CAPITALIZATION AGREEMENT
This Capitalization Agreement (the "Agreement") dated as
of November , 1995 by and among VTX Electronics Corp., a Delaware
corporation (the "Company") and the Investors set forth on the
signature page hereto (collectively, the "Investors" and
individually, an "Investor")
WHEREAS, the Investors desire to make a capital
investment in the Company on the terms and conditions set forth in
this Agreement; and
WHEREAS, the Company is desirous of Investors making such
capital investment on the terms and conditions set forth in this
Agreement
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. Representations and Warranties. The Company
represents and warrants to each Investor as follows:
a. Due Organization and Qualification; Business.
The Company is a duly organized and validly existing corporation in
good standing under the laws of the State of Delaware, has the
power and authority to own or hold under lease the properties it
purports to own or so hold and to carry on its business as now
being conducted and presently proposed to be conducted, and has the
power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby. The Company is duly
qualified as a foreign corporation in each jurisdiction where the
nature of the business transacted by it or the properties owned or
leased by it requires the Company to be so qualified except for
jurisdictions wherein the failure to be so qualified will not have
a material adverse effect on the business, operations, properties
or assets or on the condition, financial or other, of the Company.
The Company has paid all corporation taxes and franchise taxes
payable to the State of Delaware and in each other jurisdiction
where it is qualified.
b. Litigation; Compliance with Rules, Regulations,
Decrees, etc. Except as set forth on Schedule 1(b) attached
hereto, there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Company) pending or, to the knowledge
of the Company, threatened against the Company or any of its
subsidiaries, properties or assets at law, in equity or before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind; and neither the
Company nor any of its subsidiaries is in default with respect to
any judgment, order, writ, injunction, decree or award of any
court, arbitrator or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or in violation of any rule
or regulation of any thereof, or in violation of any law, which
violation would have a material adverse effect on the business or
properties of the Company. The Company has all permits, licenses
and franchises necessary or desirable in order to conduct its
business and to own and operate its property and assets.
c. Compliance with Other Instruments. Neither the
execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, nor compliance with the terms,
conditions and provisions hereof and of the Preferred Stock, the
Warrants and the Debentures (all as hereinafter defined), will
conflict with or result in a breach or violation of the certificate
of incorporation or by-laws of the Company or of any material term,
condition or provision of any agreement or instrument to which the
Company is now a party or by which it or any of its properties or
assets may be bound, or constitute a default thereunder, or result
in the creation or imposition of any lien upon any of the
properties or assets of the Company or any subsidiary.
d. Financial Statements. The consolidated balance
sheet of the Company as at June 30 in each of the years 1990 to
1995, inclusive, and the related consolidated statements of
operations, stockholder' equity and cash flows for the fiscal years
then ended, accompanied in each case by the opinion of independent
public accountants previously delivered to the Investors, as well
as the unaudited financial statements as of September 30, 1995 and
1994 (as set forth in the Form 10Q set forth below) previously
delivered to the Investors are complete and correct in all material
respects and fairly present the financial condition of the Company
and its subsidiaries and the results of the operations and changes
in financial position of the Company and its subsidiaries for the
respective fiscal periods ended on said dates, all in conformity
with generally accepted accounting principles applied on a
consistent basis (except as otherwise therein or in the notes
thereto stated) throughout the fiscal periods involved.
e. Business and Properties; No Misleading Statement
or Omissions. The annual report of the Company on Form 10-K for
the fiscal year ended June 30, 1995 including all exhibits and
material incorporated by reference (the "Form 10-K") and the Report
on Form 10-Q relating to the three-month period ended September 30,
1995 (collectively with the Form 10-K, the "Reports"), as filed
with the Securities and Exchange Commission and a copy of which has
heretofore been furnished to the Investors, correctly describes the
general nature of the business conducted by the Company during the
fiscal year ended June 30, 1995 and the three-month period ended
September 30, 1995, respectively, and the information therein with
respect to the principal properties then owned or leased by the
Company is correct in all material respects. Since September 30,
1995, there has been no material change in the general nature of
the business conducted, or in the principal properties owned or
leased, by the Company. The Reports are accurate as of their
respective dates in all material respects and do not contain any
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. There is
no fact or circumstance now in existence and currently known by the
Company which does now, or with the passage of time, would be
reasonably anticipated to have a material adverse affect on the
Company, its business, prospects, financial condition or
operations.
