AGREEMENT made this 12th day of September, 1996 between CNL HOLDING, INC.,
a Delaware corporation (the "Investor") and CONOLOG CORPORATION, a Delaware
corporation (the "Company").
WHEREAS, the Company is indebted to The Chase Manhattan Bank, formerly
known as Chemical Bank (the "Bank"), in the principal amount of $1,025,000 plus
interest and fees thereon as evidenced by that certain Amended and Restated Term
Note from the Company to the Bank, dated August 24, 1995, as modified by an
Allonge dated September 11, 1996 (as so modified, the "Note");
WHEREAS, the Note is convertible into 1,400,000 shares of the Company's
common stock;
WHEREAS, the Bank is also the holder of 375,000 shares of the Company's
common stock (the "Bank Shares");
WHEREAS, the Investor has agreed to enter into an Option Agreement with the
Bank, dated the date hereof (the "Option Agreement"), pursuant to which, under
certain circum stances, the Investor has the right to purchase the entire
indebtedness of the Company to the Bank and all of the Bank Shares;
WHEREAS, the Investor has agreed to lend up to $2,500,000 to the Company,
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1. Registration of Shares Being Acquired. The Company will use its best
efforts to file a registration statement with the Securities and Exchange
Commission (the "Commission")
covering the 375,000 Bank Shares and the 1,400,000 shares of common stock into
which the Note is convertible (collectively, the "Acquired Shares"), all of
which are subject to the Option Agreement. The Company will use its best efforts
to have such registration statement declared effective as soon as possible after
the filing thereof, and to keep such registration statement current and
effective for a period of two years or until such earlier date as all of the
Shares registered pursuant to such registration statement shall have been sold
or otherwise transferred.
2. Use of Proceeds. All proceeds of the sale of the Acquired Shares shall
be applied as follows: The first $1,500,000 shall be paid to reimburse the
Investor for the payments made to the Bank pursuant to the Option Agreement.
Fifty percent (50%) of the balance of the proceeds shall be loaned by the
Investor to the Company within five days of the Investor's receipt of such
proceeds, provided, however, that the Investor shall not be required to lend the
Company more than $2,500,000. Such loans are hereinafter collectively called the
"Loans". The balance of the proceeds shall belong to the Investor.
3. Terms of Loans. Each Loan shall be evidenced by a note which shall be
due 12 months after the making of each such Loan. Each Loan shall bear interest
at the rate of 4% per annum commencing with the date the Loan is made. Interest
will accrue prior to maturity. At maturity, the Company will have the option to
repay each of the Loans, together with all accrued interest
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thereon, by issuing a new Series C Preferred Stock (the "Preferred Stock"). For
purposes of such repayment, the shares of Preferred Stock shall be valued at
$5.00 per share.
4. The Preferred Stock. As more particularly described in Exhibit A hereto,
the Preferred Stock will be non-voting and will carry a cumulative dividend of
8% per annum, which may be payable by the issuance of shares of common stock
valued at $5.00 per share up to a maximum of 40,000 shares per annum. The
Preferred Stock will be convertible into common stock at the rate of one share
of common stock for each share of Preferred Stock. The Preferred Stock will
carry a liquidating preference of $5.00 per share.
5. Registration Rights. (a) During the period commencing on the issuance of
any shares of Preferred Stock to the Investor and ending on the second
anniversary thereof (the "Registration Period"), the Company shall advise the
Investor by written notice at least 30 days prior to the filing of any
post-effective amendment to the Registration Statement or of any new
registration statement or post-effective amendment thereto under the Securities
Act of 1933, as amended (the "Act") covering any securities of the Company, for
its own account or for the account of others (other than a registration
statement on Form S-4 or S-8 or any successor forms thereto), and will include
in any such post-effective amendment or registration statement, such informa
tion as may be required to permit a public offering of the shares of Preferred
Stock and all or any of the common stock then issu able under the terms of the
then outstanding shares of Preferred
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Stock (the "Registrable Securities"). The Company shall supply prospectuses and
such other documents as the Investor may request in order to facilitate the
public sale or other disposition of the Registrable Securities, use its best
efforts to register and qualify any of the Registrable Securities for sale in
such states as the Investor designates provided that the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or
execute a general consent to service of process in any jurisdiction in any
action and do any and all other acts and things which may be reasonably
necessary or desirable to enable the Investor to consummate the public sale or
other disposition of the Registrable Securities, and furnish indemnification in
the manner provided in Section 6 hereof. The Investor shall furnish information
and indemnification as set forth in Section 6. The Company shall use its best
efforts to cause the managing under writer or underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be
included in the registration to include such securities in such underwritten
offering on the same terms and conditions as any similar securities of the
Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering advises the Investor that the total
amount of securities which it intends to include in such offering is such as to
materially and adversely affect the success of such offering, then the amount of
securities to be offered for the account of the Investor shall be eliminated,
reduced, or limited to the extent necessary to reduce the total amount of
securities to be
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included in such offering to the amount, if any, recommended by such managing
underwriter or underwriters. The Investor will pay its own legal fees and
expenses and any underwriting discounts and commissions on the securities sold
by the Investor but shall not be responsible for any other expenses of such
registration.
