SENIOR SECURED SUBORDINATED DEBENTURE
$________ Farmingdale, New York
March ___, 1996
VTX Electronics Corp., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company"), for value received, hereby promises to pay to the order
of [name of investor] or registered assigns the principal amount of
______________________ ($_______) Dollars on March 1, 2001, in such
coin or currency of the United States of America as at the time of
payment shall be legal tender for public and private debts, at the
principal office of the Company, in Farmingdale, New York and to
pay interest (computed on the basis of a 360-day year of twelve 30-
day months) at said office, in like coin or currency, on the unpaid
portion of said principal amount from the date hereof, quarterly on
the first day of September, December, March and June in each year,
commencing on June 30, 1996, at the rate of interest from time to
time equal to the "prime rate" as publically announced from time to
time in the Wall Street Journal plus two percent (2%) per annum
adjusted monthly on the first business day of each month until such
unpaid portion of such principal amount shall have become due and
payable and thereafter at the greater of such prime rate plus six
percent (6%) or eighteen percent (18%) per annum thereafter and, so
far as may be lawful, on any overdue installment of interest at the
rate of the greater of such prime rate plus six percent (6%) or
eighteen percent (18%) per annum and provided, further, that if
this Debenture is not secured by a mortgage (which may be a second
mortgage) by April 1996, the interest rate on this Debenture shall
increase to the above referenced "prime rate" plus seven percent
(7%) provided, further, however, that in the event a senior
mortgagee having a mortgage loan to the Company of at least
$1,500,000 in original principal amount shall prohibit the granting
of a mortgage to the holders of the Debentures, the interest rate
shall remain at the "prime rate" plus two (2%) percent. This
Debenture may be prepaid at any time after one year from original
issuance, in whole or in part, with no penalty, only with the prior
written consent of the Holder of this Debenture.
Sec. 1. The Agreement; Exchanges and Transfers of the
Debenture.
Sec. 1.1. The Agreement. This Debenture (herein called the
"Debenture") is one of several identical Debentures in the
aggregate principal amount not to exceed $1,237,500 (collectively
called the "Debentures") issued on March , 1996.
Sec. 1.2. Register; Transfer or Exchange of Debentures.
The Company shall keep at its office or agency maintained in
Farmingdale, New York a register in which the Company shall provide
for the registration of Debentures and for the registration of
transfer of Debentures. The Holder of any Debenture may, at its
option and either in person or by duly authorized attorney,
surrender the same for registration of transfer or exchange at such
office and, without expense to such Holder (other than transfer
taxes, if any), receive in exchange therefor a new Debenture or
Debentures, dated as of the date to which interest has been paid on
the Debenture or Debentures so surrendered, each in the principal
amount of $10,000 or any integral multiple thereof, for the same
aggregate unpaid principal amount as the Debenture or Debentures so
surrendered for transfer or exchange and each registered in such
name or names as may be designated by such Holder. Every Debenture
so made and delivered in exchange for any Debenture shall in all
other respects be in the same form and have the same terms as the
Debenture so surrendered for transfer or exchange.
Sec. 1.3. Loss, Theft, Destruction or Mutilation of
Debentures. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any
Debenture and, in the case of any such loss, theft or destruction,
upon receipt of an indemnity bond in such reasonable amount as the
Company may determine (or if such Debenture is held by the original
Holder, of an unsecured indemnity agreement reasonably satisfactory
to the Company) or, in the case of any such mutilation, upon
surrender and cancellation of such Debenture, the Company will make
and deliver, in lieu of such lost, stolen, destroyed or mutilated
Debenture, a new Debenture of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on
the Debenture so lost, stolen, destroyed or mutilated.
Sec. 1.4. Registered Holders. The Company may deem and treat
the person in whose name any Debenture is registered as the
absolute owner and holder of such Debenture for the purpose of
receiving payment of the principal of and interest on such
Debenture and for the purpose of any notices, waivers or consents
thereunder, whether or not such Debenture shall be overdue, and the
Company shall not be affected by notice to the contrary. Payments
with respect to any Debenture shall be made only to the registered
Holder thereof.
Sec. 2. Surrender of the Debenture.
Sec. 2.1. Surrender of Debentures. (a) The Company may, as a
condition of payment of all or any of the principal of, and
interest on, this Debenture, in whole or in part, require the
holder to present this Debenture for notation of such payment and,
if this Debenture be paid in full, require the surrender hereof.
(b) Anything herein to the contrary
notwithstanding, the entire principal plus accrued interest amount
of this Debenture, or any part hereof, may be surrendered to the
Company by the Holder for redemption and cancellation as payment of
the exercise price of any warrant to acquire common stock of the
Company. If less than the entire principal amount of this
Debenture is so surrendered and redeemed, a new Debenture in the
remaining outstanding principal amount shall be redelivered to the
Holder.
