share of Common
Stock, subject to adjustment pursuant to Section 6.7 below
(as the same may be adjusted from time to time, the
"Conversion Price"). The number of shares of Common Stock
issuable upon conversion of a share of Preferred Stock
shall be equal to the quotient of the Liquidation Value
divided by the Conversion Price at the time in effect.
6.2 The shares of Common Stock deliverable upon
conversion of shares of Preferred Stock shall be Common
Stock as constituted at the date of conversion.
6.3 Before any holder of Preferred Stock shall be
entitled to convert the same into Common Stock, such holder
shall exercise its option to convert by surrendering the
certificate or certificates for such shares of Preferred
Stock at the office of the Corporation (or such office or
agency of the Corporation as it may reasonably designate),
which certificate or certificates, if the Corporation shall
so request, shall be duly endorsed to the Corporation or in
blank, or accompanied by proper instruments of transfer to
the Corporation or in blank, and shall give written notice
to the Corporation that such holder elects so to convert
such shares of Preferred Stock, and by stating in writing
therein the name or names in which such holder wishes the
certificate or certificates for Common Stock to be issued.
Every such notice of election to convert shall be effective
on the date completed and shall constitute a contract
between the holder of such shares of Preferred Stock and
the Corporation, whereby such holder shall be deemed to
subscribe for the amount of Common Stock which such holder
shall be entitled to receive upon such conversion, and, in
satisfaction of such subscription, to deposit the shares of
Preferred Stock to be converted and to release the
Corporation from all liability thereunder (except to
deliver the shares deliverable upon conversion thereof),
and thereby the Corporation shall be deemed to agree that
the amount paid to it for such shares of Preferred Stock,
together with the surrender of the certificate or
certificates therefor and the extinguishment of liability
thereof (except as aforesaid), shall constitute full
payment of such subscription for Common Stock to be
delivered upon such conversion.
6.4 The Corporation will, as soon as practicable
after such deposit of certificates for the Preferred Stock
accompanied by the written notice and the statement above
<PAGE>
prescribed, deliver at said office to the holder for whose
account such shares of Preferred Stock were so surrendered,
or to such holder's nominee or nominees, certificates for
the number of full shares of Common Stock to which such
holder shall be entitled as aforesaid, together with a cash
adjustment of any fraction of a share as hereinafter
provided, if not evenly convertible. Subject to the
following provisions of this paragraph, such conversion
shall be deemed to have been made as of the date of such
surrender of the shares of Preferred Stock to be converted
and at the Conversion Price in effect at the date of such
surrender; and the person or persons entitled to receive
the Common Stock deliverable upon conversion of such shares
of Preferred Stock shall be treated for all purpose as the
record holders of such Common Stock on such date. The
Corporation shall not be required to convert any shares of
Preferred Stock while the stock transfer books of the
Corporation are closed for any purpose; but the surrender
of shares of Preferred Stock for conversion during any
period while such books are so closed shall become
effective for conversion immediately upon reopening of such
books, as if the conversion had been made on the date such
shares of Preferred Stock were surrendered, and at the
Conversion Price in effect at the date of such surrender.
6.5 Upon any conversion of shares of Preferred Stock,
the shares of Preferred Stock so converted shall have the
status of authorized and unissued shares of the
Corporation's preferred stock, and the number of shares of
preferred stock which the Corporation shall have authority
to issue shall not be decreased by the conversion of shares
of Preferred Stock. The Corporation shall at all times
reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the
conversion of the Preferred Stock, such number of shares of
its Common Stock as shall from time to time be sufficient,
in the judgment of its Board of Directors, to effect the
conversion of all shares of Preferred Stock from time to
time outstanding. The Corporation shall from time to time,
in accordance with the laws of the State of Delaware,
increase the authorized number of shares of its Common
Stock if at any time the number of authorized shares of its
Common Stock remaining unissued shall not be sufficient to
permit the conversion of all the then outstanding shares of
Preferred Stock.
6.6 The Corporation will pay any and all issue or
other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares
of Preferred Stock pursuant hereto. The Corporation shall
not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue
and delivery of Common Stock in a name other than that in
which the shares of Preferred Stock so converted were
registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid
to the Corporation the amount of such tax, or has
established, to the satisfaction of the Corporation, that
such tax has been paid.
6.7 The Conversion Price shall be subject to the
following adjustments:
(i) If, at any time and from time to time after
<PAGE>
the date hereof, the Corporation shall issue or sell
any shares of Common Stock other than the "Excluded
Shares" (as defined in Section 6.8 below), including
by way of dividend on any Junior Stock of the
Corporation, without consideration or for a
consideration per share less than the Conversion Price
in effect immediately prior to the issue or sale of
such additional shares, the Conversion Price in effect
immediately prior to such issue or sale shall be
reduced to an amount equal to the quotient determined
by dividing:
(A) An amount equal to the sum of (x) the
product of (1) the total number of shares of
Common Stock outstanding immediately prior to the
date of such issue or sale of such additional
shares, multiplied by (2) the Conversion Price in
effect immediately prior to such issue or sale,
plus (y) the aggregate consideration, if any,
received by the Company upon such issue or sale;
by
(B) The total number of shares of Common
Stock outstanding immediately after such issue or
sale;
(ii) For purposes of Section 6.7(i) above, the
following provisions shall also be applicable:
(A) In the case of (x) the issue or sale of
additional shares of Common Stock for cash, the
consideration received by the Corporation
therefor shall be deemed to be the amount of cash
received by the Corporation or (y) the issue or
sale of additional shares of Common Stock for a
consideration other than cash (including
services), the amount of the consideration other
than cash shall be deemed to be the fair value of
such consideration as determined in good faith by
the Board of Directors of the Corporation, in
either case without deduction therefrom of any
compensation or discount paid or allowed to
underwriters or dealers or others performing
similar services or for any expenses incurred in
connection therewith.
(B) In case any shares of Common Stock (or
any "Convertible Securities" or "Rights" to
purchase Common Stock or Convertible Securities
(as defined in subparagraph (C) below)) shall be
issued in connection with any merger of another
corporation into the Corporation, the amount of
consideration therefor shall be deemed to be the
fair value of the assets of such merged
corporation as determined by the Board of
Directors of the Corporation after deduction
therefrom of all cash and other consideration (if
any) paid by the Corporation in connection with
such merger.
(C) If, at any time and from time to time
<PAGE>
after the date hereof, the Corporation shall
issue or grant any rights, warrants or options
(collectively, the "Rights") to subscribe for or
to purchase Common Stock, or to subscribe for or
purchase any indebtedness or shares of stock
convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or
securities being called "Convertible
Securities"), whether or not such Rights are
immediately exercisable or any such Convertible
Securities are immediately convertible or
exchangeable, and if the price per share for
which Common Stock is issuable upon the exercise
of such Rights or upon conversion or exchange of
such Convertible Securities (determined by
dividing (a) the total amount, if any, received
or receivable by the Corporation as consideration
for the granting of such Rights plus the minimum
aggregate amount of additional consideration
payable to the Corporation upon the exercise of
such Rights, plus, in the case of any such Rights
exercisable for Convertible Securities, the
minimum aggregate amount of additional
consideration, if any, payable upon the
conversion or exchange of such Convertible
Securities, by (b) the total maximum number of
shares of Common Stock issuable upon the exercise
of such Rights or upon the conversion or exchange
of all such Convertible Securities issuable upon
the exercise of such Rights) shall be less than
the Conversion Price in effect immediately prior
to the time of issue or grant of such Rights,
then the total maximum number of shares of Common
Stock issuable upon the exercise of such Rights
or upon conversion or exchange of the total
maximum amount of such Convertible Securities
issuable upon the exercise of such Rights shall
(as of the date of granting of such Rights) be
deemed to be issued and outstanding and to have
been issued for such price per share.
(D) If, at any time and from time to time
after the date hereof, the Corporation shall
issue or sell any Convertible Securities, whether
or not such Convertible Securities are
immediately convertible or exchangeable, and the
price per share for which Common Stock is
issuable upon such conversion or exchange
(determined by dividing (a) the total amount
received or receivable by the Corporation as
consideration for the issue or sale of such
Convertible Securities, plus the minimum
aggregate amount of additional consideration, if
any, payable to the Corporation upon the
conversion or exchange thereof, by (b) the total
maximum number of shares of Common Stock issuable
upon the conversion or exchange of all such
Convertible Securities) shall be less than the
Conversion Price in effect immediately prior to
the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable
upon conversion or exchange of all such
Convertible Securities shall (as of the date of
the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been
issued for such price per share.
<PAGE>
(E) In the case of the issuance of shares
of Common Stock or Convertible Securities as a
stock dividend, the aggregate number of shares of
Common Stock or Convertible Securities issued in
payment of such dividend shall be deemed to have
been issued at the close of business on the date
fixed for the determination of stockholders
entitled to receive such dividend and shall be
deemed to have been issued without consideration.
(F) The number of shares of Common Stock at
any time outstanding shall exclude all shares
then owned or held by or for the account of the
Corporation.
(G) For the purposes of this Section 6.7,
the term "Common Stock" shall mean (i) the class
of stock designated as the common stock of the
Corporation at the date of the adoption of these
resolutions, or (ii) any other class of stock
resulting from successive changes or
reclassification of such common stock consisting
solely of change in par value, or from par value
to no par value, or from no par value to par
value. In the event that at any time, as a
result of an adjustment made pursuant to this
Section 6.7, the holder of any share of Preferred
Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the
Corporation other than shares of its Common
Stock, thereafter the number of such other shares
so receivable upon conversion of any such share
shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the
Common Stock contained in this Section 6.7 and
all other provisions hereof with respect to
Common Stock shall apply in like terms to any
other shares.