(b) If the Investor shall give notice to the Company at any time during the
Registration Period to the effect that the Investor desires to register under
the Act its shares of Preferred Stock or any of the common stock then issuable
under the terms of the then outstanding shares of Preferred Stock under such
circumstances that a public distribution (within the meaning of the Act) of any
such securities will be involved, then the Company will promptly, but no later
than 60 days after receipt of such notice, file a post-effective amendment to a
then current Registration Statement or a new registration statement pursuant to
the Act, to the end that such shares of Preferred Stock and such shares of
common stock may be publicly sold under the Act as promptly as practicable
thereafter and the Company will use its best efforts to cause such registration
to become and remain effective for a period of 120 days (including the taking of
such steps as are reasonably necessary to obtain the removal of any stop order);
provided that the Investor shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request in
writing. The Investor may, at its option, request the filing of a post-effective
amendment to a then current Registration Statement or a new registration
statement under the Act with respect to the Registrable
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Securities on only two occasions during the Registration Period. All costs and
expenses of such post-effective amendment or new registration statement shall be
borne by the Company, except that the Investor shall bear the fees of its own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by it.
The Company shall be entitled to postpone the filing of any registration
statement pursuant to this subsection (b) other wise required to be prepared and
filed by it if (i) the Company is engaged in a material acquisition,
reorganization, or divestiture, (ii) the Company is currently engaged in a self
tender or exchange offer and the filing of a registration statement would cause
a violation of Rule 10b-6 or any other Rule under the Securities Exchange Act of
1934, (iii) the Company is engaged in an underwritten offering and the managing
underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lockup as a result
of an underwritten public offering and such underwriter has refused in writing,
the Company's request to waive such lock-up. In the event of such postponement,
the Company shall be required to file the registration statement pursuant to
this subsection (b), within 60 days of the consummation of the event requiring
such postponement.
The Company will use its best efforts to maintain such registration
statement or post-effective amendment current under
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the Act for a period of at least six months (and for up to an additional three
months if requested by the Investor) from the effective date thereof. The
Company shall supply prospectuses, and such other documents as the Investor may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities, use its best efforts to register and qualify any
of the Registrable Securities for sale in such states as such holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action.
6. Indemnification. (a) Whenever pursuant to Section 5 a registration
statement relating to the Preferred Stock or any shares issued or issuable
pursuant to the terms of any Preferred Stock, is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless the Investor (herein
after called the "Distributing Holder"), and each person, if any, who controls
(within the meaning of the Act) the Distributing Holder, and each underwriter
(within the meaning of the Act) of such securities and each person, if any, who
controls (within the meaning of the Act) any such underwriter, against any
losses, claims, damages, or liabilities, joint or several, to which the
Distributing Holder, any such controlling person or any such underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
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contained in any such registration statement or any preliminary prospectus or
final prospectus constituting a part thereof or any amendment or supplement
thereto, or arise out of or are based upon the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and will reimburse the Distributing Holder and each such
controlling person and underwriter for any legal or other expenses reasonably
incurred by the Distributing Holder or such controlling person or underwriter in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus, said final prospectus, or said amendment or supplement
in reliance upon and in conformity with written information furnished by such
Distributing Holder, for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed said registration
statement and such amendments and supplements thereto, each person, if any, who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, or liabilities, joint and several, to which the Company or any such
director, officer, or controlling person may become subject, under the Act or
otherwise, insofar as
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such losses, claims, damages, or liabilities arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission was made in said registration
statement, said preliminary prospectus, said final prospectus, or said amendment
or supplement in reliance upon and in conformity with written information
furnished by such Distributing Holder for use in the preparation thereof; and
will reimburse the Company or any such director, officer, or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this Section 6 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 6.
