SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(a) of
the Securities Exchange Act of 1934
Date of Report
September 5, 1995
COMPUDYNE CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA
(State or other jurisdiction of incorporation)
1-4245 23-1408659
(Commission File Number) (IRS Employer Identification No.)
90 State House Square
Hartford, Connecticut 06103-3720
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(203) 247-7611
Item 1. Changes in Control of Registrant.
On August 21, 1995, CompuDyne Corporation ("CompuDyne" or the "Company")
entered into and consummated a Stock Purchase Agreement by and among it, Martin
A. Roenigk and Alan Markowitz (Messrs. Roenigk and Markowitz are, collectively,
the "Sellers") and MicroAssembly Systems, Inc. ("MicroAssembly"), pursuant to
which CompuDyne issued to the Sellers 1,260,460 shares of its Convertible
Preference Stock, Series D ("Series D Preference Stock") in exchange for all of
the Sellers' shares of capital stock of MicroAssembly, which shares represent
all of MicroAssembly's issued and outstanding capital stock. The issuance by
CompuDyne of the Series D Preferred Stock, together with the issuance of certain
Notes, as defined below, and certain options to purchase common stock, all as
described below and in accordance with the terms of the Stock Purchase
Agreement, are referred to as the "Transaction". Of the 1,260,460 Shares of
Series D Preference Stock issued to the Sellers, 945,345 shares were issued to
Mr. Roenigk, and 315,115 shares were issued to Mr. Markowitz. The Series D
Preference Stock has rights to vote on a share for share basis with the
Company's common stock on all corporate issues other than the election of
directors; it is also convertible to common stock on a share for share basis at
any time prior to redemption by the Company. For the election of directors,
each share of Series D Preference Stock is entitled to 1/3.08 of a vote as
compared to the Company's common stock, which is entitled to one vote per
share.
As part of the Transaction, in return for $400,000 paid to CompuDyne at the
closing, CompuDyne issued to the Sellers Senior Convertible Promissory Notes
(the "Notes") in the aggregate principal amount of $400,000, which Notes are
convertible, prior to redemption by CompuDyne, into CompuDyne common stock at
a conversion rate of $1.50 per share of common stock, or 266,667 shares of
common stock if the entire principal amount of the Notes is converted. Of the
$400,000 principal amount of Notes issued, $300,000 principal amount of the
Notes was issued to Mr. Roenigk, and $100,000 principal amount of the Notes was
issued to Mr. Markowitz. As described in a report filed by the Sellers with the
Securities and Exchange Commission and with the Company pursuant to Section
13(d) of the Securities Exchange Act of 1934, the source of the Sellers'
$400,000 investment in the Company was personal funds.
As a further part of the Transaction, Norman Silberdick, the Company's
Chairman, President and Chief Executive Officer, has resigned as such and as a
director of the Company. The Company's Board of Directors has elected Mr.
Roenigk to fill Mr. Silberdick's seat on the Board of Directors, and to become
its Chairman, President and Chief Executive Officer. Mr. Markowitz has also
been elected to the Company's six member Board of Directors. In recognition of
Mr. Roenigk's position as Chairman, President and CEO, the Company has issued
to him options to purchase up to 200,000 shares of the Company's common stock
for $1.50 per share. The options expire in ten (10) years. Mr. Silberdick, as
part of a related transaction described in Item 2 of this report, has turned in
to the Company 60,000 shares of the Company's common stock issued pursuant to
a Stock Purchase Agreement, dated August 1, 1993, between the Company and Mr.
Silberdick, and he has relinquished his rights to purchase an additional 50,000
shares pursuant to such Agreement.
Immediately prior to the Transaction, but after the exercise by Corcap,
Inc. ("Corcap") of a warrant to acquire 150,000 shares of CompuDyne common
stock, Corcap held 670,881 shares of CompuDyne's voting shares, or approximately
38.3% of CompuDyne's 1,749,622 issued and outstanding shares of Common Stock.
After the transactions described above, Corcap's 670,881 shares now represent
approximately 22.3% of the voting power of issued and outstanding shares
(including the Series D Preference Stock) on all issues other than the election
of directors, 30.2% of the voting power of issued and outstanding shares for the
election of directors, and approximately 18.8% of the voting shares on a fully
diluted basis.
Prior to the Transaction, the Sellers held no voting shares of CompuDyne,
although Mr. Roenigk held 70,000 shares of Corcap common stock, which is
approximately 2.4% of Corcap's voting shares. Immediately after the
Transaction, the Sellers held 1,260,460 shares of CompuDyne's voting stock
(including the Series D Preference Stock), or approximately 41.9% of the voting
power of issued and outstanding shares for all issues other than the election
of directors and 19% of the voting power of issued and outstanding shares for
the election of directors. Assuming conversion by the Sellers of all of the
shares of Series D Preference Stock, the conversion of the full principal amount
of the Notes and the exercise by Mr. Roenigk of his options to purchase 200,000
shares of the Company's Common Stock, the Sellers would hold 1,727,127 shares
of the Company's voting stock, or approximately 48.5% of the Company's voting
stock on a fully diluted basis. In addition, in connection with the
Transaction, Mr. Roenigk became a director of Corcap and was issued options to
purchase 450,000 additional shares of Corcap common stock which, if exercised,
would, together with Mr. Roenigk's prior holdings, result in his holding
approximately 15.4% of Corcap's common stock.
The Sellers have, in their filing with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities and Exchange Act of 1934,
disclaimed any arrangements or understandings among themselves or their
associates with respect to the future election of the Company's directors or
other matters in connection with the operation and management of the Company.
Upon consummation of the transaction in addition to Mr. Roenigk, CompuDyne's
executive officers are, respectively, Philip M. Blackmon, Vice President, and
Elaine Chen, Treasurer and Chief Financial Officer.
Item 2. Acquisition or Disposition of Assets.
I. Acquisition of MicroAssembly Systems, Inc. Common Stock.
In connection with the Stock Purchase Agreement, the Company acquired on
August 21, 1995 all of the capital stock of MicroAssembly (the "MicroAssembly
Stock") from the Sellers. MicroAssembly, located in Willimantic, Connecticut,
is a manufacturer of a proprietary automated process called the "Stick-Screw
System". The Stick-Screw System uses custom designed screws in a stick format
for the insertion of fasteners in electronic and other assembly environments.
The Stick-Screw System provides for insertion of the fasteners at a faster speed
than can be accomplished by competing systems or processes. MicroAssembly
operates out of owned facilities, utilizing automatic screw machines to
manufacture the Stick-Screws. MicroAssembly also manufactures the specially
designed pneumatic drivers for inserting the screws. Sales are primarily
throughout the United States via a network of independent sales representatives,
with modest sales in Europe and South America.
The consideration to the Sellers for the MicroAssembly Stock was the
issuance to them of 1,260,460 shares of CompuDyne's Series D Preference Stock.
Each share of Series D Preference Stock carries an annual aggregate dividend
equal to the lower of: (a) sixty percent (60%) of MicroAssembly's after-tax net
income in the previous calendar year, divided by 1,260,460, or (b) eight percent
(8%) of the Redemption Value of $1.50 per share of the Series D Preference
Stock. Dividends may be paid on the Series D Preference Stock, at the Company's
option, in cash, CompuDyne common stock, or a combination thereof, based upon
the average closing price of CompuDyne's common stock for the prior thirty (30)
trading days as quoted on a national securities exchange or, if not so quoted,
on the NASDAQ, or if not so quoted, on the OTC Bulletin Board maintained by the
NASD, or, if not so quoted, by the average closing bid prices quoted by three
dealers regularly making a market or maintaining bid and asked prices on such
stock (or such fewer number of dealers which may be making a market or
maintaining bid and asked prices).
Beginning on August 21 in the year 2000, the Company may, at its option,
redeem all or any part of the Series D Preference Stock for a price of $1.80 per
share, that being one hundred twenty percent (120%) of the Redemption Value,
plus accrued and unpaid dividends. Beginning on August 31, 2006, and on that
date in each of the four succeeding years, the Company shall redeem 252,092
shares of Series D Preference Stock, or such lesser number as may be issued and
outstanding, for their $1.50 per share Redemption Value.
The Company reviewed the recent financial performance of MicroAssembly,
visited the manufacturing facilities, evaluated management, and considered the
strong balance sheet of MicroAssembly in coming to the determination of the
consideration to be paid. The Company considered both the value of
MicroAssembly and the ability of MicroAssembly and its shareholders to bring
considerable additional financial strength to CompuDyne's operations.
<PAGE>
II. Disposition of the Assets and Liabilities of the Suntec Division.
On August 21, 1995, Quanta Systems Corporation ("Quanta"), a wholly-owned
subsidiary of CompuDyne, transferred all of the assets and liabilities of
Quanta's Suntec division to Suntec Service Corporation, a newly-formed
corporation ("Suntec"), in return for (i) all of Suntec's issued and outstanding
common stock and (ii) Suntec's agreement to pay to Quanta a royalty of 2% of
Suntec's net sales and other revenues for thirty (30) years from the date of the
closing. Quanta then sold all of Suntec's common stock to Norman Silberdick,
who resigned on that date as CompuDyne's Chairman, President, CEO and Director.
Suntec is engaged in the business of tele-marketing home improvements in the
middle Atlantic states, primarily in the Baltimore, Maryland and Washington,
D.C., area from leased offices in Gaithersberg, Maryland. Suntec helps arrange
home improvement financing for homeowners and provides the home improvement
services through subcontractors located in its market area.
As consideration for the shares of Suntec, Mr. Silberdick executed a
nonrecourse promissory note in the initial principal amount of $79,000 (the
"Silberdick Note"), payment of which is secured by a pledge of all Suntec shares
held by Mr. Silberdick, which shares must at all times equal or exceed 33% of
all outstanding shares of Suntec capital stock. The Silberdick Note bears
interest at an annual rate equal to the Wall Street Journal prime rate, plus
2%. Through August 31, 2000, the principal of the Silberdick Note is payable
annually in amounts equal to 25% of Suntec's net, after-tax income for the year
in question. Thereafter, the unpaid principal balance, as of that date, shall
be paid in five equal annual installments.
As a condition precedent to the sale of the Suntec shares to Mr.
Silberdick, he turned in to CompuDyne 60,000 shares of CompuDyne Common Stock
and relinquished purchase rights held by him to acquire an additional 50,000
shares of additional CompuDyne Common Stock.
The amount of consideration determined by Quanta to be appropriate for the
sale of the Suntec common stock to Mr. Silberdick resulted from a number of
factors. While a division of Quanta, Suntec's business had never produced a
profit. As a result, and in light of Quanta's retention of the 2% royalty on
Suntec's net sales and other revenues for 30 years, Quanta decided that the
business should be valued at its net book value at the Closing Date. The amount
of the Silberdick Note was, at the Closing Date, based upon Suntec's net book
value at June 30, 1995 and is subject to adjustment to its net book value based
upon a Closing Date balance sheet to be completed on or before September 20,
1995.
Item 7. Financial Statements and Exhibits
(a) Audited financial statements of MicroAssembly Systems, Inc. are
not currently available, and will be filed as soon as practicable, but within
60 days from the date of this report.
(b) (i) Pro-forma financial statements to reflect the acquisition of
MircoAssembly Systems, Inc. are not currently available, and will be filed as
soon as practicable, but within 60 days of the date of this report.
(ii) Pro-forma financial statements of CompuDyne Corporation to
reflect the disposition of Suntec Service Corporation including (A) a
consolidated balance sheet as at June 30, 1995; (B) a consolidated statement of
operations for the six months ended June 30, 1995; and (C) a consolidated
statement of operations for the year ended December 31, 1994 are as follows:
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DISPOSITION OF SUNTEC ASSETS AND LIABILITIES
(in Thousands)
(Unaudited)
Actual Balance Pro forma Pro forma
June 30, 1995 Adjustments Results
ASSETS
Current Assets
Accounts receivable, net 2,244 (165) 2,079
Inventories:
Work in process 377 (25) 352
Raw Materials and
supplies 270 (18) 252
Total Inventories 647 (43) 604
Prepaid expenses and
other current assets 96 (18) 78
Total Current Assets 2,987 (226) 2,761
Non-current receivables,
related parties 13 13
Property, plant and
equipment, at cost 706 (32) 674
Less: accumulated
depreciation and
amortization (677) 14 (663)
Net property, plant
and equipment 29 (18) 11
Other assets, net 10 10
Promissory notes
receivable 129 129
Total Assets 3,039 (115) 2,924
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Accounts payable 1,831 (92) 1,739
Bank line payable 48 50 98
Customer deposits 21 (21) 0
Accrued pension costs 25 25
Accrued expenses 801 (52) 749
Current portion of
deferred compensation 96 96
Total Current Liabilities 2,822 (115) 2,707
Long term pension liability 298 298
Deferred compensation,
net of current portion 61 61
Total Liabilities 3,181 (115) 3,066
SHAREHOLDERS' (DEFICIT) EQUITY
Common Stock, par value
$.75 per share 10,000,000
shares authorized:
1,603,372 shares issued
and outstanding 1,202 1,202
Other Capital 7,988 7,988
Receivable from
Management (92) (92)
Deficit (9,240) (9,240)
Total Shareholders'
Equity (Deficit) (142) 0 (142)
Total Liabilities and
Shareholders' Equity
(Deficit) 3,039 (115) 2,924
NOTES:
1. All adjustments other than Cash and Promissory Notes Receivable reflect
the book value of the Suntec assets and liabilities that were disposed
of.
2. $50,000 was loaned to Norman Silberdick in exchange for a Promissory
Note. The bank line payable is increased to reflect the source of money.
3. The other $79,000 included in the Promissory Notes Receivable represents
the consideration received from Norman Silberdick for the purchase of
Suntec assets and liabilities.
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DISPOSITION OF SUNTEC ASSETS AND LIABILITIES
(in Thousands, Except Per Share Data)
(Unaudited)
Six Months
Ended Pro forma Pro forma
June 30, 1995 Adjustments Results
Net sales 5,223 (608) 4,615
Cost of sales 4,330 (337) 3,993
Gross margin 893 (271) 622
Selling, general and
administrative
expenses 974 (517) 457
Research and development 39 0 39
Operating income (loss) (120) 246 126
Other (income) expense
Interest (income) expense 10 10
Other (income) expense 12 12
Total other (income)
expense, net 22 22
Income (loss) from
Continuing operations
before income tax
provision (142) 246 104
Income tax provision
(benefit) 0
Net income (loss) (142) 246 104
Weighted average common
shares:
Primary 1,603 1,727
Fully diluted 1,603 1,727
Net income (loss) per
share:
Net income (loss) (0.09) 0.06
Net income (loss) per
share--full dilution:
Net income (loss) (0.09) 0.06
NOTES:
1. The pro forma adjustments were calculated assuming the disposition of
Suntec operations was consummated at the beginning of fiscal year 1994.
2. Suntec division was operated in a separate building with personnel
separate from other operations. Therefore the adjustments for the
disposition involve mainly the revenue and cost incurred directly related
to the Suntec Division. Other effects of the disposition were immaterial
and not considered in this report.
3. No Income Tax Provision is shown against the resulting net income; there
are sufficient credits from loss-carry-forwards to offset any required
tax provision.
COMPUDYNE CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DISPOSITION OF SUNTEC ASSETS AND LIABILITIES
(in Thousands, Except Per Share Data)
(Unaudited)
Fiscal Year
Ended Pro forma Pro forma
December 31, 1994 Adjustments Results
Net sales 12,287 (2,588) 9,699
Cost of sales 9,683 (1,570) 8,113
Gross margin 2,604 (1,018) 1,586
Selling, general and
administrative
expenses 2,973 (1,878) 1,095
Research and development 66 0 66
Operating income (loss) (435) 860 425
Other (income) expense
Interest (income) expense (7) (7)
Other (income) expense (1,662) (1,662)
Total other (income)
expense, net (1,669) 0 (1,669)
Income (loss) from
Continuing operations
before income tax
provision 1,234 860 2,094
Income tax provision
(benefit) 29 29
Income (loss) before
extraordinary items 1,205 860 2,065
Extraordinary items,
debt forgiveness 523 523
Net income (loss) 1,728 860 2,588
Weighted average common
shares:
Primary 1,748 1,748
Fully diluted 1,748 1,748
Net income (loss) per
share:
Continuing operations
before extraordinary
items 0.69 1.18
Extraordinary items 0.30 0.30
Net income (loss) (0.99) 1.48
Net income (loss) per
share--fully diluted
Continuing operations
before extraordinary
items 0.69 1.18
Extraordinary items 0.30 0.30
Net income (loss) (0.99) 1.48
NOTES:
1. The pro forma adjustments were calculated assuming the disposition of
Suntec operations was consummated at the beginning of fiscal year 1994.
2. Suntec division was operated in a separate building with personnel
separate from other operations. Therefore the adjustments for the
disposition involve mainly the revenue and cost incurred directly related
to the Suntec Division. Other effects of the disposition were immaterial
and not considered in this report.
3. No additional Income Tax Provision is shown against the resulting net
income: there are sufficient credits from loss-carry-forwards to offset
any required tax provision.
(c) Exhibit (4.1) CompuDyne Corporation Certificate of
Designations of the Convertible Preference Stock, Series D.
Exhibit (4.2) CompuDyne Corporation Senior
Convertible Promissory Notes.
Exhibit (99.1) Stock Purchase Agreement dated
August 21, 1995 by and among CompuDyne Corporation, MicroAssembly
Systems, Inc., Martin A. Roenigk and Alan Markowitz.
Exhibit (99.2) Asset Purchase and Sale Agreement,
dated August 21, 1995 by and among Quanta Systems Corporation,
Suntec Service Corporation and Norman Silberdick.
Exhibit (99.3) Stock Option Agreement dated
August 21, 1995 by and between Martin A. Roenigk and CompuDyne
Corporation.
____________________
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
COMPUDYNE CORPORATION
Date: September 5, 1995 By: /s/ Martin A. Roenigk
Martin A. Roenigk, Chairman and
Chief Executive Officer
INDEX TO EXHIBITS
Exhibit (4.1) CompuDyne Corporation Certificate of
Designations of the Convertible Preference Stock, Series D.
Exhibit (4.2) CompuDyne Corporation Senior Convertible
Promissory Notes.
Exhibit (99.1) Stock Purchase Agreement dated August 21, 1995
between CompuDyne Corporation, MicroAssembly Systems, Inc., Martin
A. Roenigk and Alan Markowitz.
Exhibit (99.2) Asset Purchase and Sale Agreement dated as of
August 21, 1995 by and among Quanta Systems Corporation, Suntec
Service Corporation and Norman Silberdick.
Exhibit (99.3) Stock Option Agreement dated August 21, 1995
by and between Martin A. Roenigk and CompuDyne Corporation.
EXHIBIT 4.1
COMPUDYNE CORPORATION
CERTIFICATE OF DESIGNATIONS
OF THE
CONVERTIBLE PREFERENCE STOCK, Series D
_____________________________________________
Pursuant to Section 602 of the
Pennsylvania Business Corporation Law
_____________________________________________
COMPUDYNE CORPORATION, a corporation organized and existing under the laws
of the State of Pennsylvania (the "Corporation"), hereby certifies that the
following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly called and held on August 18, 1995, at which
meeting a quorum of the directors was present and acting throughout:
RESOLVED that, pursuant to authority expressly vested in the Board of
Directors of the Corporation by the provisions of the Articles of Incorporation
of the Corporation, as amended, the Board of Directors of the Corporation hereby
provides for the issuance of a series of preference stock of the Corporation,
without par value, to consist of 1,260,460 shares, and hereby fixes the powers,
designation, preferences and relative, participating, optional or other rights
of such series of preference stock, and the qualifications, limitations and
restrictions thereof, as follows:
l. Designation.
(a) The designation of the series of preference stock created by
this resolution shall be Convertible Preference Stock, Series D
(hereinafter called "Series D Preference Stock"), and the number of shares
constituting the Series D Preference Stock upon original issuance is
1,260,460.
(b) Any shares of the Series D Preference Stock which at any time
have been redeemed, purchased or otherwise acquired by the Corporation
shall, after such redemption, purchase or other acquisition, have the
status of authorized but unissued shares of preference stock, without
designation as to series until such shares are once more designated as
part of a particular series by the Board of Directors of the Corporation.
2. Payment of Dividends.
(a) The holders of record of shares of the Series D Preference Stock
shall be entitled to receive, as and when declared by the Board of
Directors of the Corporation out of funds legally available therefor, cash
dividends thereon at the Applicable Rate (as defined below) per annum, and
no more, payable on the respective dates set forth below. The Series D
Preference Stock shall not participate in any other dividends.
(b) Dividends on the Series D Preference Stock shall accrue at the
Applicable Rate in effect on the most recent Dividend Payment Date and
shall be cumulative from the date of original issuance of the Series D
Preference Stock (the "Original Issuance Date").
(c) Accrued dividends shall be payable annually on the fifteenth day
following the delivery of audited financial statements (the "Audited
Financials") to the Board of Directors of the Corporation by the
Corporation's independent auditors (the "Independent Auditors") for the
prior year, but in no event later than April 15 of each year ("Dividend
Payment Date"), commencing on the Dividend Payment Date in 1996; provided,
however, that if any Dividend Payment Date would otherwise be a day that
is not a Business Day (as defined below), the Dividend Payment Date shall
be postponed to the next day that is a Business Day. The period beginning
on the Original Issuance Date and ending on the first Dividend Payment
Date and each successive period beginning on the first day after each
Dividend Payment Date and ending on the next succeeding Dividend Payment
Date is herein called a "Dividend Period." As used herein, "Business Day"
means any day, other than a Saturday or Sunday or a day on which
commercial banks in Hartford, Connecticut are required or authorized by
law, regulatory order or executive order to be closed.
(d) The rate of dividends per annum payable on the Series D
Preference Stock for each Dividend Period (the "Applicable Rate") per
share shall be equal to the lower of: (a) sixty percent (60%) of the
after tax net income of MicroAssembly Systems, Inc. ("MicroAssembly"), a
wholly-owned subsidiary of the Corporation, in the previous calendar year,
on an unconsolidated basis with the Corporation, based on the Audited
Financials, divided by the number of shares of Series D Preference Stock
originally issued as set forth in Section 1(a) hereof; or (b) eight
percent (8%) of the Redemption Value (as hereinafter defined) of a share
of Series D Preference Stock. Notwithstanding the foregoing, on the first
Dividend Payment Date only, the applicable rate shall be equal to the
lower of (a) sixty percent (60%) of the after-tax net income of
MicroAssembly, on an unconsolidated basis with the Corporation, for the
period in 1995 during which the Corporation owned one hundred percent
(100%) of MicroAssembly's outstanding stock (the "Period of Ownership"),
based on the Audited Financials, divided by the number of shares of
Series D Preference Stock originally issued as set forth in Section 1(a)
hereof; or (b) the product obtained by multiplying (i) eight percent (8%)
of the Redemption Value of a share of Series D Preference Stock by (ii) a
fraction the numerator of which is the number of days from the Original
Issuance Date to and including December 31, 1995 and the denominator of
which is 365.
(e) Dividends may be paid in cash or in shares of common stock, par
value $0.75 per share (the "Common Stock"), of the Corporation, or a
combination thereof, solely at the option of the Corporation. If the
dividends, or a portion thereof, are paid in Common Stock, the value of
the Common Stock shall be based upon the average closing bid price for the
Common Stock for the prior thirty (30) trading days as quoted on a
national securities exchange or, if not so quoted, on the NASDAQ, or, if
not so quoted, on the OTC Bulletin Board, an inter-dealer quotation medium
maintained by the National Association of Securities Dealers, Inc., or if
not so quoted, by the average closing bid prices quoted by three dealers
regularly making a market or maintaining bid and asked prices on the
Common Stock (or such fewer number of dealers which may be making a market
or maintaining bid and asked prices).
The Corporation shall calculate the Applicable Rate, the dividends
payable on the Series D Preference Stock and, if the dividends, or a
portion thereof, are paid in shares of Common Stock, the value of the
Common Stock. Any and all disputes between the Corporation and any holder
of the Series D Preference Stock with regard to such calculations shall be
resolved by the Independent Auditors, which resolution shall be final and
binding on the Corporation and such holders. The fees and expenses of the
Independent Auditors in resolving such calculations shall be paid by the
Corporation.
3. Priority as to Dividends.
(a) No dividends may be declared or paid on the Common Stock of the
Corporation unless and until all accrued dividends on the Series D
Preference Stock have been declared and paid. If there are one or more
series or classes of preferred stock or preference stock outstanding of a
priority equal to the Series D Preference Stock, and if there are any
accrued and unpaid dividends with respect to any such series or class, any
dividends in an amount less than the full cumulative dividends accrued and
payable, to be declared and paid with respect to the preferred stock and
preference stock shall be distributed among the different series or
classes of preferred stock and preference stock in the same proportion
that the dividends accrued and payable with respect to such series or
classes bears to the aggregate accrued and payable dividends for all
series or classes of preferred stock and preference stock of the
Corporation.