(iii) If at any time, and from time to time
after the date hereof, the shares of Common Stock
shall be subdivided into a greater number of shares of
Common Stock other than on account of or as a result
of a dividend, the Conversion Price in effect
immediately prior to such subdivision shall,
simultaneously with the effectiveness of such
subdivision, be proportionately reduced, and
conversely, in case outstanding shares of Common Stock
shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect
immediately prior to such combination shall,
simultaneously with the effectiveness of such
combination, be proportionately increased.
(iv) In case the Corporation shall make any
distribution of its assets upon or with respect to its
Common Stock, as a liquidating or partial liquidating
dividend, or other than as a dividend payable out of
earnings or retained earnings, each holder of
<PAGE>
Preferred Stock shall, upon the conversion of such
holder's Preferred Stock after the record date for
such distribution or, in the absence of a record date,
after the date of such distribution receive, in
addition to the shares of Common Stock covered by such
conversion, the amount of such assets (or, at the
option of the Corporation, a sum equal to the value
thereof at the time of distribution as determined by
the Board of Directors in good faith) which would have
been distributed to such holder if such holder had
converted his Preferred Stock immediately prior to the
record date for such distribution or, in the absence
of a record date, immediately prior to the date of
such distribution.
(v) If the Conversion Price is adjusted upon the
issuance of any Right or any Convertible Securities
pursuant to Section 6.7(ii)(B), 6.7(ii)(C) or
6.7(ii)(D), the following shall apply:
(A) If the purchase price provided for in
any such Rights, or the rate at which any such
Convertible Securities are convertible into or
exchangeable for Common Stock, shall change or a
different purchase price or rate shall become
effective at any time or from time to time (other
than under or by reason of provisions designed to
protect against dilution), then, upon such change
becoming effective, the Conversion Price then in
effect hereunder shall forthwith be increased or
decreased to such Conversion Price as would have
been applicable had the adjustments made upon the
granting or issuance of such Rights or
Convertible Securities been made upon the basis
of (1) the issuance of the number of shares of
Common Stock theretofore actually delivered upon
the exercise of such Rights or upon the
conversion or exchange of such Convertible
Securities, and the total consideration received
therefor, and (2) the granting or issuance at the
time of such change of any such Rights or
Convertible Securities then still outstanding for
the consideration, if any, received by the
Corporation therefor and to be received on the
basis of such changed price, but in no event
shall the Conversion Price be increased above
what it was prior to the original granting or
issuance of such Rights or Convertible
Securities.
(B) On the expiration of any such Rights,
or on the termination of any right to convert or
exchange any such Convertible Securities, the
Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been
applicable had the adjustment made upon the
granting or issuance of such Rights or such
Convertible Securities been made upon the basis
of the issuance or sale of only the number of
shares of Common Stock actually issued upon the
exercise of such Rights or upon the conversion or
exchange of such Convertible Securities.
<PAGE>
(C) If the purchase price provided for in
any such Rights, or the rate at which any such
Convertible Securities are convertible into or
exchangeable for Common Stock, shall change at
any time under or by reason of any provision with
respect thereto designed to protect against
dilution, then in case of the delivery of Common
Stock upon the exercise of any such Rights or
upon conversion or exchange of any such
Convertible Securities, the Conversion Price then
in effect hereunder shall forthwith be decreased
to such Conversion Price as would have been
applicable had the adjustment made upon the
issuance of such Rights or such Convertible
Securities been made upon the basis of the
issuance of (and the total consideration received
for) the shares of Common Stock delivered as
aforesaid.
(vi) In the event that at any time dividends
payable on the Preferred Stock shall have been in
arrears and unpaid for two consecutive dividend
periods, then the Conversion Price shall be
automatically reduced to 75 percent of the Conversion
Price in effect immediately prior to such reduction;
provided, however, that, if all dividends on the
Preferred Stock shall have been paid in full or
declared and set apart for payment at any time after
such reduction is made and prior to such time as when
dividends payable on the Preferred Stock shall have
been in arrears and unpaid for three consecutive
dividend periods, then the Conversion Price shall
automatically revert to 100 percent of the Conversion
Price in effect immediately prior to such reduction.
In the event that at any time dividends payable on the
Preferred Stock shall have been in arrears and unpaid
for three consecutive dividend periods, then the
Conversion Price shall be automatically and
permanently reduced to 83.3 percent of the Conversion
Price in effect immediately prior to such reduction.
In the event that at any time dividends payable on the
Preferred Stock shall have been in arrears and unpaid
for four consecutive dividend periods, then the
Conversion Price shall be automatically and
permanently further reduced to an amount equal to 80
percent of the Conversion Price in effect immediately
prior to such reduction.
(vii) Whenever the Conversion Price shall be
adjusted pursuant to the provisions of this paragraph,
the Corporation shall forthwith mail to each holder of
Preferred Stock a statement specifying the revised
Conversion Price resulting from such adjustment and
the increase or decrease, if any, in the number of
shares purchasable at such price upon the exercise of
the Preferred Stock and setting forth in reasonable
detail the method of calculation of such adjustment
and the facts upon which such calculation is based.
(viii) Notwithstanding anything contained herein
to the contrary, no adjustment in the Conversion Price
shall be made if the amount of such adjustment shall
be less than 1% of such price, but in such case any
adjustment that would otherwise be required then to be
made shall be made at the time of, and together with
<PAGE>
the next subsequent adjustment which, together with
any adjustment or adjustments so carried forward,
shall amount to not less than 1% of the Conversion
Price.
(ix) No fractional shares or scrip representing
fractional shares shall be issued upon the conversion
of any share of Preferred Stock. If more than one
share of Preferred Stock shall be surrendered for
conversion at one time by the same holder, the number
of full shares issuable upon conversion thereof shall
be computed on the basis of the aggregate number of
such shares so surrendered. If the conversion of any
share of Preferred Stock results in a fraction, an
amount equal to such fraction multiplied by the
Conversion Price of the Common Stock on the day of
conversion shall be paid to such holder in cash by the
Corporation.
(x) If any capital reorganization or
reclassification of the capital stock of the
Corporation, or consolidation or merger of the
Corporation with another corporation, or the sale of
all or substantially all of its assets to another
corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of
such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provisions shall
be made whereby each holder of Preferred Stock shall
thereafter have the right to receive, upon the basis
and upon the terms and conditions specified herein and
in lieu of the shares of the Common Stock of the
Corporation immediately theretofore issuable upon the
conversion of the Preferred Stock held by such holder,
such shares of stock, securities and assets as may be
issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock
equal to the number of shares of such stock
immediately theretofore issuable upon the conversion
of the Preferred Stock held by such holder, had such
reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to
the rights and interests of the holders of the
Preferred Stock to the end that the provisions hereof
(including without limitation provisions for
adjustments of the Conversion Price) shall thereafter
be applicable, as nearly as may be, in relation to any
shares of stock, securities and assets thereafter
deliverable upon the conversion of Preferred Stock.
The Corporation covenants and agrees that it will not
effect any such consolidation, merger or sale unless
at the time of or prior to such transaction the
purchasing or successor corporation or other entity
(if other than the Corporation) shall expressly assume
all of the liabilities and obligations of the
Corporation hereunder.
6.8 Anything hereinabove to the contrary
notwithstanding, no adjustment to the Conversion Price
shall be made pursuant to Section 6.7 upon:
<PAGE>
(i) the issuance or sale by the Corporation of
any shares of Common Stock or any rights, options,
warrants or convertible securities (or any rights or
options to purchase convertible securities) pursuant
to (A) a redemption or conversion of the Preferred
Stock or (B) the exercise, redemption or conversion of
any warrants, options, rights or convertible
securities outstanding on the Issue Date;
(ii) the issuance of shares of Common Stock to
employees or directors of the Corporation, the
granting of stock options to such employees or
directors or the issuance of shares of Common Stock
pursuant to the exercise of any such options;
provided, however, that maximum number of shares of
Common Stock issuable pursuant to the exception set
forth in this paragraph (ii) shall be 250,000 shares;
(iii) the issuance or sale of securities
pursuant to the exercise of rights, options or
warrants or conversion or exchange of convertible
securities hereafter issued for which an adjustment
has previously been made (or was not required to be
made) pursuant to the provision of Section 6.7 hereof;
and
(iv) any increase in the number of shares of
Common Stock subject to any right, option, warrant or
convertible security referred to in paragraph (i),
(ii) or (iii) of this Section 6.8 pursuant to the
provisions of such right, option, warrant or
convertible security designed to protect against
dilution.
Any securities referred to in this Section 6.8 as to
which no adjustment is required are referred to herein as
the "Excluded Shares."
7. Voting Rights.
(i) Except as otherwise required by law, the
Preferred Stock and Common Stock shall be deemed to be
one class for the purpose of voting or giving consent
in lieu of voting on all matters submitted for a vote
of the Corporation's stockholders or as to which such
consent shall be sought. Each person in whose name
shares of Preferred Stock shall be registered on the
record date for determining the holders of Preferred
Stock entitled to vote at any meeting of stockholders
or adjournment thereof or to consent to corporate
action in writing without a meeting shall be entitled
to, at such meeting or with respect to such action,
the number of votes equal to the number of whole
shares of Common Stock into which the shares of
Preferred Stock registered in the name of such person
on such record date are convertible.