- 9 -
(d) In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof.
7. Company's Representations and Warranties. The Company covenants and
agrees that the Preferred Stock and all shares of common stock which may be
issued pursuant to the terms of the Preferred Stock will, upon issuance, be duly
and validly issued, fully paid and nonassessable. The Company further covenants
and agrees that so long as any shares of Preferred Stock are outstanding, the
Company will at all times have authorized and reserved a sufficient number of
shares of its Common Stock to provide for the conversion of the Preferred Stock
and that it will have authorized and reserved a sufficient number of shares of
Common Stock for issuance upon conversion of the Preferred Stock.
8. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company as follows:
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(a) The Investor has the full right, power and authority to enter into
this Agreement and to carry out and consummate the transactions contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Investor.
(b) The Investor acknowledges that it and each of its shareholders has
received and reviewed all publicly filed documents concerning the Company and
has had an opportunity to meet with and ask questions of the management of the
Company.
(c) The Investor and each of its shareholders is an accredited
investor within the meaning of Rule 501 of the Commission under the Securities
Act, has the financial ability to bear the economic risk of its or his
investment, can afford to sustain a complete loss of such investment and has
adequate means of providing for its or his current needs and personal contingen
cies, and has no need for liquidity in its or his investment in the Company; and
the amount invested in the Company by the Investor does not constitute a
substantial portion of its or his net worth.
(d) The Investor is acquiring the Shares being purchased by it for
investment and not with a view to the sale or distribution thereof, for its own
account and not on behalf of others and has not granted any other person any
right or option or any participation or beneficial interest in any of the
securities. The Investor acknowledges its understanding that the Acquired Shares
constitute restricted securities within the
- 11 -
meaning of Rule 144 of the Commission under the Act, and that none of such
securities may be sold except pursuant to an effective registration statement
under the Act or in a trans action exempt from registration under the Act, and
acknowledges that it understands the meaning and effect of such restriction. The
Investor has sufficient knowledge and experience in financial and business
matters so that it is capable of evaluating the risks and merits of the purchase
of the Acquired Shares. The Investor is aware that no Federal or state
regulatory agency or authority has passed upon the sale of the Acquired Shares
or any of the terms of the Preferred Stock or the terms of the sale or the
accuracy or adequacy of any material provided to the Investor and that the price
of the Acquired Shares was negotiated between the Investor and the Bank and does
not necessarily bear any relationship to the underlying assets or value of the
Company and that the terms of the Preferred Stock was negotiated between the
Investor and the Company and does not necessarily bear any relationship to the
underlying assets or value of the Company. THE INVESTOR UNDERSTANDS THAT AN
INVESTMENT IN THE SHARES BEING PURCHASED BY IT INVOLVES A HIGH DEGREE OF RISK.
(e) THE INVESTOR UNDERSTANDS THAT IN CONNECTION WITH ITS EVALUATION OF
THE COMPANY, THE INVESTOR HAS BEEN OR MAY HAVE BEEN PROVIDED WITH ACCESS TO
CERTAIN INFORMATION CONCERNING THE COMPANY WHICH HAS NOT BEEN PUBLICLY
DISCLOSED. THE INVESTOR FURTHER UNDERSTANDS THAT ANY TRADING BY IT IN SECURITIES
OF THE COMPANY USING NON-PUBLIC INFORMATION COULD CONSTITUTE A VIOLATION OF
FEDERAL AND STATE SECURITIES LAWS AND/OR OTHER LAWS AND MAY
- 12 -
SUBJECT IT TO CRIMINAL AND/OR CIVIL PENALTIES AND LIABILITY. In view of the
foregoing, the Investor agrees not to (i) purchase or sell, including a short
sale, any of the Company's securities or rights to purchase or sell such
securities as long as the Investor is in possession of material non-public
information or (ii) disclose any non-public information to any other person.
(f) There is no finder's fee or brokerage commission payable with
respect to the purchase by the Investor of the Acquired Shares or the
consummation of the transactions contemplated by this Agreement and the Investor
agrees to indemnify and hold harmless the Company from and against any and all
cost, damage, liability or expense (including fees and expenses of counsel)
arising out of or relating to claims for such fees or commissions, except to the
extent that any such fees or commissions have been directly incurred by the
Company.