Sec. 3. Covenants.
Sec. 3.1. To Pay Principal and Interest. The Company
covenants and agrees to pay principal and interest on this
Debenture in accordance with the terms hereof.
Sec. 3.2. Maintenance of Company Office. The Company will
maintain an office in Farmingdale, New York in its current facility
where notices, presentations and demands to or upon the Company in
respect of the Debenture may be given or made or such other place
as a majority in principal amount of the Debentures shall consent
to in writing.
Sec. 3.3. To Keep Books. The Company will, and will cause all
subsidiaries, to keep proper books of record and account in which
full, true and correct entries will be made of its transactions in
accordance with generally accepted accounting principles.
Sec. 3.4. Payment of Taxes; Corporate Existence; Maintenance
of Properties. The Company will, and will cause each of its
subsidiaries to,
A. pay and discharge promptly or cause to be paid and
discharged promptly all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or upon any
of its property, real, personal or mixed, or upon any part thereof,
before the same shall become in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might by
law become a lien or change upon its property; provided, however,
that neither the Company nor any subsidiary shall be required to
pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in
good faith by appropriate proceedings and if the Company or such
subsidiary, as the case may be, shall have set aside on its books
reserves (provided for and segregated to the extent required by
generally accepted accounting principles) deemed by it adequate
with respect thereto;
B. maintain and keep or cause to be maintained and kept its
properties in good repair, working order and condition, and from
time to time make or cause to be made all needful and proper
repairs, renewals, replacements and improvements so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times.
Sec. 3.5. To Insure. The Company will, and will cause each of
its subsidiaries to maintain insurance in such extent and against
such hazards and liabilities as is commonly maintained by companies
similarly situated.
Sec. 3.6. Sale, Merger or Consolidation by Company. The
Company will not sell, lease, transfer or otherwise dispose of any
substantial part of its properties and assets or consolidate with
or merge into any person or permit any person to merge into it.
Sec. 3.7. Additional Debt. The Company shall not issue or
incur any debt senior to, or parri passu with, the Debentures.
Sec. 4. Representations and Warranties. The Company
represents and warrants to each Holder of this Debenture, on the
date of original issuance, as follows:
Sec. 4.1. Due Organization and Qualification; Business. The
Company is a duly organized and validly existing corporation in
good standing under the laws of the State of Delaware, has the
power and authority to own or hold under lease the properties it
purports to own or so hold and to carry on its business as now
being conducted and presently proposed to be conducted, and has the
power and authority to enter into this Debenture and to carry out
the transactions contemplated hereby. The Company is duly
qualified as a foreign corporation in each jurisdiction where the
nature of the business transacted by it or the properties owned or
leased by it requires the Company to be so qualified except for
jurisdictions wherein the failure to be so qualified will not have
a material adverse effect on the business, operations, properties
or assets or on the condition, financial or other, of the Company.
The Company has paid all corporation taxes and franchise taxes
payable to the State of Delaware and in each other jurisdiction
where it is qualified.
Sec. 4.2. Litigation; Compliance with Rules, Regulations,
Decrees, etc. Except as set forth on Schedule 4.2 attached hereto,
there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Company) pending or, to the knowledge
of the Company, threatened against the Company or any of its
subsidiaries, properties or assets at law, in equity or before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind; and neither the
Company nor any of its subsidiaries is in default with respect to
any judgment, order, writ, injunction, decree or award of any
court, arbitrator or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or in violation of any rule
or regulation of any thereof, or in violation of any law, which
violation would have a material adverse effect on the business or
properties of the Company. The Company has all permits, licenses
and franchises necessary or desirable in order to conduct its
business and to own and operate its property and assets.
Sec. 4.3. Compliance with Other Instruments. Neither the
execution and delivery of this Debenture, the consummation of the
transactions herein contemplated, nor compliance with the terms,
conditions and provisions hereof, will conflict with or result in
a breach or violation of the certificate of incorporation or by-
laws of the Company or of any material term, condition or provision
of any agreement or instrument to which the Company is now a party
or by which it or any of its properties or assets may be bound, or
constitute a default thereunder, or result in the creation or
imposition of any lien upon any of the properties or assets of the
Company or any subsidiary.
Sec. 4.4. Financial Statements. The consolidated balance
sheet of the Company as at June 30 in each of the years 1990 to
1995, inclusive, and the related consolidated statements of
operations, stockholder' equity and cash flows for the fiscal years
then ended, accompanied in each case by the opinion of independent
public accountants previously delivered to the Holder of this
Debenture, as well as the unaudited financial statements as of
September 30, and December 31, 1995 and 1994 (as set forth in the
Form 10Q set forth below) previously delivered to the Holder are
complete and correct in all material respects and fairly present
the financial condition of the Company and its subsidiaries and the
results of the operations and changes in financial position of the
Company and its subsidiaries for the respective fiscal periods
ended on said dates, all in conformity with generally accepted
accounting principles applied on a consistent basis (except as
otherwise set forth therein or in the notes thereto stated)
throughout the fiscal periods involved.