(ii) So long as any shares of Preferred Stock
are outstanding, the Corporation will not, without the
affirmative vote or consent of the holders of a
majority of the issued and outstanding Preferred Stock
voting as a separate class, (A) create any Senior
Stock or Parity Stock or (B) amend, alter or repeal
the Corporation's Certificate of Incorporation to
adversely affect the voting powers, rights or
preferences of the Preferred Stock.
<PAGE>
(iii) Whenever, at any time or times, any
dividend payable on the shares of Preferred Stock
shall be in arrears, the holders of the outstanding
shares of Preferred Stock shall have the right, voting
separately as a class, to elect one director of the
Corporation. Upon the vesting of such right of the
holders of Preferred Stock, the maximum authorized
number of members of the Board of Directors shall
automatically be increased by one and the one vacancy
so created shall be filled by vote of the holders of
the outstanding shares of Preferred Stock. The right
of the holders of Preferred Stock to elect a member of
the Board of Directors of the Corporation as aforesaid
shall continue until such time as all dividends in
arrears on the Preferred Stock shall have been paid in
full, at which time such right shall terminate, except
as herein or by law expressly provided, subject to
revesting in the event of each and every subsequent
default of the character above described. Upon
termination of such special voting rights attributable
to holders of the Preferred Stock pursuant to this
paragraph, the term of office of any director elected
by the holders of shares of Preferred Stock (any such
director, a "Preferred Stock Director") pursuant to
such special voting rights shall immediately terminate
and the number of directors constituting the entire
Board of Directors shall be reduced by one. Any
Preferred Stock Director may be removed by, and shall
not be removed otherwise than by, a majority vote of
the outstanding shares of Preferred Stock. If the
office of any Preferred Stock Director becomes vacant
by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, a
successor who shall hold office for the unexpired term
in respect of which such vacancy occurred shall be
elected by the holders of the outstanding shares of
Preferred Stock, voting separately as a class.
8. Definitions.
8.1 "Common Stock" shall mean the shares of Common
Stock of the Corporation, par value $.01 per share, and any
stock into which such Common Stock may hereafter be
changed.
8.2 The "Current Market Price" on any day shall be:
(i) if the principal trading market for the
Common Stock is an exchange or the Nasdaq Stock
Market, the closing price of the Common Stock for such
day on such exchange or market, as the case may be; or
(ii) if the principal market for the Common Stock
is the over-the-counter market, the closing bid price
of the Common Stock for such day as set forth in the
National Quotation Bureau sheet listing the Common
Stock."
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
certificate this 28th day of March, 1996.
_____________________________
A. Robert Mancuso
Chairman of the Board
and President
____________________________
Martin J. Hermann
Secretary
Exhibit 10.17
SUBSCRIPTION AGREEMENT
NOTE: THREE COMPLETED AND EXECUTED COPIES OF THIS SUB-
SUBSCRIPTION AGREEMENT MUST BE RETURNED, AND THE
ENTIRE PURCHASE PRICE FOR THE PREFERRED
STOCK SUBSCRIBED FOR MUST BE PAID AS SET FORTH HEREIN,
TO SUBSCRIBE FOR THIS OFFERING.
Name of Subscriber:
Number of Shares of 8% Convertible Redeemable Preferred
Stock,
$1.00 par value, at $100.00 per Share: _________
Aggregate Purchase Price: ______________
FOR RESIDENTS OF PENNSYLVANIA
THE SECURITIES ARE BEING SOLD AS PART OF A TRANSACTION
WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED, PURSUANT TO
SECTION 203(d) THEREOF.
SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF
1972 ALSO PROVIDES THAT EACH PERSON WHO ACCEPTS AN OFFER TO
PURCHASE SECURITIES EXEMPTED FROM REGISTRATION BY SECTION
203(d), DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE ISSUER
SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR
ANY OTHER PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE OF
RECEIPT OF THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF
PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO
BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE
MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
TIMELY NOTICE OF AN INTENTION TO WITHDRAW SHALL BE
DEEMED TO HAVE BEEN GIVEN BY A PROSPECTIVE PURCHASER WITHIN THE
TWO BUSINESS DAY PERIOD, IF, DURING SUCH TWO-DAY PERIOD, SUCH
NOTICE IS IN WRITING: (1) IS ACTUALLY RECEIVED BY THE ISSUER OR
ITS AFFILIATE; (2) IS DELIVERED TO A TELEGRAPH OR OTHER MESSAGE
<PAGE>
SERVICE FOR TRANSMITTAL; (3) IS DEPOSITED IN THE UNITED STATES
MAILS, AND IN THE CASE OF (2) ABOVE, ALL TELEGRAPH, POSTAGE OR
OTHER TRANSMITTAL FEES ARE PAID BY THE SENDER AND NOTICE IS
ADDRESSED TO THE PRESIDENT OF ACRODYNE COMMUNICATIONS, INC. (THE
"COMPANY").
PERSONS TO WHOM OFFERS OR SALES ARE MADE IN
PENNSYLVANIA ARE FURTHER ADVISED THAT A PENNSYLVANIA PURCHASER
CANNOT SELL THE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS
FROM THE DATE OF PURCHASE EXCEPT AS PERMITTED BY THE
PENNSYLVANIA SECURITIES ACT OF 1972.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), MAY BE
PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY, THE COMPANY IS AWARE THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE
UNENFORCEABLE.
___________________
SUBSCRIPTION AGREEMENT, dated as of March 29, 1996, by and
among Acrodyne Communications, Inc., a Delaware corporation (the
"Company"), and certain investors executing counterparts of this
Agreement (collectively, the "Investors," or each individually,
an "Investor").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and
the Investors desire to purchase from the Company, an aggregate
of 7,900 shares of the Company's 8% Convertible Redeemable
Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), at a purchase price of $100.00 per share, having the
rights and preferences set forth in the Certificate of
Designation attached hereto as Exhibit A (the "Certificate of
Designation"); and
WHEREAS, the Company is described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
(the "Report") to be filed with the Securities and Exchange
Commission (the "Commission") not later than April 1, 1996;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
1. Subscription and Payment.
Subject to the terms and conditions herein set forth, the
undersigned (the "Investor") hereby subscribes for the number of
shares of Preferred Stock set forth above.
The investor agrees to deliver to the Company at the
Closing (as defined below) the aggregate purchase price of
$__________, payable in immediately available funds, for the
shares of Preferred Stock subscribed for hereby.
2. Closing.
The initial closing (the "Closing") of the purchase and
sale of the Preferred Stock (the "Offering") shall occur on
March 29, 1996 or the earliest date thereafter on which the
closing conditions specified in Sections 7 and 8 of this
Agreement shall have been satisfied or waived (any such date,
the "Closing Date"); provided, however, that if the Closing has
not occurred by April 1, 1996, then this Agreement shall
terminate and the Closing shall not take place. At the Closing,
the Company will deliver to the Investor one executed copy of
this Agreement with a stock certificate representing the
Investor's ownership of the Preferred Stock subscribed for
hereby.
Similar Subscription Agreements (all such agreements and
this Subscription Agreement being collectively referred to as
the "Subscription Agreements") are being executed by each of the
Investors.
Promptly following the Closing, the Company will offer for
sale to an affiliate of Furst Associates ("FA"), FM Partners
("FM"), 2,100 additional shares of the Preferred Stock (the
"Additional Shares").
3. Termination of Offering. The Investor understands and
agrees that it will not be entitled to exercise the rights of a
shareholder of the Company until an appropriate certificate
representing the Preferred Stock for which it has subscribed has
been issued to it on the day of the Closing. If (a) the Company
shall have reasonably determined that an event has occurred or a
condition exists which could materially and adversely affect the
business or proposed business of the Company and that such
possibility warrants termination of the Offering, (b) the condi-
tions to the Closing of the Offering are not satisfied or (c)
the Company elects to terminate the Offering, the Offering will
be terminated, and the Company will not issue the Preferred
Stock and the Company will not be entitled to payment of the
purchase price for the Preferred Stock.
4. Representations and Warranties by Investor.
The Investor hereby represents and warrants to the Company
that:
<PAGE>
(a) it is an "accredited investor" as that term is
defined in Rule 501(a) under the Securities Act of 1933, as
amended (the "Act");
(b) it has the requisite knowledge and experience in
financial and business matters to be capable of evaluating
the merits and risks of an investment in the Company;
(c) it has received and read the Report and has
evaluated the risks of investing in the Company;
(d) it has been given the opportunity to ask
questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and to
obtain additional information necessary to verify the
accuracy of the information contained in the Report or such
other information as it desired in order to evaluate its
investment;
(e) in making its decision to purchase the Preferred
Stock herein subscribed for, it has relied solely upon the
Report, the representations, warranties, agreements, under-
takings and acknowledgments of the Company in this
Agreement and independent investigations made by it;
(f) it understands that an investment in the Company
involves certain risks and it has taken full cognizance of
and understands such risks, including those set forth in
the Report;
(g) it understands that neither the Preferred Stock
nor the shares of Common Stock of the Company, par value
$.01 per share, into which the Preferred Stock is
convertible (the "Common Stock") has been registered under
the Act, and agrees that neither the Preferred Stock nor
the Common Stock may be sold, offered for sale,
transferred, pledged, hypothecated or otherwise disposed of
except in compliance with the Act and subject to the terms
of this Subscription Agreement;
(h) it understands that no federal or state agency
has made any finding or determination as to the fairness
for investment in, or any recommendation or endorsement of,
the Preferred Stock;
(i) the Preferred Stock herein subscribed for is
being acquired by it in good faith solely for its own
account, for investment purposes and not with a view to
subdivision, distribution or resale. It will not sell or
otherwise dispose of any shares of the Preferred Stock or
Common Stock, as the case may be, unless:
i) it shall have advised the Company in
writing that it intends to dispose of such shares of
Preferred Stock or Common Stock, as the case may be,
in a manner to be described in such advice, and
counsel reasonably acceptable to the Company shall
<PAGE>
have delivered to the Company an opinion that
registration is not required under the Act or under
any applicable securities laws of any jurisdiction; or
ii) a registration statement on an
appropriate form under the Act, or a post-effective
amendment to such registration statement, covering the
proposed sale or other disposition of such shares of
Preferred Stock or Common Stock, as the case may be,
shall be in effect under the Act and such shares of
Preferred Stock or Common Stock or the proposed sale
or other disposition thereof shall have been
registered or qualified under applicable securities
laws of any jurisdiction.