9. Further Agreements of the Investor.
(a) The Investor hereby agrees that all sales, transfers and
dispositions of the Acquired Shares, any shares of Preferred Stock and any
shares of common stock issuable pursuant to the terms of the Preferred Stock
shall be made exclusively to bona fide third party purchasers pursuant to a
registered public offering or Rule 144 under the Act, if applicable.
(b) While the Investor holds any shares of common stock, it agrees to
vote such shares as recommended by Xxxxxx X. Xxxxx. In furtherance of the
foregoing, the Investor is delivering to Xxxxxx X. Xxxxx an Irrevocable Proxy in
substantially the form of Exhibit B attached hereto.
- 13 -
10. Termination of Underwriting Agreement. Concurrently with the execution
hereof, the Company and I.A. Xxxxxxxxxx & Co. are executing and delivering an
agreement terminating certain provisions of the Underwriting Agreement between
them dated August 16, 1995 and providing that with respect to the terminated
provisions, neither the Company nor I.A. Xxxxxxxxxx & Co. will have any further
rights or obligations pursuant thereto.
11. Further Assurances. From and after the date of this Agreement and the
date of Closing, each party hereto shall from time to time, at the request of
the other party and without further consideration, do, execute and deliver, or
cause to be done, executed and delivered, all such further acts, things and
instruments as may be reasonably requested or required more effectively to
evidence and give effect to the transactions provided for in this Agreement.
12. Expenses. Each party shall bear and pay all legal, accounting and other
fees and expenses incurred by it in connection with, and with the transactions
provided for in, this Agreement and the performance of all its obligations and
agreements hereunder.
13. Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if personally delivered against receipt or if
mailed by first class registered or certified mail return receipt requested,
addressed
- 14 -
to the parties at their respective addresses set forth on the first page of this
Agreement, with copies to their respective counsel, Xxxxxxx Xxxxx Xxxxxxx Xxxxx
& Xxxxxx LLP, Att: Xxxxxx X. Xxxxxxxx, Esq., Xxx Xxxxxxxxxxxx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, in the case of the Company, and Xxxxxxxxx & Xxxxxxxxx LLP, Att:
Xxxxxx Xxxxxxxxx, Esq., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, in the case
of the Investor, or to such other person or address as may be designated by like
notice hereunder.
14. Parties in Interest. This Agreement shall be binding upon, and shall
inure to the benefit of and be enforceable by, the parties hereto and their
respective legal representatives, successors and assigns, but no other person
shall acquire or have any rights under this Agreement.
15. Entire Agreement; Modification; Waiver. This Agreement (as below
defined) contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior
negotiations and understandings, if any, and there are no agreements, representa
tions or warranties other than those set forth, provided for or referred to
herein. All exhibits and schedules to this Agreement are expressly made a part
of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein, in any of such writings or elsewhere shall
be deemed to refer to and include all such writings. Neither this Agreement nor
any provisions hereof may be modified, amended, waived, discharged or
terminated, in whole or in part, except in writing
- 15 -
signed by the party to be charged. Any party may extend the time for or waive
performance of any obligation of any other party or waive any inaccuracies in
the representations or warranties of any other party or compliance by any other
party with any of the provisions of this Agreement. No waiver of any such
provisions or of any breach of or default under this Agreement shall be deemed
or shall constitute a waiver of any other provisions, breach or default, nor
shall any such waiver constitute a continuing waiver.
16. Interpretation.
16.(a) This Agreement shall be governed and construed and enforced in
accordance with the laws of the State of New York applicable to contracts made
and to be performed exclusively in that State without giving effect to the
principles of conflict of laws.
16.(b) All pronouns and words used in this Agreement shall be read in the
appropriate number and gender, the masculine, feminine and neuter shall be
interpreted interchangeably and the singular shall include the plural and vice
versa, as the circumstances may require.
17. Headings; Counterparts. The article and section headings in this
Agreement are for reference purposes only and shall not define, limit or affect
the meaning or interpretation of this Agreement. This Agreement maybe executed
in two or more counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
CNL HOLDING, INC.
By /s/ X.X. Xxxx, Pres.
