EXHIBIT 10.16
Subscription Agreement Between the Company and ▇▇▇▇▇ ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇
ESSEX CORPORATION
PROMISSORY NOTE SUBSCRIPTION AGREEMENT
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, NOR HAS THIS SUBSCRIPTION AGREEMENT BEEN REVIEWED,
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION SET FORTH
HEREIN. NO STATE SECURITIES LAW ADMINISTRATOR OR OTHER JURISDICTIONAL AUTHORITY
HAS PASSED UPON OR ENDORSED THE MERITS HEREOF OR THE ACCURACY OR THE ADEQUACY OF
THE INFORMATION SET FORTH HEREIN. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE SECURITIES DESCRIBED HEREIN HAVE BEEN OFFERED AND MADE AVAILABLE ONLY TO
INVESTORS WHO QUALIFY AS "ACCREDITED INVESTORS," AS DEFINED IN REGULATION D AND
RULE 501 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES DESCRIBED HEREIN WERE OFFERED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS FOR NON-PUBLIC OFFERINGS. SUCH EXEMPTIONS LIMIT
THE NUMBER AND TYPES OF SUBSCRIBERS TO WHICH THE OFFERING HAS BEEN MADE AND
RESTRICT SUBSEQUENT TRANSFER OF THE SECURITIES DESCRIBED HEREIN.
THE SECURITIES DESCRIBED HEREIN SHOULD BE CONSIDERED ONLY BY A PERSON WHO OR
ENTITY THAT CAN AFFORD TO SUSTAIN THE LOSS OF ITS ENTIRE INVESTMENT. A
SUBSCRIBER WHO SUBSCRIBES TO MAKE AN INVESTMENT IN SUCH SECURITIES IS REQUIRED
TO REPRESENT THAT IT IS ABLE TO SUSTAIN SUCH A LOSS AND IS FAMILIAR WITH AND
UNDERSTANDS THE TERMS OF THE OFFERING OF THE SECURITIES DESCRIBED HEREIN.
THE SECURITIES DESCRIBED HEREIN ARE RESTRICTED WITH RESPECT TO TRANSFERABILITY
AND RESALE. THE SECURITIES MAY NOT BE RESOLD OR OTHERWISE DISPOSED OF BY THE
SUBSCRIBER UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH REGISTRATION
REQUIREMENTS.
THE SUBSCRIBER, BY HAVING ACCEPTED DELIVERY OF THE INFORMATIONAL MATERIALS
PROVIDED BY THE COMPANY AND ALL ACCOMPANYING OR RELATED DOCUMENTS, AGREES TO
RETURN SUCH MATERIALS TO THE COMPANY UPON REQUEST IF THE SUBSCRIBER DETERMINES
NOT TO MAKE AN INVESTMENT IN ANY OF THE SECURITIES DESCRIBED HEREIN.
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THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER
OR SOLICITATION IS NOT AUTHORIZED.
FOR FLORIDA RESIDENTS:
THE SECURITIES OFFERED HEREBY WILL BE SOLD, AND ACQUIRED, IN A TRANSACTION
EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES AND INVESTOR
PROTECTION ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE
STATE OF FLORIDA. PURSUANT TO SECTION 517.061(11) OF THE FLORIDA SECURITIES AND
INVESTOR PROTECTION ACT, WHEN SALES ARE MADE TO FIVE (5) OR MORE PERSONS
(EXCLUDING ACCREDITED INVESTORS) IN THE STATE OF FLORIDA, ANY SALE IN THE STATE
OF FLORIDA MADE PURSUANT TO SECTION 517.061(11) OF SUCH ACT IS VOIDABLE BY THE
PURCHASER IN SUCH SALE (WITHOUT INCURRING ANY LIABILITY TO THE COMPANY OR TO ANY
OTHER PERSON OR ENTITY) EITHER WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER,
OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. TO VOID HIS
PURCHASE, THE PURCHASER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT
THE ADDRESS INDICATED HEREIN. ANY SUCH LETTER OR TELEGRAM SHOULD BE SENT AND
POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED THREE (3) DAY PERIOD. IT IS
PRUDENT TO SEND ANY SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO
ASSURE THAT IT IS RECEIVED AND ALSO TO HAVE EVIDENCE OF THE TIME THAT IT WAS
MAILED. SHOULD A PURCHASER MAKE THIS REQUEST ORALLY, THAT PURCHASER MUST ASK FOR
WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED. IF NOTICE IS NOT
RECEIVED WITHIN THE TIME LIMIT SPECIFIED HEREIN, THE FOREGOING RIGHT TO VOID THE
PURCHASE SHALL BE NULL AND VOID.