Sec. 4.5. Business and Properties; No Misleading Statement or
Omissions. The annual report of the Company on Form 10-K for the
fiscal year ended June 30, 1995 including all exhibits and material
incorporated by reference (the "Form 10-K") and the Reports on Form
10-Q relating to the three-month periods ended September 30 and
December 31, 1995 (collectively with the Form 10-K, the "Reports"),
as filed with the Securities and Exchange Commission and copies of
which have heretofore been furnished to the Holder, correctly
describe the general nature of the business conducted by the
Company during the fiscal year ended June 30, 1995 and the six-
month period ended December 31, 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 December 31, 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. Except as set forth in Schedule 4.5 hereto, there is
no fact or circumstance now in existence and currently known by the
Company which does now, or with the passage of time, would be
reasonably anticipated to have a material adverse affect on the
Company, its business, prospects, financial condition or
operations.
Sec. 4.6. Subsidiaries; Due Organization and Qualification.
The Form 10-K correctly and completely sets forth the name and
jurisdiction of the incorporation of each subsidiary of the
Company. All outstanding shares of stock of all classes of each
subsidiary listed in the Form 10-K are owned by the Company and
have been validly issued, are fully paid and non-assessable, and
are owned free and clear of any lien, option, contractual
restriction on transfer or contractual right of any other person.
Each subsidiary listed in the Form 10-K is a duly organized and
validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power and
authority to own or hold under lease the properties it purports to
own or so hold and to carry on its business as now being conducted
and presently proposed to be conducted; each subsidiary listed in
the Form 10-K is duly qualified and is in good standing as a
foreign corporation in each jurisdiction wherein, in the judgment
of the Company, the nature of the business transacted by it or the
properties owned or leased by it makes such qualification
necessary, except for jurisdictions wherein the failure to be so
qualified will not have a material adverse effect on the business,
operations, properties or assets or on the condition, financial or
other, of the Company.
Sec. 4.7. Title to Properties. The Company and its
subsidiaries have good and marketable title to, or valid and
enforceable leasehold estates in, their respective real properties
and assets (including leasehold improvements) reflected in the
consolidated balance sheet as at December 31, 1995 referred to in
Sec. 4.4 above, subject only to such defects or irregularities of title
which do not in the aggregate interfere with the operation, value
or use of such properties and assets considered as a whole and
subject to 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.
Sec. 4.8. Trademarks, Patents, etc. The Company and its
subsidiaries possess such trademarks, trade names, copyrights,
patents, licenses, or rights in any thereof as are adequate in the
opinion of the Company for the conduct of their respective
businesses as now conducted, without known conflict with the rights
of others except for conflicts which if adversely determined would
not, singly or in the aggregate, result in any material adverse
change in the business, operations, properties or assets or in the
condition, financial or other, of the Company.
Sec. 4.9. Tax Liability. The Company and its subsidiaries
have, to the knowledge of their respective officers, properly
prepared and filed all tax returns required to be filed with taxing
authorities prior to the date hereof or have duly obtained
extensions of time for the filing thereof and have paid all taxes
shown as due on such returns that were filed. The Company has
properly withheld all taxes required to be withheld, including,
without limitation all federal, state and local withholding taxes
and FICA payments, and, to the Company's knowledge, there are no
pending audits or investigations relating to tax matters affecting
the Company or any subsidiary. The Company has been notified of 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.
Sec. 4.10. Governmental Action. Except as otherwise
contemplated by this Debenture and blue sky laws, no action,
authorization or approval of, or registration, declaration or
filing with, any governmental or public body or authority is
required to authorize, or is otherwise required in connection with,
the execution, delivery and performance by the Company of this
Debenture, other than any post event informational filing.
Sec. 4.11. ERISA. (a) The Company is in compliance in
all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
(b) No "employee benefit plan" as defined in
ERISA, maintained by the Company or any subsidiary, as from time to
time in effect (herein called "Benefit Plans" or, individually, a
"Benefit Plan") nor any trusts created thereunder, nor any trustee
or administrator thereof, has engaged in a "prohibited
transaction," as defined in ERISA, which could subject the Company
or any subsidiary, or any Benefit Plan or any such trust, or any
trustee or administrator thereof, or any party dealing with any
Benefit Plan, or any such trust to any tax or penalty on prohibited
transactions. Neither any of the Benefit Plans nor any such trusts
have been terminated, or are liable for the tax or penalty on
prohibited transactions, nor has there been any "reportable event"
as defined in ERISA or any "accumulated funding deficiency."