(b) If dividends in full on all outstanding shares of the Series D
Preference Stock for all prior Dividend Periods and the current Dividend
Period have not been paid or been declared and set apart for payment, (i)
the Corporation may not call for redemption any shares of the Series D
Preference Stock unless all shares of the Series D Preference Stock
outstanding are called by the Corporation and (ii) the Corporation may not
call for redemption any shares of any class of stock ranking on a parity
with or junior to the Series D Preference Stock.
4. Redemption.
(a) Commencing five years after the Original Issuance Date, the
shares of Series D Preference Stock may be redeemed, as a whole at any
time, or in part from time to time, at the election of the Corporation
("Optional Redemption") by resolution of its Board of Directors, out of
funds legally available therefor, at a redemption price of one hundred and
twenty percent (120%) of the Redemption Value per share of the Series D
Preference Stock plus accrued and unpaid dividends, including a partial
dividend to the date of redemption; provided, however, that no Optional
Redemption may be declared or paid by the Corporation unless and until all
accrued dividends of the Series D Preference Stock have been declared and
paid. The redemption value of the Series D Preference Stock shall be
$1.50 per share (the "Redemption Value").
(b) On August 31 in each of the years 2006, 2007, 2008, 2009 and
2010 the Corporation shall redeem ("Mandatory Redemption") 252,092 shares
of Series D Preference Stock or such lesser number as may be issued and
outstanding, at a redemption price per share equal to the Redemption
Value. The shares of Series D Preference Stock to be so redeemed will be
selected by lot.
(c) Notice of any redemption, specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable (the "Notice of Redemption"), shall be mailed, postage prepaid at
least ninety (90) days but not more than one hundred and twenty (120)
days, in the case of Optional Redemption, and at least thirty (30) days
but not more than sixty (60) days, in the case of Mandatory Redemption,
prior to said redemption date to each holder of record of the Series D
Preference Stock to be so redeemed at his address as the same shall appear
on the books of the Corporation. The Notice of Redemption shall include
(i) the redemption date; (ii) the number of shares of the Series D
Preference Stock to be redeemed and, if fewer than all shares held by such
holder are to be redeemed, the number of shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of the
redemption price; and (v) a statement that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
If such Notice of Redemption shall have been so mailed, and none of
the holders of shares of Series D Preference Stock shall have elected to
convert such shares into Common Stock within the time periods set forth in
Section 7(c) hereof, and if on or before the redemption date specified in
such notice all funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the holders of the
shares of Series D Preference Stock to be redeemed (and so as to be and
continue to be available therefor), with a bank or trust company named in
such notice doing business in the State of Connecticut and having a
combined capital and surplus of at least $100,000,000, thereupon and
without awaiting the redemption date, notwithstanding that any certificate
for shares of the Series D Preference Stock so called for redemption shall
not have been surrendered for cancellation, the shares represented thereby
so called for redemption shall be deemed to be no longer outstanding and
all obligations to redeem and retire each share shall be deemed satisfied,
the right to receive dividends thereon shall cease to accrue, and all
rights with respect to such shares of Series D Preference Stock so called
for redemption shall forthwith upon such deposit in trust cease and
terminate, except only the right of the holders thereof to receive out of
the funds so set aside in trust, the amount payable on redemption thereof,
but without interest.
In case the holders of shares of the Series D Preference Stock which
shall have been called for redemption shall not within four years (or any
longer period if required by law) after the redemption date claim any
amount so deposited in trust for the redemption of such shares, such bank
or trust company shall, upon demand and if permitted by applicable law,
pay over to the Corporation any such unclaimed amount so deposited with
it, and shall thereupon be relieved of all responsibility in respect
thereof, and thereafter the holders of such shares shall, subject to
applicable escheat laws, look only to the Corporation for payment of the
redemption price thereof but without interest.
(d) Upon surrender of the certificates for shares of Series D
Preference Stock for redemption, in accordance with the Notice of
Redemption, such shares shall be redeemed by the Corporation at the
applicable redemption price. In case fewer than all the shares
represented by any such certificate are to be redeemed, a new certificate
shall be issued representing the unredeemed shares, without cost to the
holder of the shares.
5. Liquidation Rights.
(a) In the event of the voluntary liquidation, dissolution or
winding up of the Corporation, the holders of shares of Series D
Preference Stock then outstanding shall be entitled to receive, before any
distribution or payment shall be made in respect of the Common Stock or
any other stock of the Corporation ranking junior to the Series D
Preference Stock as to distribution of assets on liquidation, dissolution
or winding up, an amount per share equal to the Redemption Value set forth
in Section 4(a) above plus all accrued but unpaid dividends, provided that
the holders of the Series D Preference Stock then outstanding shall be
entitled to no further participation in any distribution or payment in
connection with any such liquidation, dissolution or winding up.
(b) In the event of any involuntary liquidation, dissolution or
winding up of the Corporation, the holders of shares of Series D
Preference Stock then outstanding shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders, but
before any distribution or payment shall be made in respect of the Common
Stock or any other stock of the Corporation ranking junior to the Series
D Preference stock as to distribution of assets on liquidation,
dissolution or winding up, an amount equal to the Redemption Value set
forth in Section 4(a) above, but the holders of the Series D Preference
Stock shall be entitled to no further participation in any distribution or
payment in connection with any such liquidation, dissolution or winding
up.
(c) If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation available
for distribution among the holders of all outstanding shares of Series D
Preference Stock and of any other stock of the Corporation ranking on a
parity with the Series D Preference Stock as to assets on liquidation,
shall be insufficient to permit the payment in full to such holders of the
amounts to which they are entitled, then such available assets shall be
distributed among the holders of Series D Preference Stock and of any
other stock of the Corporation ranking upon a parity with the Series D
Preference Stock as to distribution of assets on liquidation ratably in
proportion to the full preferential amounts to which they would otherwise
respectively be entitled.
(d) Neither the consolidation or merger of the Corporation with or
into any other corporation or corporations, nor the sale or transfer by
the Corporation of all or any part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of
this Section.
6. Voting Rights.
(a) Except as otherwise required by law, in connection with all
matters to be voted upon by the Corporation's shareholders, all holders of
Capital Stock shall vote together as a single class. With respect to the
election of directors, each share of Common Stock issued and outstanding
shall have one vote and, subject to the provisions of this Section 6(a),
each share of Series D Preference Stock issued and outstanding shall have
1/3.08 of a vote or such lesser or greater fraction to enable the holders
thereof to cast 19% of the total number of votes that all shareholders
would be entitled to cast in an election of directors of the Corporation
including votes that such holders would be entitled to cast as record
holders of any other shares of the Corporation, provided that in no event
shall a share of Series D Preference Stock have more than one vote per
share. Notwithstanding the foregoing, each share of Series D Preference
Stock issued and outstanding shall have one vote with respect to the
election of directors, effective as of August 1, 1996, unless the Board of
Directors of the Corporation, in its sole and absolute discretion,
approves a resolution prior to such date prohibiting such change in voting
rights, in which case each share of Series D Preference Stock issued and
outstanding will continue to have 1/3.08 vote per share with respect to
the election of directors, or such lesser or greater fraction as provided
above. In the event the Board approves such a resolution, on May 1 of
each subsequent year (until each share of Series D Preference Stock has
one vote with respect to the election of directors), each share of Series
D Preference Stock shall have one vote, effective as of such date, unless
the Board of Directors of the Corporation approves a resolution prior to
such date prohibiting such change in voting rights.
With respect to all other matters to be voted upon by the
Corporation's shareholders, each share of Common Stock issued and
outstanding shall have one vote and each share of Series D Preference
Stock issued and outstanding shall have one vote in addition to those
rights herein specifically accorded to Series D Preference Stock herein
and in the Articles of Incorporation of the Corporation.
(b) (i) If at the time of any meeting of shareholders called for
the election of directors, any one or more annual dividends (whether or
not consecutive) payable on the Series D Preference Stock shall be in
arrears, or if a mandatory redemption payment on any outstanding Series D
Preference Stock has been omitted, the holders of the outstanding Series D
Preference Stock, voting as a single class, shall thereafter have the
right to elect a majority of the directors. Such voting rights shall
remain vested until such time as all dividends in arrears on the Series D
Preference Stock or the mandatory redemption payment, the omission of
which gave rise to such voting rights, have been paid or declared and a
sum sufficient therefor set apart for payment, at which time the right
shall terminate (subject to revesting) and upon any termination of the
aforesaid voting right, subject to the requirements of the Corporation's
Articles of Incorporation, as amended, all directors elected by the
holders of the Series D Preference Stock, voting separately as a class,
are to resign.
(ii) A director elected by the holders of the Series D
Preference Stock pursuant to Section 6(b)(i) above (a "Preference
Director") may be removed only for cause, and only by the affirmative vote
of the holders of record of seventy-five percent (75%) of the Series D
Preference Stock.
(c) So long as any shares of the Series D Preference Stock remain
outstanding, the Corporation may not, without the affirmative vote or
consent of the holders of at least two-thirds of the then outstanding
shares of Series D Preference Stock, (i) authorize stock ranking prior to
the Series D Preference Stock as to dividends or as to distribution of
assets; or (ii) increase the authorized number of shares of any class of
stock ranking prior to the Series D Preference Stock as to dividends or as
to distribution of assets; or (iii) amend, repeal or change any of the
provisions of the Articles of Incorporation, as amended, respecting any
stock of the Corporation or to authorize any reclassification of the
Series D Preference Stock so as to adversely affect the preferences,
special rights or powers of the Series D Preference Stock, either directly
or indirectly or through a merger or consolidation with any corporation.
So long as any shares of the Series D Preference Stock are outstanding,
the Corporation may not, without the affirmative vote or consent of the
holders of at least a majority of the then outstanding shares of
Preference Stock, voting separately as a class, increase the number of
authorized shares of Preference Stock or create, or increase the
authorized number of shares of, any other series or class of capital stock
of the Corporation ranking on a parity with the Preference Stock as to
dividends or distribution of assets.
7. Conversion.
(a) Series D Preference Stock shall be convertible at the option of
the record holder thereof at any time after the Original Issuance Date
into fully paid and nonassessable shares of Common Stock of the
Corporation (rounded to the nearest, or if there shall be no nearest, then
to the next lower whole share of Common Stock) at the rate of one share of
Common Stock for each Series D Preference share. The minimum number of
Series D Preference shares eligible for conversion at any one time by any
one holder shall be one thousand (1,000) shares. Upon conversion of any
shares of Series D Preference Stock, subject to Section 2 above, the
holder thereof shall be entitled to the amount of any dividends accrued
and unpaid with respect to such shares through the Dividend Payment Date
next preceding the Conversion Date (as defined in Section 7(c) hereof);
such dividends shall be payable on the Conversion Date. With respect to
the period from such Dividend Payment Date through the Conversion Date,
the holder of the shares of Series D Preference Stock to be converted
shall be entitled to the amount of any dividends accrued and unpaid with
respect to such shares on the Dividend Payment Date next succeeding the
Conversion Date prorated to the Date of Conversion; such dividends shall
be payable on the Dividend Payment Date next succeeding the Conversion
Date.
(b) The conversion rate shall be subject to the following
adjustments:
(i) In case the Corporation shall declare and pay a dividend in
shares of Common Stock, the conversion rate in effect immediately prior to
the time fixed for the determination of stockholders entitled to such
dividend shall be proportionately increased (adjusted to the nearest or,
if there shall be no nearest, then to the next lower, one-hundredth of a
share of Common Stock), such adjustment to become effective immediately
after the time fixed for such determination.
(ii) In case the Corporation shall subdivide the outstanding
shares of Common Stock into a greater number of shares of Common Stock or
combine the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, the conversion rate in effect immediately prior to
such subdivision or combination, as the case may be, shall be
proportionately increased or decreased (adjusted to the nearest, or if
there shall be no nearest, then to the next lower, one-hundredth of a
share of Common Stock), as the case may require, such increase or decrease
to become effective when such subdivision or combination becomes
effective.
(iii) In case of any reclassification or change of outstanding
shares of Common Stock, or in case of any consolidation or merger of the
Corporation with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the
property of the Corporation, the holder of such Series D Preference Stock
then outstanding shall have the right thereafter, so long as his
conversion right hereunder shall exist, to convert such shares into the
kind and amount of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation, merger, sale
or conveyance by a holder of the number of shares of Common Stock of the
Corporation into which such Series D Preference Stock might have been
converted immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance, and shall have no other
conversion rights under these provision; and, effective provisions, if
required, shall be made in the Articles or Certificate of Incorporation of
the resulting, surviving or successor corporation or otherwise, so that
the provisions set forth herein for the protection of the conversion
rights of the holders of the Series D Preference shares shall hereafter be
applicable, as nearly as reasonably may be, to any such other shares of
stock and other securities and property deliverable upon conversion of the
Series D Preference shares remaining outstanding or other convertible
preferred or preference shares received by the holders in place thereof;
and any such resulting, surviving or successor corporation shall expressly
assume the obligations to deliver, upon the exercise of the conversion
privilege, such shares, securities, or property as the holders of the
Series D Preference Stock remaining outstanding, or other convertible
preferred or preference shares received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions hereof, and to
make provision for the protection of the conversion rights as above
provided. In case securities or property other than shares of Common
Stock shall be issuable or deliverable upon conversion as aforesaid, then
all references in this section shall be deemed to apply so far as
appropriate and as nearly as may be, to such other securities or property.
The subdivision or combination of shares of Common stock at anytime
outstanding into a greater or lesser number of shares of Common Stock
(whether with or without par value) shall not be deemed to be a
reclassification of the Common Stock of the Corporation for the purposes
of this subsection (iii).
(c) In order to convert Series D Preference shares into shares of
Common Stock, the holder thereof shall give at least thirty (30) days' but
not more than ninety (90) days' written notice to the Corporation at the
office of the Corporation (or such other place as may be designated by the
Corporation) that the holder elects to convert the same and shall state in
writing therein the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued and shall surrender
the certificate or certificates for the Series D Preference shares, duly
endorsed to the Corporation in blank, at said office of the Corporation.
The Corporation shall, as soon as practicable thereafter, deliver at said
office to such holder of Series D Preference Stock, or to his nominee or
nominees, a certificate or certificates for the number of full shares of
Common Stock to which he shall be entitled. Series D Preference Stock
shall be deemed to have been converted as of the date of the surrender of
such stock for conversion as provided in this Section 7(c) (the
"Conversion Date"), and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be deemed for
all purposes to be the record holder or holders of such Series D
Preference shares on such date.
A number of authorized shares of Common Stock sufficient to provide
for the conversion of the Series D Preference Stock outstanding upon the
basis of this Section 7 shall at all times be reserved for such
conversion.
8. Preemptive Rights.
(a) Upon the offering or sale by the Corporation for cash of its
shares of Common Stock or any security convertible into shares of Common
Stock, including warrants, rights to subscribe and options to acquire
shares of Common Stock (collectively, "Convertible Securities"; such
shares and Convertible Securities are collectively referred to in this
Section 8 as the "Securities"), each holder of Series D Preference Stock
shall have the preemptive right, subject to the provisions of this Section
8, to receive or purchase up to that amount of Securities which would
maintain his percentage ownership interest in the Common Stock, assuming
conversion of the Series D Preference Stock, after the issuance of the
Securities on a fully diluted basis as existed prior to the issuance of
the Securities. As used in this Section 8, the term "fully diluted basis"
shall mean the calculation of percentage ownership based upon all
outstanding shares of Common Stock plus the assumed issuance of Common
Stock then issuable upon conversion of the Series D Preference Stock and
any other security, including the Convertible Securities, convertible into
shares of Common Stock, including warrants, rights to subscribe and
options to acquire shares of Common Stock. Notwithstanding the foregoing,
the holders of Series D Preference Stock shall not have preemptive rights
with respect to shares or Convertible Securities (a) that are offered,
sold or issued to directors or employees of the Corporation or any of its
wholly-owned subsidiaries, (b) that were issued or authorized prior to the
Original Issuance Date, (c) that were issued on the conversion of
Convertible Securities and such Convertible Securities were offered or
issued to the holders of Series D Preference Stock in satisfaction of this
Section 8, or (d) that are issued in connection with a merger or
consolidation or a proceeding under the Federal Bankruptcy Act, as
amended, or pursuant to an order of a court of competent jurisdiction
unless such order otherwise provides.
(b) Notice. Prior to any issuance by the Corporation of any
Securities, the Corporation shall notify each holder of Series D
Preference Stock, in writing, of his intention to issue such Securities,
setting forth the terms under which he proposes to make such issuance.
Within thirty (30) days after receipt of such notice, each holder of
Series D Preference Stock shall notify the Corporation as to the amount of
Securities so offered that such holder desires to purchase. The holders
of Series D Preference Stock shall receive or purchase and the Corporation
shall issue and/or sell the Securities at the same time, and upon the same
terms and conditions, as the Securities are issued or sold. The
Corporation shall take all such action as may reasonably be required by
any regulatory authority in connection with the exercise by a holder of
Series D Preference Stock of the right to receive or purchase Securities
as set forth in this Section 8.
9. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series D
Preference Stock shall not have any preferences, or relative,
participating, optional or other special rights, other than those
specifically set forth in this resolution and in the Articles of
Incorporation, as amended, of the Corporation. The shares of Series D
Preference Stock shall have no preemptive or subscription rights except as
provided herein.
<PAGE>
IN WITNESS WHEREOF, CompuDyne Corporation has caused this Certificate to
be signed by Diane Burns, its Secretary, this 21st day of August, 1995.
COMPUDYNE CORPORATION
By /s/ Diane Burns
[CORPORATE SEAL]
CERT-COM.R-4]
EXHIBIT 4.2
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS COVERING SUCH SECURITIES OR (B) COMPUDYNE CORPORATION RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES ACCEPTABLE TO THE
CORPORATION (CONCURRED IN BY COUNSEL FOR THE CORPORATION) STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND SUCH STATE
LAWS AND THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION WILL NOT
CAUSE THE ORIGINAL ISSUANCE OF SUCH SECURITIES BY THE CORPORATION TO BE IN
VIOLATION OF THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
OR SUCH STATE LAWS.
SENIOR CONVERTIBLE PROMISSORY NOTE
$300,000 August 21, 1995
1. FOR VALUE RECEIVED, the undersigned COMPUDYNE CORPORATION, a
Pennsylvania corporation (the "Maker"), promises to pay to the order of MARTIN
ROENIGK (the "Holder") an individual residing at 26 Barton Hill, East
Hampton, Connecticut 06424 or at such other place as the Holder hereof may
designate, in lawful money of the United States, the principal sum of THREE
HUNDRED THOUSAND DOLLARS ($300,000), together with interest on the unpaid
balance of this Note, beginning on the date hereof, before maturity, default
or judgment, at two percent (2%) above the variable annual rate equal to the
rate published from time to time in The Wall Street Journal (Eastern Edition)
("WSJ-EE") as the "Prime Rate" (the base rate on corporate loans posted by at
least seventy-five percent (75%) of the nation's thirty (30) largest banks)
(the "Prime Rate"). The interest rate will be adjusted upward or downward,
as of the date of a change in the Prime Rate; provided, however, that at no
time shall the interest rate be more than the rate permitted by applicable
law. The Prime Rate is not necessarily the lowest rate available. In the
event that the "Prime Rate" is no longer published from time to time by
WSJ-EE, then the term "Prime Rate" shall mean the variable rate of interest
published or publicly promulgated from time to time by the WSJ-EE or some
other entity generally recognized in the financial community as reputable
and authoritative, determined by the Holder, in its sole discretion, most
nearly approximate to the base rate on corporate loans posted by at least
seventy-five percent (75%) of the nation's thirty (30) largest banks.
Interest under this Note shall be computed daily on the basis of a 360-day
year and the actual number of days elapsed, together with (a) all taxes
levied or assessed against the Holder of this Note or the debt evidenced
by this Note, and (b) all reasonable costs, expenses, reasonable attorneys'
fees and reasonable professional fees incurred in (i) any action to collect
the indebtedness of this Note or to foreclose any security interest
granted to the Holder or (ii) in any litigation or controversy arising from
or connected with this Note or any other agreement between Maker and Holder.
2. Interest. Accrued interest shall be payable in arrears on the
first day of each calendar quarter commencing on October 1, 1995. Any
installment of interest not paid when due shall also accrue interest at the
rate set forth herein from the due date thereof until paid. From the date of
this Note until the Maturity Date, as hereinafter defined, if any such
accrued and unpaid interest is not paid when due the amount of the accrued
and unpaid interest shall be added to the principal balance of this Note.
3. Principal. The principal amount of this Note shall be paid in a
single payment, together with all accrued and unpaid interest, on August 21,
2005 (the "Maturity Date").
4. Payments. All payments of principal and interest shall be made in
immediately available lawful money of the United States. If any payment due
on, or with respect to, this Note shall fall due on a day other than a
Business Day (as defined below), then such payment shall be made on the first
Business Day following the day on which such payment shall have so fallen
due. For the purposes of this paragraph, a "Business Day" shall mean a day
other than a Saturday, a Sunday or a legal holiday in the State of
Connecticut.
5. Senior Obligation. Except as noted below, this Note shall be a
senior obligation of Maker. During the term of this Note, Maker shall not
pay any dividends on any class of its common stock or make any other
distribution or payment of its common stock or make any other distribution
or payment on account of or in redemption, retirement or purchase of such
common stock or make payment of any portion of principal or interest on any
note or debt instrument held by any officer, director or shareholder of Maker
or any affiliate of Maker. This Note shall be subordinated to any note or
other debt instrument of Maker payable to a third party unaffiliated with
Maker or Maker's officers, directors or shareholders ("Third-Party
Debt") only in the event such Third-Party Debt is secured by any assets,
tangible or intangible, of Maker. In such event, Maker shall, upon Holder's
written request, grant Holder a security interest subordinate only
to such Third-Party Debt in the same assets to secure repayment of this
Note. Maker shall execute and deliver any and all agreements, documents or
instruments that Holder may deem necessary or appropriate to perfect such
subordinate security interest. In the event such Third-Party Debt is not
secured by any assets, tangible or intangible of Maker, this Note shall
rank pari passu with such Third-Party Debt.
6. Events of Default. Holder shall have the right, at its option, to
declare the unpaid principal amount of this Note and any accrued interest
immediately due and payable without presentment, demand, or protest or
further notice of any kind, all of which are hereby expressly waived by
Maker, upon the occurrence of any one of the following events (each being an
"Event of Default"):
(a) The failure to pay any interest, principal or other sum owing
by the Maker to the Holder, whether pursuant to this Note or otherwise,
within ten (10) business days of the due date.
(b) The breach by Maker of any term, provision, obligation,
covenant, representation or warranty arising under (i) this agreement,
(ii) any other present or future agreement or instrument between the
Maker and Holder or (iii) any present or future agreement or instrument
for borrowed money or other financial accommodations with any other
person or entity.
(c) Maker commences any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under the United States
Bankruptcy Code or under any similar foreign, federal, state or
local statute, or any dissolution or liquidation proceeding, or makes a
general assignment for the benefit of creditors, or takes any action
for the purpose of effecting any of the foregoing.
(d) Any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under the United States Bankruptcy Code or under
similar foreign, federal, state or local statute, or any dissolution
or liquidation proceeding, is involuntarily commenced against or in
respect of Maker or an order for relief is entered in any such
proceeding, and such bankruptcy, reorganization, debt, arrangement, or
other case or proceeding or any dissolution or liquidation proceeding
is not dismissed within ninety (90) days after the commencement thereof.
(e) The appointment, or the filing of a petition seeking the
appointment, of a custodian, receiver, trustee, or liquidator for Maker
or any of its property, or the taking of possession of any part of the
property of Maker at the instance of any governmental authority, and
such appointment, filing, or taking of possession is not cured within
ninety (90) days after the commencement thereof.
(f) Maker becomes insolvent within the meaning of any applicable
law, is generally not paying its debts as they become due, or has
suspended transaction of its usual business.
(g) If Maker shall dissolve or liquidate, or be dissolved or
liquidated, or cease to legally exist, or merge into, or consolidate
with, any other corporation.
(h) If at any time, the ratio of Maker's current assets (as
determined in accordance with generally accepted accounting principles
consistently applied) to Maker's current liabilities is less than
1.25 to 1.0.
(i) If at any time, Maker's net worth (as determined in
accordance with generally accepted accounting principles consistently
applied) is less than $1,250,000.00.
(j) Maker transfers or sells all or substantially all of its
assets, without the prior written consent of the Holder.