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FOR MARYLAND RESIDENTS:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FOR VIRGINIA RESIDENTS:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE VIRGINIA SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS
THEREUNDER RELATING TO THE LIMITED AVAILABILITY OF THE OFFERING. THESE
SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR
ENTITY UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES ACT OF THIS STATE, IF SUCH REGISTRATION IS REQUIRED,
OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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ESSEX CORPORATION
PROMISSORY NOTE SUBSCRIPTION AGREEMENT
The undersigned, (the "Subscriber") hereby subscribes to acquire a
Non-Negotiable 8% Convertible Promissory Note (the "Note") issued by Essex
Corporation, a Virginia corporation (the "Company"), in the principal amount of
Two Hundred Thousand Dollars ($200,000.00) substantially in the form attached
hereto as Exhibit A. The unpaid principal amount of this Note and the interest
thereon, shall be convertible at the option of the Subscriber (the "Conversion
Right") prior to the Maturity Date, in the manner and on the terms hereinafter
set forth, into shares of common stock of the Company, par value ($.10) at any
time prior to the Maturity Date at a conversion price equal to the greater of
market value on the date that the election to convert is made or fifty cents
($.50) per shares, subject to adjustment pursuant to Section 4 of the Note;
provided however, that in the event the assets of the optoelectronics division
of the Company have been transferred to another business enterprise in which the
Company has a controlling shareholder interest ("Transferee"), and at the
election of the Subscriber, the unpaid principal amount of this Note and the
accrued interest thereon, shall be convertible into a percentage equity interest
of the Transferee determined pursuant to the following formula:
x/y where x is the dollar amount converted and y is the fair market
value (or mean fair market value, if more than one valuation
methodology is utilized) as determined by a third party expert in
providing such valuations retained by the Company.
The Subscriber represents and warrants that it qualifies as an
"accredited investor" under Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
The Subscriber hereby agrees to pay an aggregate of Two Hundred
Thousand Dollars ($200,000.00) as subscription for and in consideration of the
issuance of the Note being acquired pursuant hereto.
The Subscriber hereby acknowledges that it has retained its own counsel
and/or other professional advisors to review and evaluate the economic, tax and
other consequences of an investment in the Company, to the extent the Subscriber
has deemed necessary.
The Subscriber acknowledges that: (i) neither the Note nor the
securities issuable upon conversion thereof and default thereunder have been the
subject of registration under the Securities Act, the federal securities laws or
the laws of any state; (ii) absent an exemption from registration under such
laws, the issuance and sale of the Note (and the securities issuable upon
conversion thereof and default thereunder) would require registration; (iii) the
Company and NEWCO-OPTO are and will be issuing such securities in reliance upon
exemption from the registration requirements of the Securities Act; and (iv)
reliance by the Company and NEWCO-OPTO upon such exemption is based upon the
Subscriber's representation, warranties, and agreements contained in this
Subscription Agreement.
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SECTION 1. The Subscriber represents, warrants, acknowledges and
agrees as follows:
A. Subject to applicable laws, rules and regulations, the Subscriber agrees
that the subscription evidenced by this Subscription Agreement is and shall be
irrevocable.