f. Subsidiaries; Due Organization and
Qualification. The Form 10-K correctly and completely sets forth
the name and jurisdiction of the incorporation of each subsidiary
of the Company. All outstanding shares of stock of all classes of
each subsidiary listed in the Form 10-K are owned by the Company
and have been validly issued, are fully paid and non-assessable,
and are owned free and clear of any lien, option, contractual
restriction on transfer or contractual right of any other person.
Each subsidiary listed in the Form 10-K is a duly organized and
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and
authority to own or hold under lease the properties it purports to
own or so hold and to carry on its business as now being conducted
and presently proposed to be conducted; each subsidiary listed in
the Form 10-K is duly qualified and is in good standing as a
foreign corporation in each jurisdiction wherein, in the judgment
of the Company, the nature of the business transacted by it or the
properties owned or leased by it makes such qualification
necessary, except for jurisdictions wherein the failure to be so
qualified will not have a material adverse effect on the business,
operations, properties or assets or on the condition, financial or
other, of the Company.
g. Title to Properties. The Company and its
subsidiaries have good and marketable title to, or valid and
enforceable leasehold estates in, their respective real properties
and assets (including leasehold improvements) reflected in the
consolidated balance sheet as at September 30, 1995 referred to in
Section 1(b) above, subject only to such defects or irregularities
of title which do not in the aggregate interfere with the
operation, value or use of such properties and assets considered as
a whole and subject to liens in favor of Congress Financial
Corporation ("Congress") and Sterling Commercial Capital, Inc.,
First Wall Street SBIC, L.P., Fundex Capital Corp. and Tappan Zee
Capital (collectively, the "Sterling Group") and notice liens in
favor of equipment lessors, except for properties and assets sold
or otherwise disposed of subsequent to said date in the ordinary
course of business. The Company owns, or has a valid leasehold in,
all properties or assets reasonably necessary to operate and
conduct its business.
h. Trademarks, Patents, etc. The Company and its
subsidiaries possess such trademarks, trade names, copyrights,
patents, licenses, or rights in any thereof as are adequate in the
opinion of the Company for the conduct of their respective
businesses as now conducted, without known conflict with the rights
of others except for conflicts which if adversely determined would
not, singly or in the aggregate, result in any material adverse
change in the business, operations, properties or assets or in the
condition, financial or other, of the Company.
i. Tax Liability. The Company and its subsidiaries
have, to the knowledge of their respective officers, properly
prepared and filed all tax returns required to be filed with taxing
authorities prior to the date hereof or has duly obtained
extensions of time for the filing thereof and have paid all taxes
shown as due on such returns that were filed. The Company has
properly withheld all taxes required to be withheld, including,
without limitation all federal, state and local withholding taxes
and FICA payments, and, to the Company's knowledge, there are no
pending audits or investigations relating to tax matters affecting
the Company or any subsidiary. The Company has been notified of 1)
a final assessment by City of Dayton, Ohio in the amount of
approximately $3,400 and, 2) an amount due to the Illinois
Department of Revenue upon audit and resolution thereof in the
amount, as of September 27, 1995, of approximately $15,400.
j. Governmental Action. Except as otherwise
contemplated by this Agreement and blue sky laws, no action,
authorization or approval of, or registration, declaration or
filing with, any governmental or public body or authority is
required to authorize, or is otherwise required in connection with,
the execution, delivery and performance by the Company of this
Agreement or the Debentures, other than any post event
informational filing.
k. ERISA.