(k) Maker shall default in the payment or performance of any
obligation for borrowed money to the Holder or to any person, firm or
corporation (excluding trade creditors in the ordinary course of
business).
(l) Maker pledges, creates or otherwise suffers the imposition of
any liens, security interests, charges or encumbrances upon any of its
fixed assets, whether now owned or hereafter acquired, except (i)
pledges, security interests, liens, charges or encumbrances existing at
the date of this Note, (ii) tax liens or other involuntary liens and
encumbrances not yet due and payable, or (iii) mechanics',
materialmen's or other involuntary liens and encumbrances which Maker
diligently takes actions to remove the same, which lien or encumbrance
is removed within ninety (90) days after the imposition thereof.
(m) "Change in Control" of the Maker. A "Change in Control" shall
be deemed to have occurred with respect to the Maker if any Person, as
defined below, acquires control of the Maker, other than (i) Persons
having control at the date of this Note, (ii) the officers and
executive officers (as defined under Rules 3b-2 and 3b-7, respectively,
under the Securities Exchange Act of 1934, as amended) of the Maker
immediately prior to the Change of Control, (iii) the Holder hereof or
(iv) the holder of a Senior Convertible Promissory Note dated the date
hereof, of the Maker in the principal amount of $100,000 . A Person has
control if (w) the Person, directly or indirectly or acting through one
or more other Persons, Associates or Affiliates, beneficially owns,
controls, or has power to vote 20% or more of the common stock, par
value $.75 per share (the "Common Stock"), of Maker; or (x) the Person,
directly or indirectly or acting through one or more other Persons,
Associates or Affiliates, acquires or agrees to acquire all or
substantially all of the assets and business of Maker; or (y) the
Person, directly or indirectly or acting through one or more other
Persons, Associates or Affiliates, controls in any manner the election
of a majority of the directors of Maker; or (z) the Board of Directors
of Maker determines, in its sole discretion, that a Person, directly or
indirectly or acting through one or more other Persons, possesses the
power to direct or cause the direction of the management and policies of
the Maker, whether through the ownership of outstanding securities, by
contract, or otherwise. A "Person" shall include a natural person,
corporation, trust or other entity. When two or more Persons act as a
partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding or disposing of Maker's capital stock,
such partnership, syndicate, or group shall be considered a Person.
Beneficial ownership shall be determined pursuant to the then current
provision for Rule 13d-3 under the Securities Exchange Act of 1934 as
amended (the "1934 Act"). "Associates" and "Affiliates" shall have the
meanings provided in the then current provisions of Rule 12b-2 under
the 1934 Act.
7. Conversion.
(a) This Note, or any portion of the principal amount thereof
which is $1,500 or an integral multiple of $1,500 (or such lesser
amount if the amount of principal outstanding is less than $1,500),
may be converted at the option of the Holder hereof at any time after
the date of this Note set forth above (the "Original Issuance Date") at
the principal amount thereof, or of such portion thereof, into fully
paid and nonassessable shares of Common Stock of the Maker (rounded to the
nearest, or if there shall be no nearest, then to the next lower whole
share of Common Stock) at the conversion rate of $1.50 per share of
Common Stock (the "Conversion Rate"). Upon conversion of this Note,
or any portion thereof, subject to Section 2 above, the Holder shall be
entitled to the amount of any interest accrued and unpaid with respect
to this Note through the Conversion Date (as defined in Section 7(c)
hereof). Such interest shall be payable on the Conversion Date.
(b) The Conversion Rate shall be subject to the following
adjustments:
(i) In case the Maker shall declare and pay a dividend in
shares of Common Stock, the Conversion Rate in effect immediately prior
to the time fixed for the determination of stockholders entitled to
such dividend shall be proportionately increased (adjusted to the
nearest or if there shall be no nearest, then to the next lower, one-
hundredth of a share of Common Stock), such adjustment to become
effective immediately after the time fixed for such determination.
(ii) In case the Maker shall subdivide the outstanding shares
of Common Stock into a greater number of shares of Common Stock or
combine the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, the Conversion Rate in effect immediately prior
to such subdivision or combination, as the case may be, shall be
proportionately increased or decreased (adjusted to the nearest, or if
there shall be no nearest, then to the next lower, one-hundredth of a
share of Common Stock), as the case may require, such increase or
decrease to become effective when such subdivision or combination becomes
effective.
(iii)In case of any reclassification or change of outstanding
shares of Common Stock, or in case of any consolidation or merger of
the Maker with or into another corporation, or in case of any sale or
conveyance to another corporation of all or substantially all of the
property of the Maker, the Holder shall have the right thereafter, so
long as his conversion right hereunder shall exist, to convert this
Note, or any portion thereof, into the kind and amount of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock of the Maker into
which this Note, or any portion thereof, might have been converted
immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance, and shall have no other conversion rights
under these provision; and, effective provisions, if required, shall be
made in an amendment to this Note or in the Articles or Certificate of
Incorporation of the resulting, surviving or successor corporation or
otherwise, so that the provisions set forth herein for the protection
of the conversion rights of the Holder hereof shall hereafter be
applicable, as nearly as reasonably may be, to any such other shares of
stock and other securities and property deliverable upon conversion of
this Note, or any portion thereof; and any such resulting, surviving or
successor corporation shall expressly assume the obligations to deliver,
upon the exercise of the conversion privilege, such shares, securities,
or property as the Holder hereof shall be entitled to receive pursuant
to the provisions hereof, and to make provision for the protection of
the conversion rights as above provided. In case securities or
property other than shares of Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this
section shall be deemed to apply so far as appropriate and as nearly as
may be, to such other securities or property. The subdivision or
combination of shares of Common stock at any time outstanding into
a greater or lesser number of shares of Common Stock (whether with or
without par value) shall not be deemed to be a reclassification of the
Common Stock of the Corporation for the purposes of this subsection
(iii).
(c) In order to convert this Note or any portion thereof into
shares of Common Stock, the Holder hereof shall give at least thirty
(30) days' but not more than ninety (90) days' (or, if a Notice
of Redemption has been sent or given to the Holder as provided in
Section 8(b) hereof, the Holder shall give at least one (1) days' but
not more than ninety (90) days') written notice to the Maker at
the office of the Maker (or such other place as may be designated by
the Maker) that the Holder elects to convert the same and shall state
in writing therein the name or names in which he wishes the certificate
or certificates for shares of Common Stock to be issued and shall
surrender this Note, duly endorsed or assigned to the Maker in blank,
at said office of the Maker. The Maker shall, as soon as practicable
thereafter, deliver at said office to the Holder, or to his nominee
or nominees, a certificate or certificates for the number of full
shares of Common Stock to which he shall be entitled. This Note or any
portion thereof shall be deemed to have been converted as of the date
of the surrender of this Note for conversion as provided in this
Section 7(c) (the "Conversion Date"), and the person or persons
entitled to receive the shares of Common Stock issuable upon such
conversion shall be deemed for all purposes to be the Holder of this
Note on such date.
In case this Note is converted in part only, upon such conversion
the Maker shall execute and deliver to the Holder hereof, at the
expense of the Maker, a new Note in principal amount equal to
the unconverted portion of the principal amount of such Note.
A number of authorized shares of Common Stock sufficient to
provide for the conversion of this Note upon the basis of this Section
7 shall at all times be reserved for such conversion.
8. Redemption.
(a) Commencing five years after the Original Issuance Date, this
Note may be redeemed, as a whole at any time, or in part from time to
time, at the election of the Maker ("Optional Redemption") by
resolution of its Board of Directors, out of funds legally available
therefor, at a redemption price of one hundred and twenty percent
(120%) of the principal amount of this Note, or portion thereof,
together with accrued interest to the date of redemption.
(b) Notice of any redemption, specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable (the "Notice of Redemption"), shall be mailed, postage prepaid
at least ninety (90) days but not more than one hundred and twenty (120)
days prior to said redemption date to the Holder at his address as the
same shall appear on the books of the Corporation. The Notice of
Redemption shall include (i) the redemption date; (ii) the principal
amount; (iii) the redemption price; (iv) the place or places where this
Note shall be surrendered for payment of the redemption price; and (v)
a statement that interest on the principal amount to be redeemed will
cease to accrue on such redemption date.
If such Notice of Redemption shall have been so mailed, and the
Holder shall not have elected to convert this Note or any portion
thereof into Common Stock within the time periods set forth in
Section 7(c) hereof, and if on or before the redemption date specified
in such notice all funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the Holder (and so
as to be and continue to be available therefor), with a bank or trust
company named in such notice doing business in the State of Connecticut
and having a combined capital and surplus of at least $100,000,000,
thereupon and without awaiting the redemption date, notwithstanding that
this Note so called for redemption shall not have been surrendered for
cancellation, this Note, or any portion thereof, so called for
redemption shall be deemed to be no longer outstanding and all
obligations with respect to this Note or any portion thereof shall
be deemed satisfied, the right to receive interest thereon shall cease
to accrue, and all rights with respect to this Note or any portion
thereof so called for redemption shall forthwith upon such deposit in
trust cease and terminate, except only the right of the Holder thereof
to receive out of the funds so set aside in trust, the amount
payable on redemption thereof, but without interest from the date of
redemption.
In case the Holder hereof shall not within four (4) years (or
any longer period if required by law) after the redemption date claim
any amount so deposited in trust for the redemption of such shares,
such bank or trust company shall, upon demand and if permitted by
applicable law, pay over to the Maker any such unclaimed amount so
deposited with it, and shall thereupon be relieved of all
responsibility in respect thereof, and thereafter the Holder shall,
subject to applicable escheat laws, look only to the Maker for payment
of the redemption price thereof but without interest.
(c) Upon surrender of this Note for redemption, in accordance
with the Notice of Redemption, such Note, or portion thereof, shall be
redeemed by the Maker at the applicable redemption price. If this Note
is redeemed in part, a new Note shall be issued by the Maker
representing the unredeemed portion, without cost to the Holder of
the Note.
10. Demand for Payment.
(a) Commencing three years after the Original Issuance Date, the
Holder may require the Maker to purchase this Note, as a whole at any
time, or in part from time to time, at the election of the Holder (the
"Demand for Payment"), out of funds legally available therefor, at a
purchase price of one hundred percent (100%) of the principal amount of
this Note, or portion thereof, together with accrued interest to the
date of purchase (the "Purchase Date").
(b) In order to make a Demand for Payment, the Holder hereof shall
give written notice to the Maker at the office of the Maker (or such
other place as may be designated by the Maker) that (i) the Holder
elects to make a Demand for Payment, (ii) the principal amount of the
Note subject to the Demand for Payment, and (iii) the date of purchase
(the "Purchase Date") which date shall be at least ninety (90) days but
not more than one hundred twenty (120) days after such notice is mailed
or delivered to the Maker. The Holder shall surrender this Note, duly
endorsed to the Maker in blank, at said office of the Maker at least ten
(10) days prior to the Purchase Date. On the Purchase Date, the Maker
shall deliver to the Holder the purchase price, together with accrued
interest to the Purchase Date, with respect to the Note or portion
thereof subject to the Demand for Payment. In case the Holder elects
to make a Demand for Purchase with respect to only a portion of this
Note, the Maker shall also execute and deliver to the Holder hereof on
the Purchase Date, at the expense of the Maker, a new Note in principal
amount equal to the portion of the principal amount not subject to the
Demand for Payment.
11. Non-Waiver of Rights. The failure of the Holder to exercise its
option to accelerate the indebtedness of this Note shall not constitute a
waiver of his right to exercise the same upon the occurrence of any
continued or subsequent Event of Default. The failure by the Holder to
insist upon the strict performance by the Maker of any terms and provisions
contained herein shall not be deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to
insist upon strict performance by the Maker of any and all terms and
provisions of this Note or any document securing the repayment of this Note.
12. Additional Interest. The Maker agrees that upon the occurrence
and during the continuance of an Event of Default, after judgment on behalf
of the Holder, or on and after the Maturity Date, the indebtedness
outstanding under this Note shall bear interest at an annual rate of three
percent (3.0%) above the Prime Rate.
13. Maximum Rate of Interest. Notwithstanding any provision of this
Note, it is the understanding and agreement of the Maker and the Holder that
the maximum rate of interest to be paid by the Maker to the Holder shall not
exceed the highest or the maximum rate of interest permissible to be charged
under the laws of the State of Connecticut. Any amount paid in excess of
such rate shall be considered to have been payments in reduction of principal.
14. Choice of Law; Jurisdiction. To the extent not superseded by
federal law, this Note shall be governed by and construed in accordance with
the laws of the State of Connecticut without giving effect to its choice of
law principles. The Maker consents to the jurisdiction of the appropriate
federal or state courts within the State of Connecticut with respect to any
claims or disputes arising out of the enforcement of this Note.
15. Commercial Transaction. THE MAKER ACKNOWLEDGES THAT THE TRANSACTION
OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND VOLUNTARILY
AND KNOWINGLY WAIVES (A) ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR
COURT ORDER PRIOR TO THE ISSUANCE OF ANY PREJUDGMENT REMEDY UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR AS OTHERWISE ALLOWED
UNDER ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER MAY DESIRE TO USE AND (B) ALL RIGHTS TO REQUEST THAT THE
HOLDER HEREOF POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MAKER
AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR
OBTAINED BY THE HOLDER HEREOF BY VIRTUE OF ANY DEFAULT OR PROVISION OF THIS
NOTE OR ANY AGREEMENT SECURING THIS NOTE. THE MAKER ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
16. Waiver of Right To Jury Trial. THE MAKER WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION, PROCEEDING OR ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THIS NOTE OR THE FINANCING
TRANSACTION OF WHICH THIS NOTE IS A PART, OR THE DEFENSE OR ENFORCEMENT OF
ANY OF THE HOLDER'S RIGHTS AND REMEDIES IN CONNECTION THEREWITH, THE MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT
DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH
ITS ATTORNEYS.
17. Headings. The descriptive headings of the several sections of
this Note are inserted for convenience only and shall not be deemed to affect
the meaning or construction of any of the provisions hereof.
18. Severability. If any provision of this Note or application thereof
to any person or circumstance shall to any extent be invalid, the remainder of
this Note or the application of such provision to persons, entities or
circumstances other than those as to which it is held invalid, shall not be
affected thereby and each provision of this Note shall be valid and
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed
and delivered by the proper and duly authorized officer and agent as of the
date and year first above written.
COMPUDYNE CORPORATION
By /s/ Norman Silberdick
Title President
EXHIBIT 4.2
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS (A)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS COVERING SUCH SECURITIES OR (B) COMPUDYNE CORPORATION
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES ACCEPTABLE
TO THE CORPORATION (CONCURRED IN BY COUNSEL FOR THE CORPORATION)
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR DISTRIBUTION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND
SUCH STATE LAWS AND THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR
DISTRIBUTION WILL NOT CAUSE THE ORIGINAL ISSUANCE OF SUCH SECURITIES BY THE
CORPORATION TO BE IN VIOLATION OF THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT OR SUCH STATE LAWS.
SENIOR CONVERTIBLE PROMISSORY NOTE
$100,000 August 21, 1995
2. FOR VALUE RECEIVED, the undersigned COMPUDYNE CORPORATION, a
Pennsylvania corporation (the "Maker"), promises to pay to the order of ALAN
MARKOWITZ (the "Holder") an individual residing at 26 Barton Hill, East
Hampton, Connecticut 06424 or at such other place as the Holder
hereof may designate, in lawful money of the United States, the principal
sum of ONE HUNDRED THOUSAND DOLLARS ($100,000), together with interest on the
unpaid balance of this Note, beginning on the date hereof, before maturity,
default or judgment, at two percent (2%) above the variable annual rate
equal to the rate published from time to time in The Wall Street Journal
(Eastern Edition) ("WSJ-EE") as the "Prime Rate" (the base rate on corporate
loans posted by at least seventy-five percent (75%) of the nation's thirty
(30) largest banks) (the "Prime Rate"). The interest rate will be adjusted
upward or downward, as of the date of a change in the Prime Rate; provided,
however, that at no time shall the interest rate be more than the rate
permitted by applicable law. The Prime Rate is not necessarily the lowest
rate available. In the event that the "Prime Rate" is no longer published
from time to time by WSJ-EE, then the term "Prime Rate" shall mean the
variable rate of interest published or publicly promulgated from time
to time by the WSJ-EE or some other entity generally recognized in the
financial community as reputable and authoritative, determined by the Holder,
in its sole discretion, most nearly approximate to the base rate on
corporate loans posted by at least seventy-five percent (75%) of the
nation's thirty (30) largest banks. Interest under this Note shall be
computed daily on the basis of a 360-day year and the actual number of days
elapsed, together with (a) all taxes levied or assessed against the Holder
of this Note or the debt evidenced by this Note, and (b) all reasonable
costs, expenses, reasonable attorneys' fees and reasonable professional
fees incurred in (i) any action to collect the indebtedness of this Note or
to foreclose any security interest granted to the Holder or (ii) in any
litigation or controversy arising from or connected with this Note or any
other agreement between Maker and Holder.
2. Interest. Accrued interest shall be payable in arrears on the
first day of each calendar quarter commencing on October 1, 1995. Any
installment of interest not paid when due shall also accrue interest
at the rate set forth herein from the due date thereof until paid. From the
date of this Note until the Maturity Date, as hereinafter defined, if any
such accrued and unpaid interest is not paid when due the amount of the
accrued and unpaid interest shall be added to the principal balance of
this Note.
3. Principal. The principal amount of this Note shall be paid in a
single payment, together with all accrued and unpaid interest, on August 21,
2005 (the "Maturity Date").
4. Payments. All payments of principal and interest shall be made
in immediately available lawful money of the United States. If any payment
due on, or with respect to, this Note shall fall due on a day
other than a Business Day (as defined below), then such payment shall be
made on the first Business Day following the day on which such payment shall
have so fallen due. For the purposes of this paragraph, a "Business Day"
shall mean a day other than a Saturday, a Sunday or a legal holiday in the
State of Connecticut.
5. Senior Obligation. Except as noted below, this Note shall be a
senior obligation of Maker. During the term of this Note, Maker shall not
pay any dividends on any class of its common stock or make any other
distribution or payment of its common stock or make any other distribution
or payment on account of or in redemption, retirement or purchase of such
common stock or make payment of any portion of principal or interest on any
note or debt instrument held by any officer, director or shareholder of Maker
or any affiliate of Maker. This Note shall be subordinated to any note or
other debt instrument of Maker payable to a third party unaffiliated with
Maker or Maker's officers, directors or shareholders ("Third-Party Debt")
only in the event such Third-Party Debt is secured by any assets, tangible
or intangible, of Maker. In such event, Maker shall, upon Holder's written
request, grant Holder a security interest subordinate only
to such Third-Party Debt in the same assets to secure repayment of this Note.
Maker shall execute and deliver any and all agreements, documents or
instruments that Holder may deem necessary or appropriate to perfect such
subordinate security interest. In the event such Third-Party Debt is not
secured by any assets, tangible or intangible of Maker, this Note shall
rank pari passu with such Third-Party Debt.
6. Events of Default. Holder shall have the right, at its option, to
declare the unpaid principal amount of this Note and any accrued interest
immediately due and payable without presentment, demand, or protest or
further notice of any kind, all of which are hereby expressly waived by
Maker, upon the occurrence of any one of the following events (each being an
"Event of Default"):
(a) The failure to pay any interest, principal or other sum owing
by the Maker to the Holder, whether pursuant to this Note or otherwise,
within ten (10) business days of the due date.
(b) The breach by Maker of any term, provision, obligation,
covenant, representation or warranty arising under (i) this agreement,
(ii) any other present or future agreement or instrument between the
Maker and Holder or (iii) any present or future agreement or instrument
for borrowed money or other financial accommodations with any other
person or entity.
(c) Maker commences any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under the United States
Bankruptcy Code or under any similar foreign, federal, state or
local statute, or any dissolution or liquidation proceeding, or makes
a general assignment for the benefit of creditors, or takes any action
for the purpose of effecting any of the foregoing.
(d) Any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under the United States Bankruptcy Code or under
similar foreign, federal, state or local statute, or any dissolution or
liquidation proceeding, is involuntarily commenced against or in
respect of Maker or an order for relief is entered in any such
proceeding, and such bankruptcy, reorganization, debt, arrangement, or
other case or proceeding or any dissolution or liquidation proceeding
is not dismissed within ninety (90) days after the commencement thereof.
(e) The appointment, or the filing of a petition seeking the
appointment, of a custodian, receiver, trustee, or liquidator for Maker
or any of its property, or the taking of possession of any part of the
property of Maker at the instance of any governmental authority, and
such appointment, filing, or taking of possession is not cured within
ninety (90) days after the commencement thereof.
(f) Maker becomes insolvent within the meaning of any applicable
law, is generally not paying its debts as they become due, or has
suspended transaction of its usual business.
(g) If Maker shall dissolve or liquidate, or be dissolved or
liquidated, or cease to legally exist, or merge into, or consolidate
with, any other corporation.
(h) If at any time, the ratio of Maker's current assets (as
determined in accordance with generally accepted accounting principles
consistently applied) to Maker's current liabilities is less than
1.25 to 1.0.
(i) If at any time, Maker's net worth (as determined in
accordance with generally accepted accounting principles consistently
applied) is less than $1,250,000.00.
(j) Maker transfers or sells all or substantially all of its
assets, without the prior written consent of the Holder.
(k) Maker shall default in the payment or performance of any
obligation for borrowed money to the Holder or to any person, firm or
corporation (excluding trade creditors in the ordinary course of
business).
(l) Maker pledges, creates or otherwise suffers the imposition of
any liens, security interests, charges or encumbrances upon any of its
fixed assets, whether now owned or hereafter acquired, except (i)
pledges, security interests, liens, charges or encumbrances existing at
the date of this Note, (ii) tax liens or other involuntary liens and
encumbrances not yet due and payable, or (iii) mechanics', materialmen's
or other involuntary liens and encumbrances which Maker diligently takes
actions to remove the same, which lien or encumbrance is removed within
ninety (90) days after the imposition thereof.
(m) "Change in Control" of the Maker. A "Change in Control" shall
be deemed to have occurred with respect to the Maker if any Person, as
defined below, acquires control of the Maker, other than (i) Persons
having control at the date of this Note, (ii) the officers and
executive officers (as defined under Rules 3b-2 and 3b-7, respectively,
under the Securities Exchange Act of 1934, as amended) of the Maker
immediately prior to the Change of Control, (iii) the Holder hereof or
(iv) the holder of a Senior Convertible Promissory Note dated the date
hereof, of the Maker in the principal amount of $300,000. A Person has
control if (w) the Person, directly or indirectly or acting through one
or more other Persons, Associates or Affiliates, beneficially owns,
controls, or has power to vote 20% or more of the common stock, par
value $.75 per share (the "Common Stock"), of Maker; or (x) the Person,
directly or indirectly or acting through one or more other Persons,
Associates or Affiliates, acquires or agrees to acquire all or
substantially all of the assets and business of Maker; or (y) the
Person, directly or indirectly or acting through one or more other
Persons, Associates or Affiliates, controls in any manner the election
of a majority of the directors of Maker; or (z) the Board of Directors
of Maker determines, in its sole discretion, that a Person, directly or
indirectly or acting through one or more other Persons, possesses the
power to direct or cause the direction of the management and policies
of the Maker, whether through the ownership of outstanding securities,
by contract, or otherwise. A "Person" shall include a natural person,
corporation, trust or other entity. When two or more Persons act as a
partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding or disposing of Maker's capital stock, such
partnership, syndicate, or group shall be considered a Person.
Beneficial ownership shall be determined pursuant to the then current
provision for Rule 13d-3 under the Securities Exchange Act of 1934 as
amended (the "1934 Act"). "Associates" and "Affiliates" shall have the
meanings provided in the then current provisions of Rule 12b-2 under
the 1934 Act.
7. Conversion.
(a) This Note, or any portion of the principal amount thereof
which is $1,500 or an integral multiple of $1,500 (or such lesser
amount if the amount of principal outstanding is less than $1,500),
may be converted at the option of the Holder hereof at any time after
the date of this Note set forth above (the "Original Issuance Date") at
the principal amount thereof, or of such portion thereof, into
fully paid and nonassessable shares of Common Stock of the Maker
(rounded to the nearest, or if there shall be no nearest, then to the
next lower whole share of Common Stock) at the conversion
rate of $1.50 per share of Common Stock (the "Conversion Rate"). Upon
conversion of this Note, or any portion thereof, subject to Section 2
above, the Holder shall be entitled to the amount of any interest
accrued and unpaid with respect to this Note through the Conversion Date
(as defined in Section 7(c) hereof). Such interest shall be payable on
the Conversion Date.