B. The Subscriber has received and carefully read the following: (i)
certain general business information about the Company; (ii) any and all other
information deemed by the Subscriber to be necessary to verify the accuracy and
completeness of the representations, warranties and covenants made herein; and
(iii) written or verbal responses for all questions that the Subscriber has
submitted to the Company regarding an investment in the securities described
herein, all of which the Subscriber acknowledges have been provided to the
Subscriber (the "Corporate Materials"). The Subscriber has not been furnished
with any other materials or literature relating to the offer and sale of the
securities described herein, other than the Corporate Materials. The Subscriber
is fully aware of the financial condition of the Company, in particular the lack
of working capital and other financial distress being experienced by the
Company. The Subscriber has been given the opportunity to ask questions of and
to receive answers from the Company concerning the terms and conditions of the
offer and sale of the securities described herein and the Corporate Materials,
and to obtain such additional written information necessary to verify the
accuracy of same as the Subscriber desires in order to evaluate an investment in
the securities described herein. The Subscriber acknowledges and confirms that
the written and/or verbal responses provided to the Subscriber by the Company in
response to the Subscriber's questions are not contrary to or inconsistent with,
nor do they in any way conflict with the information set forth in the Corporate
Materials. The Subscriber further acknowledges that it fully understands the
information contained in Corporate Materials and has had the opportunity to
discuss any questions regarding the Corporate Materials with its counsel or
other advisor. Notwithstanding the foregoing, the only information upon which
the Subscriber has relied is that set forth in the Corporate Materials and its
own independent investigation. The Subscriber acknowledges that the Subscriber
has received no representations or warranties from the Company, or any of its
employees or agents in making an investment decision related to the acquisition
of the securities described herein, other than as set forth herein.
C. The Subscriber is aware that the acquisition of the securities described
herein is a speculative investment involving a high degree of risk and that
there is no guarantee that the Subscriber will realize any gain from an
investment in such securities. The Subscriber further understands that the
Subscriber could lose the entire amount of the Subscriber's investment in such
securities. The Subscriber acknowledges that the Subscriber has specifically
reviewed the Corporate Materials with a view toward subscribing for the
securities described herein.
D. The Subscriber understands that no federal or state agency or other
authority (within or outside of the United States) has made any finding or
determination regarding the fairness of the offer, sale and/or issuance of the
securities described herein, has made any recommendation or endorsement of the
offer and sale of the securities described herein or has passed in any way upon
this Subscription Agreement or the other Corporate Materials.
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E. The Subscriber: (i) is acquiring the securities described herein solely
for the Subscriber's own account for investment purposes only and not with a
view toward resale or distribution thereof, either in whole or in part; (ii) has
no contract, undertaking, agreement or other arrangement, in existence or
contemplated, to sell, pledge, assign or otherwise transfer the securities to
any other person or entity; and (iii) agrees not to sell or otherwise transfer
such securities unless and until they are subsequently registered under the
Securities Act and any applicable state securities laws, or unless an exemption
from any such requirement is available.
F. The Subscriber has read, is familiar with and understands Rule 501 of
Regulation D and represents that the Subscriber is an "accredited investor" as
defined in Rule 501(a) of Regulation D under the Securities Act.
G. The Subscriber is financially able to bear the economic risk of an
investment in the securities described herein, including the ability to hold
such securities indefinitely and to afford a complete loss of the Subscriber's
investment in such securities.
H. The Subscriber's overall commitment to investments which are not readily
marketable is not disproportionate to the Subscriber's net worth, and the
Subscriber's investment in the securities described herein will not cause such
overall commitment to become excessive. The Subscriber understands that the
statutory basis on which such securities are being offered, sold and/or issued
to the Subscriber would not be available if the Subscriber's present intention
were to hold such securities for a fixed period of time or until the occurrence
of a certain event. The Subscriber realizes that, in view of the Securities and
Exchange Commission (the "Commission"), a purchase of such securities now, with
a present intention to resell by reason of a foreseeable specific contingency or
any anticipated change in the market value of such securities, or in the
condition of the Company or that of the industry in which the business of the
Company is engaged or in connection with a contemplated liquidation, or
settlement of any loan obtained by the Subscriber for the acquisition of such
securities, and for which such securities may be pledged as a security or as
donations to religious or charitable institutions for the purpose of securing a
deduction on an income tax return, would, in fact, constitute a purchase with an
intention inconsistent with the Subscriber's representations to the Company and
the Commission would then regard such purchase as a purchase for which the
exemption from registration under the Securities Act relied upon by the Company
in connection herewith is not available.