The Investor undertakes to notify the Company as soon as
practicable of any material change in any representation,
warranty or other information relating to the Investor set forth
herein which occurs prior to the Closing in order to insure
compliance of the Investor with the terms of this Agreement.
The Investor acknowledges and agrees that the certificates
representing the Preferred Stock and the Common Stock shall bear
the following legend (unless not required under the Act):
"The securities represented by this certificate
have not been registered under the Securities Act of
1933 and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with
that certain Subscription Agreement dated as of March
29, 1996 among the Corporation and various
stockholders of the Corporation."
The Investor also acknowledges that the Company may place a
stop transfer order against transfer of the Preferred Stock and
the Common Stock, if necessary in the Company's reasonable
judgment in order to assure compliance by the Investor with the
terms of this Agreement.
Each Investor located in the Commonwealth of Pennsylvania
further acknowledges and agrees that such Investor cannot sell
the Preferred Stock for a period of twelve (12) months from the
date of purchase thereof except as permitted by the Pennsylvania
Securities Act of 1972.
If the Investor is a partnership, corporation, trust or
other entity, the Investor represents and warrants that (i) the
individual executing this Agreement has appropriate authority to
act on behalf of the Investor and (ii) the Investor was not
specifically formed to acquire the Preferred Stock subscribed
for hereby. If the Investor is a partnership, the Investor
further represents that the funds to make this investment were
not derived from additional capital contributions of the
partners of such partnership made solely for the purpose of
<PAGE>
enabling such partnership to purchase the Preferred Stock and
that such partnership was not formed solely for the purpose of
enabling such partnership to purchase the Preferred Stock.
The foregoing representations, warranties, agreements,
undertakings and acknowledgments are made by the Investor with
the intent that they be relied upon in determining its suitabil-
ity as a purchaser of Preferred Stock.
5. Representations and Warranties of the Company. The
Company represents and warrants to the Investor that:
(a) The Company has duly filed with the Commission
all reports required by the Securities Exchange Act of 1934
(the "Exchange Act"). The Company has made all necessary
arrangements to cause the Report to be duly filed with the
Commission by April 1, 1996. The Company has furnished to
the Investor a true and correct copy of the Report. The
Report does not, as of the date on which it was signed,
contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading.
(b) The financial statements (including the related
notes) of the Company included in the Report present fairly
the financial position of the Company as of the dates
indicated and its results of operations for the periods
specified therein. All such financial statements have been
prepared in accordance with generally accepted accounting
principles on a basis consistently applied.
(c) Except as disclosed in the Report, the Company
does not have any subsidiaries. The Company has been duly
organized and validly existing as a corporation in good
standing under the laws of its jurisdiction of
organization, with full power and authority (corporate and
other) to own its properties and conduct its business as
described in the Report, and is duly qualified to do
business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or
leased by it makes such licenses, certificates and permits
from governmental authorities necessary for the conduct of
its business as described in the Report.
(d) The authorized capital stock of the Company
consists of (i) 1,000,000 shares of Preferred Stock, par
value $1.00 per share, of which no shares are issued and
outstanding, and (ii) 10,000,000 shares of Common Stock,
par value $.01 per share, of which 2,635,280 shares are
issued and outstanding. At February 27, 1996, there are
outstanding options and warrants exercisable for a total of
2,441,120 shares of Common Stock. In addition, the Company
has agreements with certain investors to issue, under
certain circumstances, additional warrants for up to
400,000 shares of Common Stock. The Company has all
requisite power and authority to issue, sell and deliver
<PAGE>
the Preferred Stock in accordance with and upon the terms
and conditions set forth in this Agreement and the Common
Stock issuable upon conversion of the Preferred Stock; and
all corporate action required to be taken by the Company
for the due and proper authorization, issuance, sale and
delivery of the Preferred Stock and Common Stock has been
validly and sufficiently taken. The outstanding shares of
Common Stock are, and the shares of Common Stock issuable
upon conversion of the Preferred Stock in accordance with
its terms will be, when issued, duly authorized, validly
issued, fully paid and nonassessable.
(e) Except as set forth in this Agreement, or as
described in the Report, subsequent to the respective dates
as of which information is given in the Report, the Company
has not incurred any material liability or obligation,
direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of
business, and there has not been any material change on a
consolidated basis in the capital stock, or any material
increase in the short-term debt or long-term debt, or any
material adverse change in the condition (financial or
other), business, key personnel, properties or results of
operations of the Company.
(f) The Company is not in violation of its
Certificate of Incorporation or Bylaws or in default in the
performance of any material obligation contained in any
material agreement, indenture or other instrument. The
performance by the Company of its obligations under this
Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach
of the Certificate of Incorporation or Bylaws of the
Company, or any material agreement, indenture or other
instrument to which the Company is a party or by which it
is bound, or any law, rule, administrative regulation or
decree of any court or governmental authority having
jurisdiction over the Company or its properties, or result
in the creation or imposition of any material lien, charge,
claim or encumbrance upon any property or asset of the
Company. Except as required by the Act and applicable
state securities or blue sky laws, no consent, approval,
authorization or order of any court or governmental
authority is required in connection with the consummation
of the transactions contemplated by this Agreement. The
rights granted to the Investors hereunder do not in any way
conflict with and are not inconsistent with any rights
granted to the holders of the Company's securities or debt
instruments.
(g) The Common Stock issuable upon conversion of the
Preferred Stock, upon such issuance, will conform to the
description thereof contained in the Report. Except as
described in the Report or as set forth in this Agreement,
there are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the
Company's Certificate or Incorporation or Bylaws or any
agreement or other instrument to which the Company is a
party. Neither the Offering nor the sale of the Preferred
Stock as contemplated in this Agreement gives rise to any
rights, other than those which have been waived, for or
<PAGE>
relating to the registration of any shares of Common Stock
(other than as provided in Section 9 of this Agreement).
(h) The Company has full right, power and authority
to enter into this Agreement and this Agreement has been
duly authorized, executed and delivered by the Company and
constitutes the legal, valid and binding agreement of the
Company enforceable against the Company in accordance with
its terms.
(i) Except as otherwise stated in the Report, (A) the
Company has good and marketable title (in fee simple, in
the case of real property), free and clear of all liens and
encumbrances, to all of the material real and personal
property described in the Report as being owned by it,
except for any liens and encumbrances which are not
material in the aggregate and do not materially interfere
with the conduct of the business of the Company, and (B)
has valid leases to the material real property described in
the Report as under lease to it with such exceptions as do
not materially interfere with the conduct of the business
of the Company.
(j) Except as set forth in the Report, there are no
actions, suits or proceedings pending before or by any
court or governmental agency or authority, or any
arbitrator, which seek to restrain or prohibit the
consummation of the transactions contemplated hereby or
which might reasonably be expected to result in any
material adverse change in the condition (financial or
other), business or results of operations of the Company
and, to the best of the Company's knowledge, no such
action, suit or proceeding has been threatened.
(k) The Company is not in violation of any law,
ordinance, governmental rule or regulation or court degree
to which it may be subject and the Company has not failed
to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of
its property or to the conduct of its business, which
violation or failure to obtain is likely to have a material
adverse effect on the condition (financial or other),
business or results of operations of the Company.
(l) Neither the Company nor any of its officers,
employees or other persons directly or indirectly
affiliated with it has, either directly or through an
agent, sold or offered for sale or solicited offers to
subscribe for or buy, or approached potential investors for
or otherwise negotiated in respect of the Preferred Stock,
other than with the Investors and FM, and neither the
Company nor any of its employees or other persons directly
or indirectly affiliated with it has, either directly or
through an agent, participated in the organization or
management of any entity or has engaged or proposes during
any time after the Closing to engage in any other activity,
in a manner or under circumstances that would jeopardize
the status of the Offering as an exempted transaction under
the Act or under the laws of any state in which it is
represented by the Company that the Offering may be made.
<PAGE>
(m) No person is entitled to receive any commission,
fee or compensation from the Company for services rendered
as placement agent or lender in connection with the offer
or sale of the Preferred Stock pursuant to the Offering.
6. Covenants of the Company.
The Company covenants with the Investor that:
(a) The Company will apply the net proceeds from the
sale of the Preferred Stock for general corporate purposes.