(b) The Conversion Rate shall be subject to the following
adjustments:
(i) In case the Maker shall declare and pay a dividend in
shares of Common Stock, the Conversion Rate in effect immediately prior
to the time fixed for the determination of stockholders entitled to
such dividend shall be proportionately increased (adjusted to the
nearest or if there shall be no nearest, then to the next lower, one-
hundredth of a share of Common Stock), such adjustment to become
effective immediately after the time fixed for such determination.
(ii) In case the Maker shall subdivide the outstanding shares
of Common Stock into a greater number of shares of Common Stock or
combine the outstanding shares of Common Stock into a smaller number of
shares of Common Stock, the Conversion Rate in effect immediately prior
to such subdivision or combination, as the case may be, shall be
proportionately increased or decreased (adjusted to the nearest, or if
there shall be no nearest, then to the next lower, one-hundredth of a
share of Common Stock), as the case may require, such increase or
decrease to become effective when such subdivision or combination
becomes effective.
(iii) In case of any reclassification or change of outstanding
shares of Common Stock, or in case of any consolidation or merger of
the Maker with or into another corporation, or in case of any
sale or conveyance to another corporation of all or substantially all of
the property of the Maker, the Holder shall have the right thereafter,
so long as his conversion right hereunder shall exist, to convert
this Note, or any portion thereof, into the kind and amount of shares of
stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock of the Maker into which
this Note, or any portion thereof, might have been converted
immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance, and shall have no other conversion rights
under these provision; and, effective provisions, if required, shall be
made in an amendment to this Note or in the Articles or Certificate of
Incorporation of the resulting, surviving or successor corporation or
otherwise, so that the provisions set forth herein for the protection
of the conversion rights of the Holder hereof shall hereafter be
applicable, as nearly as reasonably may be, to any such other shares of
stock and other securities and property deliverable upon conversion of
this Note, or any portion thereof; and any such resulting, surviving or
successor corporation shall expressly assume the obligations to deliver,
upon the exercise of the conversion privilege, such shares, securities,
or property as the Holder hereof shall be entitled to receive pursuant
to the provisions hereof, and to make provision for the protection of
the conversion rights as above provided. In case securities or
property other than shares of Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references in this
section shall be deemed to apply so far as appropriate and as nearly as
may be, to such other securities or property. The subdivision or
combination of shares of Common stock at any time outstanding into a
greater or lesser number of shares of Common Stock (whether with or
without par value) shall not be deemed to be a reclassification of the
Common Stock of the Corporation for the purposes of this subsection
(iii).
(c) In order to convert this Note or any portion thereof into
shares of Common Stock, the Holder hereof shall give at least thirty
(30) days' but not more than ninety (90) days' (or, if a Notice
of Redemption has been sent or given to the Holder as provided in
Section 8(b) hereof, the Holder shall give at least one (1) days' but
not more than ninety (90) days') written notice to the Maker at
the office of the Maker (or such other place as may be designated by
the Maker) that the Holder elects to convert the same and shall state
in writing therein the name or names in which he wishes the certificate
or certificates for shares of Common Stock to be issued and shall
surrender this Note, duly endorsed or assigned to the Maker in blank,
at said office of the Maker. The Maker shall, as soon as practicable
thereafter, deliver at said office to the Holder, or to his nominee or
nominees, a certificate or certificates for the number of full shares
of Common Stock to which he shall be entitled. This Note or any portion
thereof shall be deemed to have been converted as of the date of the
surrender of this Note for conversion as provided in this Section 7(c)
(the "Conversion Date"), and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
deemed for all purposes to be the Holder of this Note on such date.
In case this Note is converted in part only, upon such conversion
the Maker shall execute and deliver to the Holder hereof, at the expense
of the Maker, a new Note in principal amount equal to the unconverted
portion of the principal amount of such Note.
A number of authorized shares of Common Stock sufficient to provide
for the conversion of this Note upon the basis of this Section 7 shall
at all times be reserved for such conversion.
8. Redemption.
(a) Commencing five years after the Original Issuance Date, this
Note may be redeemed, as a whole at any time, or in part from time to
time, at the election of the Maker ("Optional Redemption") by
resolution of its Board of Directors, out of funds legally available
therefor, at a redemption price of one hundred and twenty percent
(120%) of the principal amount of this Note, or portion thereof,
together with accrued interest to the date of redemption.
(b) Notice of any redemption, specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable (the "Notice of Redemption"), shall be mailed, postage prepaid
at least ninety (90) days but not more than one hundred and twenty (120)
days prior to said redemption date to the Holder at his address as the
same shall appear on the books of the Corporation. The Notice of
Redemption shall include (i) the redemption date; (ii) the principal
amount; (iii) the redemption price; (iv) the place or places where this
Note shall be surrendered for payment of the redemption price; and (v)
a statement that interest on the principal amount to be redeemed will
cease to accrue on such redemption date.
If such Notice of Redemption shall have been so mailed, and the
Holder shall not have elected to convert this Note or any portion
thereof into Common Stock within the time periods set forth in Section
7(c) hereof, and if on or before the redemption date specified in such
notice all funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the Holder (and so as
to be and continue to be available therefor), with a bank or trust
company named in such notice doing business in the State of Connecticut
and having a combined capital and surplus of at least $100,000,000,
thereupon and without awaiting the redemption date, notwithstanding that
this Note so called for redemption shall not have been surrendered for
cancellation, this Note, or any portion thereof, so called for
redemption shall be deemed to be no longer outstanding and all
obligations with respect to this Note or any portion thereof shall be
deemed satisfied, the right to receive interest thereon shall cease to
accrue, and all rights with respect to this Note or any portion
thereof so called for redemption shall forthwith upon such deposit in
trust cease and terminate, except only the right of the Holder thereof
to receive out of the funds so set aside in trust, the amount
payable on redemption thereof, but without interest from the date of
redemption.
In case the Holder hereof shall not within four (4) years (or any
longer period if required by law) after the redemption date claim any
amount so deposited in trust for the redemption of such shares, such
bank or trust company shall, upon demand and if permitted by applicable
law, pay over to the Maker any such unclaimed amount so deposited with
it, and shall thereupon be relieved of all responsibility in respect
thereof, and thereafter the Holder shall, subject to applicable escheat
laws, look only to the Maker for payment of the redemption price thereof
but without interest.
(c) Upon surrender of this Note for redemption, in accordance with
the Notice of Redemption, such Note, or portion thereof, shall be
redeemed by the Maker at the applicable redemption price. If this Note
is redeemed in part, a new Note shall be issued by the Maker
representing the unredeemed portion, without cost to the Holder of the
Note.
10. Demand for Payment.
(a) Commencing three years after the Original Issuance Date, the
Holder may require the Maker to purchase this Note, as a whole at any
time, or in part from time to time, at the election of the Holder (the
"Demand for Payment"), out of funds legally available therefor, at a
purchase price of one hundred percent (100%) of the principal amount of
this Note, or portion thereof, together with accrued interest to the
date of purchase (the "Purchase Date").
(b) In order to make a Demand for Payment, the Holder hereof
shall give written notice to the Maker at the office of the Maker (or
such other place as may be designated by the Maker) that (i) the Holder
elects to make a Demand for Payment, (ii) the principal amount of the
Note subject to the Demand for Payment, and (iii) the date of purchase
(the "Purchase Date") which date shall be at least ninety (90) days but
not more than one hundred twenty (120) days after such notice is
mailed or delivered to the Maker. The Holder shall surrender this
Note, duly endorsed to the Maker in blank, at said office of the Maker
at least ten (10) days prior to the Purchase Date. On the Purchase
Date, the Maker shall deliver to the Holder the purchase price,
together with accrued interest to the Purchase Date, with respect to
the Note or portion thereof subject to the Demand for Payment. In case
the Holder elects to make a Demand for Purchase with respect to only a
portion of this Note, the Maker shall also execute and deliver to the
Holder hereof on the Purchase Date, at the expense of the Maker, a new
Note in principal amount equal to the portion of the principal
amount not subject to the Demand for Payment.
11. Non-Waiver of Rights. The failure of the Holder to exercise its
option to accelerate the indebtedness of this Note shall not constitute a
waiver of his right to exercise the same upon the occurrence of any
continued or subsequent Event of Default. The failure by the Holder to
insist upon the strict performance by the Maker of any terms and provisions
contained herein shall not be deemed to be a waiver of any terms and
provisions herein, and the Holder shall retain the right thereafter to
insist upon strict performance by the Maker of any and all terms and
provisions of this Note or any document securing the repayment of this Note.
12. Additional Interest. The Maker agrees that upon the occurrence and
during the continuance of an Event of Default, after judgment on behalf of the
Holder, or on and after the Maturity Date, the indebtedness outstanding
under this Note shall bear interest at an annual rate of three percent
(3.0%) above the Prime Rate.
13. Maximum Rate of Interest. Notwithstanding any provision of this
Note, it is the understanding and agreement of the Maker and the Holder that
the maximum rate of interest to be paid by the Maker to the Holder shall not
exceed the highest or the maximum rate of interest permissible to be charged
under the laws of the State of Connecticut. Any amount paid in excess of
such rate shall be considered to have been payments in reduction of principal.
14. Choice of Law; Jurisdiction. To the extent not superseded by
federal law, this Note shall be governed by and construed in accordance with
the laws of the State of Connecticut without giving effect to its choice of
law principles. The Maker consents to the jurisdiction of the appropriate
federal or state courts within the State of Connecticut with respect to any
claims or disputes arising out of the enforcement of this Note.
15. Commercial Transaction. THE MAKER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND
VOLUNTARILY AND KNOWINGLY WAIVES (A) ALL RIGHTS TO NOTICE AND PRIOR COURT
HEARING OR COURT ORDER PRIOR TO THE ISSUANCE OF ANY PREJUDGMENT REMEDY UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES OR AS OTHERWISE ALLOWED
UNDER ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY
WHICH THE HOLDER MAY DESIRE TO USE AND (B) ALL RIGHTS TO REQUEST THAT THE
HOLDER HEREOF POST A BOND, WITH OR WITHOUT SURETY, TO PROTECT SAID MAKER
AGAINST DAMAGES THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR
OBTAINED BY THE HOLDER HEREOF BY VIRTUE OF ANY DEFAULT OR PROVISION OF THIS
NOTE OR ANY AGREEMENT SECURING THIS NOTE. THE MAKER ACKNOWLEDGES THAT
IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT DURESS AND ONLY AFTER
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS.
16. Waiver of Right To Jury Trial. THE MAKER WAIVES TRIAL BY JURY IN
ANY COURT IN ANY SUIT, ACTION, PROCEEDING OR ANY MATTER ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THIS NOTE OR THE FINANCING
TRANSACTION OF WHICH THIS NOTE IS A PART, OR THE DEFENSE OR ENFORCEMENT OF
ANY OF THE HOLDER'S RIGHTS AND REMEDIES IN CONNECTION THEREWITH, THE MAKER
ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY, WITHOUT
DURESS AND ONLY AFTER CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH
ITS ATTORNEYS.
17. Headings. The descriptive headings of the several sections of
this Note are inserted for convenience only and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.
18. Severability. If any provision of this Note or application
thereof to any person or circumstance shall to any extent be invalid, the
remainder of this Note or the application of such provision to persons,
entities or circumstances other than those as to which it is held invalid,
shall not be affected thereby and each provision of this Note shall be valid
and enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed
and delivered by the proper and duly authorized officer and agent as of the
date and year first above written.
COMPUDYNE CORPORATION
By /s/ Norman Silberdick
Title President
EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
Among
COMPUDYNE CORPORATION
MICROASSEMBLY SYSTEMS, INC.
MARTIN ROENIGK
and
ALAN MARKOWITZ
August 21, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
ARTICLE I - TERMS OF PURCHASE; CLOSING . . . . . . . . . . 1
1.1 Purchase of Shares . . . . . . . . . . . . . . . 1
1.2 Purchase Price . . . . . . . . . . . . . . . . . 1
1.3 Closing . . . . . . . . . . . . . . . . . . . . 2
1.4 Delivery of Stock Certificates . . . . . . . . . 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND SELLERS . . . . . . . . . . . . 2
2.1 Organization and Standing of the Company . . . . 2
2.2 Capitalization . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . 3
2.4 Financial Statements . . . . . . . . . . . . . . 3
2.5 Absence of Certain Changes . . . . . . . . . . . 3
2.6 Real Property . . . . . . . . . . . . . . . . . 3
2.7 Personal Property . . . . . . . . . . . . . . . 3
2.8 Patents and Trademarks . . . . . . . . . . . . . 4
2.9 Insurance . . . . . . . . . . . . . . . . . . . 4
2.10 Material Contracts . . . . . . . . . . . . . . . 4
2.11 Labor, Employment Agreements and
Employee Benefits . . . . . . . . . . . . . . . 4
2.12 Taxes . . . . . . . . . . . . . . . . . . . . . 5
2.13 Litigation . . . . . . . . . . . . . . . . . . . 5
2.14 Authorization . . . . . . . . . . . . . . . . . 5
2.15 No Breach or Default . . . . . . . . . . . . . . 5
2.16 Finders and Investment Bankers . . . . . . . . . 6
2.17 Investment . . . . . . . . . . . . . . . . . . . 6
2.18 No Distinctive Intent . . . . . . . . . . . . . 6
2.19 Information . . . . . . . . . . . . . . . . . . 7
2.20 Accredited Investor . . . . . . . . . . . . . . 7
2.21 Experience . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF BUYER . . 7
3.1 Organization and Standing of the Buyer . . . . . 7
3.2 Capitalization . . . . . . . . . . . . . . . . . 8
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . 8
3.4 Financial Statements . . . . . . . . . . . . . . 8
3.5 Absence of Certain Changes . . . . . . . . . . . 9
3.6 Real Property . . . . . . . . . . . . . . . . . 9
3.7 Personal Property . . . . . . . . . . . . . . . 9
3.8 Patents and Trademarks . . . . . . . . . . . . . 9
3.9 Insurance . . . . . . . . . . . . . . . . . . . 9
3.10 Material Contracts . . . . . . . . . . . . . . . 9
3.11 Labor, Employment Agreements and
Employee Benefits . . . . . . . . . . . . . . . 10
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . 10
3.13 Litigation . . . . . . . . . . . . . . . . . . . 10
3.14 Authorization . . . . . . . . . . . . . . . . . 11
3.15 No Breach or Default . . . . . . . . . . . . . . 11
3.16 Finders and Investment Bankers . . . . . . . . . 11
ARTICLE IV - COVENANTS OF THE PARTIES . . . . . . . . . . 12
4.1 Conduct of Business . . . . . . . . . . . . . . 12
4.2 Access to Information . . . . . . . . . . . . . 13
4.3 Expenses . . . . . . . . . . . . . . . . . . . . 14
4.4 Consents . . . . . . . . . . . . . . . . . . . . 14
4.5 Public Announcements . . . . . . . . . . . . . . 14
4.6 Sale of Suntec Division . . . . . . . . . . . . 14
4.7 Appointment of Chairman and CEO . . . . . . . . 15
4.8 Use of Proceeds from Sale of Notes . . . . . . . 15
ARTICLE V - CONDITIONS TO OBLIGATION OF BUYER . . . . . . 15
5.1 Representations and Warranties of
the Company and the Sellers . . . . . . . . . . 15
5.2 Covenants of the Company and Sellers . . . . . . 15
5.3 Good Standing Certificate . . . . . . . . . . . 15
5.4 Certificates . . . . . . . . . . . . . . . . . . 16
5.5 Purchase of Notes . . . . . . . . . . . . . . . 16
ARTICLE VI - CONDITIONS TO OBLIGATIONS OF SELLERS . . . . 16
6.1 Representations and Warranties of Buyer . . . . 16
6.2 Covenants of Buyer . . . . . . . . . . . . . . . 16
6.3 Good Standing Certificate . . . . . . . . . . . 16
6.4 Certificates . . . . . . . . . . . . . . . . . . 17
6.5 Sale of Notes . . . . . . . . . . . . . . . . . 17
6.6 Opinion of Counsel for Buyer . . . . . . . . . . 17
6.7 Resignations of Directors;
Election of Directors . . . . . . . . . . . . . 17
6.8 Issuance of CompuDyne Options . . . . . . . . . 17
6.9 Issuance of Corcap Options . . . . . . . . . . . 17
6.10 Stock Management Agreements . . . . . . . . . . 17
ARTICLE VII - REGISTRATION RIGHTS . . . . . . . . . . . . 18
7.1 Piggyback Registration Rights . . . . . . . . . 18
7.2 Demand Registration Rights . . . . . . . . . . . 19
7.3 Restrictions on Public Sale . . . . . . . . . . 20
7.4 Registration Expenses . . . . . . . . . . . . . 21
7.5 Rule 144 . . . . . . . . . . . . . . . . . . . . 21
7.6 Other Registration Rights . . . . . . . . . . . 22
7.7 Definition . . . . . . . . . . . . . . . . . . . 22
7.8 Other . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII - TERMINATION AND ABANDONMENT . . . . . . . . 23
8.1 Termination . . . . . . . . . . . . . . . . . . 23
8.2 Procedure and Effect of Termination . . . . . . 23
ARTICLE IX - SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION . . . . . . . . 23
9.1 Survival of Representations and Warranties;
Covenants . . . . . . . . . . . . . . . . . . . 23
9.2 Indemnification . . . . . . . . . . . . . . . . 24
9.3 Conditions of Indemnification . . . . . . . . . 24
9.4 Limitations on Indemnification . . . . . . . . . 25
ARTICLE X - MISCELLANEOUS PROVISIONS . . . . . . . . . . . 25
10.1 Amendment and Modification . . . . . . . . . . . 25
10.2 Notices . . . . . . . . . . . . . . . . . . . . 25
10.3 Assignment . . . . . . . . . . . . . . . . . . . 26
10.4 Governing Law . . . . . . . . . . . . . . . . . 27
10.5 Counterparts . . . . . . . . . . . . . . . . . . 27
10.6 Headings . . . . . . . . . . . . . . . . . . . . 27
10.7 Entire Agreement . . . . . . . . . . . . . . . . 27
SCHEDULES
EXHIBITS
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of this
21st day of August, 1995, by and among COMPUDYNE CORPORATION, a Pennsylvania
corporation ("Buyer"), MICROASSEMBLY SYSTEMS, INC., a Connecticut corporation
(the "Company"), MARTIN ROENIGK, a Connecticut resident ("Roenigk"), and ALAN
MARKOWITZ, a Pennsylvania resident ("Markowitz") (Roenigk and Markowitz are
collectively referred to herein as the "Sellers").
W I T N E S S E T H:
WHEREAS, Sellers own all of the issued and outstanding capital stock
of the Company and each Seller desires to sell all of the Common Stock, par
value $.10 per share (the "MASI Common Stock"), owned by him as set forth on
Schedule A hereto, on the terms and conditions set forth herein.
WHEREAS, Buyer desires to purchase all of the outstanding capital
stock of the Company from the Sellers on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual agreements contained
in this Agreement, the parties hereto agree as follows:
ARTICLE I
TERMS OF PURCHASE; CLOSING
1.1 Purchase of Shares. On the basis of the representations, warranties and
agreements, and upon the terms and conditions herein set forth, Buyer
agrees to purchase from each Seller, and each Seller, severally and not
jointly, agrees to sell and deliver to Buyer on the Closing Date (as
defined in Section 1.3) the respective number of shares of MASI Common
Stock set forth opposite the name of each Seller on Schedule A hereto,
being all of the outstanding capital stock of the Company (the "Shares")
at the purchase price set forth below.
1.2 Purchase Price. The purchase price for the shares shall be paid in shares
of a newly created class of Preference Stock of the Buyer, designated
Convertible Preference Stock, Series D, no par value (the "Preference
Stock"), at a price of 757.488 shares of Preference Stock for each share
of MASI Common Stock surrendered by the Sellers; each Seller to receive
the number of shares of Preference Stock set forth opposite his name on
Schedule A hereto. The Preference Stock shall have the terms and
designations as set forth on Exhibit 1.2 hereto.
1.3 Closing. The consummation of the transactions contemplated by this
Agreement shall take place at a Closing to be held at Tyler Cooper &
Alcorn, 35th Floor, CityPlace, Hartford, Connecticut at 11:00 a.m. on
August 21, 1995, or on such other date as the parties may agree upon in
writing. The date and hour of Closing is referred to in this Agreement
as the "Closing Date."
1.4 Delivery of Stock Certificates. On the Closing Date, each Seller shall
deliver certificates for the Shares to be sold by such Seller hereunder
duly endorsed in blank, or accompanied by stock powers duly executed in
blank, with all applicable stock transfer tax stamps properly affixed, to
the Buyer and the Buyer shall deliver certificates for the Preference
Stock to be issued by the Buyer registered in the names of the Sellers as
they may designate at least 10 days prior to the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
With respect to Section 2.1 through 2.16, Markowitz, to the best of his
knowledge, Roenigk and the Company, severally and not jointly based upon the
percentage of Preference Stock each Seller owns, represent and warrant to Buyer
and, with respect to Sections 2.17 through 2.21, each Seller, severally and not
jointly based upon the percentage of Preference Stock each Seller owns,
represents and warrants to Buyer, as follows:
2.1 Organization and Standing of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Connecticut, with corporate power and authority to own,
operate and lease its properties and carry on its business as now
conducted, and is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which the failure to
qualify would have a material adverse effect on its business and
operations taken as a whole.
2.2 Capitalization. The authorized capital stock consists of 20,000 shares
of MASI Common Stock, par value $0.10 per share, of which 1,664 shares are
validly issued and outstanding, fully paid and nonassessable. No shares
are held in the Company's treasury. All of the outstanding shares of MASI
Common Stock are owned of record and beneficially by Sellers, free and
clear of any lien, charge or encumbrance. There are no outstanding
options, warrants, rights or other agreements or commitments providing for
the issuance of, nor any securities convertible into capital stock of the
Company.
2.3 Subsidiaries. The Company does not own directly or indirectly either an
equity or debt interest in any corporation, partnership or express written
trust.
2.4 Financial Statements. The balance sheets of the Company as of December
31, 1994 and 1993 and the related statements of income (loss) and
accumulated deficit and cash flows for the years ended December 31, 1994
and 1993 previously furnished to Buyer, present fairly the financial
position of the Company at the dates, and the results of operations of the
Company for the periods, stated therein in conformity with generally
accepted accounting principles applied on a consistent basis. The balance
sheet of the Company as of June 30, 1995 and the related operating
statement for the six month period ended June 30, 1995 previously
furnished to Buyer present fairly the financial position of the Company
at the dates, and the results of operations of the Company for the
periods, stated therein. The date June 30, 1995 is sometimes referred to
in this Agreement as the "Financials Date."
2.5 Absence of Certain Changes. Since the Financials Date, there has not been
any material adverse change in the business or financial condition of the
Company.
2.6 Real Property. The Company has good and marketable fee simple title to
or valid leasehold interests in all of the real property which it occupies
or uses in its operations, including the plants, buildings and
improvements thereon, free and clear of all encumbrances, liens and
charges of every kind and character other than: (i) the lien of current
state and local property taxes not in default, (ii) the encumbrances,
liens and charges set forth in the balance sheet as of the Financials Date
or in Schedule 2.6, and (iii) such other minor liens, encumbrances,
easements, rights of way, restrictions, exceptions, reservations,
limitations, burdens and other imperfections as do not materially detract
from the value of such real property or impair its use for the purposes
for which it is now employed, or materially affect the validity of the
title thereto, and all leases or subleases under which it claims or holds
leasehold interests (all of which are listed on Schedule 2.6) are
currently in effect and there is not, under any of such instruments, any
existing default or event of default which with notice or lapse of time,
or both, would constitute a default.
2.7 Personal Property. The Company has good and marketable title to all
personal tangible and intangible property reflected in the balance sheet
as of the Financials Date, except for such changes in such personal
tangible and intangible property made since the Financials Date in the
ordinary course of business, free and clear of all encumbrances, liens or
charges of any kind or character other than encumbrances, liens or charges
(i) incurred in the ordinary course of the business of the Company or (ii)
set forth in the balance sheet as of the Financials Date.
2.8 Patents and Trademarks. Except as disclosed in Schedule 2.8, the Company
owns or possesses licenses or other rights to use all patents, trademarks
and tradenames necessary to conduct the business now being conducted by
the Company, each of which is listed on Schedule 2.8, and neither Seller
nor the Company has engaged in any conduct which could give rise to
termination or suspension of same. Neither Seller nor the Company has
received any notice of conflict with any asserted rights of others.