I. The funds provided for the Subscriber's investment in the securities
described herein are either the separate property of the Subscriber, community
property over which the Subscriber has the right of control, or are funds as to
which the Subscriber otherwise has the sole right of control, or are funds as to
which the Subscriber otherwise has the sole right of management.
J. The Subscriber was not organized or reorganized for the specific
purposes of acquiring the securities described herein; the Subscriber has the
full power and authority to execute this Subscription Agreement on behalf of
such entity and to make the representations and warranties made herein on its
behalf; and an investment in the securities described herein has
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been affirmatively authorized, if required, by the governing body of such entity
and is not prohibited by the governing documents of the entity.
K. The following address is the Subscriber's principal business address:
c/o Essex Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
L. The Subscriber has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the securities described herein.
M. The Note and the certificates evidencing the shares of Common Stock
described herein will contain a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED HEREBY HAVE NOT BEEN THE SUBJECT OF
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED AND REMAINS EFFECTIVE
UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE COMPANY
THAT AN EXEMPTION FROM REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
The Subscriber further acknowledges that: (i) any necessary stop transfer
orders will be placed upon the certificates for the securities described herein
in accordance with Securities Act; and (ii) the Company is under no obligation
to aid the Subscriber in obtaining any exemption from the registration
requirements of the Securities Act or any jurisdiction.
N. In no event will the Subscriber sell or otherwise transfer any of the
securities described herein other than in accordance with the terms thereof and
applicable law.
O. All information which the Subscriber has provided concerning the
Subscriber, the Subscriber's financial position and the Subscriber's knowledge
of financial and business matters is correct and complete as of the date hereof,
and if there should be any change in such information, the Subscriber will
immediately provide such new information.
P. In connection with the offer and sale of the securities described herein
to the Subscriber, the Company is and will be relying upon the Subscriber's
representations and warranties as contained in this Subscription Agreement.
Q. The Subscriber acknowledges that the Subscriber understands the meaning
and legal consequences of the representations and warranties which are contained
herein and hereby agrees to indemnify, save and hold the Company and the its
officers, directors, employees, agents and affiliates harmless from and against
any and all claims or actions arising out of a breach by the Subscriber of any
representation, warranty, acknowledgment, term or condition contained in this
Subscription Agreement. Such indemnification shall be deemed to include not only
the specific liabilities or obligations with respect to which such indemnity is
provided, but
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also all reasonable costs, expenses, counsel fees and expenses of
settlement relating thereto, whether or not any such liability or obligation
shall have been reduced to judgment. THE PARTIES HERETO HAVE EACH BEEN ADVISED
THAT THE INDEMNIFICATION DESCRIBED HEREIN MAY BE VOID AS AGAINST PUBLIC POLICY
AND UNENFORCEABLE IN SOME JURISDICTIONS.
SECTION 2. The Company represents, warrants, acknowledges and agrees as
follows:
A. The execution, delivery and performance of this Subscription Agreement
and consummation of the transactions contemplated hereby have been duly
authorized, adopted and approved by its board of directors. It has taken all
necessary corporate action and has all the necessary corporate power to enter
into this Subscription Agreement and to consummate the transactions contemplated
hereby. This Subscription Agreement has been duly and validly executed and
delivered by its officers on its behalf, and assuming that this Subscription
Agreement is the valid and binding obligation of the Subscriber, is the valid
and binding obligation of the Company enforceable against each in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect, or by legal or equitable principles, relating to or
limiting creditors' rights generally and except that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
B. It is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation. It has the
corporate power and authority to own and lease its properties and assets and to
carry on its business as it is now being conducted.