Neither the Company nor any of its subsidiaries has incurred any
liability to the Pension Benefit Guaranty Corporation.
Sec. 4.12. Environmental Issues. (a) The property owned
or leased by the Company or any of its subsidiaries ("Premises")
and the present and contemplated use and occupancy thereof are in
full compliance in all material respects with all applicable
federal, state and local laws, ordinances, building codes, rules
and regulations pertaining to zoning, parking, construction,
building, land use and environmental matters, including, without
limitation, the provisions of the Federal Occupation Safety and
Health Act and the Environmental Protection Act, and all applicable
rules and regulations thereunder and all similar state and local
laws, rules and regulations; there are no current citations,
notices or orders of non-compliance issued to the Company or any of
its subsidiaries or relating to its business, assets, property
(leased or owned), leaseholds or equipment under any such laws,
rules and regulations. The Company and each of its subsidiaries
has been issued all required federal, state and local licenses,
certificates and permits relating to the business, assets, property
(leased or owned) leaseholds and equipment, and are in compliance
in all material respects with all applicable federal, state and
local laws, rules and regulations relating to air emissions, water
discharge, noise emissions, solid or liquid disposal, hazardous
waste or materials, or other environmental, health or safety
matters.
(b) (i) No hazardous or toxic substance or material
or other waste ("Hazardous Substance") as defined in or regulated
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended (42 U.S.C. Sec. 9601, et. seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Sec. 6901,
et. seq.), The Oil Pollution Act of 1990 (33 U.S.C. Sec. 2701 et.
seq.) or any other federal, state or local law, order or regulation
pertaining to health, safety, or the environment (the
"Environmental Laws") has ever been unlawfully disposed, released,
discharged or spilled on or under any part of the Premises, (ii)
the Premises has never been used as a dump or landfill, (iii) no
litigation or administrative action or proceeding has been
commenced or, to the Company's knowledge, threatened against the
Company or any of its subsidiaries alleging a violation of any
Environmental Laws, and (iv) no underground storage tank (other
than fuel oil storage tanks), equipment containing polycholorinated
biphenyl, asbestos, or urea formaldehyde is located on or under the
Premises; the Premises are free from any contamination by any
Hazardous Substance and the Company is in compliance in all
material respects with all Environmental Laws affecting the Company
or the Premises.
(c) There is not present in the Premises any
friable asbestos or any substance containing asbestos and deemed
hazardous by federal, state or local laws, rules, regulations or
orders respecting such material.
Sec. 4.13. Due Authorization of Debenture. This
Debenture and the transactions herein contemplated, have been duly
authorized by the Company, and when this Debenture has been duly
executed, paid for and delivered by the Company, no shareholder
approval is required in connection therewith, this Debenture will
be a valid and legally binding obligation, enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium or similar
laws affecting the enforcement of creditors' rights generally and
that the availability of equitable remedies is subject to the
discretion of the court before which any proceeding therefor may be
brought.
Sec. 4.14. No Defaults. The Company is presently,
and at all time in the past twelve (12) months has been, in
compliance and not in any violation or default under its lending
agreements with its lenders, including, without limitation,
Congress and the Sterling Group and has been in compliance with,
and not it default under, any material contract, leases, mortgages
or agreement. No event, fact or circumstance exists which, with
the passage of time or the giving of the notice, would create an
event of default under any of the above instruments. The Company
is in compliance with its certificate of incorporation and its by-
laws.
Sec. 4.15. Capitalization. The authorized and
outstanding shares of capital stock, warrants or rights to convert
into or receive capital stock of the Company, are stated on
Schedule 4.15 attached hereto. All of the issued and outstanding
shares of capital stock of the Company are duly and validly issued
and outstanding, are fully paid and non-assessable. Except as
stated on such Schedule 4.15, there are no outstanding, options,
warrants, or rights to convert into or receive capital stock of the
Company or securities exchangeable for, or convertible into,
capital stock of the Company. No person or entity has demand or
"piggy-back" registration rights as to any security issued or
issuable by the Company, except as set forth on Schedule 4.15.
Sec. 4.16. Undisclosed Liabilities; Material Changes.