---------------------------------
(Title)
CONOLOG CORPORATION
By /s/ Xxxxxx X. Xxxxx
---------------------------------
Xxxxxx X. Xxxxx, President
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EXHIBIT A
CERTIFICATE OF THE DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF
of the
SERIES C PREFERRED STOCK (par value $.50)
of
CONOLOG CORPORATION
---------------------------
Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware
---------------------------
We, the undersigned, being the President and the Secretary, respectively,
of CONOLOG CORPORATION, a corporation organized and existing under the laws of
the State of Delaware (hereinafter called the "Corporation"), do hereby certify
pursuant to the provisions of Section 151(g) of the General Corporation Law of
the State of Delaware, as amended, that at a meeting of the Board of Directors
of the Corporation duly convened and held on ______ __, 199_, the following
resolutions were duly adopted:
RESOLVED that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") by the provisions of Article FIFTH of the Certificate
of Incorporation, as amended, of the Corporation, this Board of Directors hereby
creates a series of Preferred Stock, par value $.50 per share, of the
Corporation to consist of 600,000 shares, which number may be increased or
decreased (but not below the number of shares thereof then outstanding) by
further resolution or resolutions of the Board of
Directors, and this Board of Directors hereby fixes the designations, rights,
voting powers, preferences, and the relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series as follows:
I. Designation. The designation of said series of Preferred Stock shall be
"Series C Preferred Stock" (hereinafter called "this Series" or the "Series C
Preferred Stock").
II. Dividends. The holders of outstanding shares of the Series C Preferred
Stock shall be entitled to receive, out of any funds legally available therefor,
dividends at the rate of eight percent (8%) per annum, and no more, payable
annually in cash or shares of the Common Stock of the corporation on the
________ day of ____________________ in each year, commencing ________________,
199_, to registered holders thereof on said payment date. Such dividends shall
be cumulative and shall accrue (whether or not in any annual period there shall
be net profits or surplus of the Corporation legally available therefor) from
the annual dividend payment date next preceding the date of their issue.
If for any annual dividend period or periods after _______________, 199_,
full dividends upon the outstanding Series C Preferred Stock at the aforesaid
rate shall not have been paid, or declared and set apart for payment, the amount
of the deficiency shall be paid (but without interest), or declared and set
apart for payment, before any sum or sums shall be set aside for or applied to
the purchase or redemption of Preferred Stock of any series or the purchase,
redemption or other acquisition for value of shares of any junior stock) shall
be paid or
2
declared, or any other distribution shall be ordered or made, upon shares of any
junior stock. The term "junior stock" as used in this resolution with respect to
the Series C Preferred Stock means the Common Stock, as well as any other class
of stock of the Corporation ranking junior to the Series C Preferred Stock as to
dividends or assets.
III. Voting. Except as otherwise required by law or this Resolution, the
holders of Series C Preferred Stock shall have no voting rights and shall not be
entitled to notice of any stockholders' meetings or to vote upon the election of
directors or upon any question affecting the management or affairs of this
Corporation.
IV. Liquidation. In the event of a liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of Series C
Preferred Stock shall be entitled to receive out of the assets of this
Corporation, whether such assets are capital or surplus of any nature, an amount
equal to five dollars ($5) per share and, in addition to such amount, a further
amount equal to the dividends unpaid and accumulated thereon, as provided in
paragraph II of this Resolution, to the date that payment is made to the holders
of Series C Preferred Stock, whether earned or declared or not, and no more,
before any payment shall be made or any assets distributed to the holders of
junior stock. If upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the assets thus distributable among the holders of the
Series C Preferred Stock shall be insufficient to permit the payment to such
stockholders of the full preferential amounts
3
aforesaid, then the entire assets of this Corporation to be distributed shall be
distributed ratably among the holders of Series C Preferred Stock. In the event
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, subject to all of the preferential rights of the
holders of Series C Preferred Stock on distribution or otherwise, the holders of
junior stock shall be entitled to receive, ratably, all remaining assets of this
Corporation. A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be liquidation, dissolution or
winding up, within the meaning of this paragraph.