(b) The Company will, so long as the Investor shall
be the holder of Preferred Stock or Common Stock, furnish
to the Investor, as soon as practicable after the end of
each fiscal year, an annual report with respect to such
year (including financial statements audited by independent
public accountants) and, as soon as practicable after the
end of each quarterly period (other than the last quarterly
period) of each fiscal year, a statement (which need not be
audited) of the results of operations of the Company for
such period, and, to the extent not otherwise furnished,
promptly upon the filing thereof, copies of all reports
filed by the Company with the Commission pursuant to the
Exchange Act.
(c) So long as the Investor shall be the holder of
Preferred Stock or Common Stock, the Company will permit
any person designated by the Investor in writing, at the
sole expense of the Investor, to visit and inspect any of
the properties and books of account of the Company and to
discuss its affairs, finances and accounts with the
principal officers of the Company, all at such reasonable
times and at such reasonable intervals as the Investor may
reasonably request; provided, that the Company shall not be
required to reveal trade secrets or information not
reasonably pertinent to an evaluation of the credit of the
Company or compliance with this Agreement.
(d) The Company shall at all times keep in reserve
the number of shares of its Common Stock issuable from time
to time upon the conversion of all the outstanding
Preferred Stock.
(e) So long as the Investor shall be the holder of
Preferred Stock or Common Stock, the Company shall use its
best efforts to continue its existence, pay all applicable
taxes and comply with all applicable laws.
(f) The Company undertakes to notify each Investor as
soon as practical of any material change in any
representation, warranty or other information relating to
the Company set forth herein which occurs prior to the
Closing.
<PAGE>
(g) Neither the Company nor any of its employees or
other persons directly or indirectly affiliated with it
will engage in any activity that would jeopardize the
status of the Offering as an exempt transaction under the
Act or under the laws of any state in which the Offering is
made.
(h) The Company acknowledges that the
representations, warranties, agreements, undertakings and
acknowledgments are made by the Company with the intent
that they be relied upon by each Investor in determining
whether to invest in the Preferred Stock.
7. Conditions of Investor Obligations.
The Investor's obligations under this Agreement are subject
to the accuracy of the representations and warranties of the
Company made in Section 5 hereof in all material respects, to
the performance by the Company of its other obligations under
this Agreement to be performed at or prior to the Closing and to
the following further conditions:
(a) At the Closing, the Investor shall have received
the favorable opinion of counsel to the Company, dated the
Closing Date and in form and substance satisfactory to the
Investor, to the effect that:
i) The Company has been duly organized and
is validly existing as a corporation in good standing
under the laws of its jurisdiction of organization,
with full power and authority to own its properties
and conduct its business as described in the Report,
and is duly qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction in which the location of the properties
owned or leased by it, as known by such counsel, makes
such qualification necessary.
ii) The authorized capital stock of the
Company consists of 1,000,000 shares of preferred
stock, par value $1.00 per share, and 10,000,000
shares of Common Stock, par value $.01 per share. The
Company has all requisite power and authority to
issue, sell and deliver the Preferred Stock in
accordance with and upon the terms and conditions set
forth in this Agreement; and all corporate action
required to be taken by the Company for the due and
proper authorization, issuance, sale and delivery of
the Preferred Stock has been validly and sufficiently
taken. Upon payment by the Investor at the Closing of
the purchase price for the shares of Preferred Stock
subscribed for hereby, the Preferred Stock will be,
and the Common Stock issuable upon conversion thereof,
upon issuance and delivery in the manner described in
the Certificate of Designation attached hereto, will
be duly authorized, validly issued, fully paid and
nonassessable. The Certificate of Designation, in the
form attached hereto, has been duly filed with the
Secretary of State of the State of Delaware and the
<PAGE>
resolutions contained therein have been duly adopted
by the Board of Directors of the Company. There are
no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to
the Company's Certificate of Incorporation, By-laws or
any agreement or other instrument known to such
counsel to which the Company is a party except as
described in the Report.
iii) The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby do not result in a violation of,
or constitute a default under, the Certificate of
Incorporation or Bylaws of the Company, or any
material agreement, indenture or other instrument
known to such counsel to which the Company is a party
or by which it may be bound, or to which any property
of the Company is subject, nor will the performance by
the Company of its obligations hereunder violate any
law, rule, administrative regulation or decree known
to such counsel of any court, or any governmental
agency or authority having jurisdiction over the
Company or its properties, or, to the knowledge of
such counsel, result in the creation or imposition of
any material lien, charge, claim or encumbrance upon
any property or asset of the Company. No consent,
approval, authorization or other order of any court,
governmental agency or authority is required in
connection with the consummation of the transactions
contemplated by this Agreement, except such as have
been obtained or as are contemplated hereunder.
iv) The Company has full legal right, power
and authority to enter into this Agreement. This
Agreement has been validly authorized, executed and
delivered by the Company and constitutes a legal,
valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally
and court decisions with respect thereto (provided
that no opinion need be expressed with respect to the
application of equitable principles in any proceeding,
whether at law or in equity).
In expressing such opinion, such counsel may state (i)
that, as to questions of fact not independently established
by such counsel, such counsel has relied on certificates of
the Company or its officers and of public officials, (ii)
that such opinion is limited to the General Corporation Law
of the State of Delaware, the laws of the United States and
the laws of the state in which such counsel maintains its
principal office, and that, in the event such principal
office is located outside of Pennsylvania, such counsel has
assumed that the laws of the Commonwealth of Pennsylvania
are the same as the laws of the state in which such
principal office is located, and (iii) that, when reference
is made in such opinion to "knowledge" or to what is
"known" to such counsel, such reference means the actual
<PAGE>
knowledge of only those attorneys who have given
substantive attention to the representation of the Company
and the preparation and negotiation of this Agreement and
the Certificate of Designation attached hereto.
(b) At the Closing the Investor shall have received a
certificate, dated the date thereof and signed by the
Chairman of the Board and President of the Company to the
effect that:
i) The representations and warranties of
the Company in this Agreement are true and correct in
all material respects, as if made at and as of the
Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the
Closing Date; and
ii) The signer of said certificate has
carefully examined the Report and after giving effect
to all amendments or supplements thereto, on the
Closing Date, such Report does not include any untrue
statement of a material fact or omit to state any
material fact necessary to make the statements therein
not misleading.
(c) The Certificates of Designation for the Preferred
Stock shall have been duly filed with the Secretary of
State of the State of Delaware.
If any of the conditions specified in this Section 7 have
not been fulfilled in all material respects when and as required
by this Agreement to be fulfilled, the Investor may cancel this
Agreement and all its obligations under this Agreement by
notifying the Company of such cancellation in writing or by
telegram or by facsimile at any time at or before the Closing
and any such cancellation will be without liability or
obligation of any party to any other party (except in the case
of willful breach).
8. Conditions of Obligations of the Company.
The obligations of the Company under this Agreement are
subject to the accuracy of the representations and warranties of
the Investor made in Section 4 hereof in all material respects,
to the performance by the Investor of its other obligations
under this Agreement to be performed at or prior to the Closing
and to the further condition that all other Investors shall
concurrently make the Investments contemplated to be made in
connection with this Offering.
If any of the conditions specified in this Section 8 have
not been fulfilled in all material respects when and as required
by this Agreement to be fulfilled, the Company may cancel this
Agreement and all its obligations under this Agreement by
notifying the Investor of such cancellation in writing or by
telegram at any time at or before the Closing and any such
cancellation will be without liability or obligation of any
party to any other party (except in the case of willful breach).
<PAGE>
9. Rule 144.
The Company covenants that it will file the reports
required to be filed by it under the Act and the Exchange Act
and the rules and regulations adopted by the Commission
thereunder (or, if it ceases to be required to file such
reports, it will, upon the request of the Investor, make pub-
licly available other information), and it will take such
further action as the Investor may reasonably request, all to
the extent required from time to time to enable the Investor to
sell the Common Stock without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 under
the Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the
Commission. Upon the request of the Investor, the Company will
deliver to it a written statement as to whether the Company has
complied with such information disclosure and other
requirements.
10. Automatic Conversion.
The Investors agree that if, at any time, 75% of the then
outstanding shares of Preferred Stock have been surrendered for
conversion into Common Stock in accordance with the Certificate
of Designation, the remaining 25% of the outstanding Preferred
Stock shall also be surrendered for conversion.
11. Expenses.
The reasonable legal expenses of the Investors incurred in
connection with this Offering (up to a total of $6,500) shall be
borne by the Company. Subject to the preceding sentence, each
party hereto shall bear its own legal and other expenses
incurred in connection with this Offering.
12. Notices.
(a) Any notice required to be given or delivered to
the Investor shall be mailed first class, postage prepaid,
return receipt requested, to such Investor's address shown
on the signature page hereof.
(b) Any notice required to be given or delivered to
the Company shall be mailed first class, postage prepaid,
return receipt requested, to:
Acrodyne Communications, Inc.
516 Township Line Road
Blue Bell, PA 19422
Attn: President
<PAGE>
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Stephan Haimo, Esq.
13. Survival of Representations and Warranties. All
representations and warranties and agreements hereunder shall
survive execution of this Agreement and delivery of the
Preferred Stock.
14. Governing Law. This Agreement and the rights and
obligations of the parties shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed wholly within
that State.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement as of the date first above written.