2.9 Insurance. The Company maintains insurance adequate for its operations.
2.10 Material Contracts. Except for agreements, plans or obligations referred
to in Section 2.11 and leases referred to in Section 2.6, Schedule 2.10
contains a complete list identifying all outstanding contracts, purchase
orders, agreements, leases (whether as landlord or tenant), indentures,
loan agreements, notes, mortgages and undertakings to which the Company
is a party or to which any of its properties is subject, other than any
individual contracts, purchase orders, agreements or leases of personal
property which involve payments by or to the Company of less than $50,000.
Except for immaterial defaults in contracts and agreements with customers
and suppliers which are consistent with past practice, in the ordinary
course of business and which are known to, and not objected to by, the
other party thereto, no event has occurred which with or without notice,
lapse of time, or both places the Company in default under any such
contract, purchase order, license, agreement, lease, indenture, loan
agreement, note, mortgage, or undertaking and the Company has no knowledge
of any default by any other party thereto.
2.11 Labor, Employment Agreements and Employee Benefits. Except for (i) the
contracts, agreements or plans referred to in Schedule 2.11, (ii)
personnel practices and policies in the ordinary course of business which
are not customarily embodied in formal plans or arrangements and which,
to the extent the same have been described in writing, are listed on
Schedule 2.11 and (iii) personnel practices and policies required by
statutory or regulatory authority, the Company is not a party to or bound
by any employment agreement, consulting agreement, shareholders'
agreement, voting trust agreement, collective bargaining agreement,
executive compensation agreement, deferred compensation agreement, pension
plan, retirement plan, profit-sharing plan, stock purchase plan, stock
option plan, group life insurance, hospitalization insurance, vacation
pay, severance pay or any other similar agreements or employee benefit
plans. Neither the Company, nor, to the knowledge of the Company and each
Seller, any other party to any such agreement or plan, is in breach
thereof or default thereunder, and no event has occurred that with the
passage of time or the giving of notice, or both, would constitute such
a breach or default.
2.12 Taxes. The Company has filed all tax and similar returns and has paid or
provided for the payment of all taxes and assessments due. The Company
has no knowledge of any claims for taxes which might become a lien upon
its assets.
2.13 Litigation. Except as set forth in Schedule 2.13, there is no suit,
action or legal, administrative, arbitration or other proceeding pending,
or, to the best knowledge of the Company and each Seller, threatened,
filed, initiated by or against the Company that would result in any
material adverse change in the business or financial condition of the
Company.
2.14 Authorization. The Company has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of the Company
and its shareholders, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Company and each Seller and
constitutes a valid and binding agreement of the Company and each Seller.
No filing with, and no permit, authorization, consent or approval of any
public body or authority, the absence of which would, either individually
or in the aggregate, have a material adverse effect on the business or
financial condition of the Company, is necessary for the consummation by
the Company and the Sellers of the transactions contemplated by this
Agreement.
2.15 No Breach or Default. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not (i)
violate any provision of the Certificate of Incorporation or By-laws of
the Company, (ii) violate any statute, rule, regulation, order or decree
of any public body or authority of the United States or any state or
municipality thereof by which Seller or the Company or any of their
respective properties is bound, which violation or violations either
individually or in the aggregate would have a material adverse affect on
the business or financial condition of the Company, or (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default under, any license, franchise, permit,
indenture, agreement, shareholders' agreement, voting trust agreement or
other instrument to which any of the Sellers or the Company is a party,
or by which any of them or any of their respective properties is bound
which violation, breach or default either individually or in the aggregate
would have a material adverse effect on the business or financial
condition of the Company.
2.16 Finders and Investment Bankers. Neither Seller, the Company nor any of
its officers, directors or agents has employed any broker or finder or
incurred any liability that is or would be an obligation of the Company
or the Buyer for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated herein.
2.17 Investment. Each Seller is acquiring the Preference Stock and the Notes
referred to in Section 5.5 hereof (the Preference Stock and the Notes are
collectively referred to herein as the "Securities"), and Roenigk is
acquiring the CompuDyne Options referred to in Section 6.7 hereof and the
Corcap Options referred to in Section 6.8 hereof (the CompuDyne Options
and the Corcap Options are collectively referred to herein as the
"Options"), for his own account as principal and not with a view to, or
for, distribution or fractionalization thereof, in whole or in part, and
no other person has a direct or indirect beneficial interest in such
Securities or Options.
2.18 No Distributive Intent. Neither Seller will sell or otherwise transfer
any Securities or Options without registration under the Securities Act
of 1933, as amended (the "Act"), and under applicable state securities or
"blue sky" laws, or pursuant to an exemption therefrom. Each Seller fully
understands and agrees that he must bear the economic risk of the
Securities and Options for an indefinite period of time because, among
other reasons, neither the Securities nor the Options have been registered
under the Act or under the securities laws of any state and, therefore,
they cannot be resold, pledged, assigned or otherwise disposed of unless
they are subsequently registered under the Act and under the applicable
securities laws of such states or an exemption from such registration is
available. Each certificate for the Securities and Options will be
imprinted with a legend in substantially the following form:
The security evidenced hereby has not been registered under
the Securities Act of 1933, as amended, or any state
securities laws and may not be sold, transferred, assigned,
pledged or otherwise distributed for value unless (a) there
is an effective registration statement under such act and
applicable state securities laws covering such securities
or (b) the Corporation receives an opinion of counsel for
the holder of these securities acceptable to the
Corporation (concurred in by counsel for the Corporation)
stating that such sale, transfer, assignment, pledge or
distribution is exempt from the registration and prospectus
delivery requirements of such Act and such state laws and
that such sale, transfer, assignment, pledge or
distribution will not cause the original issuance of such
securities by the Corporation to be in violation of the
registration and prospectus delivery requirements of such
Act or such state laws.
2.19 Information. Each Seller has received and reviewed a copy of the Buyer's
Annual Reports filed on Form 10-K, Quarterly Reports filed on Form 10-Q
and Current Reports filed on Form 8-K for the past two years. Each Seller
has been granted the opportunity to ask questions of, and receive answers
from, officers and employees of the Buyer and its subsidiaries concerning
the Buyer and has been granted full access to the books and records of the
Buyer, as Sellers deem necessary to make an informed investment decision.
2.20 Accredited Investor. Each Seller has read the text of Rule 501(a)(1)-(8)
of Regulation D under the Act, and confirms that he is an "accredited
investor" as described thereby.
2.21 Experience. Each Seller has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks
of the purchase of the Securities and Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and each Seller as follows:
3.1 Organization and Standing of the Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Pennsylvania, with corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted, and
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to qualify would
have a material adverse effect on its business and operations taken as a
whole.
3.2 Capitalization. The authorized capital stock consists of (i) 200,000
shares of Preferred Stock, par value $100.00 per share, none of which are
issued and outstanding, (ii) 2,000,000 shares of Preference Stock, without
par value, none of which are validly issued and outstanding except that
1,260,460 shares of Preference Stock, Series D, have been reserved for
issuance pursuant to this Agreement, and (iii) 10,000,000 shares of common
stock, par value $.75 per share (the "CompuDyne Common Stock"), of which
1,749,622 are validly issued and outstanding, fully paid and nonassessable
and 1,260,460 have been reserved for issuance upon conversion of the
Preference Stock and 266,667 have been reserved for issuance upon
conversion of the Notes, as defined in Section 5.5 hereof. No shares are
held in the Buyer's treasury.
3.3 Subsidiaries. Except as disclosed in Schedule 3.3, the Buyer does not own
directly or indirectly either an equity or debt interest in any
corporation, partnership or express written trust. Each subsidiary listed
on Schedule 3.3 is a corporation duly organized, validly existing and in
good standing under its respective state of incorporation, with corporate
power and authority to own, operate and lease its properties and carry on
its business as now conducted, and is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which
the failure to qualify would have a material adverse effect on its
respective business and operations taken as a whole. Buyer owns all of
the issued and outstanding stock of each such subsidiary.
3.4 Financial Statements. The balance sheets of the Buyer as of December 31,
1994 and 1993 and the related statements of income, changes in financial
position and stockholders' equity for the years ended December 31, 1994
and 1993 previously furnished to Buyer, present fairly the financial
position of the Buyer at the dates, and the results of operations of the
Buyer for the periods, stated therein in conformity with generally
accepted accounting principles applied on a consistent basis. The balance
sheet of Buyer as of June 30, 1995 and the related statement of income for
the six-month period ended June 30, 1995 previously furnished to the
Company and the Sellers present fairly the financial position of Buyer at
the dates, and the results of operations of Buyer for the periods, stated
therein.
3.5 Absence of Certain Changes. Except as provided in Schedule 3.5, since the
Financials Date, there has not been any material adverse change in the
business or financial condition of the Buyer or any of its subsidiaries.
3.6 Real Property. Buyer has good and marketable fee simple title to or valid
leasehold interests in all of the real property which it occupies or uses
in its operations, including the plants, buildings and improvements
thereon, free and clear of all encumbrances, liens and charges of every
kind and character other than: (i) the lien of current state and local
property taxes not in default, (ii) the encumbrances, liens and charges
set forth in the balance sheet as of the Financials Date or in Schedule
3.6, and (iii) such other minor liens, encumbrances, easements, rights of
way, restrictions, exceptions, reservations, limitations, burdens and
other imperfections as do not materially detract from the value of such
real property or impair its use for the purposes for which it is now
employed, or materially affect the validity of the title thereto, and all
leases or subleases under which it claims or holds leasehold interests
(all of which are listed on Schedule 3.6) are currently in effect and
there is not, under any of such instruments, any existing default or event
of default which with notice or lapse of time, or both, would constitute
a default.
3.7 Personal Property. Buyer has good and marketable title to all personal
tangible and intangible property reflected in the balance sheet as of the
Financials Date, except for such changes in such personal tangible and
intangible property made since the Financials Date in the ordinary course
of business, free and clear of all encumbrances, liens or charges of any
kind or character other than encumbrances, liens or charges (i) incurred
in the ordinary course of the business of Buyer or (ii) set forth in the
balance sheet as of the Financials Date.
3.8 Patents and Trademarks. Except as disclosed in Schedule 3.8, Buyer owns
or possesses licenses or other rights to use all patents, trademarks and
tradenames necessary to conduct the business now being conducted by Buyer,
each of which is listed on Schedule 3.8, and has not engaged in any
conduct which could give rise to termination or suspension of same. Buyer
has not received any notice of conflict with any asserted rights of
others.
3.9 Insurance. Buyer maintains insurance adequate for its operations.
3.10 Material Contracts. Except for agreements, plans or obligations referred
to in Section 3.11 and leases referred to in Section 3.6, Schedule 3.10
contains a complete list identifying all outstanding contracts, purchase
orders, agreements, leases (whether as landlord or tenant), indentures,
loan agreements, notes, mortgages and undertakings to which Buyer is a
party or to which any of its properties is subject, other than any
individual contracts, purchase orders, agreements or leases of personal
property which involve payments by or to Buyer of less than $50,000.
Except for immaterial defaults in contracts and agreements with customers
and suppliers which are consistent with past practice, in the ordinary
course of business and which are known to, and not objected to by, the
other party thereto, no event has occurred which with or without notice,
lapse of time, or both places the Buyer in default under any such
contract, purchase order, license, agreement, lease, indenture, loan
agreement, note, mortgage, or undertaking and Buyer has no knowledge of
any default by any other party thereto.
3.11 Labor, Employment Agreements and Employee Benefits. Except for (i) the
contracts, agreements or plans referred to in Schedule 3.11, (ii)
personnel practices and policies in the ordinary course of business which
are not customarily embodied in formal plans or arrangements and which,
to the extent the same have been described in writing, are listed on
Schedule 3.11 and (iii) personnel practices and policies required by
statutory or regulatory authority, Buyer is not a party to or bound by any
employment agreement, consulting agreement, shareholders' agreement,
voting trust agreement, collective bargaining agreement, executive
compensation agreement, deferred compensation agreement, pension plan,
retirement plan, profit-sharing plan, stock purchase plan, stock option
plan, group life insurance, hospitalization insurance, vacation pay,
severance pay or any other similar agreements or employee benefit plans.
Neither Buyer, nor, to the knowledge of Buyer, any other party to any such
agreement or plan, is in breach thereof or default thereunder, and no
event has occurred that with the passage of time or the giving of notice,
or both, would constitute such a breach or default.
3.12 Taxes. Buyer and each subsidiary has filed all tax and similar returns
and has paid or provided for the payment of all taxes and assessments due.
The Buyer has no knowledge of any claims for taxes which might become a
lien upon its assets.
3.13 Litigation. Except as set forth in Schedule 3.13, there is no suit,
action or legal, administrative, arbitration or other proceeding pending,
or, to the best knowledge of Buyer, threatened, filed, initiated by or
against the Buyer or any of its subsidiaries that would result in any
material adverse change in the business or financial condition of Buyer.
3.14 Authorization. Buyer has the corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby, including without limitation the Preference Stock and the Notes.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation the
Preference Stock and the Notes, have been duly and validly authorized and
approved by the Board of Directors of Buyer, and no other corporate
proceedings on the part of Buyer, including approval by its shareholders,
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby, including without limitation the
Preference Stock and the Notes. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid and binding
agreement of Buyer. No filing with, and no permit, authorization, consent
or approval of any public body or authority, the absence of which would,
either individually or in the aggregate, have a material adverse effect
on the business or financial condition of Buyer, is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement.
3.15 No Breach or Default. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, including
without limitation the Preference Stock and the Notes, will not (i)
violate any provision of the Certificate of Incorporation or By-laws of
Buyer, (ii) violate any statute, rule, regulation, order or decree of any
public body or authority of the United States or any state or municipality
thereof by which Buyer, its subsidiaries or any of their respective
properties are bound, which violation or violations either individually
or in the aggregate would have a material adverse affect on the business
or financial condition of Buyer, or (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both)
a default under, any license, franchise, permit, indenture, agreement,
shareholders' agreement, voting trust agreement or other instrument to
which Buyer or any of its subsidiaries is a party, or by which it or their
respective properties are bound which violation, breach or default either
individually or in the aggregate would have a material adverse effect on
the business or financial condition of Buyer.
3.16 Finders and Investment Bankers. Neither Buyer nor any of its officers,
directors or agents has employed any broker or finder or incurred any
liability that is or would be an obligation of the Company or the Buyer
for any brokerage fees, commissions or finders' fees in connection with
the transactions contemplated herein.
ARTICLE IV
COVENANTS OF THE PARTIES
4.1 Conduct of Business. During the period from the date of this Agreement
to the Closing Date, each of the Company and the Buyer shall conduct their
respective operations according to their ordinary and usual course of
business, and each of the Company and the Buyer shall use their respective
best efforts to keep available the services of officers and employees of
the Company and the Buyer, as the case may be, and to maintain
satisfactory relationships with licensors, suppliers, distributors,
customers and others having business relations with the Company and the
Buyer, as the case may be. Without limiting the generality of the
foregoing, and except as otherwise expressly provided or disclosed in this
Agreement or any Schedules, prior to the Closing Date, without the prior
written consent of the other parties hereto, neither the Company nor the
Buyer shall:
(a) amend their respective Certificates of Incorporation or By-laws,
except that the Buyer shall amend its Certificate of Incorporation to
provide for the Preference Stock;
(b) issue, sell or agree to issue or sell any capital stock of any
class or any options, warrants, rights to purchase any capital stock of
any class or any securities convertible into shares of capital stock of
any class, except as contemplated by this Agreement and, with respect to
the Buyer, except as may be required pursuant to Stock Purchase
Agreements, dated as of August 1, 1993, between the Buyer and each of
certain members of Buyer's management;
(c) create, incur or assume any short-term or long-term debt, or
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other individuals, firm or corporation, except in the ordinary course of
business and except as contemplated by this Agreement;
(d) (i) pay or agree to pay any bonuses or make or agree to make any
increase in the rate of wages, salaries, or other remuneration of any of
its officers or salaried employees; or (ii) pay or agree to pay any
pension, retirement allowance or other employee benefit not required or
permitted by any existing plan, agreement or arrangements to any such
director, officer or employee, whether past or present or, (iii) hire,
fire or change the job title or job description of any salaried personnel,
except as contemplated by this Agreement or as set forth in Schedule 4.1;
(e) sell, transfer, mortgage, lease or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, lease or otherwise dispose
of or encumber, any properties, real, personal or mixed, in excess of
$10,000, except as contemplated by this Agreement;
(f) enter into or modify in any material respect any material
obligation, agreement, commitment or contract, including strategic
partnering or venture arrangements, or make any further additions to their
respective properties or further purchases of machinery or equipment
(other than as provided for in agreements or commitments existing at the
date of this Agreement), except agreements, commitments or contracts for
the purchase, sale or lease of goods or services in the ordinary course
of business consistent with past practice and not in excess of current
requirements;
(g) enter into any letter of intent, commitment or agreement to
merge, consolidate or sell substantially all of their respective assets,
enter into any partnership or joint venture, enter into, effect or consent
to a plan of dissolution, liquidation or other agreement with creditors,
or affect any other fundamental change in their respective businesses; or
(h) enter into any agreement or contract, written or verbal, for
sales in excess of $25,000 at any one time or over a period of time.
Any disputes between the Company and the Sellers on the one hand and
the Buyer on the other with regard to this Section 4.1 shall be resolved
by Millard Pryor, a director of the Buyer, whose determination shall be
final and binding on the parties hereto.
4.2 Access to Information. (a) Between the date of this Agreement and the
Closing Date, the Company and the Buyer will give to one another and their
respective authorized representatives reasonable access to all plants,
offices, warehouses and other facilities and to all books and records of
the Company and the Buyer, as the case may be, will permit one another to
make such inspections thereof as may be reasonably required and will cause
their respective officers to furnish one another with such financial and
operating data and other information with respect to their respective
businesses and properties as may from time to time be reasonably
requested, provided, however, that any such investigation shall be
conducted in such a manner as not to interfere unreasonably with the
operation of the Buyer's and the Company's respective businesses.
(b) Each party hereto will hold and will cause its representatives,
consultants and advisors to hold in strict confidence, unless compelled
to disclose by judicial or administrative process or, in the opinion of
their respective counsels, by other requirements of law, and each party
hereto will not and will cause its representatives, consultants and
advisors not to use in any manner except as contemplated by this
Agreement, all documents and information concerning the Company or the
Buyer, as the case may be, furnished to the Company, the Buyer, the
Sellers or their representatives, as the case may be, in connection with
the transactions contemplated by this Agreement and will not release or
disclose such information to any other person, except their respective
auditors, attorneys, financial advisors and other consultants and advisors
in connection with this Agreement. If the transactions contemplated by
this Agreement are not consummated, the obligations of confidentiality and
non-use set forth herein shall continue. The parties hereby agree that
Miles Jennings has served as a representative of the Company and is
thereby subject to the provisions of this Section 4.2(b).
4.3 Expenses. Whether or not the transactions contemplated by this Agreement
are consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the
party incurring such costs and expenses, provided, however, that if the
transactions contemplated by this Agreement are not consummated, the
Company shall pay one-half of the fees and expenses of Tyler Cooper &
Alcorn, Buyer's counsel, charged in connection with this transaction.
4.4 Consents. Buyer and Seller each will use their best efforts to obtain
consents of all third parties and governmental authorities necessary to
the consummation of the transactions contemplated by this Agreement.
4.5 Public Announcements. Buyer, Sellers and the Company will use their best
efforts to consult with one another before issuing any press releases or
otherwise making any public statements with respect to the transactions
contemplated herein. Buyer shall use its best efforts to ensure that
Corcap, Inc., a Nevada corporation and holder of 38.3% of the issued and
outstanding shares of the Buyer ("Corcap"), will similarly comply with
this Section 4.5.
4.6 Sale of Suntec Division. On, or as soon as practicable after, the Closing
Date, the Buyer shall sell the assets of its Suntec Division to Norman
Silberdick, Chairman and Chief Executive Officer of the Buyer. The terms
of the sale shall be substantially as set forth in the Asset Purchase and
Sale Agreement attached hereto as Exhibit 4.6.
4.7 Appointment of Chairman and CEO of Buyer. Upon the execution of this
Agreement, Buyer shall cause Norman Silberdick, the Chairman and Chief
Executive Officer of Buyer, to tender his resignation to the Board of
Directors of the Buyer effective immediately after the Closing. The Board
of Directors of the Buyer shall elect Roenigk to succeed Mr. Silberdick
in such positions at the Buyer effective immediately after the Closing.
4.8 Use of Proceeds from Sale of Notes. After the Closing, Buyer shall use
the proceeds from the sale of the Notes, as described in Section 5.5
hereof, for working capital purposes in the operations of the Buyer. Such
proceeds shall not be used for working capital purposes in the operations
of the Company.
ARTICLE V
CONDITIONS TO OBLIGATION OF BUYER
The obligation of Buyer to effect the transactions contemplated by this
Agreement is subject to satisfaction on or prior to the Closing Date of each of
the following conditions, any of which may be waived by Buyer:
5.1 Representations and Warranties of the Company and the Sellers. Except as
otherwise permitted by this Agreement, all representations and warranties
of the Company and the Sellers contained in this Agreement shall be true
in all material respects on the Closing Date with the same effect as
though made at such date. All Schedules to this Agreement relating to the
Seller shall also be true on the Closing Date, except as permitted by this
Agreement.
5.2 Covenants of the Company and Sellers. The Company and the Sellers shall
have performed or satisfied all covenants and obligations required by this
Agreement to be performed or satisfied by Seller on or prior to the
Closing Date.
5.3 Good Standing Certificate. The Company and the Sellers shall have
furnished to Buyer a good standing certificate and a copy of the
Certificate of Incorporation, including amendments, of the Company, each
certified by the Secretary of State of the State of Connecticut. The
Secretary of the Company shall certify that neither the Board of Directors
nor its shareholders has approved any resolution approving any amendment
to the Certificate of Incorporation since the filing of the latest
amendment to such Certificate.
5.4 Certificates. The Company and Sellers shall have furnished Buyer such
other certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in this Article V as
Buyer may reasonably request. Each of Roenigk and Markowitz shall have
furnished Buyer with a certificate executed by each of them in their
individual capacity and not as officers of the Company as to the accuracy
of the representations and warranties of the Company (Markowitz may
certify as to the accuracy of the representations and warranties to the
best of his knowledge) and each of them contained in this Agreement and
such other matters as Buyer may reasonably request.
5.5 Purchase of Notes. The Sellers, or their designees, shall have purchased
from the Buyer on the Closing Date Senior Convertible Promissory Notes
(the "Notes") in the aggregate principal amount of $400,000. The Notes
shall be in the form attached hereto as Exhibit 5.5.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of the Sellers and the Company to effect the transactions
contemplated by this Agreement are subject to satisfaction on or prior to the
Closing Date of the following conditions, any of which may be waived by the
Company and the Sellers:
6.1 Representations and Warranties of Buyer. Except as otherwise permitted
by this Agreement, all representations and warranties of Buyer contained
in this Agreement shall be true in all material respects on the Closing
Date with the same effect as though made at such date. All Schedules to
this Agreement relating to the Buyer shall also be true on the Closing
Date, except as permitted by this Agreement.
6.2 Covenants of Buyer. Buyer shall have performed or satisfied all of its
respective covenants and obligations required by this Agreement to be
performed or satisfied by Buyer on or prior to the Closing Date.
6.3 Good Standing Certificate. Buyer shall have furnished to Seller a good
standing certificate and a copy of the Certificate of Incorporation,
including amendments, of the Buyer, each certified by the Secretary of
State of the Commonwealth of Pennsylvania. The Secretary of the Buyer
shall certify that neither the Board of Directors nor its shareholders has
approved any resolution approving any amendment to the Certificate of
Incorporation since the filing of the latest amendment to such
Certificate.
6.4 Certificates. Buyer shall have furnished Sellers such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Article VI as the Company and the Sellers may
reasonably request.
6.5 Sale of Notes. The Buyer shall have sold to the Sellers on the Closing
Date the Notes.
6.6 Opinion of Counsel for Buyer. Sellers shall have received from Tyler
Cooper & Alcorn and Connolly Epstein Chicco Foxman Engelmeyer & Ewing,
counsel for Buyer, opinions dated the Closing Date, in form and substance
reasonably satisfactory to Seller in the form attached to this Agreement
as Exhibit 6.6(a) and 6.6(b), respectively.
6.7 Resignation of Directors; Election of Directors. Sellers shall have
received resignations, effective immediately after the Closing, of Norman
Silberdick as a director of each of Buyer and Corcap. The remaining
directors of each of the Buyer and Corcap shall have elected Roenigk to
fill such vacancies, effective immediately after the Closing, created by
such resignations in accordance with the respective By-laws of the Buyer
and Corcap. Each of the Buyer and Corcap shall have increased the size
of the Board by one director and each shall have elected Markowitz to fill
such vacancy in accordance with the respective By-laws of the Buyer and
Corcap.