Except for such claims, debts and liabilities as are reflected in
the financial statements referred to in Sec. 4.4 hereto and borrowing
under the Company's revolving credit agreement with Congress, the
Company does not have any outstanding indebtedness for money
borrowed and is not subject to any claims or liabilities (whether
matured or unmatured, liquidated or unliquidated, accrued, fixed,
contingent or otherwise), other than trade or business obligations
incurred in the ordinary course of business since the date of such
financial statements, in amounts usual and normal, both
individually and in the aggregate, for the Company, all accounting
procedures and methods have been maintained in a manner consistent
with prior periods, there has been no lease, sale (other than
inventory in the ordinary course of business), or abandonment of
any property or assets of the Company, nor has there been any labor
strife, strike or lock-out. Since the date of such financial
statements, there has not been any material increase in the
compensation payable or to become payable by the Company to any of
its officers, employees or agents, or any bonus payment or
arrangement made to or with any of them, other than in the ordinary
course and consistent with past practices. Since the date of such
financial statements, there has not been any payment by the Company
of any dividends or any distribution by the Company to any of its
shareholders in redemption or as a purchase price of any
indebtedness (whether in payment of principle, interest or
otherwise) owing to any of them nor has there been any mortgage,
pledge or subjection to a lien, charge or encumbrance of any
material kind of any of the Company's assets, tangible or
intangible.
Sec. 4.17. Insurance. The Company maintains
insurance adequate and reasonable for its needs and consistent with
industry standards. All such insurance is in full force and effect
and the Company has received no notices of cancellation or
indication of any intention on the part of any insurance company
not to renew.
Sec. 4.18. Employment Contracts. Except as set forth
on Schedule 4.18 attached hereto, the Company is not a party to, or
otherwise subject to, any oral or written (i) collective bargaining
agreement, (ii) contract or other agreement for the employment of
any officer or employee, (iii) profit-sharing, bonus, deferred
compensation, stock option, severance pay, pension, retirement or
similar plan or agreement (including individual agreements)
providing employee benefits.
Sec. 4.19. Future Agreements. The Company is not a
party to or otherwise subject to any oral or written (i) guarantee
of any obligations for the borrowing of money or otherwise, or any
other agreement or guarantee of the obligations of another person
or entity, (ii agreement or arrangement for the purchase or sale of
any assets of the Company other than in the ordinary course of
business or for the grant of any preferential rights to purchase
any of the Company's assets, properties or rights, (iii) agreement,
contract or commitment containing any covenant limiting the freedom
of the Company to engage in any line of business in any area of the
world or to compete with any person or entity, (iv) agreement,
contract or commitment relating to the acquisition of assets or
capital stock of any business enterprise, (v) contract, agreement
or other instrument not entered at arms length and in the ordinary
course of business.
Sec. 4.20. Market Price of Common Stock. Schedule
4.20 sets forth the high, low and closing prices for the Common
Stock of the Company for the trading days March 4, to March 12,
1996 as prepared from information provided to the Company by
Bloomberg Financial Markets.
Sec. 5. Subordination. (a) "Senior Debt" means
(i) all indebtedness for principal and interest, including interest
accruing during the period of any bankruptcy and other amounts
payable under the terms of such Senior Debt, of the Company to
Congress Financial Corporation ("Congress") under that certain
Accounts Financing Agreement (Security Agreement) dated December
31, 1992 and the Covenant Supplement to Accounts Financing
Agreement (Security Agreement) dated December 31, 1992 and all
amounts owing to Sterling Commercial Capital, Inc., First Well
Street SBIC, L.P., Fundex Capital Corp. and Tappan Zee Capital
Corp. under that certain Loan Agreement dated March 31, 1994,
Mortgage dated March 31, 1994 and Security Agreement dated March
31, 1994.
(b) The Company covenants and agrees, and each
Holder of this Debenture, by his acceptance hereof likewise
covenants and agrees that the payment of the principal of, interest
and all other amounts payable on this Debenture shall be
subordinated in accordance with the provisions of this Sec. 5 and each
holder of any of the Debenture, whether upon original issue or upon
transfer or assignment thereof, accepts and agrees to be bound by
such provisions. This Debenture, shall, to the extent and in the
manner hereinafter in this Sec. 5 set forth, be subordinated and
subject in right of payment to the prior payment in full of all
Senior Debt of the Company.
(c) Upon any payment or distribution of assets or
securities of the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or
total or partial liquidation or reorganization of the Company
whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Debt of the Company
shall first be paid in cash or cash equivalents, before the holder
of this Debenture shall be entitled to receive any assets or
securities (other than shares of stock of the Company, as
reorganized or readjusted or securities of the Company, or of any
other corporation provided for by a plan of reorganization or
readjustment, junior to, or the payment of which is subordinated at
least to the extent provided in this Sec. 5 to the payment of, all
Senior Debt of the Company, which may at the time be outstanding or
any securities issued in respect thereof under any such plan of
reorganization or readjustment) in respect of the Debentures (for
principal, interest or other amounts); and upon any such
dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company, of
any kind or character, whether in cash, property or securities
(other than as aforesaid), to which the Holders of the Debentures
would be entitled, except for the provisions of this Sec. 5, shall
be made by the Company, or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or
distribution, directly to the holders of Senior Debt of the
Company, or their representatives to the extent necessary to pay
all such Senior Debt of the Company, after giving effect to any
concurrent payment or distribution to or for the holders of such
Senior Debt.