_______________________________
Name of Subscriber
By:_____________________________
Title:
Address:
________________________________
________________________________
________________________________
Tax Identification Number:________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted on this
March __, 1996:
ACRODYNE COMMUNICATIONS, INC.
By:
Title: President
Exhibit A
(Intentionally Omitted)
Exhibit 10.18
SUBSCRIPTION AGREEMENT
NOTE: THREE COMPLETED AND EXECUTED COPIES OF THIS SUB-
SUBSCRIPTION AGREEMENT MUST BE RETURNED, AND THE
ENTIRE PURCHASE PRICE FOR THE PREFERRED
STOCK SUBSCRIBED FOR MUST BE PAID AS SET FORTH HEREIN,
TO SUBSCRIBE FOR THIS OFFERING.
Name of Subscriber:
Number of Shares of 8% Convertible Redeemable Preferred Stock,
$1.00 par value, at $100.00 per Share: _________
Aggregate Purchase Price: ______________
FOR RESIDENTS OF PENNSYLVANIA
THE SECURITIES ARE BEING SOLD AS PART OF A TRANSACTION
WHICH IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED, PURSUANT TO
SECTION 203(d) THEREOF.
SECTION 207(m) OF THE PENNSYLVANIA SECURITIES ACT OF
1972 ALSO PROVIDES THAT EACH PERSON WHO ACCEPTS AN OFFER TO
PURCHASE SECURITIES EXEMPTED FROM REGISTRATION BY SECTION
203(d), DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE ISSUER
SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT
INCURRING ANY LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR
ANY OTHER PERSON WITHIN TWO BUSINESS DAYS FROM THE DATE OF
RECEIPT OF THE ISSUER OF HIS WRITTEN BINDING CONTRACT OF
PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO
BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE
MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
TIMELY NOTICE OF AN INTENTION TO WITHDRAW SHALL BE
DEEMED TO HAVE BEEN GIVEN BY A PROSPECTIVE PURCHASER WITHIN THE
TWO BUSINESS DAY PERIOD, IF, DURING SUCH TWO-DAY PERIOD, SUCH
NOTICE IS IN WRITING: (1) IS ACTUALLY RECEIVED BY THE ISSUER OR
ITS AFFILIATE; (2) IS DELIVERED TO A TELEGRAPH OR OTHER MESSAGE
SERVICE FOR TRANSMITTAL; (3) IS DEPOSITED IN THE UNITED STATES
MAILS, AND IN THE CASE OF (2) ABOVE, ALL TELEGRAPH, POSTAGE OR
OTHER TRANSMITTAL FEES ARE PAID BY THE SENDER AND NOTICE IS
ADDRESSED TO THE PRESIDENT OF ACRODYNE COMMUNICATIONS, INC. (THE
"COMPANY").
<PAGE>
PERSONS TO WHOM OFFERS OR SALES ARE MADE IN
PENNSYLVANIA ARE FURTHER ADVISED THAT A PENNSYLVANIA PURCHASER
CANNOT SELL THE SECURITIES FOR A PERIOD OF TWELVE (12) MONTHS
FROM THE DATE OF PURCHASE EXCEPT AS PERMITTED BY THE
PENNSYLVANIA SECURITIES ACT OF 1972.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), MAY BE
PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY, THE COMPANY IS AWARE THAT IN THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE
UNENFORCEABLE.
___________________
SUBSCRIPTION AGREEMENT, dated as of May 7, 1996, by and
among Acrodyne Communications, Inc., a Delaware corporation (the
"Company"), and certain investors executing counterparts of this
Agreement (collectively, the "Investors," or each individually,
an "Investor").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and
the Investors desire to purchase from the Company, an aggregate
of 2,600 shares of the Company's 8% Convertible Redeemable
Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), at a purchase price of $100.00 per share, having the
rights and preferences set forth in the Certificate of
Designation attached hereto as Exhibit A (the "Certificate of
Designation"); and
WHEREAS, the Company is described in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995
(the "Report") as filed with the Securities and Exchange
Commission (the "Commission");
NOW, THEREFORE, the parties hereto agree as follows:
1. Subscription and Payment.
Subject to the terms and conditions herein set forth, the
undersigned (the "Investor") hereby subscribes for the number of
shares of Preferred Stock set forth above.
<PAGE>
The investor agrees to deliver to the Company at the
Closing (as defined below) the aggregate purchase price of
$__________, payable in immediately available funds, for the
shares of Preferred Stock subscribed for hereby.
2. Closing.
The closing (the "Closing") of the purchase and sale of the
Preferred Stock (the "Offering") shall occur on May 1, 1996 or
the earliest date thereafter on which the closing conditions
specified in Sections 7 and 8 of this Agreement shall have been
satisfied or waived (any such date, the "Closing Date");
provided, however, that if the Closing has not occurred by
May 15, 1996, then this Agreement shall terminate and the
Closing shall not take place. At the Closing, the Company will
deliver to the Investor one executed copy of this Agreement with
a stock certificate representing the Investor's ownership of the
Preferred Stock subscribed for hereby.
Similar Subscription Agreements (all such agreements and
this Subscription Agreement being collectively referred to as
the "Subscription Agreements") are being executed by each of the
Investors.
3. Termination of Offering. The Investor understands and
agrees that it will not be entitled to exercise the rights of a
shareholder of the Company until an appropriate certificate
representing the Preferred Stock for which it has subscribed has
been issued to it on the day of the Closing. If (a) the Company
shall have reasonably determined that an event has occurred or a
condition exists which could materially and adversely affect the
business or proposed business of the Company and that such
possibility warrants termination of the Offering, (b) the condi-
tions to the Closing of the Offering are not satisfied or (c)
the Company elects to terminate the Offering, the Offering will
be terminated, and the Company will not issue the Preferred
Stock and the Company will not be entitled to payment of the
purchase price for the Preferred Stock.
4. Representations and Warranties by Investor.
The Investor hereby represents and warrants to the Company
that:
(a) it has the requisite knowledge and experience in
financial and business matters to be capable of evaluating
the merits and risks of an investment in the Company;
(b) it understands that the Preferred Stock involves
risk of loss of such Investor's investment;
(c) its financial situation is such that such
Investor is able to bear the economic risks of its
investment made hereby and at the present time and in the
foreseeable future could afford a complete loss of such
investment;
<PAGE>
(d) it has received and carefully read the
Confidential Private Placement Memorandum dated May 1, 1996
and the annexes thereto (collectively, the "PPM"), relating
to the Offering, and the Report and has evaluated the risks
of investing in the Company;
(e) it has been given the opportunity to ask
questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering and to
obtain additional information necessary to verify the
accuracy of the information contained in the PPM and Report
or such other information as it desired in order to
evaluate its investment;
(f) in making its decision to purchase the Preferred
Stock herein subscribed for, it has relied solely upon the
PPM, the Report, the representations, warranties,
agreements, undertakings and acknowledgments of the Company
in this Agreement and independent investigations made by
it;
(g) it understands that an investment in the Company
involves certain risks and it has taken full cognizance of
and understands such risks, including those set forth in
the PPM and Report;
(h) it understands that neither the Preferred Stock
nor the shares of Common Stock of the Company, par value
$.01 per share, into which the Preferred Stock is
convertible (the "Common Stock") has been registered under
the Securities Act of 1933, as amended (the "Act"), and
agrees that neither the Preferred Stock nor the Common
Stock may be sold, offered for sale, transferred, pledged,
hypothecated or otherwise disposed of except in compliance
with the Act and subject to the terms of this Subscription
Agreement;
(i) it understands that no federal or state agency
has made any finding or determination as to the fairness
for investment in, or any recommendation or endorsement of,
the Preferred Stock;
(j) the Preferred Stock herein subscribed for is
being acquired by it in good faith solely for its own
account, for investment purposes and not with a view to
subdivision, distribution or resale. It will not sell or
otherwise dispose of any shares of the Preferred Stock or
Common Stock, as the case may be, unless:
i) it shall have advised the Company in writing
that it intends to dispose of such shares of Preferred
Stock or Common Stock, as the case may be, in a manner
to be described in such advice, and counsel reasonably
acceptable to the Company shall have delivered to the
Company an opinion that registration is not required
under the Act or under any applicable securities laws
of any jurisdiction; or
<PAGE>
ii) a registration statement on an appropriate
form under the Act, or a post-effective amendment to
such registration statement, covering the proposed
sale or other disposition of such shares of Preferred
Stock or Common Stock, as the case may be, shall be in
effect under the Act and such shares of Preferred
Stock or Common Stock or the proposed sale or other
disposition thereof shall have been registered or
qualified under applicable securities laws of any
jurisdiction.
The Investor undertakes to notify the Company as soon as
practicable of any material change in any representation,
warranty or other information relating to the Investor set forth
herein which occurs prior to the Closing in order to insure
compliance of the Investor with the terms of this Agreement.
The Investor acknowledges and agrees that the certificates
representing the Preferred Stock and the Common Stock shall bear
the following legend (unless not required under the Act):
"The securities represented by this certificate
have not been registered under the Securities Act of
1933 and may not be sold, exchanged, hypothecated or
transferred in any manner except in compliance with
that certain Subscription Agreement dated as of May 7,
1996 among the Corporation and various stockholders of
the Corporation."
The Investor also acknowledges that the Company may place a
stop transfer order against transfer of the Preferred Stock and
the Common Stock, if necessary in the Company's reasonable
judgment in order to assure compliance by the Investor with the
terms of this Agreement.