6.8 Issuance of CompuDyne Options. Roenigk shall have received from the Buyer
options (the "CompuDyne Options") to purchase 200,000 shares of CompuDyne
Common Stock at a price of $1.50 per share as set forth in Exhibit 6.7
hereto.
6.9 Issuance of Corcap Options. Roenigk shall have received from Corcap
options, exercisable on or before the first anniversary of the Closing
Date, to purchase 300,000 shares of common stock of Corcap at a price of
$0.15 per share and options, exercisable on or before the tenth
anniversary of the Closing Date, to purchase an additional 150,000 shares
of common stock of Corcap at a price of $0.15 per share, as set forth in
Exhibit 6.9 hereto (all such options granted by Corcap are collectively
referred to herein as the "Corcap Options").
6.10 Stock Management Agreements. Buyer shall have delivered to Sellers,
executed waivers from each party to Stock Purchase Agreements, dated as
of August 1, 1993, between the Buyer and Messrs. Silberdick, Blackmon and
Manz and Ms. Burns of their rights pursuant to Section 3 thereto.
ARTICLE VII
REGISTRATION RIGHTS
7.1 Piggyback Registration Rights.
(a) Right to Piggyback. Whenever the Buyer proposes to register any
shares of CompuDyne Common Stock (or securities convertible into or
exchangeable or exercisable for CompuDyne Common Stock) under the
Securities Act (a "Proposed Registration"), and the registration form to
be used may be used for the registration of the Registrable Securities as
defined in Section 7.7 below (a "Piggyback Registration"), the Buyer will
give prompt written notice to each holder of record of the Preference
Stock and the Notes (the "Securityholders") at his address as the same
shall appear on the books of the Buyer of the Buyer's intention to effect
such a registration. Such notice will specify among other things the
proposed offering price, the kind and number of securities proposed to be
registered, the distribution arrangements and such other information that
at the time would be appropriate to include in such notice, and will,
subject to paragraph 7.1(b) below, offer to include in such Piggyback
Registration all Registrable Securities with respect to which the Buyer
has received written requests for inclusion therein within 15 business
days after receipt of the Buyer's notice. Except as may otherwise be
provided in this Agreement, Registrable Securities with respect to which
such request for registration has been received within such 15-day period
will be registered by the Buyer and offered to the public pursuant to this
Article VII on the same terms and subject to the same conditions
applicable to the registration in a Proposed Registration of such shares
of CompuDyne Common Stock (or securities convertible into or exchangeable
or exercisable for CompuDyne Common Stock) to be sold by the Buyer or by
the person selling under such Proposed Registration.
(b) Priority on Piggyback Registrations. If the managing
underwriter or underwriters, if any, advise the holders of Registrable
Securities in writing that in its or their opinion, or, in the case of a
Piggyback Registration not being underwritten, the Buyer shall reasonably
determine (and notify the holders of Registrable Securities of such
determination) after consultation with an investment banker or advisor of
nationally recognized standing, that the number or kind of securities
proposed to be sold in such registration (including Registrable Securities
to be included in paragraph 7.1(a) above) will adversely affect the
success of such offering, the Buyer will include in such registration the
number of securities, if any, which, in the opinion of such underwriter
or underwriters, or the Buyer, as the case may be, can be sold as follows:
(i) first, the shares of CompuDyne Common Stock the Buyer proposes to
sell, (ii) second, the Registrable Securities requested to be included in
such registration by the Securityholders, and (iii) third, other shares
of CompuDyne Common Stock held by persons other than the Securityholders
requested to be included in such registration, provided, however, that any
Piggyback Registration must include a minimum number of shares of
Registrable Securities equal to the product obtained by multiplying (i)
the number of shares being registered in the Proposed Registration by (ii)
a fraction, the numerator of which is the number of Registrable Securities
and the denominator of which is the number of shares of Common Stock of
the Buyer on a fully diluted basis.
7.2 Demand Registration Rights.
(a) Right to Demand. At any time after 24 months following the
Closing Date, at least 60% of the Securityholders may collectively make
a written request to the Buyer for registration with the Securities and
Exchange Commission under and in accordance with the provisions of the Act
of all or part of their Registrable Securities (a "Demand Registration").
Within 10 days after receipt of such request, the Buyer will serve written
notice (the "Buyer's Notice") of such registration request to all other
Securityholders notifying such holders of the Demand Registration and
stating that any Securityholder who wishes to be included in such
registration shall notify the Buyer within 15 days of the date of the
Buyer's Notice (the "Inclusion Deadline"). Any Securityholder who does
not so notify the Buyer by the Inclusion Deadline forfeits his right to
have his Registrable Securities included in the registration. All
requests of the Securityholders pursuant to this Section shall specify the
aggregate number of Registrable Securities to be registered and shall also
specify the intended methods of disposition thereof.
Within 15 days after the Inclusion Deadline, the Buyer will advise
the Securityholders who made the Demand Registration and any other
Securityholder who notified the Buyer of his desire to be included in the
registration by the Inclusion Deadline (the "Selling Securityholders")
whether, in the reasonable judgment of the Board of Directors of the Buyer
(after consultation with an investment banker or advisor of nationally
recognized standing), (i) the Company has sufficient working capital,
together with projected cash flow (x) to pay for the costs associated with
the registration and offering of the Registrable Securities to be
registered, (y) to satisfy its current liabilities and liabilities
expected to arise over the next 18 months as such liabilities become due,
and (z) to provide a sufficient reserve for extraordinary expenses
reasonably anticipated, and (ii) there is a reasonable likelihood of
completing a successful public offering of such securities within the next
12 months taking into account the financial condition of the Buyer, the
market for securities existing at the time and in the foreseeable future,
and the amount of Registrable Securities to be registered pursuant to this
Section 7.2(a).
If the Board of Directors of the Buyer, in its reasonable judgment,
determines to proceed with the registration, the Buyer shall include in
such registration all Registrable Securities of the Selling
Securityholders as to which the Buyer has received written requests for
inclusion and shall promptly proceed to register such securities. The
Securityholders shall have the right to make two Demand Registrations
pursuant to this Section 7.2. The Buyer shall be deemed to have satisfied
its obligations with respect to a Demand Registration under this Section
7.2(a) only when the registration statement has been declared effective.
(b) Selection of Underwriters. If any Demand Registration is an
underwritten offering, the Selling Stockholders will collectively select
a managing underwriter or underwriters of recognized national standing to
administer the offering, which shall be reasonably satisfactory to the
Buyer.
7.3 Restrictions on Public Sale.
(a) Public Sale by Holders of Registrable Securities. Each
Securityholder, if requested by the managing underwriter or underwriters
for any underwritten Piggyback or Demand Registration in which such
Securityholder is not participating or by the Securityholders holding a
majority of the Registrable Securities being registered in a Demand
Registration in which such Securityholder is not participating and which
is not being underwritten, agrees not to effect any public sale or
distribution of Registrable Securities, including a sale pursuant to Rule
144 (or any similar provision then in force) under the Act, during the
five business days prior to, and during the 90-day period (or such shorter
period as may be agreed to by the parties hereto) beginning on, the
effective date of such Piggyback or Demand Registration (except as part
of such Piggyback or Demand Registration) or such earlier time as all the
shares of CompuDyne Common Stock included in such registration statement
have been disposed of pursuant thereto.
(b) Public Sale by the Buyer and Others. If requested by the
managing underwriter or underwriters for any underwritten Piggyback or
Demand Registration or by the Securityholders holding a majority of the
Registrable Securities being registered in a Demand Registration which is
not being underwritten, the Buyer will (i) not effect any public sale or
distribution of CompuDyne Common Stock for its own account (or securities
convertible into or exchangeable or exercisable for CompuDyne Common
Stock) during the 10 business days prior to, and during the 90-day period
beginning on, the effective date of such Piggyback or Demand Registration
(except as part of such registration or pursuant to registrations on Forms
S-4, S-8, or any successor form to such forms) and with respect to any
Demand Registration the Buyer will not effect any such sale or
distribution during the period commencing on the date of filing such
Demand Registration and ending on the sixtieth day following the effective
date of such Demand Registration, and (ii) use reasonable efforts to cause
each other holder of CompuDyne Common Stock (or securities convertible
into or exchangeable or exercisable for CompuDyne Common Stock) purchased
from the Buyer at any time after the date of this Agreement (other than
in a registered public offering) to agree not to effect any public sale
or distribution of any such securities during such period (except as part
of such Piggyback or Demand Registration, if otherwise permitted).
7.4 Registration Expenses. All of the costs and expenses of each Registration
hereunder will be borne by the Buyer, including the fees and expenses of
the counsel and accountants for the Buyer (including the expenses of any
"cold comfort" letters required by or incident to such performance), and
all other costs and expenses of the Buyer incident to the preparation,
printing and filing under the Act of the Registration Statement (and all
amendments and supplements thereto) and furnishing copies thereof and of
any preliminary Prospectus and the Prospectus including therein, and the
costs and expenses incurred by the Buyer in connection with the
qualification of the Registrable Securities under the state securities or
"blue-sky" laws of various jurisdictions as agreed to by Buyer, which
agreement to such choice of jurisdictions shall not be unreasonably
withheld; provided, that, the Buyer shall not bear costs and expenses of
any Securityholders comprising underwriters commissions, brokerage fees,
transfer taxes, or the fees and expenses of any counsel (including counsel
for the underwriters), accountants or other representatives retained by
any Securityholder and provided, further, that the Buyer shall not be
required to purchase insurance in lieu of indemnification.
7.5 Rule 144. The Buyer agrees that at all times after the Closing Date, it
will use its best efforts to file in a timely manner all reports required
to be filed by it pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). At any time and upon request of a
Securityholder, the Buyer will furnish such Securityholder and others with
such information as may be necessary to enable the Securityholder to
effect sales of CompuDyne Common Stock pursuant to Rule 144 under the Act.
Notwithstanding the foregoing, the Buyer may deregister any class of its
equity securities under Section 12 of the Exchange Act or suspend its duty
to file reports with respect to any class of its securities pursuant to
Section 15(d) of the Exchange Act if it is then permitted to do so
pursuant to the Exchange Act and the rules and regulations thereunder.
7.6 Other Registration Rights. Subject to the proviso below, the Buyer will
not grant any person any demand or piggyback registration rights with
respect to CompuDyne Common Stock (or securities convertible into or
exchangeable or exercisable for CompuDyne Common Stock) other than (a)
piggyback rights, substantially the same as those contained herein,
granted to officers, directors, consultants or employees of the Buyer or
its subsidiaries who acquire CompuDyne Common Stock (b) piggyback
registration rights ("new piggyback rights") that would be consistent with
the terms of this Article VII and which would provide that the
Securityholders have a piggyback right upon the exercise of such new
piggyback rights and shall be included in such registration statement
before the inclusion of any shares pursuant to the exercise of the new
rights and (c) demand registration rights ("new demand rights") that may
not be exercised until at least 90 days after the right to a Demand
Registration initially becomes exercisable pursuant to paragraph 7.2(a)
above and which provide that the Securityholders have a piggyback right
upon the exercise of such new demand rights; provided, however, that to
the extent that the Buyer grants to any person registration rights with
respect to any shares of CompuDyne Common Stock of the Buyer having
provisions more favorable to the holders thereof than the provisions
contained in this Agreement, the Buyer will confer comparable rights to
the holders of Registrable Securities in this Agreement, but only while
this Agreement remains in effect. The Buyer will not grant any
registration rights that would permit any person (including the Buyer) the
right to piggyback on any Demand Registration.
7.7 Definition. "Registrable Securities" means the shares of CompuDyne Common
Stock issuable upon conversion of the Preference Stock, and the Notes, as
more fully described in Exhibits 1.2 and 5.5 attached hereto; provided,
however, that any share of CompuDyne Common Stock that (i) has been
effectively registered under the Act and disposed of in accordance with
the registration statement covering it or (ii) has been sold to the public
pursuant to Rule 144 (or any similar provision then in force) under the
Act shall not be a Registrable Security.
7.8 Other. The Buyer will follow the registration Procedures customarily
followed in this type of transaction and will enter into underwriting,
indemnity and other documents customarily required in this type of
transaction. The Securityholders agree to cooperate with the Buyer in
connection with the preparation and filing of the registration statement
and accompanying prospectus.
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing Date by mutual consent of the Sellers and the Boards of Directors
of Buyer and the Company; or by either (i) Buyer if any of the conditions
set forth in Article V have not been satisfied or performed on or before
September 30, 1995; or (ii) the Company and the Sellers if any of the
conditions set forth in Article VI have not been satisfied or performed
on or before September 30, 1995.
8.2 Procedure and Effect of Termination. In the event of termination and
abandonment by Buyer, the Company or Sellers or any of them pursuant to
Section 8.1, written notice thereof shall forthwith be given to the other
and this Agreement shall terminate and be abandoned, without further
action by any of the parties hereto. If this Agreement is terminated as
provided herein:
(a) Upon request therefor, each party will redeliver all documents,
work papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) No party hereto shall have any liability or further obligation
to any other party to this Agreement except as stated in this Section 8.2
and in Sections 4.2(b), 4.3 and 4.6.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
9.1 Survival of Representations and Warranties; Covenants. All
representations and warranties contained herein and the covenants
contained in Sections 4.2, 4.3, 4.6 and 4.8 and Article VII hereof shall
survive the purchase of the MASI Shares for a period ending one year from
the date of this Agreement.
9.2 Indemnification.
(a) Subject to the conditions and limitations of this Article IX,
each Seller, severally based upon the percentage of Preference Stock each
Seller owns immediately after the Closing, agrees to indemnify and hold
Buyer harmless from and against any and all damages, losses and expenses
(including reasonable attorneys' fees) sustained by the Buyer ("Damages")
arising out of any breach of warranty or misrepresentation contained in
this Agreement or any Schedule to this Agreement made by either of them
or the Company.
(b) Subject to the conditions and limitations of this Article IX,
the Buyer agrees to indemnify and hold the Company and each Seller
harmless from and against any and all Damages arising out of any breach
of warranty or misrepresentation contained in this Agreement or any
Schedule to this Agreement made by it.
(c) In determining the amount of any Damages pursuant to this
Section 9.2:
(i) No Damages shall be deemed sustained by reason of any taxes
measured by income payable by the party making a claim for
indemnification (the "Indemnified Party") as a result of (A) the
inclusion in income of any amount in one or more taxable years, if,
as a result of the inclusion, the Indemnified Party is or would be
entitled to exclude or to deduct from income such amount in other
taxable years subsequent to the Closing Date, or (B) the disallowance
of a deduction from income or a credit against taxes of any amount
in one or more taxable years, if, as a result of such disallowance,
the Indemnified Party is or would be entitled to exclude or to deduct
from income or credit against taxes such amount in other taxable
years subsequent to the Closing Date.
(ii) There shall be a credit for any reduction in tax
liabilities of the Indemnified Party as a result of the state of
facts giving rise to any claim of damages, losses or expenses, such
credit to be the amount of actual cash savings realized or to be
realized by the Indemnified Party.
9.3 Conditions of Indemnification. Indemnified Party agrees to give prompt
written notice to the party or parties indemnifying the Indemnified Party
(the "Indemnifying Party") of any claim against the Indemnified Party
which might give rise to a claim by the Indemnified Party against the
Indemnifying Party under the terms of this Agreement, stating the nature
and basis of such third-party claim or litigation. Indemnified Party
agrees to (i) keep the Indemnifying Party fully informed, (ii) use all
reasonable efforts to defend such claim or litigation with substantially
the same action and steps to contest, defend, resolve, settle or
compromise such claim as it would otherwise take with respect to similar
claims in the ordinary course of its business and (iii) present any
defense reasonably suggested by the Indemnifying Party or the Indemnifying
Party's counsel. The Indemnifying Party shall have the right to be
represented in such claim or proceeding by legal counsel and accountants,
at its own expense. So long as there exists any right to indemnification
by the Indemnifying Party, the Indemnified Party will not make any
settlement of any claim or litigation which might give rise to a right to
indemnification from the Indemnifying Party without the consent of the the
Indemnifying Party, provided that such consent shall not be unreasonably
withheld. In the event that the Indemnified Party is able to settle a
claim or litigation by payment of a sum of money and the Indemnifying
Party disagrees with the proposed settlement, the Indemnified Party may
tender the further defense of such litigation to the Indemnifying Party,
provided that the Indemnifying Party fully indemnify the Indemnified Party
against the final outcome of such litigation for all damages, costs and
attorneys' fees.
9.4 Limitations on Indemnification. The Indemnified Party shall be entitled
to indemnification under this Article IX only to the extent that the
aggregate amount of damages exceeds $50,000 (after which point the the
Indemnifying Party shall be obligated to indemnify the Indemnified Party
from all Damages including the first $50,000). The limit of the
Indemnifying Party's liability under this Agreement for all Damages in the
aggregate from any and all claims, actions, suits, liabilities, losses,
damages, expenses and amounts paid in settlement shall be $1,900,000
(after which point the Indemnifying Party will have no obligation to
indemnify the Indemnified Party from and against further such Damages).
In no event shall Seller be liable for any Damages or any other payment
under this Agreement with respect to any claim, action, suit, liability,
loss, damage, or expense which has not been asserted, instituted,
determined or paid within two years from the date of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of the parties hereto at any time
prior to the Closing Date.
10.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested), delivered to a
nationally recognized overnight delivery service, or sent by facsimile
transmission answerback to the parties at the following addresses or at
such other address for a party as shall be specified by like notice:
(a) If to Roenigk, to:
Martin Roenigk
26 Barton Hill
East Hampton, CT 06424
FAX: 203-267-1120
If to Markowitz, to:
Alan Markowitz
110 Maple Hill Road
Gladwyne, PA 19135
FAX: 610-642-6946
If to the Company, to:
MicroAssembly Systems, Inc.
120 Union Street
Willimantic, CT 06226
FAX: 203-456-1187
(b) If to Buyer, to:
CompuDyne Corporation
10th Floor
90 State House Square
Hartford, CT 06103-3720
FAX: 203-549-2345
Attention: Chief Executive Officer
With a copy to:
Kathleen A. Maher, Esquire
Tyler Cooper & Alcorn
205 Church Street
P. O. Box 1936
New Haven, CT 06509-1910
FAX: 203-865-7865
10.3 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent
of the other parties, nor is this Agreement intended to confer upon any
other person except the parties any rights or remedies hereunder.
10.4 Governing Law. The Agreement shall be governed by the laws of the State
of Connecticut, without giving effect to the principles of conflicts of
laws thereof, as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.
10.5 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10.6 Headings. Article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not affect in any way the meaning or interpretation of
this Agreement.
10.7 Entire Agreement. This Agreement, including the Schedules and Exhibits
hereto and the documents and instruments referred to herein, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants, or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to
such subject matter.
<PAGE>
IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to
be signed by their respective duly authorized officers, and each Seller has
signed this Agreement, as of the date first above written.
COMPUDYNE CORPORATION
By /s/ Diane Burns
Name: Diane Burns
Its Corporate Secretary
MICROASSEMBLY SYSTEMS, INC.
By /s/ Martin Roenigk
Name: Martin Roenigk
Its President
SELLERS:
/s/ Martin Roenigk
Martin Roenigk
/s/ Alan Markowitz
Alan Markowitz
LIST OF SCHEDULES AND EXHIBITS
Description
Schedule A Name and Address of Seller, Number of MASI Shares Being Sold,
Number of Preference Shares Being Obtained
Schedule 2.6 Real Property
Schedule 2.8 Patents and Trademarks
Schedule 2.10 Material Contracts
Schedule 2.11 Employment Matters
Schedule 2.13 Litigation
Schedule 3.3 Subsidiaries
Schedule 3.5 Adverse Changes
Schedule 3.6 Leasehold Interests
Schedule 3.7 Personal Property
Schedule 3.8 Patents and Trademarks
Schedule 3.10 Material Contracts
Schedule 3.11 Employment Matters
Schedule 3.12 Taxes
Schedule 3.13 Litigation
Schedule 4.1 Conduct of Business
Exhibit 1.2 Form of Convertible Preference Stock, Series D
Exhibit 4.6 Form of Suntec Asset Purchase and Sale Agreement
Exhibit 5.5 Form of Senior Convertible Promissory Note
Exhibit 6.6(a) Form of Opinion of Tyler Cooper & Alcorn
Exhibit 6.6(b) Form of Opinion of Connolly Epstein Chicco Foxman Engelmeyer &
Ewing
Exhibit 6.8 Form of CompuDyne Options
Exhibit 6.9 Form of Corcap Options
SCHEDULE A
Number of MicroAssembly Number of Shares
Name and Address Systems, Inc. Shares of Preference
of Sellers Being Sold Stock Being Acquired
Martin Roenigk
26 Barton Hill
East Hampton, CT 06424 1,248 945,345
Alan Markowitz
110 Maple Hill Road
Gladwyne, PA 19135 416 315,115
TOTAL 1,664 1,260,460
Schedule 2.6
Real property owned in fee simple at 120 Union Street, Willimantic,
Connecticut. There are no mortgages or other liens on such property.
Schedule 2.8
The Company has no patents.
The Company has the following registered trademarks:
"Stick-Screw" (U.S. registration number 1,669,135)
"Screwstick" (U.S. registration number 815,209
The Company has not allowed anyone to use/license these trademarks.
Schedule 2.10
Contract to purchase heat treating furnace from L&L Furnace. Adjusted
purchase price of $90,175 (plus independent engineering assistance,
moving, and installation). Paid to date $49,596.25. Balance due upon
satisfactory operation (55% after 10 days satisfactory operation, 45%
after three months operation) of $40,578.75.
Contract to purchase 126 Union Street, Willimantic, Connecticut for
$30,000 once FNMA has removed the tenants. Deposit paid of $2,500.
Blanket purchase orders from customers with initial balances in excess of
$50,000:
Baldor Electric $ 90,000
Baldor Electric 49,275
Thompson Electronics 133,800
Watts Regulator 62,375
The Company has no purchase orders to vendors in excess of $50,000 each.
The largest purchase order the Company has is for $43,860 with Carpenter
Tech Corporation for stainless steel.
In addition, the Company has a $100,000 working capital line with Fleet
Bank. Since this carries a personal guarantee, it is expected that this
will be cancelled and the funding availability will be wrapped into an
expanded corporate loan facility. The Company has never drawn on this
working capital line other than when the bank drew on it to automatically
pay the $250 application fee. Copy of agreement has been previously
provided to Buyer.
Schedule 2.11
The Company has an "Employee Handbook" dated January 1992 (copy
previously provided to Buyer). This has been amended from time to time
but a revision has not been prepared.
The Company has signed Confidentiality and Non-Compete Agreements from
most salaried employees.
The Company has no written employment contracts with employees. The
Company has some understandings with individual employees, but nothing
which commits the Company to continue their employment.
The Company has a profit sharing plan for senior employees (copy of
announcement letter dated May 9, 1995 previously provided to Buyer).
The Company had a production-based bonus program for factory workers which
the Company cancelled at the end of July. It is expected to be replaced
(as is the profit sharing plan for salaried employees) with a general
profit sharing plan for all employees.
The Company has a Shareholders' Agreement (copy previously provided to
Buyer).
The Company has no union.
The Company has a standard group health plan for employees with Blue
Cross. The Company also provides minor amounts of Group Life Insurance.
Vacation and related policies are covered in the Employee Handbook.
Schedule 2.13
The Company's only litigation since acquiring the Company in March of 1991
has been with an ex-employee, Bob Wheeler. He was sued by the Company
several years ago for removing company documents (customer list,
engineering drawings) and attempting to compete with us using these
materials. Wheeler countersued for business interference. Over a year
ago we concluded that the suit was costing us more than it was worth since
we no longer perceived Wheeler as a competitive threat. Papers were
drafted for a settlement which involved the return of the Company's
documents, but these were never executed and the suit has been dormant
since. We feel the issue is moot and any competitive advantage from the
documents has been largely dissipated by time and our addition of many new
customers in the interim.
Schedule 4.1
During the interim MASI replaced its Sales Manager. In connection with
this, it has committed to a bonus to the new Sales Manager based on sales
results.
MASI plans to terminate its accountant and replace him with a combination
of resources from CompuDyne. This may occur prior to the closing of this
transaction.
Schedule 3.5
Suntec had sales of $47,000 in July 1995 and has a continuing low
level of sales in August 1995.