C. There is no action, suit, proceeding or investigation pending against or
related to it, to the best of its knowledge, nor has it been threatened with any
such action, suit, proceeding or investigation, which would restrict its ability
to perform its obligations hereunder or which would have a material adverse
effect on its business, assets, operations, earnings, prospects or condition
(financial or otherwise). To the best of its knowledge, there are no grounds for
or facts, events or circumstances which would form the basis of any such action
that would cause or result in any such action, suit, proceeding or investigation
or which is probable of assertion. It is not in default in respect of any
judgment, order, writ, injunction or decree of any court or any national,
federal, provincial, state, local or other governmental agency, authority, body,
board, bureau, commission, department or instrumentality which could have a
material adverse effect on its business, assets, operations, earnings, prospects
or condition (financial or otherwise).
D. No statement by it as set forth herein and no statement set forth in any
certificate or other instrument or document required to be delivered by or on
behalf of it pursuant hereto or in connection with consummation of the
transactions contemplated hereby, contained, contains or will contain any untrue
statement of a material fact, or omitted, omits or will omit to state any
material fact which is necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
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E. The execution, delivery and performance by the Company of this
Subscription Agreement and the Note and the consummation by them of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance, sale and delivery of the Note, do not require the consent, waiver,
approval, license or authorization of or filing of any notice or report with any
person, entity or public authority and will not violate, result in a breach of
or the acceleration of any obligation under, or constitute a default under, any
provision of their respective organizational documents or any material
indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, decree, law, ordinance or regulation to which any property of the
Company is subject or by which either such party is bound or result in the
creation or imposition of any lien, claim, charge, restriction, equity or
encumbrance of any kind whatsoever upon, or give to any other person any
interest or right in or with respect to, any of the properties, assets,
business, agreements or contracts of the Company.
SECTION 3. Except as otherwise specifically provided for hereunder, no
party shall be deemed to have waived any of his, her or its rights hereunder
unless such waiver is in writing and signed by the party waiving said right.
Except as otherwise specifically provided for hereunder, no delay or omission by
any party in exercising any right with respect to the subject matter hereof
shall operate as a waiver of such right or of any such other right. A waiver on
any one occasion with respect to the subject matter hereof shall not be
construed as a bar to or waiver of any right or remedy on any future occasion.
All rights and remedies with respect to the subject matter hereof be cumulative
and may be exercised separately or concurrently.
SECTION 4. None of the parties hereto has made any representations or
warranties with respect to the subject matter hereof not set forth herein or in
the Note. This Subscription Agreement and the Note constitute the entire
agreement between the parties hereto with respect to the subject matter hereof.
All understandings and agreements which heretofore may have existed or did exist
between the parties hereto with respect to the subject matter hereof are
superseded by this Subscription Agreement and the Note.
SECTION 5. This Subscription Agreement may not be changed, modified,
extended or terminated other than by an agreement in writing, signed by the
parties hereto.
SECTION 6. The parties hereto agree to execute any and all such other
documents and to take any and all such further actions reasonably required to
effectuate the agreement evidenced by this Subscription Agreement and the intent
and purposes hereof.
SECTION 7. This Subscription Agreement shall be governed by and construed
in accordance with the laws of the State of Maryland without regard to the
principles of conflicts of laws thereof. The Subscriber hereby consents to
the jurisdiction of the state courts of and federal courts located in the
State of Maryland.
SECTION 8. This Subscription Agreement, including the representations and
warranties contained herein, shall be binding upon the Subscriber's heirs,
executors, administrators, representatives, successors and assigns (to the
extent assignment may be permitted hereunder).
* * * * *
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IN WITNESS WHEREOF, the Subscriber has executed this Subscription
Agreement this 24th day of June, 1997.
NAME OF SUBSCRIBER
▇▇▇▇▇ ▇▇▇▇▇ ▇▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇ Ten Ent.
-------------------------------------------
In consideration of and in reliance upon the foregoing, the
subscription and purchase described herein is hereby accepted this 24th day of
June, 1997 by the undersigned.
ESSEX CORPORATION
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Chief Financial Officer
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