Each Investor located in the Commonwealth of Pennsylvania
further acknowledges and agrees that such Investor cannot sell
the Preferred Stock for a period of twelve (12) months from the
date of purchase thereof except as permitted by the Pennsylvania
Securities Act of 1972.
If the Investor is a partnership, corporation, trust or
other entity, the Investor represents and warrants that (i) the
individual executing this Agreement has appropriate authority to
act on behalf of the Investor and (ii) the Investor was not
specifically formed to acquire the Preferred Stock subscribed
for hereby. If the Investor is a partnership, the Investor
further represents that the funds to make this investment were
not derived from additional capital contributions of the
partners of such partnership made solely for the purpose of
enabling such partnership to purchase the Preferred Stock and
that such partnership was not formed solely for the purpose of
enabling such partnership to purchase the Preferred Stock.
The foregoing representations, warranties, agreements,
undertakings and acknowledgments are made by the Investor with
the intent that they be relied upon in determining its suitabil-
ity as a purchaser of Preferred Stock.
<PAGE>
5. Representations and Warranties of the Company. The
Company represents and warrants to the Investor that:
(a) The Company has duly filed with the Commission
all reports required by the Securities Exchange Act of 1934
(the "Exchange Act"). The Company has furnished to the
Investor a true and correct copy of the Report. The Report
does not, as of the date on which it was signed, contain
any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in light of the circumstances under which they
were made, not misleading.
(b) The financial statements (including the related
notes) of the Company included in the Report present fairly
the financial position of the Company as of the dates
indicated and its results of operations for the periods
specified therein. All such financial statements have been
prepared in accordance with generally accepted accounting
principles on a basis consistently applied.
(c) Except as disclosed in the Report, the Company
does not have any subsidiaries. The Company has been duly
organized and validly existing as a corporation in good
standing under the laws of its jurisdiction of
organization, with full power and authority (corporate and
other) to own its properties and conduct its business as
described in the Report, and is duly qualified to do
business as a foreign corporation and is in good standing
in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or
leased by it makes such licenses, certificates and permits
from governmental authorities necessary for the conduct of
its business as described in the Report.
(d) The authorized capital stock of the Company
consists of (i) 1,000,000 shares of Preferred Stock, par
value $1.00 per share, of which 7,900 shares are issued and
outstanding, and (ii) 10,000,000 shares of Common Stock,
par value $.01 per share, of which 2,635,530 shares are
issued and outstanding at May 1, 1996. At February 27,
1996, there are outstanding options and warrants
exercisable for a total of 2,441,120 shares of Common
Stock. In addition, the Company has agreements with
certain investors to issue, under certain circumstances,
additional warrants for up to 400,000 shares of Common
Stock. The Company has all requisite power and authority
to issue, sell and deliver the Preferred Stock in
accordance with and upon the terms and conditions set forth
in this Agreement and the Common Stock issuable upon
conversion of the Preferred Stock; and all corporate action
required to be taken by the Company for the due and proper
authorization, issuance, sale and delivery of the Preferred
Stock and Common Stock has been validly and sufficiently
taken. The outstanding shares of Common Stock are, and the
shares of Common Stock issuable upon conversion of the
Preferred Stock in accordance with its terms will be, when
issued, duly authorized, validly issued, fully paid and
nonassessable.
<PAGE>
(e) Except as set forth in this Agreement, or as
described in the Report, subsequent to the respective dates
as of which information is given in the Report, the Company
has not incurred any material liability or obligation,
direct or contingent, or entered into any material
transaction, whether or not in the ordinary course of
business, and there has not been any material change on a
consolidated basis in the capital stock, or any material
increase in the short-term debt or long-term debt, or any
material adverse change in the condition (financial or
other), business, key personnel, properties or results of
operations of the Company.
(f) The Company is not in violation of its
Certificate of Incorporation or Bylaws or in default in the
performance of any material obligation contained in any
material agreement, indenture or other instrument. The
performance by the Company of its obligations under this
Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach
of the Certificate of Incorporation or Bylaws of the
Company, or any material agreement, indenture or other
instrument to which the Company is a party or by which it
is bound, or any law, rule, administrative regulation or
decree of any court or governmental authority having
jurisdiction over the Company or its properties, or result
in the creation or imposition of any material lien, charge,
claim or encumbrance upon any property or asset of the
Company. Except as required by the Act and applicable
state securities or blue sky laws, no consent, approval,
authorization or order of any court or governmental
authority is required in connection with the consummation
of the transactions contemplated by this Agreement. The
rights granted to the Investors hereunder do not in any way
conflict with and are not inconsistent with any rights
granted to the holders of the Company's securities or debt
instruments.
(g) The Common Stock issuable upon conversion of the
Preferred Stock, upon such issuance, will conform to the
description thereof contained in the Report. Except as
described in the Report or as set forth in this Agreement,
there are no preemptive rights or other rights to subscribe
for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the
Company's Certificate or Incorporation or Bylaws or any
agreement or other instrument to which the Company is a
party. Neither the Offering nor the sale of the Preferred
Stock as contemplated in this Agreement gives rise to any
rights, other than those which have been waived, for or
relating to the registration of any shares of Common Stock
(other than such registration rights as are granted to the
Investors).
(h) The Company has full right, power and authority
to enter into this Agreement and this Agreement has been
duly authorized, executed and delivered by the Company and
constitutes the legal, valid and binding agreement of the
Company enforceable against the Company in accordance with
its terms.
<PAGE>
(i) Except as otherwise stated in the Report, (A) the
Company has good and marketable title (in fee simple, in
the case of real property), free and clear of all liens and
encumbrances, to all of the material real and personal
property described in the Report as being owned by it,
except for any liens and encumbrances which are not
material in the aggregate and do not materially interfere
with the conduct of the business of the Company, and (B)
has valid leases to the material real property described in
the Report as under lease to it with such exceptions as do
not materially interfere with the conduct of the business
of the Company.
(j) Except as set forth in the Report, there are no
actions, suits or proceedings pending before or by any
court or governmental agency or authority, or any
arbitrator, which seek to restrain or prohibit the
consummation of the transactions contemplated hereby or
which might reasonably be expected to result in any
material adverse change in the condition (financial or
other), business or results of operations of the Company
and, to the best of the Company's knowledge, no such
action, suit or proceeding has been threatened.
(k) The Company is not in violation of any law,
ordinance, governmental rule or regulation or court degree
to which it may be subject and the Company has not failed
to obtain any license, permit, franchise or other
governmental authorization necessary to the ownership of
its property or to the conduct of its business, which
violation or failure to obtain is likely to have a material
adverse effect on the condition (financial or other),
business or results of operations of the Company.
(l) Neither the Company nor any of its officers,
employees or other persons directly or indirectly
affiliated with it has, either directly or through an
agent, sold or offered for sale or solicited offers to
subscribe for or buy, or approached potential investors for
or otherwise negotiated in respect of the Preferred Stock,
other than with the Investors, with Furst Associates and
Eagle Partners with respect to their respective purchases,
as of March 29, 1996, of an aggregate of 7,900 shares of
Preferred Stock (such purchases, the "Prior Placement"),
and, preliminarily, with one other accredited investor and
neither the Company nor any of its employees or other
persons directly or indirectly affiliated with it has,
either directly or through an agent, participated in the
organization or management of any entity or has engaged or
proposes during any time after the Closing to engage in any
other activity, in a manner or under circumstances that
would jeopardize the status of the Offering as an exempted
transaction under the Act or under the laws of any state in
which it is represented by the Company that the Offering
may be made.
(m) No person is entitled to receive any commission,
fee or compensation from the Company for services rendered
as placement agent or lender in connection with the offer
or sale of the Preferred Stock pursuant to the Offering.
<PAGE>
6. Covenants of the Company.
The Company covenants with the Investor that:
(a) The Company will apply the net proceeds from the
sale of the Preferred Stock for general corporate purposes.
(b) The Company will, so long as the Investor shall
be the holder of Preferred Stock or Common Stock, furnish
to the Investor, as soon as practicable after the end of
each fiscal year, an annual report with respect to such
year (including financial statements audited by independent
public accountants) and, as soon as practicable after the
end of each quarterly period (other than the last quarterly
period) of each fiscal year, a statement (which need not be
audited) of the results of operations of the Company for
such period, and, to the extent not otherwise furnished,
promptly upon the filing thereof, copies of all reports
filed by the Company with the Commission pursuant to the
Exchange Act.
(c) So long as the Investor shall be the holder of
Preferred Stock or Common Stock, the Company will permit
any person designated by the Investor in writing, at the
sole expense of the Investor, to visit and inspect any of
the properties and books of account of the Company and to
discuss its affairs, finances and accounts with the
principal officers of the Company, all at such reasonable
times and at such reasonable intervals as the Investor may
reasonably request; provided, that the Company shall not be
required to reveal trade secrets or information not
reasonably pertinent to an evaluation of the credit of the
Company or compliance with this Agreement.
(d) The Company shall at all times keep in reserve
the number of shares of its Common Stock issuable from time
to time upon the conversion of all the outstanding
Preferred Stock.
(e) So long as the Investor shall be the holder of
Preferred Stock or Common Stock, the Company shall use its
best efforts to continue its existence, pay all applicable
taxes and comply with all applicable laws.
(f) The Company undertakes to notify each Investor as
soon as practical of any material change in any
representation, warranty or other information relating to
the Company set forth herein which occurs prior to the
Closing.