V. Redemption. The Corporation, at its election, expressed by resolution of
the Board of Directors, may at any time or from time to time on or after
____________, 199_ (but not prior thereto) redeem the whole or any part of the
outstanding shares of Series C Preferred Stock by paying in cash therefor five
dollars ($5) per share and, in addition to the foregoing amount, an amount in
cash equal to all dividends on shares of Series C Preferred Stock unpaid and
accumulated as provided in paragraph II of this Resolution, whether earned or
declared or not, to and including the date fixed for redemption, such sum being
hereinafter sometimes referred to as the "Redemption Price." In case of the
redemption of a part of only of the outstanding shares of Series C Preferred
Stock, the Corporation shall designate by lot, in such manner as the Board of
Directors may determine, the shares to be redeemed, or shall effect such
4
redemption pro rata. Less than all of the shares of Series C Preferred Stock at
any time outstanding may not be redeemed until all dividends accrued and in
arrears upon all shares of Series C Preferred Stock outstanding shall have been
paid for all past dividend periods, and until full dividends for the then
current dividend period on all shares of Series C Preferred Stock then
outstanding, other than the shares to be redeemed, shall have been paid or
declared and the full amount thereof set apart for payment. At least ninety (90)
days' prior notice by first class mail, postage prepaid, shall be given to the
holders of record of shares of Series C Preferred Stock to be redeemed, such
notice to be addressed to each such stockholder at his post office address as
shown by the records of the Corporation, but failure of any holder of Series C
Preferred Stock to receive any such notice, if given, shall not affect the
validity of the proceedings for such redemption. On or after the date fixed for
redemption and stated in such notice, each holder of shares of Series C
Preferred Stock called for redemption shall surrender his certificate(s)
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Redemption Price. In
case less than all the shares represented by any such surrendered certificate(s)
are redeemed, a new certificate shall be issued representing the unredeemed
shares. If such notice of redemption shall have been duly given, and if on the
date fixed for redemption funds necessary for the redemption shall be available
therefor, then notwithstanding that the certificates evidencing any shares of
Series C Preferred Stock so called for redemption shall not have been
surrendered,
5
all dividends with respect to the shares so called for redemption shall cease to
accrue after the date fixed for redemption and all rights with respect to the
shares so called for redemption shall forthwith after such date cease and
terminate, except only the right of the holders to receive the Redemption Price
without interest upon surrender of their certificates therefor.
If, on or prior to any date fixed for redemption of shares of Series C
Preferred Stock, the Corporation deposits, with any bank or trust company in the
City of New York, State of New York, as a trust fund, a sum sufficient to
redeem, on the date fixed for redemption thereof, the shares called for
redemption, with irrevocable instructions and authority to the bank or trust
company to give the notice of redemption thereof if such notice shall not
previously have been given by the Corporation, or to complete the giving of such
notice if theretofore commenced, and to pay, on or after the date fixed for
redemption or prior thereto, the Redemption Price of the shares to their
respective holders upon the surrender of their share certificate(s), then from
and after the date of the deposit (although prior to the date fixed for
redemption), the shares so called shall (except as hereinafter provided) be
deemed to be redeemed and dividends on those shares shall cease to accrue after
the date fixed for redemption. The deposit shall be deemed to constitute full
payment of the shares to their holders and from and after the date of the
deposit the shares shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be stockholders with respect to such shares, and shall
have no rights with respect thereto except the right to receive from the
6
bank or trust company payment of the Redemption Price of the shares, without
interest, upon the surrender of their certificates therefor, and the right to
surrender said shares and receive Common Stock as provided in paragraph IV of
this Resolution at any time up to but not after the close of business on the
fifth day prior to the date fixed for redemption of such shares. Any moneys so
deposited on account of the Redemption Price of shares of Series C Preferred
Stock converted subsequent to the making of such deposit shall be repaid to the
Corporation forthwith upon the conversion of such shares. Any moneys so
deposited which remain unclaimed by the holders of shares of Series C Preferred
Stock after the expiration of six years from the redemption date, together with
any interest thereon allowed by the bank or trust company with which the deposit
shall have been made, shall be paid to the Corporation.
VI. Right to Convert into Common Stock. Holders of shares of Series C
Preferred Stock shall have the right to convert their shares of Series C
Preferred Stock into shares of the Common Stock of the Corporation upon the
following terms and conditions:
1. At any time between _____________, 199_ and the fifth day prior to
such date, if any, as may have been fixed for the redemption of shares of Series
C Preferred Stock in any notice of redemption given as provided in paragraph V
hereof, holders of shares of Series C Preferred Stock may, at their option,
receive for each share of Series C Preferred Stock held one (1) fully paid and
non-assessable share of the Common Stock of the Corporation upon surrender of
the certificate for such
7
shares of the Series C Preferred Stock to the Corporation at the office of the
Corporation or the transfer agent for the Series C Preferred Stock. The
conversion ratio of one share of Series C Preferred Stock for each share of
common stock as aforesaid at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Conversion Ratio." The Conversion
Ratio shall be subject to adjustment from time to time in certain instances as
hereinafter provided. The Corporation shall make no payment or adjustment on
account of any dividends accrued on shares of Series C Preferred Stock
surrendered for conversion. In case of the call for redemption of any shares of
Series C Preferred Stock, such right to convert into shares of Common Stock
shall terminate as to the shares of Series C Preferred Stock designated for
redemption at the close of business on the fifth day preceding the day fixed for
redemption, unless default is made by the Corporation in the payment of the
redemption price.