EXHIBIT 99.2
ASSET PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE AND SALE OF ASSETS. . . . . . . . . . . . . . . . . . . .4
2. ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . . .6
3. CONSIDERATION AND PAYMENT. . . . . . . . . . . . . . . . . . . . .7
3.1 Shares of Common Stock. . . . . . . . . . . . . . . . . . . .7
3.2 Royalty Payments. . . . . . . . . . . . . . . . . . . . . . .7
3.3 Sublease. . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Assumption of Liabilities.. . . . . . . . . . . . . . . . . .8
4. CLOSING, TITLE, RISK OF LOSS, ETC. . . . . . . . . . . . . . . . .8
5. SALE OF BUYER COMMON STOCK.. . . . . . . . . . . . . . . . . . . .8
5.1 Promissory Note.. . . . . . . . . . . . . . . . . . . . . . .8
5.2 Pledge of Buyer Common Stock. . . . . . . . . . . . . . . . .9
6. TRANSACTIONS TO BE EFFECTED AT CLOSING.. . . . . . . . . . . . . 11
6.1 Sale of Acquired Assets.. . . . . . . . . . . . . . . . . . 11
6.2 Deliveries of Seller at Closing.. . . . . . . . . . . . . . 11
6.2.1 Consents and Approvals. . . . . . . . . . . . . . 11
6.2.2 Secretary's Certificate.. . . . . . . . . . . . . 11
6.2.3 Agreements of Transfer, Etc.. . . . . . . . . . . 11
6.2.4 Loan Proceeds.. . . . . . . . . . . . . . . . . . 11
6.2.5 The Buyer Common Stock. . . . . . . . . . . . . . 12
6.2.6 The Canceled Note . . . . . . . . . . . . . . . . 12
6.3 Deliveries of Buyer at Closing. . . . . . . . . . . . . . . 12
6.3.1 Assumption of Liability.. . . . . . . . . . . . . 12
6.3.2 Secretary's or Assistant Secretary's Certificates.12
6.3.3 Opinion of Buyer's Counsel. . . . . . . . . . . . 12
6.3.4 Buyer Common Stock. . . . . . . . . . . . . . . . 12
6.3.5 Promissory Note.. . . . . . . . . . . . . . . . . 12
6.4 Deliveries of Silberdick at Closing.. . . . . . . . . . . . 12
6.4.1 Promissory Note:. . . . . . . . . . . . . . . . . 12
6.4.2 CompuDyne Shares. . . . . . . . . . . . . . . . . 13
6.4.3 The Consulting Agreement. . . . . . . . . . . . . 13
6.4.4 Stock Purchase Termination Agreement. . . . . . . 13
6.5 Mutual Deliveries by Buyer and Seller
at Closing. . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Mutual Deliveries by Seller and Silberdick at the Closing.. 13
7. REPRESENTATIONS AND WARRANTIES OF SELLER.. . . . . . . . . . . . 13
7.1. Organization and Standing of the Seller.. . . . . . . . . . 13
7.2. Authorization.. . . . . . . . . . . . . . . . . . . . . . . 13
7.3. No Breach or Default. . . . . . . . . . . . . . . . . . . . 14
7.4 Finders and Investment Bankers. . . . . . . . . . . . . . . 14
8. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . 14
8.1 Organization and Standing of the Buyer. . . . . . . . . . . 14
8.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Authorization.. . . . . . . . . . . . . . . . . . . . . . . 14
8.4 No Breach or Default. . . . . . . . . . . . . . . . . . . . 15
8.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6 Finders and Investment Bankers. . . . . . . . . . . . . . . 15
8.7 Limitation on Seller's Warranties.. . . . . . . . . . . . . 15
9. EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. TRANSACTIONS SUBSEQUENT TO CLOSING.. . . . . . . . . . . . . . . 16
10.1 Transfer Taxes, Recording Fees and
Other Expenses. . . . . . . . . . . . . . . . . . . . . . . 16
10.2 Survival of Representations, Warranties, Agreements, Covenants
and Obligations.. . . . . . . . . . . . . . . . . . . . . . 16
10.3 Further Assurances. . . . . . . . . . . . . . . . . . . . . 17
10.4 Use of Name.. . . . . . . . . . . . . . . . . . . . . . . . 17
10.5 Continuance of Suntec Business. . . . . . . . . . . . . . . 17
11. TERM LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12. CONSULTING AGREEMENT.. . . . . . . . . . . . . . . . . . . . . . 17
13. BULK TRANSFER LAWS.. . . . . . . . . . . . . . . . . . . . . . . 17
14. TRANSITION ASSISTANCE. . . . . . . . . . . . . . . . . . . . . . 17
15. INDEMNIFICATIONS.. . . . . . . . . . . . . . . . . . . . . . . . 17
15.1 Seller.
15.1.1 Misrepresentations, Breach of Warranty,
Nonfulfillment. . . . . . . . . . . . . . . . . . 18
15.1.2 Litigation and Claims.. . . . . . . . . . . . . . 18
15.2 Buyer.
15.2.1 Certain Liabilities.. . . . . . . . . . . . . . . 18
15.2.2 Misrepresentations, Breach of Warranty,
Nonfulfillment. . . . . . . . . . . . . . . . . . 18
15.2.3 Litigation and Claims.. . . . . . . . . . . . . . 18
15.3 Indemnified Litigation. . . . . . . . . . . . . . 18
16. BUYER'S FINANCIAL INFORMATION AND MEETINGS.. . . . . . . . . . . 19
17. AMENDMENT; WAIVER. . . . . . . . . . . . . . . . . . . . . . . . 19
18. EXPENSES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
19. SECTION AND PARAGRAPH HEADINGS.. . . . . . . . . . . . . . . . . 20
20. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
22. PARTIES IN INTEREST; ASSIGNMENT. . . . . . . . . . . . . . . . . 21
23. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
23.1 General.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
23.2 No Liabilities in Event of Termination. . . . . . . . . . . 21
24. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . 21
25. LAW TO GOVERN. . . . . . . . . . . . . . . . . . . . . . . . . . 22
26. CONDITION PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . 22
EXHIBITS
1. Suntec Balance Sheet
3.3 Gaithersburg Premises Sublease
5.1 Silberdick Note
5.2 Stock Pledge Agreement
6.1 Bill of Sale
6.3.1 Assumption Agreement
6.3.3 Opinion of Buyer's Counsel
11. Buyer Note
12. Consulting Agreement
26. Stock Purchase Termination Agreement
ASSET PURCHASE AND SALE AGREEMENT
ASSET PURCHASE AND SALE AGREEMENT, dated as of August 21, 1995 (the
"Agreement"), by and among QUANTA SYSTEMS CORPORATION, a Colorado corporation
("Seller"), SUNTEC SERVICE CORPORATION, a Maryland corporation ("Buyer") and
NORMAN SILBERDICK, an individual residing in the State of New Hampshire
("Silberdick").
WHEREAS, Seller wishes to sell, and Buyer wishes to purchase, all of the
Seller's tangible and intangible assets relating to the business of marketing
and installation of home improvement and energy conservation products and
services to consumer customers, as such business is carried out, engaged in or
being developed by the Seller's Suntec division (formerly known as the QDi
division) prior to the date hereof, as a going concern (the "Suntec Business");
and
WHEREAS, as partial consideration for the sale of Seller's Assets to Buyer,
Buyer will issue to Seller and Seller shall accept from Buyer shares of Buyer's
common stock; and
WHEREAS, Seller wishes to sell to Silberdick, and Silberdick wishes to buy
from Seller, all of the shares of Buyer's common stock held by Seller;
WHEREAS, following the consummation of the transactions set forth herein,
Silberdick shall be a substantial shareholder of Buyer and shall benefit
directly from such transactions.
NOW, THEREFORE, in consideration of the premises and the mutual and
dependent covenants hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from Seller, and Seller agrees to
sell, transfer and convey and deliver to the Buyer, all of the following assets
(the "Acquired Assets") to the extent such assets are exclusively used in or
relate solely to the Suntec Business:
"Acquired Assets" means all right, title and interest in and to all
of the assets of Seller used solely in or related exclusively to the Suntec
Business and as reflected on the pro forma balance sheet of the Suntec Division
as at June 30, 1995, attached hereto as Exhibit 1 and made a part hereof (the
"Suntec Balance Sheet") including (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property which shall mean: (i) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (ii) all trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith (but excluding the names "Quanta", "Quanta
Systems", "DCS" and "Data Control Systems" and derivatives thereof and logos,
service marks, trade dress and good will associated therewith), (iii) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(v) all computer software (including data and related documentation), (vi) all
other proprietary rights, and (vii) all copies and tangible embodiments thereof
(in whatever form or medium), (d) leases, subleases, and rights thereunder (but
excluding the Gaithersburg Premises Lease, as defined in Section 3.3, hereof),
(e) agreements, contracts, indentures, mortgages, instruments, security
interests, guaranties, other similar arrangements, and rights thereunder, (f)
accounts, notes, and other receivables, (g) claims, deposits, prepayments,
refunds, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment (excluding any such item relating to the payment
of Taxes), (h) franchises, approvals, permits, licenses, orders, registrations,
certificates, variances, and similar rights obtained from governments and
governmental agencies, and (i) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, provided, however, that the Acquired Assets
shall not include (i) Seller's corporate charter, qualifications to conduct
business as a foreign corporation, arrangements with registered agents relating
to foreign qualifications, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of Seller as
a corporation (ii) any of the rights of the Seller under this Agreement (or
under any side agreement between Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement) or (iii) any
assets of Seller, whether similar or dissimilar to the foregoing, not used
exclusively by or related solely to the Suntec Business.
2. ASSUMPTION OF LIABILITIES. Subject to the terms and conditions of
this Agreement, and as partial consideration for the sale and purchase of the
Acquired Assets, the Buyer agrees to assume and become responsible as of the
Closing, as hereinafter defined, for all of the liabilities of Seller incurred
in respect to or related to the Suntec Business including, but not limited to
the following (the "Assumed Liabilities"):
"Assumed Liabilities" means (a) all liabilities (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated and whether due or to
become due, including any liability resulting from, arising out of, relating to,
in the nature of, or caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law, (the "Liabilities") of or related to the
Suntec Business (as conducted by Suntec or QDi), including but not limited to
those set forth in the Suntec Balance Sheet, (b) all Liabilities of the Suntec
Business which have arisen after the date of the Suntec Balance Sheet, (c) all
Liabilities of the Suntec Business for unpaid taxes with respect to periods
prior to the Closing for which the return is due after the Closing up to an
amount computed in accordance with the past custom and practice of Seller and
its Subsidiaries in filing their tax returns, (d) all obligations of the Suntec
Business under the agreements, contracts, leases, licenses, and other
arrangements referred to in the definition of Acquired Assets either (i) to
furnish goods, services, and other non-cash benefits to another party after the
Closing or (ii) to pay for goods, services, and other non-cash benefits that
another party has furnished to it prior to the Closing or will furnish to it
after the Closing, and (e) any and all Liabilities related to or arising out of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, and the Occupational
Safety and Health Act of 1970, each as amended, together with all other laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes; provided, however, that the
Assumed Liabilities shall not include (i) any Liability of Seller for income,
transfer, sales, use, and other taxes arising in connection with the
consummation of the transactions contemplated hereby (including any income taxes
arising in connection with the consummation of the transactions contemplated
hereby (including any income taxes arising because the Seller is transferring
the Acquired Assets), (ii) any Liability of the Seller for costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby, or (iii) any Liability or obligation of Seller under this Agreement (or
under any side agreement between Seller on the one hand and the Buyer on the
other hand entered into on or after the date of this Agreement).
3. CONSIDERATION AND PAYMENT. The consideration for the Acquired Assets
is as follows:
3.1 Shares of Common Stock. At Closing, Buyer shall deliver to
Seller a certificate or certificates representing 850,000 shares of Buyer's
common stock, $.001 par value (the "Buyer Common Stock"), which shares shall be
duly authorized, validly issued, fully paid and nonassessable. Buyer and Seller
hereby agree that, for the purpose of this Agreement, the value of the shares
of Buyer Common Stock delivered to Seller hereunder shall be equal to the Asset
Net Value of the Acquired Assets as of the Closing Date as determined in
accordance with Section 5.1 hereof.
3.2 Royalty Payments. As further consideration for the sale and
purchase of the Acquired Assets as set forth herein, Buyer shall pay to Seller
or Seller's assignee a royalty equal to Two Percent (2%) of Buyer's net
installed sales and other revenues (the "Royalties") for a period commencing on
the Closing Date and ending on the later of (i) thirty (30) years after the
Closing Date and (ii) the date on which all earned Royalties have been paid in
full (the "Royalty Period"). The Royalties shall be paid monthly on the
fifteenth day of each month based on Buyer's net installed sales and other
revenues during the immediately preceding calendar month. Buyer shall prepare
and deliver to Seller, no later than the fifteenth day of each month during the
Royalty Period, a statement in reasonable detail with respect to the Buyer's net
installed sales and other revenues earned during the preceding calendar month
prepared in accordance with generally accepted accounting principles
consistently applied and certifying the Royalties due thereon based on the net
installed sales and other revenues in accordance with this Section 3.2. Such
statement shall be signed by an officer of Buyer and accompanied by a check in
the amount of the Royalties then payable as set forth in the statement. Seller,
or its designated representative, may audit such statements and Buyer shall
fully cooperate with Seller or its representatives in the performance of such
audit including, without limitation, providing Seller or its representative with
full opportunity to inspect the relevant books and records of Buyer and to
interview Buyer's officers, employees, consultants and accountants. At any time
that Royalties becoming due under this Section 3.3 are not paid when due and
remain past due, Buyer shall not pay any dividends on any class of its capital
stock or make any other distribution or payment on account of or in redemption,
retirement and purchase of such capital stock or make payment of any portion of
principal or interest on any debt owing to any officer, employee, shareholder
or affiliate of Buyer. Furthermore, Buyer covenants and agrees that the
Royalties shall be an obligation of Buyer senior to all other debt obligations
of Buyer and Buyer shall execute such documents and take such steps as Seller
may reasonably require to evidence such senior status of the Royalties. Any
Royalties not paid when due shall bear interest from the due date thereof until
paid at the variable annual rate of 2% over the Prime Rate (as defined in the
Buyer Note).
3.3 Sublease. Buyer and Seller shall enter into a sublease agreement
in substantially the form as Exhibit 3.3, attached hereto and made a part
hereof, (the "Gaithersburg Premises Sublease") pursuant to which Seller shall
sublease to Buyer and Buyer shall sublease from Seller that portion of the
premises leased by Seller located at 205 Perry Parkway, Suite 8, Gaithersburg,
Maryland (the "Premises") and currently occupied by the Seller's Suntec
Division.
3.4 Assumption of Liabilities. Buyer shall, pursuant to this
Agreement, assume the Assumed Liabilities.
4. CLOSING, TITLE, RISK OF LOSS, ETC. Completion of the transactions
contemplated by this Agreement shall be effected at a closing (the "Closing")
to be held at the offices of Tyler Cooper & Alcorn, CityPlace I, 35th Floor,
Hartford, Connecticut on August 21, 1995, commencing at 10:00 A.M., or at such
other place, date and time as shall be mutually agreed upon by the parties. The
date of the Closing is referred to herein as the "Closing Date". Title and risk
of loss to the Acquired Assets shall pass to Buyer upon Closing.
5. SALE OF BUYER COMMON STOCK. At the Closing, Seller shall sell to
Silberdick and Silberdick shall purchase from Seller the Buyer Common Stock.
The consideration for the Buyer Common Stock shall be as follows:
5.1 Promissory Note. At the Closing, Silberdick shall deliver to
Seller Silberdick's promissory note in the principal amount of Seventy-Nine
Thousand Dollars ($79,000) (which principal amount is subject to adjustment as
set forth below) in substantially the form set forth in Exhibit 5.1 attached
hereto and made a part hereof (the "Silberdick Note"; such term shall also apply
to any extensions, renewals, modifications or replacements therefor), which
shall be duly executed by Silberdick with all appropriate blanks completed. The
principal amount of the Silberdick Note is intended to equal the sum of (i) the
current book value of the Acquired Assets less (ii) the amount of the Assumed
Liabilities (the "Asset Net Value"), all as reflected on the books of Seller
on June 30, 1995 adjusted for assets or liabilities created in the ordinary
course of business between June 30, 1995 and the Closing Date. Such newly
created assets and liabilities will be recorded in accordance with
generally accepted accounting principles consistently applied. The initial
principal amount set forth above represents the Asset Net Value as of the date
of the Suntec Balance Sheet. Within thirty (30) days after the Closing Date,
Coopers & Lybrand, Seller's independent accountants, shall determine the Asset
Net Value as of the Closing Date based on the Asset Net Value as reflected on
the Suntec Balance Sheet adjusted only for changes in the Asset Net Value as a
result of business conducted by the Suntec Division in the ordinary course
between the date of the Suntec Balance Sheet and the Closing Date. Such
determination by Coopers & Lybrand shall constitute a compilation, not an audit
or review except as to determining the proper accounting treatment of the newly
created assets and liabilities. The principal amount of the Silberdick Note
shall be adjusted to equal the Asset Net Value so determined, but in no event
shall the principal amount of the Silberdick Note exceed One Hundred Thousand
Dollars ($100,000). In the event the Asset Net Value as determined by the
independent accountant exceeds $100,000, Seller shall select, and Buyer shall
reconvey to Seller, certain assets the value of which when retained by Seller
shall cause the Asset Net Value to be as close to, but not above, $100,000 as
is practicable. The fee payable to the independent accountant with respect to
the determination of the Asset Net Value shall be borne equally by Buyer and
Seller.
5.2 Pledge of Stock. Silberdick shall pledge his shares of all of
the capital stock of any class of Suntec owned by him (including, but not
limited to the Buyer Common Stock) (the "Silberdick Shares") to Seller to secure
payment of the Silberdick Note. Silberdick shall also cause (a) each person
(including individuals, corporations, partnerships or other business
organizations) that controls, is or are controlled by or is or are under common
control with Silberdick, or (b) each (i) corporation or organization (other than
Suntec) of which Silberdick is an officer or partner or is, directly or
indirectly the beneficial owner of ten percent or more of any class or equity
securities, (ii) trust or other estate in which Silberdick has any substantial
interest or as to which Silberdick serves as trustee or in a similar capacity,
and (iii) any relative or spouse of Silberdick, or any relative of such spouse,
who has the same home as Silberdick or who is a director or officer of Suntec
or any of its parents or subsidiaries (the parties described in (a) and (b)
above being referred to hereinafter collectively as the "Silberdick Affiliates"
and singularly as a "Silberdick Affiliate") to pledge any class of equity
securities of Suntec beneficially owned by any Silberdick Affiliate (the
"Silberdick Affiliate Shares") as further security for the repayment of the
Silberdick Note. The foregoing shall apply to any Silberdick Affiliate whether
such Silberdick Affiliate is or becomes a Silberdick Affiliate on or after the
date of this Agreement. At the Closing, Silberdick shall deliver to the Seller
a certificate or certificates representing 100% of the Silberdick Shares and
100% of the Silberdick Affiliate Shares together with stock powers in blank and
a Stock Pledge Agreement, in substantially the form set forth on Exhibit 5.2,
attached hereto and made a part hereof, executed by Silberdick. In the event
of a Silberdick Event of Default, as defined in the Silberdick Note, Buyer's
sole and only recourse against Silberdick or the Silberdick Affiliates for the
payment of Silberdick's obligations under the Silberdick Note shall be derived
from Seller's rights with respect to the Silberdick Shares or the Silberdick
Affiliate Shares under the Stock Pledge Agreement except that, in the event that
Silberdick or any Silberdick Affiliate requires the Seller to dispose of the
Silberdick Shares or the Silberdick Affiliate Shares at a public or private sale
pursuant to the provisions of Section 42a-9-505(2) of the Connecticut General
Statutes, Silberdick shall remain personally liable for the amount of any
deficiency between the amount recovered from such sale and the outstanding
indebtedness under the Silberdick Note. The foregoing limitation shall not
affect Seller's rights, which are unconditional and absolute, to declare the
indebtedness evidenced by the Silberdick Note to be immediately due and payable
upon the occurrence of any Silberdick Event of Default. Silberdick and Buyer
hereby covenant and agree that, until and unless the Silberdick Note and all
obligations thereunder have been paid and discharged in full, (i) the issued and
outstanding shares of the capital stock of Buyer of any class (other than
Silberdick Shares or Silberdick Affiliate Shares pledged under the Stock Pledge
Agreement) shall not exceed sixty-six and two-thirds percent (66-2/3%) of the
total aggregate issued and outstanding shares of the capital stock of Buyer of
any class (including the Silberdick Shares or Silberdick Affiliate Shares
pledged under the Stock Pledge Agreement) and (ii) no shares of the capital
stock of Buyer of any class (other than the Silberdick Shares or Silberdick
Affiliate Shares pledged under the Stock Pledge Agreement) shall be issued other
than in consideration of a capital infusion into the Buyer with all proceeds
thereof accruing to the Buyer or pursuant to a stock incentive plan to Buyer's
employees.
6. TRANSACTIONS TO BE EFFECTED AT CLOSING. At Closing, subject to the
terms and conditions hereof:
6.1 Sale of Acquired Assets. Seller shall sell the Acquired Assets
to Buyer and shall execute and/or deliver to Buyer a bill of sale for the
Acquired Assets in the form set forth in Exhibit 6.1, attached hereto and made
a part hereof (the "Bill of Sale"), and other necessary instruments of
assignments, third party consents, releases and acceptances, in form and
substance satisfactory to Buyer's counsel, as shall be good and sufficient to
transfer to and vest in Buyer good and marketable title in and to the Acquired
Assets. If and to the extent that the full and effective assignment of any of
the Acquired Assets to be transferred to Buyer pursuant hereto shall require the
consent of any third party, Seller shall use its best efforts to obtain such
consent and deliver to Buyer written confirmation thereof in a form satisfactory
to Buyer's counsel at Closing, or if such consents are not available at Closing,
then promptly following Closing.
6.2 Deliveries of Seller at Closing. At Closing Seller shall deliver
the following:
6.2.1 Consents and Approvals. To Buyer, all consents,
approvals, notices, waivers, authorizations and evidence of action, as may be
required to permit the performance of the obligations of the Seller under this
Agreement and the consummation of the transactions contemplated hereby,
including without limitation, Consents of third parties as provided in Section
6.1.
6.2.2 Secretary's Certificate. To Buyer and Silberdick, a
certificate of the Secretary or Assistant Secretary of the Seller certifying the
incumbency of the officers executing this Agreement and any agreements
contemplated hereby and containing specimens of the signatures of the officers
whose incumbency is certified. Attached to each such certificate as exhibits
shall be a true and complete copy of resolutions of the board of directors of
Seller authorizing the execution and delivery of this Agreement and the
consummation of the transactions provided for herein and contemplated hereby,
all certified by the Secretary or Assistant Secretary of Seller.
6.2.3 Agreements of Transfer, Etc. To the Buyer, the Bill
of Sale and instruments of transfer contemplated by Section 6.1 duly executed
on behalf of Seller.
6.2.4 Loan Proceeds. To the Buyer, a certified check or
money order in the amount of $50,000 representing the proceeds of the Loan from
Seller to Buyer pursuant to Section 11 hereof.
6.2.5 The Buyer Common Stock. To Silberdick, a certificate
or certificates representing the Buyer Common Stock, together with executed
stock or other transfer powers sufficient to transfer the Buyer Common Stock to
Silberdick on Buyer's stock transfer books.
6.3 Deliveries of Buyer at Closing. At Closing, Buyer shall deliver
the following:
6.3.1 Assumption of Liabilities. To Seller, the Assignment
and Assumption Agreement in substantially the form in Exhibit 6.3.1 attached
hereto and made a part hereof (the "Assumption Agreement") executed by Buyer
evidencing the assumption of the Assumed Liabilities by Buyer.
6.3.2 Secretary's or Assistant Secretary's Certificates.To
Seller, a certificate of the Secretary or an Assistant Secretary of Buyer
certifying the incumbency of those officers or officials of the Buyer executing
this Agreement or any agreements contemplated hereby and containing specimens
of the signatures of each of the officers whose incumbency is certified.
Attached to each such certificate as exhibits shall be true and complete copies
of resolutions of the board of directors and of the shareholders of Buyer
authorizing the execution and delivery of this Agreement and the consummation
of the transactions provided for herein and contemplated hereby, all certified
by the Secretary or Assistant Secretary of Buyer.
6.3.3 Opinion of Buyer's Counsel. To Seller and Silberdick,
an opinion of Buyer's counsel, E. Nicholson Gault, Jr., Esq., in form and
substance satisfactory to Seller, dated as of the Closing Date and addressed to
Seller and Silberdick, and otherwise to the effect set forth in Exhibit 6.3.3,
attached hereto and made a part hereof.
6.3.4 Buyer Common Stock. To Seller, the certificate or
certificates for Buyer Common Stock pursuant to Section 3.1, hereof.
6.3.5 Promissory Note. To Seller, the Buyer Note executed
by Buyer pursuant to Section 11.1.2, hereof.