(i) The Company is in compliance in all
material respects with the applicable provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
(ii) No "employee benefit plan" as defined in
ERISA, maintained by the Company or any subsidiary, as from time to
time in effect (herein called "Benefit Plans" or, individually, a
"Benefit Plan") nor any trusts created thereunder, nor any trustee
or administrator thereof, has engaged in a "prohibited
transaction," as defined in ERISA, which could subject the Company
or any subsidiary, or any Benefit Plan or any such trust, or any
trustee or administrator thereof, or any party dealing with any
Benefit Plan, or any such trust to any tax or penalty on prohibited
transactions. Neither any of the Benefit Plans nor any such trusts
have been terminated, or are liable for the tax or penalty on
prohibited transactions, nor has there been any "reportable event"
as defined in ERISA or any "accumulated funding deficiency."
Neither the Company nor any of its subsidiaries has incurred any
liability to the Pension Benefit Guaranty Corporation.
l. Environmental Issues.
(i) The property owned or leased by the
Company or any of its subsidiaries ("Premises") and the present and
contemplated use and occupancy thereof are in full compliance in
all material respects with all applicable federal, state and local
laws, ordinances, building codes, rules and regulations pertaining
to zoning, parking, construction, building, land use and
environmental matters, including, without limitation, the
provisions of the Federal Occupation Safety and Health Act and the
Environmental Protection Act, and all applicable rules and
regulations thereunder and all similar state and local laws, rules
and regulations; there are no current citations, notices or orders
of non-compliance issued to the Company or any of its subsidiaries
or relating to its business, assets, property (leased or owned),
leaseholds or equipment under any such laws, rules and regulations.
The Company and each of its subsidiaries has been issued all
required federal, state and local licenses, certificates and
permits relating to the business, assets, property (leased or
owned) leaseholds and equipment, and are in compliance in all
material respects with all applicable federal, state and local
laws, rules and regulations relating to air emissions, water
discharge, noise emissions, solid or liquid disposal, hazardous
waste or materials, or other environmental, health or safety
matters.
(ii) (a) No hazardous or toxic substance or material or
other waste ("Hazardous Substance") as defined in or regulated
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. paragraph 9601, et. seq.), the
Resource Conservation and Recovery Act (42 U.S.C. paragraph 6901, et. seq.),
The Oil Pollution Act of 1990 (33 U.S.C. paragraph 2701 et. seq.) or any
other federal, state or local law, order or regulation pertaining
to health, safety, or the environment (the "Environmental Laws")
has ever been unlawfully disposed, released, discharged or spilled
on or under any part of the Premises, (b) the Premises has never
been used as a dump or landfill, (c) no litigation or
administrative action or proceeding has been commenced or, to the
Company's knowledge, threatened against the Company or any of its
subsidiaries alleging a violation of any Environmental Laws, and
(d) no underground storage tank (other than fuel oil storage
tanks), equipment containing polycholorinated biophenyle, asbestos,
or urea formaldehyde is located on or under the Premises; the
Premises are free from any contamination by any Hazardous Substance
and the Company is in compliance in all material respects with all
Environmental Laws affecting the Company or the Premises.
(iii) There is not present in the Premises any
friable asbestos or any substance containing asbestos and deemed
hazardous by federal, state or local laws, rules, regulations or
orders respecting such material.
m. Due Authorization of Agreement, Preferred Stock,
Debentures and Warrants.