2. Before any holder of shares of Series C Preferred Stock shall be
entitled to receive shares of Common Stock, he shall surrender the certificate
or certificates for shares of Series C Preferred Stock, with the Conversion Form
annexed thereto or other form as prescribed by the Board of Directors duly
executed, at the office of the Corporation or of any transfer agent for the
Series C Preferred Stock and shall state in writing therein the name and names
in which he wishes the certificates for Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of shares of Series C Preferred Stock,
8
or to his nominee or nominees, certificates for the number of full shares of
Common Stock to which he shall be entitled, as aforesaid, together with cash in
lieu of any fraction of a share as hereinafter provided. Conversion shall be
deemed to have been made as of the date of such surrender of the shares of
Series C Preferred Stock, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock on said date.
3. In case the Corporation shall at any time subdivide the outstanding
shares of Common Stock, or shall issue as a dividend on Common Stock such number
of shares of Common Stock as shall equal five percent (5%) or more of the number
of shares of Common Stock outstanding immediately prior to the issuance of such
dividend, then in either of such cases, the Conversion Ratio per share of Common
Stock in effect immediately prior to such subdivision or the issuance of such
dividend shall be proportionately decreased and the number of shares of Common
Stock issuable hereunder shall be proportionately increased, and conversely, in
case the Corporation shall at any time combine the outstanding shares of Common
Stock, the Conversion Ratio in effect immediately prior to such combination
shall be proportionately adjusted, and the number of shares of Common Stock
issuable hereunder shall be proportionately reduced, in each case effective at
the close of business on the date of such subdivision, dividend or combination,
as the case may be. For the purposes of this subparagraph 3, the date of
issuance of any such dividend shall be the record date fixed by the Board of
9
Directors of the Corporation. In the absence of a record date so fixed, the
first business day during which the stock transfer books of the Corporation
shall be closed for the purpose of such determination shall be deemed to be the
record date.
4. No fractional shares of Common Stock or scrip representing
fractional shares shall be issued upon the conversion of Series C Preferred
Stock into Common Stock hereunder. If any fractional interest in a share of
Common Stock would, except for the provisions of this subparagraph 4, be
deliverable, the Corporation shall, in lieu of delivering the fractional share
therefor, pay to the holder of such surrendered shares of Series C Preferred
Stock an amount in cash equal (computed to the nearest cent) to the current
market value of such fractional interest, which current market value shall be
determined in such reasonable manner as may be prescribed by the Board of
Directors.
5. Whenever the Conversion Ratio is adjusted, as herein provided, the
Corporation shall forthwith maintain at its office and file with the transfer
agents for shares of Series C Preferred Stock a statement, signed by the
Chairman of the Board, the President or a Vice President of the Corporation and
by its Treasurer or an Assistant Treasurer, showing in detail the facts
requiring such adjustment and the Conversion Ratio after such adjustment. Such
transfer agent shall be under no duty or responsibility with respect to any such
statement except to exhibit the same from time to time to any holder of shares
of Series C Preferred Stock desiring an inspection thereof.
10
6. In case of any capital reorganization or any reclassification of
the capital stock of the Corporation or in case of the consolidation or merger
of the Corporation with or into another corporation (other than a merger with a
subsidiary in which the Corporation is the continuing corporation and which does
not result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock) or the conveyance of all or substantially
all of the assets of the Corporation to another corporation, each share of
Series C Preferred Stock shall thereafter be entitled, upon surrender thereof,
to receive the number and kind of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock of the
Corporation issuable upon surrender of such share of Series C Preferred Stock
would have been entitled upon such reorganization, reclassification,
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (ad determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of shares of Series C Preferred Stock, to
the end that the provisions set forth herein (including provisions with respect
to changes in and other adjustments of the Conversion Ratio) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon such surrender of shares of Series
C Preferred Stock.