(d) No demand, declaration, acceleration or direct
or indirect payment, prepayment or enforcement of principal of this
Debenture may be made or done until the Senior Debt is finally paid
in full, provided, however, demand for payment and acceleration may
be made after 180 days following an Event of Default. Also, no
direct or indirect payment of or on account of this Debenture
(including without limitation principal, interest and premiums)
shall be made if, at the time of such payment or immediately after
giving effect thereto, (i) there shall exist a default in the
payment of any amount (including without limitation principal,
interest and premiums) payable by the Company in respect of any
Senior Debt (any default referred to in this clause (i) herein
called a "Monetary Default"), or (ii) the Company receives a notice
from a holder of any Senior Debt that there exists a default or an
Event of Default other than a Monetary Default in respect of any
Senior Debt (any default or Event of Default specified in this
clause (ii) herein called a "Non-Monetary Default"). If the
Company receives any notice of a Non-Monetary Default, a subsequent
notice given within 360 days from the date of the giving of the
first notice relating to the same Non-Monetary Default on the same
issue of Senior Debt shall not be effective for the purposes of
this paragraph. Notwithstanding the occurrence of a Non-Monetary
Default (but subject to the provisions of Section 5(c) above and
clause (i) of the second sentence of this Section 5(d)), the
Company shall resume payments on and distribution in respect of
interest and other amounts (but not principal) on this Debenture
when: (1) the Non-Monetary Default is cured or waived, or (2) 180
days after the giving of the aforementioned notice of the
occurrence of such Non-Monetary Default (unless during such 180 day
period the maturity of the Senior Debt is accelerated, or such
indebtedness otherwise comes due, and is not paid in full), but in
any event only if this Sec. 5 otherwise permits the payments or
acquisition at the time of such payment.
(e) In the event that, notwithstanding the
foregoing, the holder of any Debenture shall have received any
payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities
(other than as expressly permitted by this Sec. 5) in contravention
of the terms of the subordination contained herein before all
Senior Debt of the Company is paid in full, then and in such event,
such payment or distribution of assets or securities of the Company
shall be held in trust for and paid over or delivered to the holder
of Senior Debt of the Company, for application to the payment of
all Senior Debt of the Company, remaining unpaid to the extent
necessary to pay in full in cash the principal of and the premium
(if any) and interest and such other amounts on such Senior Debt of
the Company, in accordance with its terms, after giving effect to
any concurrent payment or distribution to holders of such Senior
Debt of the Company.
(f) If any Event of Default occurs (under
circumstances when the provisions of Sec. 5(c) shall not be
applicable) with respect to the Company and as a result this
Debenture is declared due and payable, and such declaration has not
been rescinded or annulled, all principal and premium, if any, of
all Senior Debt of the Company then due, or thereafter declared to
be due, pursuant to the terms of such Senior Debt at such time, and
all interest and such other amounts then due upon such Senior Debt
shall first be paid in full before any payment is made on account
of principal or interest or other amounts on any Debenture.
(g) Subject to the prior payment in full of all
Senior Debt of the Company, the Holder of this Debenture shall be
subrogated to the rights of the holders of such Senior Debt to
receive payments or distributions of assets or securities of the
Company with respect to payments or distributions to the holders of
Senior Debt by or on behalf of the Company to which the Holder of
this Note would be entitled except for the provisions of this Sec. 5,
applicable to Senior Debt until the principal of and interest on
the Debenture shall be paid in full; provided, however, that all
payments of principal and interest on this Debenture which were
permitted under the provisions of this Sec. 5 at the time made
shall remain the property of the Holder of this Debenture and shall
not be subject to recapture by the holders of the Senior Debt. For
purposes of such subrogation, no such payments or distributions to
the holders of Senior Debt by or on behalf of the Company, to which
the Holder of this Debenture would be entitled, except for the
provisions of this Sec. 5, and no such payments or distributions
pursuant to the provisions of this Sec. 5 to or for the benefit of
the holders of Senior Debt of the Company, by the Holder of
Debenture, shall, as between the Company, its creditors other than
the holders of their respective Senior Debt, as the case may be,
and the Holders of this Debenture, be deemed to be a payment by the
Company, to or on account of Senior Debt and no such payments or
distribution to the Holders of Debentures by virtue of the
subrogation herein provided for shall, as between the Company, its
creditors other than the Holders of their respective Senior Debt
and the Holders of the Debentures, be deemed to be a payment by the
Company, on account of such Senior Debt, it being understood that
the provisions of this Sec. 5 are solely for the purpose of defining
the relative rights of the Holders of the Debentures, on the one
hand, and the holders of Senior Debt of the Company, on the other
hand. Nothing contained in this is intended to or shall impair,
as between the Company and the Holders of Debentures, the
obligation of the Company, which is unconditional and absolute, to
pay to the Holders of the Debentures the principal of and interest
on the Debentures, as and when the same shall become due and
payable in accordance with their terms, or to affect (except to the
extent specifically provided above in this paragraph) the relative
rights of the Holders of the Debentures and creditors of the
Company, other than the Holders of Senior Debt of the Company, nor
shall anything herein prevent the Holder of any Debentures from
exercising all remedies otherwise permitted by applicable law upon
default under this Debenture, subject to the rights, if any, under
this Sec. 5, of the Holders of Senior Debt of the Company, in respect
of assets or securities of the Company, of any kind or character,
whether cash, property or securities, received upon the exercise of
any such remedy.