(i) This Agreement and the transactions herein
contemplated, have been duly authorized by the Company. This
Agreement has been duly executed and delivered by the Company, no
shareholder approval is required in connection therewith, and is a
valid and binding instrument, enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally and that
the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought;
and
(ii) The Secured Subordinated Debentures in
the aggregate principal amount of $1,237,500 in the form attached
hereto as Exhibit A (the "Debentures"), and the Warrants in the
forms attached hereto as Exhibits B-1 and B-2 (the "Warrants"),
have been duly authorized by the Company, and when each is duly
executed and delivered by the Company and paid for as provided in
this Agreement, will be valid and legally binding obligations of
the Company enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of
creditors' rights generally and that the availability of equitable
remedies is subject to the discretion of the court before which any
proceeding therefor may be brought. The Preferred Stock is
convertible into, and the Warrants are exercisable for shares of
Common Stock in accordance with their terms.
o. Validity of Preferred Stock. The Certificate
of Designation, Preferences and Rights of Senior Cumulative
Convertible Preferred Stock of the Company (the "Preferred Stock")
in the form attached hereto as Exhibit C has been duly authorized
by the Board of Directors of the Company and has been duly filed
with the Secretary of the State of Delaware. When the Preferred
Stock is issued by the Company to the Investors and paid for by
them as provided in this Agreement, such Preferred Stock will be
duly and validly authorized and issued, fully paid and non-
assessable Preferred Stock of the Company entitled to the rights
and preferences of the Certificate of Designation referenced above.
p. Validity of Common Stock Issuable Upon
Conversion of Preferred Stock and Exercise of Warrants. The shares
of Common Stock initially to be reserved for issuance upon
conversion of the Preferred Stock and upon exercise of the Warrants
hereof have been duly and validly authorized and, when so issued
upon conversion in accordance with the terms of the Preferred Stock
or exercise of the Warrants, will be duly and validly issued, fully
paid and nonassessable. Schedule 1(p) hereto sets forth the
Company's outstanding stock options, exercise price, expiration
date and option holders.
q. No Defaults. The Company is presently, and at all
time in the past twelve (12) months has been, in compliance and not
in any violation or default under its lending agreements with its
lenders, including, without limitation, Congress and the Sterling
Group and has been in compliance with, and not it default under,
any material contract, leases, mortgages or agreement. No event,
fact or circumstance exists which, with the passage of time or the
giving of the notice, would create an event of default under any of
the above instruments. The Company is in compliance with its
certificate of incorporation and its by-laws.
r. Capitalization. The authorized and outstanding
shares of capital stock, warrants or rights to convert into or
receive capital stock of the Company (other than options which are
set forth on Schedule 1(p)), are stated on Schedule 1(r) attached
hereto. All of the issued and outstanding shares of capital stock
of the Company are duly and validly issued and outstanding, are
fully paid and non-assessable. Except as stated on such Schedule
1(r), there are no outstanding, options, warrants, or rights to
convert into or receive capital stock of the Company or securities
exchangeable for, or convertible into, capital stock of the
Company. No person or entity has demand or "piggy-back"
registration rights as to any security issued or issuable by the
Company, except to the Investors as set forth in the Warrants and
the Preferred Stock. The Company has agreed to use its best
efforts to register up to 400,000 shares of Common Stock issuable
upon the exercise of certain options granted to ▇▇▇▇▇▇ ▇▇▇▇▇▇.
s. Undisclosed Liabilities; Material Changes. Except
for such claims, debts and liabilities as are reflected in the
financial statements referred to in Section 1(d) hereto and
borrowings under the Company's revolving credit agreement with
Congress, the Company does not have any outstanding indebtedness
for money borrowed and is not subject to any claims or liabilities
(whether matured or unmatured, liquidated or unliquidated, accrued,
fixed, contingent or otherwise), other than trade or business
obligations incurred in the ordinary course of business since the
date of such financial statements, in amounts usual and normal,
both individually and in the aggregate, for the Company, all
accounting procedures and methods have been maintained in a manner
consistent with prior periods, there has been no lease, sale (other
than inventory in the ordinary course of business), or abandonment
of any property or assets of the Company, nor has there been any
labor strife, strike or lock-out. Since the date of such financial
statements, there has not been any material increase in the
compensation payable or to become payable by the Company to any of
its officers, employees or agents, or any bonus payment or
arrangement made to or with any of them, other than in the ordinary
course and consistent with past practices. Since the date of such
financial statements, there has not been any payment by the Company
of any dividends or any distribution by the Company to any of its
shareholders in redemption or as a purchase price of any
indebtedness (whether in payment of principle, interest or
otherwise) owing to any of them nor has there been any mortgage,
pledge or subjection to a lien, charge or encumbrance of any
material kind of any of the Company's assets, tangible or
intangible.