11
7. In case:
(1) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend, or any
other distribution, payable otherwise than in cash; or
(2) the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase any
shares of stock of any class or to receive any other rights; or
(3) of any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation (other than a
subdivision or combination of its outstanding shares of Common Stock),
consolidation or merger of the Corporation with or into another corporation, or
conveyance of all or substantially all of the assets of the Corporations to
another corporation; or
(4) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, and in any such case, the Corporation shall
cause to be mailed to the transfer agent for the Series C Preferred Stock, and
to the holders of record of the outstanding Series C Preferred Stock, at least
thirty (30) days' prior to the date hereinafter specified, a notice stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their shares
12
of Common Stock for securities or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
8. The Corporation shall at all times reserve and keep available, out
of its authorized but unissued Common Stock, solely for the purpose of effecting
conversions upon surrender of Series C Preferred Stock, the full number of
shares of Common Stock issuable upon the surrender of all shares of Series C
Preferred Stock, from time to time outstanding. The Corporation shall from time
to time (subject to obtaining necessary director and stockholder approval), in
accordance with the laws of the State of Delaware, increase the authorized
amount of its Common Stock if at anytime the authorized number of shares of
Common Stock remaining unissued shall not be sufficient to permit the conversion
of all of the shares of Series C Preferred Stock at the time outstanding. If
shares of Common Stock of the Corporation are listed on any securities exchange
and the listing thereon of the shares of such Common Stock to be reserved as
aforesaid is required by the rules of said exchange as a condition precedent to
the issue thereof upon conversion, the Corporation shall make application for
such listing, on notice of issuance, of said shares and shall use its best
efforts to effect such listing. Also, if any shares of Common Stock so to be
reserved shall require registration or qualification with or approval of any
governmental authority or under any Federal or State law as a condition to the
issue thereof upon conversion, the Corporation shall use its best efforts to
cause such shares to be duly registered, qualified or approved, as the case may
be.
13
9. The Corporation shall be any and all issue and other taxes that may
be payable in respect of any issue or delivery of shares of Common 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 shares of Common Stock in a name other than that in which the shares
of Series C Preferred Stock so surrendered 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 any such tax, or has established, to the
satisfaction of the Corporation, that such tax has been paid.
10. Whenever reference is made in these provisions to the issue or
sale of shares of Common Stock, the term "Common Stock" shall include any stock
of any class of the Corporation other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
11. All certificates for shares of Series C Preferred Stock
surrendered shall be appropriately cancelled on the books of the Corporation,
and the shares so surrendered represented by such certificates shall be restored
to the status of authorized but unissued shares of Preferred Stock of the
Corporation.
RESOLVED FURTHER, that the President or any Vice-President and the
Secretary or any Assistant Secretary of this Corporation, be and they hereby are
authorized and directed to prepare and file a certificate setting forth a copy
of these
14
resolutions in accordance with the provisions of the General Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned do hereby declare, certify and
affirm, under penalties of perjury, that the facts herein stated are true, and
accordingly have hereunto executed this Certificate and affixed the seal of the
Corporation, this ____ day of ________________, 199_.
-----------------------------
Xxxxxx X. Xxxxx, President
-----------------------------
Xxxxx Xxxxxx, Secretary
[SEAL]
- 15 -
EXHIBIT B
Dated: , 1996
IRREVOCABLE PROXY
The undersigned, CNL Holding, Inc., a Delaware corporation, does
hereby constitute and appoint Conolog Corporation, a Delaware corporation
("Conolog"), acting solely through its President, Xxxxxx X. Xxxxx ("Benou"), as
the undersigned's true and lawful substitute attorney and proxy, with full power
to act for and in the name, place and stead of the undersigned to vote according
to the number of votes which the undersigned would be entitled to cast and with
all powers which the undersigned would be entitled to exercise if personally
present at any meeting of the stockholders of Conolog or any adjournment
thereof, upon any matter coming before such meeting or adjournment or to
otherwise consent or withhold consent from any action of stockholders of
Conolog; provided, however, that if Benou shall die while this Irrevocable Proxy
remains in effect, any successor to Benou as President of Conolog shall succeed
to Benou as the person through whom Conolog shall exercise its rights under this
Irrevocable Proxy.
The undersigned does hereby revoke all other proxies given by the
undersigned to any other person or entity prior to the date hereof with respect
to the aforesaid matters.
This proxy is irrevocable and shall not expire until the earlier of
the tenth anniversary hereof and the date on which the undersigned no longer
owns any of the capital stock of Conolog.
IN WITNESS WHEREOF, the undersigned has executed this proxy as of the
date first set forth hereinabove.
CNL HOLDING, INC.
By
-------------------------
(Title)