(h) Upon any payment or distribution of assets or
securities of the Company referred to in this Sec. 5, the Holders
of this Debenture shall be entitled to rely upon any order or
decree of a court of competent jurisdiction in which such
dissolution, winding up, liquidation or reorganization proceedings
are pending, and upon a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making any
such payment or distribution, delivered to the Holders of the
Debentures for purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Senior Debt and
other indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Sec. 5.
(i) No right of any present or future holder of any
Senior Debt of the Company, to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by
any act or failure to act on the part of the Company, or by any act
or failure to act, in good faith, by any Holder, or by any
noncompliance by the Company, with the terms, provisions and
covenants of this Debenture regardless of any knowledge thereof any
such Holder may have or otherwise be charged with.
(j) The provisions of this Sec. 5 are intended to
be for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt of the Company.
Sec. 6. Events of Default.
Sec. 6.1. Events of Default. If one or more of the
following events, herein called Events of Default, shall happen for
any reason whatsoever and whether such happening shall be voluntary
or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of
any court of any order, rule or regulation of any administrative or
governmental body) and be continuing:
(a) Default shall be made in the payment of the
principal of any Debenture, when and as the same shall become due
and payable,whether at maturity or at a date fixed for prepayment
or by acceleration or otherwise; or
(b) Default shall be made in the payment of any
installment of interest on any Debenture according to its tenor
when and as the same shall become due and payable and such default
shall continue for a period of 10 days; or
(c) Default shall be made in the due observance or
performance of any covenant, condition or agreement on the part of
the Company contained in this Debenture; or
(d) The Company shall be adjudicated a bankrupt or
insolvent, or shall consent to the appointment of a receiver,
trustee or liquidator of itself or of any material part of its
property, or shall admit in writing its inability to pay its debts
generally as they come due, or shall make a general assignment for
the benefit of creditors, or shall file a voluntary petition or an
answer seeking reorganization or arrangement in a proceeding under
any bankruptcy law (as now or hereafter in effect) or an answer
admitting the material allegations of a petition filed against the
Company in any such proceeding, or shall, by voluntary petition,
answer or consent, seek relief under the provisions of any other
now existing or future bankruptcy or other similar law providing
for the reorganization or winding up of corporations, or the
Company or its directors or majority stockholders shall take action
looking to the dissolution or liquidation of the Company; or
(e) An order, judgment or decree shall be entered
by any court of competent jurisdiction appointing, without the
consent of the Company, a receiver, trustee or liquidator of the
Company or of any material part of its property, and such receiver,
trustee or liquidator shall not have been removed or discharged
within 90 days thereafter, or any material part of the property of
the Company shall, in any judicial proceeding, be sequestered and
shall not be returned to the possession of the Company within 90
days thereafter; or
(f) A petition against the Company in a proceeding
under any bankruptcy law (as now or hereinafter in effect) shall be
filed and shall not be dismissed within 30 days after such filing,
or, in case the approval of such petition by a court of competent
jurisdiction is required, shall be filed and approved by such a
court as properly filed and such approval shall not be withdrawn or
the proceeding dismissed within 30 days thereafter, or if, under
the provisions of any other similar law providing for
reorganization or winding up of corporations and which may apply to
the Company, any court of competent jurisdiction, custody or
control of the Company or of any material part of its property and
such jurisdiction, custody or control shall not be relinquished or
terminated within 30 days thereafter; or
(g) The Company shall (x) be declared in default in
the payment of principal or interest on any evidence of
indebtedness for money borrowed (other than the Debentures) or
other material obligations and such default shall continue for more
than the period of grace, if any, therein specified, unless such
default shall have been cured or waived prior to such indebtedness
becoming or being declared to be due and payable prior to its
stated maturity, or (y) default shall continue for more than the
period of grace, if any, therein specified, or (z) default in the
performance or observance of any other term, condition or agreement
contained in any such evidence of indebtedness for money borrowed
or in any agreement relating thereto if as a result of such default
such evidence of indebtedness is declared to be due and payable
prior to its stated maturity;
then, in any such event, any registered Holder or Holders of the
Debentures may declare the Debenture or Debentures held by it or
them to be due and payable, together with accrued interest thereon,
thirty (30) days after such declaration, unless, prior do the
expiration of such thirty (30) day period the registered Holders of
a majority of the then outstanding principal amount of the
Debentures at such time outstanding, together with the concurrence
of each registered Holder owning originally and at such time a
principal amount of $150,000 or greater of Debentures, shall waive,
suspend, cancel or annul such declaration.