(t) Insurance. The Company maintains insurance adequate
and reasonable for its needs and consistent with industry
standards. All such insurance is in full force and effect and the
Company has received no notices of cancellation or indication of
any intention on the part of any insurance company not to renew.
(u) Employment Contracts. Except as set forth on
Schedule 1(u) attached hereto, the Company is not a party to, or
otherwise subject to, any oral or written (i) collective bargaining
agreement, (ii) contract or other agreement for the employment of
any officer or employee, (iii) profit-sharing, bonus, deferred
compensation, stock option, severance pay, pension, retirement or
similar plan or agreement (including individual agreements)
providing employee benefits.
(v) Future Agreements. The Company is not a party to or
otherwise subject to any oral or written (i) guarantee of any
obligations for the borrowing of money or otherwise, or any other
agreement or guarantee of the obligations of another person or
entity, (ii) agreement or arrangement for the purchase or sale of
any assets of the Company other than in the ordinary course of
business or for the grant of any preferential rights to purchase
any of the Company's assets, properties or rights, (iii) agreement,
contract or commitment containing any covenant limiting the freedom
of the Company to engage in any line of business in any area of the
world or to compete with any person or entity, (iv) agreement,
contract or commitment relating to the acquisition of assets or
capital stock of any business enterprise, (v) contract, agreement
or other instrument not entered at arms length and in the ordinary
course of business.
(w) Market Price of Common Stock. Schedule 1 (w) sets
forth the high, low and closing prices for the Common Stock of the
Company for the trading days November 20, to November 27, 1995 as
prepared from information provided to the Company by Troster
Singer.
2. Representation and Warranty of Each Investor. Each
Investor hereby represents and warrants to the Company, as to
itself, as of the date hereof, as follows:
a. Investment. Each Investor is acquiring the
Debentures, the Preferred Stock and the Warrants and if it converts
any Preferred Stock or exercises any Warrants, the underlying
Common Stock, for its own account for investment purposes only, and
not with a view to, or for resale in connection with, any offering
or distribution thereof; provided, however, it may transfer any of
the foregoing to any affiliate of itself.
b. Experience. Each Investor has such knowledge
and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of an investment in the
Debentures, Preferred Stock and Warrants and of making an informed
decision.
c. Financial Resources. Each Investor is able to
bear the economic risk of such investment hereof and, at the
present time, is able to afford a complete loss of such investment.
d. Restrictions on Transfer. Each Investor
understands that the Debentures, Preferred Stock and Warrants, and
the shares of Common Stock issuable upon conversion or exercise
thereof, have not been registered under the Act by reason of a
specific exemption from the registration provisions of the Act
which depends upon, among other things, the bona fide nature of
such Investor's investment intent as expressed herein.
e. Litigation. There are no legal, administrative,
arbitral or other proceedings or governmental investigations
pending or, to the knowledge of such Investor, threatened against
such Investor which would give any third party the right to enjoin
or rescind the transactions contemplated by this Agreement or
otherwise prevent such Investor from complying with the terms and
provisions of this Agreement.
f. Limitations and Dispositions. Each Investor
acknowledges that the securities purchased hereby must be held
indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available. Each Investor
has been advised or is aware of the provisions of Rule 144
promulgated under the Act. Each Investor consents to the affixing
on certificates representing the Debentures, Preferred Stock,
Warrants and Common Stock issuable upon conversion or exercise
thereof of a legend regarding transfer restrictions.
g. Required Filings and Consents. The Investors
are not required to submit any notice, report or other filing with
any governmental authority in connection with the execution,
delivery or performance of this Agreement.
h. Due Authorization of Agreement. This Agreement
has been duly authorized, executed and delivered by each Investor,
no shareholder approval is required, and is a valid and binding
instrument enforceable in accordance with its terms.
i. SEC Reports; Recent Losses. Each Investor
acknowledges receipt of the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995 and the Company's Form 10-Q
for the Quarter ended September 30, 1995. Each Investor
acknowledges that it is aware that the Company expects to have a
significant net loss for the quarter ended December 31, 1995.