6.4 Deliveries of Silberdick at Closing. At Closing, Silberdick
shall deliver the following to Seller:
6.4.1 Promissory Note: The Silberdick Note executed by
Silberdick pursuant to Section 5.1.
6.4.2 Silberdick and Silberdick Affiliate Shares. A
certificate or certificates representing the Silberdick Shares and the
Silberdick Affiliate Shares, together with stock powers in blank and the Stock
Pledge Agreement, pursuant to Section 5.2, hereof.
6.4.3 The Consulting Agreement. The Consulting Agreement
executed by Silberdick and CompuDyne pursuant to Section 12, hereof.
6.4.4 Stock Purchase Termination Agreement. The Stock
Purchase Termination Agreement executed by Silberdick and CompuDyne pursuant to
Article 26, hereof.
6.5 Mutual Deliveries by Buyer and Seller at Closing. At Closing, each
of Seller and Buyer shall execute and delivery to the other the Gaithersburg
Premises Sublease pursuant to Section 3.3, hereof.
7. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer and Silberdick as follows:
7.1. Organization and Standing of the Seller. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Colorado, with corporate power and authority to own, operate and lease
the Acquired Assets and carry on the Suntec Business as now conducted, and is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to qualify could have a material
adverse effect on its business and operations taken as a whole.
7.2. Authorization. Seller has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Seller, and no other
corporate proceedings on the part of Seller are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Seller and constitutes a
valid and binding agreement of Seller. No filing with, and no permit,
authorization, consent or approval of any public body or authority, the absence
of which would, either individually or in the aggregate, have a material adverse
effect on the business or financial condition of Seller, is necessary for the
consummation by Seller of the transactions contemplated by this Agreement.
7.3. No Breach or Default. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or By-laws of
Seller, (ii) violate any statute, rule, regulation, order or decree of any
public body or authority of the United States or any state or municipality
thereof by which Seller or any of its properties is bound, which violation or
violations either individually or in the aggregate would have a material adverse
affect on the business or financial condition of Seller, or (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under any license, franchise, permit, indenture,
agreement, shareholders' agreement, voting trust agreement or other instrument
to which Seller is a party, or by which it or its properties is bound which
violation, breach or default either individually or in the aggregate would have
a material adverse effect on the business or financial condition of Seller.
7.4 Finders and Investment Bankers. Neither Seller nor any of its
officers, directors or agents has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated herein.
8. REPRESENTATIONS AND WARRANTIES OF BUYER AND SILBERDICK. Buyer and
Silberdick represents and warrants to Seller as follows:
8.1 Organization and Standing of the Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland, with corporate power and authority to own, operate and lease
its properties and carry on its business as now conducted, and is duly qualified
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to qualify could have a material adverse
effect on its business and operations taken as a whole.
8.2 Capitalization. The authorized capital stock of Buyer consists
of Five Million (5,000,000) shares of common stock, par value $.001 per share
(the "Buyer Common Stock"), of which 990,000 are validly issued and outstanding,
fully paid and nonassessable. No shares are held in the Buyer's treasury. No
shares of preferred stock are authorized.
8.3 Authorization. Buyer has the corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Buyer and by the
shareholders of Buyer, and no other corporate proceedings on the part of Buyer
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes a valid and binding agreement of Buyer. No
filing with, and no permit, authorization, consent or approval of any public
body or authority, the absence of which would, either individually or in the
aggregate, have a material adverse effect on the business or financial condition
of Buyer, is necessary for the consummation by Buyer of the transactions
contemplated by this Agreement.
8.4 No Breach or Default. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or By-laws of
Buyer, (ii) violate any statute, rule, regulation, order or decree of any public
body or authority of the United States or any state or municipality thereof by
which Buyer or any of its properties is bound, which violation or violations
either individually or in the aggregate would have a material adverse affect on
the business or financial condition of Buyer, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default under, any license, franchise, permit, indenture, agreement
shareholders' agreement, voting trust agreement or other instrument to which
Buyer is a party, or by which it or its properties is bound which violation,
breach or default either individually or in the aggregate would have a material
adverse effect on the business or financial condition of Buyer.
8.5 Litigation. Except as set forth in Schedule 3.13, there is no
suit, action or legal, administrative, arbitration or other proceeding pending,
or, to the best knowledge of Buyer, threatened, filed, initiated by or against
the Buyer that may result in any material adverse change in the business or
financial condition of Buyer.
8.6 Finders and Investment Bankers. Neither Buyer, nor any of its
officers, directors or agents (including Silberdick) has employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated herein.
8.7 Limitation on Seller's Warranties. As a former corporate officer
of Seller whose duties included primary responsibility for the Seller's Suntec
Business, Silberdick is fully knowledgeable with respect to the Suntec Business,
the Acquired Assets and the Assumed Liabilities. Seller has permitted
Silberdick and Buyer (acting through its agents and representatives) full
opportunity to perform such other inquiry, investigation and review of the
books, records and personnel of Seller with respect to the Suntec Business, the
Acquired Assets and the Assumed Liabilities as Silberdick and the Buyer have
determined to be necessary in their sole judgment and Silberdick and Buyer have
conducted such inquiry, investigation and review. Seller, its officers,
directors, shareholders, employees, agents or representatives have made and are
making no representations or warranties with respect to the Suntec Business, the
Acquired Assets or the Assumed Liabilities or any transaction contemplated by
this Agreement, and neither Silberdick nor Buyer is relying or has relied on any
such representation or warranty, other than those expressly set forth in Section
7, above. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SILBERDICK AND
BUYER ACKNOWLEDGE AND AGREE THAT SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED,
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY OF
THE ACQUIRED ASSETS.
9. EMPLOYEES.
9.1 No later than the Closing Date, Buyer shall extend offers of
employment to all of Seller's active employees who are employed exclusively in
the Suntec Business on a full or part-time basis (the "Suntec Employees"). The
terms of employment shall be the same terms as those under which the Suntec
Employees are employed by Seller. A Suntec Employee shall become an employee
of Buyer on the day such individual reports to work for Buyer, but no later than
five (5) days after the Closing Date.
9.2 In the event any Suntec Employee refuses Buyer's offer of
employment and Seller terminates such individual's employment with Seller at any
time within thirty (30) days after the Closing Date, Buyer shall reimburse
Seller, upon Seller's written demand therefor, for all compensation and other
benefits and payments to which such individual shall be entitled by virtue of
such termination of employment by Seller.
10. TRANSACTIONS SUBSEQUENT TO CLOSING.
10.1 Transfer Taxes, Recording Fees and Other Expenses. Seller and
Buyer agree to share equally the cost of transfer taxes (not including taxes on
income or gain) or filing fees incident to the transfer of Assets hereunder.
10.2 Survival of Representations, Warranties, Agreements, Covenants
and Obligations. All representations, warranties, agreements, covenants and
obligations herein or in any exhibit, schedule, certificate or financial
statement delivered by any party to another party incident to the transactions
contemplated hereby shall be deemed to have been relied upon the other party,
shall survive the execution and delivery of this Agreement, any investigation
at any time made by any party hereto, and the sale and purchase of the Business
and the Acquired Assets.
10.3 Further Assurances. From time to time after the Closing and
without further consideration, the parties will execute and deliver, or arrange
for the execution and delivery of, such other instruments of conveyance and
transfer and take such other actions as may be reasonably requested to complete
more effectively any of the transactions provided for in this Agreement or any
document annexed hereto.
10.4 Use of Name. After the Closing, Seller shall not use the name
"Suntec" or any variant thereof alone or in any combination containing "Suntec"
as part of any trade or business name. Seller shall execute and deliver to
Buyer any and all documents or instruments reasonably requested by Buyer on or
after the Closing to allow and enable Buyer to use the name "Suntec" alone or
in any combination as part of any trade or business name.
10.5 Continuance of Suntec Business. Buyer hereby agrees that, during
the Royalty Period (as defined in Section 3.2) and except as otherwise agreed
to in writing by Seller, Buyer: (i) shall not sell, transfer or cede all or
substantially all of Buyer's assets including the Acquired Assets except in the
ordinary course of Buyer's business; and (ii) shall not divert or dispose of any
of the Suntec Business outside Buyer.
11. TERM LOAN. Seller hereby agrees to lend to Buyer at the Closing the
amount of $50,000 in return for Buyer's promissory note in substantially the
form set forth in Exhibit 11 attached hereto and made a part hereof (the "Buyer
Note"). The entire principal amount of the loan will be advanced to the Buyer
at the Closing.
12. CONSULTING AGREEMENT. At the Closing Silberdick shall enter into a
consulting agreement with CompuDyne in substantially the form as set forth in
Exhibit 12, attached hereto and made a part hereof (the "Consulting Agreement").
13. BULK TRANSFER LAWS. The Buyer acknowledges that Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction in
connection with the transactions contemplated by this Agreement.
14. TRANSITION ASSISTANCE. Seller shall provide Buyer with administrative
support and other transitional services, on a best efforts basis, as reasonably
requested by Buyer and agreed to by Seller, upon such terms and conditions and
for a price, as mutually agreed to by Seller and Buyer.
15. INDEMNIFICATIONS.
15.1 Seller. Seller hereby agrees to indemnify, defend and hold
harmless Buyer against and in respect of the following:
15.1.1 Misrepresentations, Breach of Warranty,
Nonfulfillment. Any and all Liabilities resulting from any
misrepresentation, breach of warranty, breach of covenant or nonfulfillment
of any covenant or agreement on the part of Seller under this Agreement or
any Schedule hereto, including any misrepresentation in, or occasioned by,
any certificate or document furnished by Seller pursuant to this Agreement.
15.1.2 Litigation and Claims. Any and all actions, suits,
proceedings, demands, claims, assessments, judgements, costs and reasonable
legal and other expenses incidental to any of the foregoing.
15.2 Buyer. Buyer hereby agrees to indemnify, defend and hold
harmless Seller against and in respect of the following:
15.2.1 Certain Liabilities. Any and all Liabilities of Buyer
arising out of or in connection with (i) the Assumed Liabilities or (ii) the
ownership and/or operation by Buyer of the Acquired Assets on and after the
Closing Date.
15.2.2 Misrepresentations, Breach of Warranty,
Nonfulfillment. Any and all Liabilities resulting from any
misrepresentation, breach of warranty, breach of covenant or nonfulfillment
or any covenant or agreement on the part of Buyer under this Agreement,
including any misrepresentation in, or occasioned by, any certificate or
document furnished by Buyer pursuant to this Agreement.
15.2.3 Litigation and Claims. Any and all actions, suits,
proceedings, demands, claims, assessments, judgements, costs and reasonable
legal and other expenses incident to any of the foregoing.
15.3 Indemnified Litigation. Promptly after receipt by a party to
be indemnified under this Section 15 ("Indemnified Party") of notice of any
claim or the commencement of any action, the Indemnified Party shall, if a claim
in respect thereof is to be made hereunder, notify the party which is to
indemnify hereunder ("Indemnifying Party") in writing of the claim or the
commencement of that action. If any such claim or action shall be brought
against an Indemnified Party, and it shall notify the Indemnifying Party
thereof, the Indemnifying Party shall be obligated to assume the defense thereof
with counsel reasonably satisfactory to the Indemnified Party and be entitled
to settle and compromise any such claim or action; if the Indemnified Party has
a legitimate business, reputation or other interest with respect to the matter
in controversy, the defense of the matter shall be conducted with reasonable
regard to such legitimate interest of the Indemnified Party.
Buyer and Seller shall render to each other such assistance as may reasonably
be requested in order to insure the proper and adequate defense of any such
claim or proceeding, at the cost and expense of the Indemnifying Party.
16. BUYER'S FINANCIAL INFORMATION AND MEETINGS. Buyer covenants and
agrees that, at all times that the Silberdick Note or the Buyer Note are
outstanding, and during the Royalty Period, Buyer shall promptly provide Seller
with any and all financial statements and reports prepared by or on behalf of
Buyer for Buyer's management or shareholders. Buyer shall also permit the
Seller's representatives and agents full and complete access to any or all of
the Buyer's financial records, to make extracts from and/or audit such records
and to examine and discuss the Buyer's finances and affairs with the Buyer's
officers and employees and to direct the Buyer's outside accountants to disclose
all such matters to the Seller's representatives and to discuss with them any
aspects of such matters. During such period, Seller shall also have the right
to have its representative attend as an observer all meetings of Buyer's board
of directors or any committee thereof and all meetings of Buyer's shareholders.
Buyer shall provide Seller with not less than ten (10) days written notice of
such meetings. Buyer shall also provide Seller with true and complete copies
of any actions adopted by Buyer's board of directors or shareholders by written
consent within five days after adoption thereof.
17. AMENDMENT; WAIVER. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed by the parties hereto.
No waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving. Except
as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein or in any documents delivered or to be delivered
pursuant to this Agreement or in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
18. EXPENSES. Whether or not the transactions contemplated by this
Agreement are completed, and except as specifically provided otherwise herein,
each party to this Agreement shall bear and pay its own respective costs and
expenses in connection with the negotiations, preparation, execution, delivery
and performance of this Agreement and the transactions contemplated hereby,
including, without limitation, any and all legal and accounting fees and
expenses.
19. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any usage of the
term "person" and/or reference to the male gender in this Agreement is made for
convenience only and said term and such reference shall be deemed to include
natural persons of either sex and corporations, unless a contrary meaning is
indicated.
20. NOTICES. Notices and communications under this Agreement and the
other Loan Documents shall be in writing and shall be given by either (i) hand-
delivery, (ii) first class mail (postage prepaid), (iii) commercially recognized
overnight delivery service (charges prepaid), or (iv) facsimile, to the
respective parties to this Agreement as follows:
(a) If to Seller:
Quanta Systems Corporation
213 Perry Parkway
Gaithersburg, MD 20877-2145
Telefax: (301) 590-3325
Attention: Elaine Chen
with a copy to:
Kathleen A. Maher
Tyler Cooper & Alcorn
205 Church Street
P. O. Box 1936
New Haven, CT 06509-1910
(b) If to Buyer:
Suntec Service Corporation
205 Perry Parkway, Suite 8
Gaithersburg, MD 20877-2145
Attention: Norman Silberdick
with a copy to:
Resident Agent
E. Nicholson Gault, Jr., Esq.
York Plaza, Suite 304
1205 York Road
Lutherville, MD 21093
(c) If to Silberdick:
Norman Silberdick
70 Tide Mill Road
Hampton, NH 03842
Notice given by facsimile shall be deemed to have been given and received when
the sender receives electronic confirmation of receipt. Notice by overnight
courier shall be deemed to have been given and received on the date delivered.
Notice by mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited in the United States mail. Notice
by hand delivery shall be deemed to have been given and received upon delivery.
A party may change its address and/or facsimile number by giving written notice
to the other party as specified herein.
21. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be
necessary for every party hereto to sign each counterpart but only that each
party shall sign at least one counterpart.
<PAGE>
22. PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, provided that any assignment of this Agreement or of the
rights hereunder by any party without the written consent of both of the other
parties (which consent shall not be unreasonably withheld) shall be void.
23. TERMINATION.
23.1 General. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time by mutual written consent of
Silberdick, Buyer and Seller.
23.2 No Liabilities in Event of Termination. In the event of any
termination of this Agreement as provided in Section 23.1 above, this Agreement
shall forthwith become wholly void and of no further force or effect and there
shall be no liability on the part of Silberdick, Buyer or Seller or their
respective officers, directors, employees or agents in respect to the subject
matter hereof.
24. SEVERABILITY. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
25. LAW TO GOVERN. This Agreement shall be governed by, and construed in
accordance with, the laws (except as to conflicts of law) of the State of
Connecticut.
26. CONDITION PRECEDENT. It shall be a condition precedent to Seller's
obligation under this Agreement that Silberdick shall have entered into a stock
purchase termination agreement with CompuDyne in substantially the form set
forth in Exhibit 26, attached hereto and made a part hereof (the "Stock Purchase
Termination Agreement").
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first above written.
Attest: QUANTA SYSTEMS CORPORATION ("Seller")
By: /s/ Diane W. Burns
Title: Secretary
Attest: SUNTEC SERVICE CORPORATION ("Buyer")
By: /s/ Norman Silberdick
Title:
/s/ Norman Silberdick
Norman Silberdick ("Silberdick")
EXHIBIT 99.3
CORCAP, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Option Granted To
Martin Roenigk
Grantee
OPTION ONE:
300,000 $.15
Number of Option Shares Purchase Price per Share
GRANT DATE: August 21, 1995
EXPIRATION DATE: August 21, 1996
OPTION TWO:
150,000 $.15
Number of Option Shares Purchase Price per Share
Grant Date: August 21, 1995
Expiration Date: August 21, 2005
I accept the Options, subject to their
terms set forth above and in the
attachment.
/s/ Martin Roenigk
Signature
August 21, 1995
Date
NON-QUALIFIED STOCK OPTION TERMS
Corcap, Inc. ("Corcap") hereby grants to the Grantee the following Option
One and Option Two (the "Options") to purchase on or before the respective
Expiration Dates at the Purchase Price per Share for the Option Shares, which
shall be fully paid and non-assessable shares of the Common Stock of Corcap, par
value $.01 per share (the "Common Stock").
The Options are granted subject to the following terms and conditions:
1. Option One shall be immediately exercisable and shall expire on August
21, 1996 (the "Option One Expiration Date").
2. Option Two shall be exercisable upon the exercise in full of Option
One and, assuming the exercise of Option One, shall terminate on August 21,
2005. In the event the Grantee does not exercise Option One on or before the
Option One Expiration Date, Grantee's rights to both Option One and Option Two
shall expire.
3. The Options may be exercised according to these terms, in whole or in
part, by written notification delivered in person or by mail to Corcap's
Corporate Secretary at Corcap's executive offices in Hartford, Connecticut or
at such other location of its executive offices. Such notification shall be
effective upon its receipt by the Corporate Secretary of Corcap on or before the
respective Expiration Date of each of Option One and Option Two, and shall be
in substantially the form attached as Exhibit A and Exhibit B, respectively,
specifying the number of shares with respect to which the appropriate Option is
then being exercised and accompanied by payment for such shares. Neither Option
may be exercised with respect to a fractional share or with respect to fewer
than 100 shares. In the event the Expiration Date falls on a day which is not
a regular business day at Corcap's executive offices, then such written
notification must be received at such office on or before the last regular
business day prior to the Expiration Date. Payment is to be made by check
payable to the order of Corcap. No shares shall be issued on exercise of either
Option until full payment for such shares has been made and all checks delivered
in payment therefor have been collected. The Grantee shall not have any rights
of a shareholder upon exercise of either Option, including but not limited to,
the right to vote or to receive dividends, until stock certificates have been
issued to the Grantee.
2. Corcap shall not be required to issue any certificate or certificates
for shares purchased upon the exercise of any part of the Options prior to
(i) the admission of such shares to listing on any stock exchange on which the
stock may then be listed, (ii) the completion of any registration or other
qualification of such shares under any state or federal law or rulings or
regulations of any governmental regulatory body if required prior to such
exercise unless an exemption from registration is available, as determined by
Corcap in its sole discretion, (iii) the obtaining of any consent or approval
or other clearance from any governmental agency which Corcap shall, in its sole
discretion, determine to be necessary or advisable, and (v) the payment to
Corcap, upon its demand, of any amount requested by Corcap for withholding,
federal, state or local income or earnings taxes or any other applicable tax or
assessment (plus interest or penalties thereon, if any, caused by a delay in
making such payment) incurred by reason of the exercise of the Options or the
transfer of such shares. The Options shall be exercised and shares issued only
upon compliance with the Securities Act of 1933, as amended (the "Act"), and any
other applicable securities laws, and the Grantee shall comply with any
requirements imposed by the Securities and Exchange Commission or any state
securities commission under such laws.
If the Grantee qualifies as an "affiliate" (as that term is defined in
Rule 144 ("Rule 144" promulgated under the Act), upon demand by Corcap, the
Grantee (or any person acting on his behalf) shall deliver to the Corporate
Secretary of Corcap at the time of any exercise of the Options a written
representation that upon exercising the Options he will acquire shares for his
own account, that he is not taking the shares with a view to distribution and
that he or she will dispose of the shares only in compliance with Rule 144.
3. The Options are not transferrable by the Grantee otherwise than by
will or by the laws of descent and distribution, and is exercisable, during the
life of the Grantee, only by him or by his guardian or legal representative.
More particularly (but without limiting the generality of the foregoing), the
Options may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process.
4. Notwithstanding any other provisions:
(a) If the Grantee should die during the term of the Options, the Options
may be exercised by the person designated in the Grantee's last will and
testament or, in the absence of such designation, by the Grantee's estate, to
the full extent that the Options could have been exercised by the Grantee
immediately prior to the Grantee's death, but not later than the second
anniversary of the Grantee's death until the expiration of its original term.
In the event the Options are exercised by the executors, administrators,
legatees or distributees of the estate of the Optionee, Corcap shall be under
no obligation to issue shares unless Corcap is satisfied that the person or
persons exercising the Options are the duly appointed legal representatives of
the Optionee's estate or the proper legatees or distributees thereof.
(b) In the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other changes in corporate
structure or capitalization affecting the Common Stock, the number of shares
remaining to be exercised under the Options and the Purchase Price shall be
appropriately adjusted. If, as a result of any adjustment under this paragraph,
the Grantee becomes entitled to a fractional share, he or she shall have the
right to purchase only the adjusted number of full shares and no payment or
other adjustment will be made with respect to the fractional share so
disregarded.
5. The waiver by Corcap of any provision of this Agreement shall not
operate as or be construed to be a subsequent waiver of the same provision or
a waiver of any other provision of the Agreement.
6. The Option shall be irrevocable during the Option period and its
validity and construction shall be governed by the laws of the State of
Connecticut.
CORCAP, INC.
By /s/ Diane Burns
Diane Burns
Its Corporate Secretary
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE NOTICE
________________, ____
Corcap, Inc.
90 State House Square
Hartford, Connecticut 06053
Attention:
Ladies and Gentlemen:
Pursuant to the provisions of the Non-Qualified Stock Option Agreement,
dated August __, 1995 (the "Agreement"), whereby you have granted me two stock
options, including Option One to purchase a total of 300,000 shares of Common
Stock of Corcap, Inc. (the "Company"), I hereby notify you that I elect to
exercise Option One to purchase ____________ of the shares covered by Option One
at the price specified therein.
I understand that the Agreement will be deemed to be amended automatically
to reduce the number of shares remaining to be exercised under the Agreement by
the number of shares exercised by this notice.
In full payment of the price for the shares being purchased, I am
delivering to you herewith a check payable to the order of the Company in the
amount of $__________.
Please mail the stock certificates to me at:
Name _____________________________
Address __________________________
__________________________
Calculation of funds due:
Option price $________ x
Number of shares exercised
= Cost of Exercise ________ = $________
plus
Federal income tax (28% x the difference between
the option price and the Fair Market Value of the
shares on the date of exercise x number of shares
exercised)* = $________
Total Amount Due = $________
To be paid by:
[ ] Cash or check = $________
TOTAL = $________
________________________
Signature of Grantee
____________________
* In the states that have an income tax, an additional payment may be
required over and above the 28% federal income tax payment when exercising a
non-qualified stock option. Moreover, an additional payment may be required to
cover FICA and other such taxes.
EXHIBIT B
NON-QUALIFIED STOCK OPTION EXERCISE NOTICE
________________, ____
Corcap, Inc.
90 State House Square
Hartford, Connecticut 06053
Attention:
Ladies and Gentlemen:
Pursuant to the provisions of the Non-Qualified Stock Option Agreement,
dated August __, 1995 (the "Agreement"), whereby you have granted me two stock
options, including Option Two to purchase a total of 150,000 shares of Common
Stock of Corcap, Inc. (the "Company"), I hereby notify you that I elect to
exercise Option Two to purchase ____________ of the shares covered by Option Two
at the price specified therein.
I understand that the Agreement will be deemed to be amended automatically
to reduce the number of shares remaining to be exercised under the Agreement by
the number of shares exercised by this notice.
In full payment of the price for the shares being purchased, I am
delivering to you herewith a check payable to the order of the Company in the
amount of $__________.
Please mail the stock certificates to me at:
Name _____________________________
Address ____________________________
____________________________
Calculation of funds due:
Option price $________ x
Number of shares exercised
= Cost of Exercise = $________
plus
Federal income tax (28% x the difference between
the option price and the Fair Market Value of the
shares on the date of exercise x number of shares
exercised)* = $________
Total Amount Due = $________
To be paid by:
[ ] Cash or check = $________
TOTAL = $________
__________________________
Signature of Grantee
____________________
* In the states that have an income tax, an additional payment may be
required over and above the 28% federal income tax payment when exercising a
non-qualified stock option. Moreover, an additional payment may be required to
cover FICA and other such taxes.