Sec. 6.2. Suits for Enforcement. In case any one or more
of the Events of Default specified in Sec. 6.1 shall happen and be
continuing, each Holder of a Debenture which may, pursuant to the
provisions of Sec. 6.1, declare the Debenture or Debentures held by
it to be immediately due and payable, may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other
appropriate proceeding, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained
in this Debenture, such Debenture or in aid of the exercise of any
power granted in this Debenture, such Debenture, or may proceed to
enforce the payment of such Debenture or to enforce any other legal
or equitable right of holder of such Debenture. If, pursuant to
the provisions of Sec. 6.1 or of this Sec. 6.2, the holder of any
Debenture shall demand payment thereof or take any action in
respect of a default or an Event of Default, the Company will
forthwith give written notice, addressed as provided in Sec. 6.4,
to the other Holders of Debentures, specifying such action and the
nature of the default or Event of Default. Nothing contained in
this Sec. 6.2 or in 6.1 shall in any manner impair that absolute
and unconditional right of each holder of a Debenture to receive
payment of the principal of and interest, on such Debenture when
the same shall become due and payable in accordance with the terms
thereof, and to institute suit for the enforcement of such payment.
Sec. 6.3. Remedies Cumulative. No remedy herein
conferred upon the Holder of any Debenture is intended to be
exclusive of any other remedy, and each and every such remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
Sec. 6.4. Remedies Not Waived. No course of dealing
between the Company and any Holder of a Debenture shall operate as
a waiver of any right of such Holder hereunder or under such
Xxxxxxxxx, and no delay on the part of such Holder in exercising
any right hereunder or thereunder shall so operate.
Sec. 7. Waivers. Anything in this Debenture to
the contrary notwithstanding, upon the affirmative written consent
of the registered Holders of a majority of the then outstanding
principal amount of Debentures, plus the affirmative written
consent of each registered Holder owning originally and at such
time a principal amount of $150,000 or greater of Debentures, any
provision, covenant, requirement, agreement or condition of the
Company under this Debenture may be waived or amended at any time
or from time to time and such waiver or amendment shall be binding
upon all Holders and all Debentures.
Sec. 8. Security. This Debenture is secured by
that certain Security Agreement dated as of March 1, 1996 made by
the Company for the benefit of the holders of the Debentures.
Sec. 9. Costs of Collection. In case of a default
in the payment of any principal of or interest on this Debenture,
the Company will pay to the Holder hereof such further amount as
shall be sufficient to cover the costs and expenses of collection,
including (without limitation) reasonable attorneys' fees.
Sec. 10. Legend. Each Debenture shall bear the
following legend:
The Securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended,
or registered or qualified under the "blue sky" laws of any State.
The securities may not be pledged, hypothecated, assigned, sold or
transferred unless registered under that Act and registered or
qualified under the blue sky laws as may be applicable or unless,
in the opinion of counsel reasonably satisfactory to the Company,
exemptions from such laws are available.
Sec. 11. Covenants Bind Successors and Assigns.
All the covenants, stipulations, promises and agreements in this
Debenture contained by or on behalf of the Company shall bind its
successors and assigns, whether so expressed or not.
Sec. 12. Governing Law. This Debenture shall be
governed by and construed in accordance with the laws of the State
of New York.
Sec. 13. Notice. Any notice pursuant to this
Debenture shall be effected on the day delivered by hand and
receipted, the second business day after delivery to a recognized
overnight courier service or seven days after delivery to the
United States Post Office, proper postage prepaid sent registered
or certified mail, return receipt requested, addressed as follows:
If to the holder at the address shown on the register
maintained by the Company pursuant to Sec. 1.2 of this Debenture.
If to the Company:
00 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxx Xxxx 00000
Sec. 14. Waiver of Jury Trial. THE COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS DEBENTURE AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
Sec. 15. Headings. The headings of the sections
and subsections of this Debenture are inserted for convenience only
and do not constitute a part of this Debenture.
IN WITNESS WHEREOF, VTX Electronics Corp. has caused this
Debenture to be signed in its corporate name by one of its officers
thereunto duly authorized and this Debenture to be dated as of the
day and year first above written.
VTX ELECTRONICS CORP.
By:/s/ Xxxxxx Xxxx, C.E.O.
_______________________
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