3. Purchase of Preferred Stock. Contemporaneously with
the execution and delivery of this Agreement, each Investor shall
purchase, and the Company shall issue and sell, the number of
shares of Preferred Stock set forth opposite such Investor's name
on the signature page hereof (an aggregate of 12,500 shares of
Preferred Stock) for a purchase price also set forth opposite such
Investor's name on the signatures page hereof.
4. Purchase of Debentures. Contemporaneously with the
execution and delivery of this Agreement, each Investor shall
purchase and the Company shall issue and sell, the principal amount
of Debentures set forth opposite such Investor's name on the
signature page hereof.
5. Issuance of Warrants. Contemporaneously with the
execution and delivery of this Agreement, the Company shall issue
to each Investor Warrants to purchase the number of shares of
Common Stock set forth opposite each Investor's name on the
signature page hereof.
6. Appointment of Directors; Visitation Rights. (a)
The Company represents and warrants that the entire Board of
Directors of the Company is comprised of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. Bayern, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇. Concurrently with the execution
and delivery of this Agreement, all the directors, except ▇▇. ▇▇▇▇
shall resign, ▇▇. ▇▇▇▇ shall then elect Messrs. ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ to fill all vacancies on the Board, and then ▇▇. ▇▇▇▇
shall resign. The Company represents and warrants that such action
is consistent with the Company's Certificate of Incorporation and
By-laws and when such action is taken by the Board of Directors,
the above named individuals shall be duly elected and acting
directors of the Company.
(b) So long as an Investor whose initial purchase
of Securities under this Capitalization Agreement exceeds a
purchase price of $400,000 holds at least 33% of the aggregate of
the Debentures, Preferred Stock and Warrants issued to such
Investor pursuant to this Capitalization Agreement, or Common Stock
issued pursuant to exercise or conversion of the foregoing, as
applicable, the Company will give to such Investor adequate notice
(which shall not be less than two weeks for regularly scheduled
meetings) of, and permit a nominee designated by such Investor,
whose nominee is not serving on the Board of Directors, to attend
as an observer (who shall be considered an advisory director), all
meetings, whether in person or by telephone of the Company's Board
of Directors and all committee meetings thereof. Such Investor
will be entitled to receive all written materials and other
information given to directors in connection with such meeting at
the same time such materials or information are given to directors.
If the Company proposes to take any action by written consent in
lieu of a meeting of its Board of Directors or of any committee
thereof, the Company will give actual notice, prior to the
effective date of such consent, to such Investor describing in
reasonable detail the nature and substance of such action. Any
such Investor whose nominee is serving on the Board of Directors
may select a representative to attend as an observer in said
nominee's absence. Board meetings will be held at the discretion
of the Board, but not less than quarterly. Advisory directors will
receive the same compensation payable to outside directors per
meeting plus out-of-pocket costs related to such attendance.
7. Voting Proxy; Escrow Agreement.
(a) Contemporaneously with the execution and
delivery of this Agreement, the Company shall cause the Voting
Proxy in the form attached hereto as Exhibit D to be executed and
delivered by the parties therein listed.
(b) By their signature below, the Investors hereby
agree to the terms and conditions of that certain Escrow Agreement
dated the date hereof among the Investors, the Company and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Frome & ▇▇▇▇▇▇▇▇▇▇, LLP, as Escrow Agent, a copy of which
is attached hereto as Exhibit E, and covenant to promptly deliver
to the Escrow Agent original signed copies of such Escrow
Agreement.