(g) Neither the Company nor any of its employees or
other persons directly or indirectly affiliated with it
will engage in any activity that would jeopardize the
status of the Offering as an exempt transaction under the
Act or under the laws of any state in which the Offering is
made.
(h) The Company acknowledges that the
representations, warranties, agreements, undertakings and
acknowledgments are made by the Company with the intent
that they be relied upon by each Investor in determining
whether to invest in the Preferred Stock.
<PAGE>
7. Conditions of Investor Obligations.
The Investor's obligations under this Agreement are subject
to the accuracy of the representations and warranties of the
Company made in Section 5 hereof in all material respects, to
the performance by the Company of its other obligations under
this Agreement to be performed at or prior to the Closing and to
the following further conditions:
(a) At the Closing, the Investor shall have received
the favorable opinion of counsel to the Company, dated the
Closing Date and in form and substance satisfactory to the
Investor, to the effect that:
i) The Company has been duly organized and is
validly existing as a corporation in good standing
under the laws of its jurisdiction of organization,
with full power and authority to own its properties
and conduct its business as described in the Report,
and is duly qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction in which the location of the properties
owned or leased by it, as known by such counsel, makes
such qualification necessary.
ii) The authorized capital stock of the Company
consists of 1,000,000 shares of preferred stock, par
value $1.00 per share, and 10,000,000 shares of Common
Stock, par value $.01 per share. The Company has all
requisite power and authority to issue, sell and
deliver the Preferred Stock in accordance with and
upon the terms and conditions set forth in this
Agreement; and all corporate action required to be
taken by the Company for the due and proper
authorization, issuance, sale and delivery of the
Preferred Stock has been validly and sufficiently
taken. Upon payment by the Investor at the Closing of
the purchase price for the shares of Preferred Stock
subscribed for hereby, the Preferred Stock will be,
and the Common Stock issuable upon conversion thereof,
upon issuance and delivery in the manner described in
the Certificate of Designation attached hereto, will
be duly authorized, validly issued, fully paid and
nonassessable. The Certificate of Designation, in the
form attached hereto, has been duly filed with the
Secretary of State of the State of Delaware and the
resolutions contained therein have been duly adopted
by the Board of Directors of the Company. There are
no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to
the Company's Certificate of Incorporation, By-laws or
any agreement or other instrument known to such
counsel to which the Company is a party except as
described in the Report.
<PAGE>
iii) The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby do not result in a violation of,
or constitute a default under, the Certificate of
Incorporation or Bylaws of the Company, or any
material agreement, indenture or other instrument
known to such counsel to which the Company is a party
or by which it may be bound, or to which any property
of the Company is subject, nor will the performance by
the Company of its obligations hereunder violate any
law, rule, administrative regulation or decree known
to such counsel of any court, or any governmental
agency or authority having jurisdiction over the
Company or its properties, or, to the knowledge of
such counsel, result in the creation or imposition of
any material lien, charge, claim or encumbrance upon
any property or asset of the Company. No consent,
approval, authorization or other order of any court,
governmental agency or authority is required in
connection with the consummation of the transactions
contemplated by this Agreement, except such as have
been obtained or as are contemplated hereunder.
iv) The Company has full legal right, power and
authority to enter into this Agreement. This
Agreement has been validly authorized, executed and
delivered by the Company and constitutes a legal,
valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally
and court decisions with respect thereto (provided
that no opinion need be expressed with respect to the
application of equitable principles in any proceeding,
whether at law or in equity).
In expressing such opinion, such counsel may state (i)
that, as to questions of fact not independently established
by such counsel, such counsel has relied on certificates of
the Company or its officers and of public officials, (ii)
that such opinion is limited to the General Corporation Law
of the State of Delaware, the laws of the United States and
the laws of the state in which such counsel maintains its
principal office, and that, in the event such principal
office is located outside of Pennsylvania, such counsel has
assumed that the laws of the Commonwealth of Pennsylvania
are the same as the laws of the state in which such
principal office is located, and (iii) that, when reference
is made in such opinion to "knowledge" or to what is
"known" to such counsel, such reference means the actual
knowledge of only those attorneys who have given
substantive attention to the representation of the Company
and the preparation and negotiation of this Agreement and
the Certificate of Designation attached hereto.
(b) At the Closing the Investor shall have received a
certificate, dated the date thereof and signed by the
Chairman of the Board and President of the Company to the
effect that:
i) The representations and warranties of the
Company in this Agreement are true and correct in all
<PAGE>
material respects, as if made at and as of the Closing
Date, and the Company has complied with all the
agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the
Closing Date; and
ii) The signer of said certificate has carefully
examined the Report and after giving effect to all
amendments or supplements thereto, on the Closing
Date, such Report does not include any untrue state-
ment of a material fact or omit to state any material
fact necessary to make the statements therein not
misleading.
(c) The Certificates of Designation for the Preferred
Stock shall have been duly filed with the Secretary of
State of the State of Delaware.
If any of the conditions specified in this Section 7 have
not been fulfilled in all material respects when and as required
by this Agreement to be fulfilled, the Investor may cancel this
Agreement and all its obligations under this Agreement by
notifying the Company of such cancellation in writing or by
telegram or by facsimile at any time at or before the Closing
and any such cancellation will be without liability or
obligation of any party to any other party (except in the case
of willful breach).
8. Conditions of Obligations of the Company.
The obligations of the Company under this Agreement are
subject to the accuracy of the representations and warranties of
the Investor made in Section 4 hereof in all material respects,
to the performance by the Investor of its other obligations
under this Agreement to be performed at or prior to the Closing
and to the further condition that all other Investors shall
concurrently make the Investments contemplated to be made in
connection with this Offering.
If any of the conditions specified in this Section 8 have
not been fulfilled in all material respects when and as required
by this Agreement to be fulfilled, the Company may cancel this
Agreement and all its obligations under this Agreement by
notifying the Investor of such cancellation in writing or by
telegram at any time at or before the Closing and any such
cancellation will be without liability or obligation of any
party to any other party (except in the case of willful breach).
9. Rule 144.
The Company covenants that it will file the reports
required to be filed by it under the Act and the Exchange Act
and the rules and regulations adopted by the Commission
thereunder (or, if it ceases to be required to file such
reports, it will, upon the request of the Investor, make pub-
licly available other information), and it will take such
further action as the Investor may reasonably request, all to
the extent required from time to time to enable the Investor to
sell the Common Stock without registration under the Act within
the limitation of the exemptions provided by (a) Rule 144 under
the Act, as such Rule may be amended from time to time, or (b)
<PAGE>
any similar rule or regulation hereafter adopted by the
Commission. Upon the request of the Investor, the Company will
deliver to it a written statement as to whether the Company has
complied with such information disclosure and other
requirements.
10. Automatic Conversion.
The Investors agree that if, at any time, 75% of the then
outstanding shares of Preferred Stock have been surrendered for
conversion into Common Stock in accordance with the Certificate
of Designation, the remaining 25% of the outstanding Preferred
Stock shall also be surrendered for conversion.
11. Expenses.
The reasonable legal expenses of the Investors incurred in
connection with this Offering (aggregating, together with the
expenses of Furst Associates and Eagle Partners in connection
the Prior Placement, up to a total of $6,500) shall be borne by
the Company. Subject to the preceding sentence, each party
hereto shall bear its own legal and other expenses incurred in
connection with this Offering.
12. Notices.
(a) Any notice required to be given or delivered to
the Investor shall be mailed first class, postage prepaid,
return receipt requested, to such Investor's address shown
on the signature page hereof.
(b) Any notice required to be given or delivered to
the Company shall be mailed first class, postage prepaid,
return receipt requested, to:
Acrodyne Communications, Inc.
516 Township Line Road
Blue Bell, PA 19422
Attn: President
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attn: Stephan Haimo, Esq.
13. Survival of Representations and Warranties. All
representations and warranties and agreements hereunder shall
survive execution of this Agreement and delivery of the
Preferred Stock.
<PAGE>
14. Governing Law. This Agreement and the rights and
obligations of the parties shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed wholly within
that State.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Subscription Agreement as of the date first above written.
_______________________________
Name of Subscriber
By:____________________________
Title:
Address:
________________________________
________________________________
________________________________
Tax Identification Number:________
The terms of the foregoing
including the subscription
described therein are agreed
to and accepted on this
May 7, 1996:
ACRODYNE COMMUNICATIONS, INC.
By:
Title: President
Exhibit A
(Intentionally Omitted)
Acrodyne Industries, Inc., a Pennsylvania corporation is a 100% wholly owned
subsidiary of Acrodyne Communications, Inc, a Delaware corporation.
Exhibit 23.1
We hereby consent to the incorporation by reference in each Prospectus
constituting part of the Registration Statements on Form S-3 (No. 333-6727
and No. 33-98674) of Acrodyne Communications, Inc. of our report dated
March 18, 1997 appearing on page 30 of this Form 10-KSB.
/s/ PRICE WATERHOUSE LLP
Philadelphia, PA
April 8, 1997
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3921544
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<RECEIVABLES> 2181435
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<TOTAL-ASSETS> 16239262
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<BONDS> 1305240
<COMMON> 43843
0
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<OTHER-SE> 12485295
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<SALES> 10417029
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<CGS> 7371857
<TOTAL-COSTS> 3948482
<OTHER-EXPENSES> (247255)
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<INTEREST-EXPENSE> 70845
<INCOME-PRETAX> (1221410)
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<INCOME-CONTINUING> (1221410)
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