8. Opinion of Counsel. Contemporaneously with the
execution and delivery of this Agreement, the Company shall provide
the Investors with an opinion of counsel in form set substantially
forth as Exhibit F hereto.
9. Use of Proceeds. The Company shall use the proceeds
from sale of the Debentures, Preferred Stock and Warrants within
the United States and for working capital and other general
corporate purposes. The Company shall not use such proceeds to
repurchase, redeem, or otherwise acquire outstanding securities,
for any purpose prohibited by the regulations promulgated by the
U.S. Small Business Administration under the Small Business
Investment Act of 1958, as amended, or for any other purpose
prohibited by law. The Company understands that LEG Partners SBIC,
L.P. (the "SBIC Investor") is required under such regulations to
conduct a reasonable review within 90 days after the Closing to
assure that proceeds from sale of the Debentures, the Preferred
Stock and Warrants are used for the intended purposes, and the
Company agrees to cooperate with the SBIC Investor in such review,
including permitting access to the Company's records by a
representative of the SBIC Licensee. Any use of such proceeds
other than as contemplated herein shall constitute a violation of
a covenant with the SBIC Investor for which the SBIC Investor may,
at its option, demand that the Company repurchase the Debentures
and/or Preferred Stock issued to the SBIC Investor pursuant to this
Agreement at a price equal to the purchase price paid for such
Debentures and/or Preferred Stock. The parties hereto agree and
understand that but for the issuance of the Warrants to the
Investors, the interest on the Debentures would have been one (1%)
percent greater than as set forth in the Debentures.
10. Survival of Representations, Warranties and
Agreements. All representations, warranties, covenants and
agreements made by any party hereto in this Agreement or in any
document or certificate delivered pursuant hereto shall survive the
purchase and sale of the Debentures, Preferred Stock and the
issuance of the Warrants, the conversion or exercise, as the case
may be, of the foregoing and shall be unaffected by any
investigation made by or on behalf of any party hereto.
11. Miscellaneous.
(a) This Agreement shall be construed under the
laws of the State of New York without giving effect to conflict of
laws rules of such State.
(b) This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
(c) If any provision of this Agreement is held to
be invalid or unenforceable by a court of competent jurisdiction,
this Agreement shall be interpreted and enforceable as if such
provision were severed or limited but only to the extent necessary
to render such provision and this Agreement enforceable.
(d) Notices shall be effective on the day delivered
by hand and receipted, the second business day after delivery to a
recognized overnight courier service or seven days after delivery
to the United States Post Office proper postage prepaid sent
registered or certified mail, return receipt requested, addressed
in each case as follows:
If to the Company: ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
If to any Investor: At the address set forth on the
signature page hereof
(e) The headings contained herein are for the sole
purpose of convenience of reference, and shall not in any way limit
or affect the meaning or interpretation of any of the terms or
provisions of this Agreement.
(f) This Agreement may only be amended by a written
instrument executed by each of the parties hereto.
(g) This Agreement (together with the other
agreements and documents delivered pursuant to or in connection
with this Agreement) constitute the entire agreement of the parties
hereto with respect to the subject matter hereof; and supersede all
prior agreements and understandings of the parties, oral and
written, with respect to the subject matter hereof.
(h) This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but
all of which taken shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed and
delivered the Agreement as of the date first above written.
VTX ELECTRONICS CORP.
BY:
Name:
Title:
Agreement as to the provisions of
Section 6
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. Bayern
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
INVESTORS
Name:
By:
Signature: _______________________________________
Address: _______________________________________
_______________________________________
_______________________________________
Number of Shares
of Preferred Stock: _______________________________________
Principal Amount
of Debentures _______________________________________
Warrants (Form B-1)
To Purchase Number
of Shares of Common
Stock _______________________________________
Warrants (Form B-2)
To Purchase Number
of Shares of Common
Stock _______________________________________
Total Consideration: _______________________________________
