<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
CompuDyne Corporation
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, Par Value $.75 Per Share
- --------------------------------------------------------------------------------
(Title and Class of Securities)
20479530 6
- --------------------------------------------------------------------------------
(CUSIP Number)
Mary Adamowicz Richard S. Smith, Jr.
General Counsel and Secretary With Murtha, Cullina, Richter and Pinney
Lydall, Inc. Copies CityPlace I
One Colonial Road to: 185 Asylum Street
Manchester, CT 06040 Hartford, CT 06103
(860) 646-1233 (860) 240-6000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications)
March 25, 1996
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ X ]. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
(Continued on following page(s))
The Exhibit Index is located on page 13.
Page 1 of 27
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Item 1. Security and Issuer.
-------------------
This statement on Schedule 13D relates to the common stock, par value $.75
per share ("Common Stock"), of CompuDyne Corporation, a Pennsylvania corporation
("CompuDyne"), whose principal executive offices are located at 120 Union
Street, Willimantic, Connecticut 06226.
Item 2. Identity and Background.
-----------------------
(a)-(c) and (f). This statement on Schedule 13D is filed by Lydall, Inc., a
Delaware corporation ("Lydall"), whose principal executive offices are located
at One Colonial Road, Manchester, Connecticut 06040. Lydall is a manufacturer of
technologically advanced engineered materials for demanding specialty
applications.
The name, business address, principal occupation, address of
employment and citizenship of each executive officer, director and controlling
person of Lydall are set forth in Schedule A attached hereto, which is hereby
incorporated herein by this reference.
(d) Neither Lydall nor, to the best of its knowledge, any executive
officer, director or controlling person of Lydall named in Schedule A has,
during the last five years, been convicted in any criminal proceeding, excluding
traffic violations or similar misdemeanors.
(e) Neither Lydall nor, to the best of its knowledge, any executive
officer, director or controlling person of Lydall named in Schedule A has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which it was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or other Consideration.
-------------------------------------------------
On March 25, 1996, Lydall and Corcap, Inc., a Nevada corporation
("Corcap"), entered into a Settlement Agreement, pursuant to which Lydall and
Corcap settled certain outstanding claims that had arisen between them under the
terms of a certain Post-Distribution Agreement, dated as of July 1, 1988 (as
amended by Amendments Nos. 1, 2 and 3 thereto, the "Post-Distribution
Agreement"). A copy of the Settlement Agreement is filed as Exhibit 1 to this
statement and is hereby incorporated herein by this reference. Pursuant to the
Settlement Agreement, Lydall and Corcap released one another from such claims,
and in exchange therefor, Corcap agreed to convey to Lydall an aggregate of
120,000 shares (the "Shares") of Common Stock of CompuDyne then owned by and
registered in the name of Corcap. The sole
Page 3 of 27
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consideration for the Shares was the execution of the Settlement Agreement and
the mutual release of claims set forth therein.
Item 4. Purpose of Transaction.
----------------------
The sole purpose of Lydall in acquiring the Shares was to resolve certain
claims that had arisen between Lydall and Corcap under the Post-Distribution
Agreement. Although not presently contemplated, it is possible that Lydall or a
subsidiary may acquire additional shares of Common Stock through open market or
privately negotiated transactions. Any decision to do so would be made in light
of the then current financial condition and prospects of CompuDyne, the market
price of the Common Stock, the financial condition and prospects of Lydall and
other relevant factors.
Except as set forth above, Lydall does not have any present plans or
proposals which relate to or would result in any of the following:
(a) The acquisition by any person of additional securities of CompuDyne,
or the disposition of securities of CompuDyne;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving CompuDyne or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of CompuDyne or any
of its subsidiaries;
(d) Any change in the present board of directors or management of
CompuDyne, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy
of CompuDyne;
(f) Any other material change in CompuDyne's business or corporate
structure;
(g) Changes in CompuDyne's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of CompuDyne by any person;
(h) Causing a class of securities of CompuDyne to be delisted from a
national securities exchange or to cease to be authorized to be quoted
in an inter-dealer quotation system of a registered national
securities association;
Page 4 of 27
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(i) A class of equity securities of CompuDyne becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) Lydall is the record and beneficial owner of 120,000 shares of Common
Stock. Based on information contained in the Annual Report on Form 10-K of
CompuDyne for the year ended December 31, 1995, the Shares represent
approximately 6.6% of the issued and outstanding shares of Common Stock.
(b) Lydall has the sole power to vote, or direct the vote of, and the sole
power to dispose, of or direct the disposition of, the Shares.
(c) Except as set forth herein, Lydall has not effected any transactions
in the Common Stock during the past sixty (60) days.
(d) Lydall has the sole and exclusive right to receive, or the power to
direct the receipt of, dividends from, or the proceeds from the sale of, the
Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
---------------------------------------------------------------------
to the Issuer.
- -------------
In connection with the execution and delivery of the Settlement Agreement,
Lydall executed and delivered an Investment Purpose Agreement in the form of
Exhibit A attached to the Settlement Agreement and a Registration Rights
Agreement in the form of Exhibit B attached to the Settlement Agreement. The
Investment Purpose Agreement contains certain representations of Lydall intended
to document the private nature of the transaction. The Registration Rights
Agreement grants certain rights to Lydall in connection with the registration of
the Shares under the Securities Act of 1933, as amended. Copies of the
Investment Purpose Agreement and the Registration Rights Agreement are attached
as Exhibits A and B, respectively, to the Settlement Agreement filed as Exhibit
1 to this statement.
Item 7. Material to be Filed as Exhibits.
--------------------------------
A copy of the Settlement Agreement, including the Investment Purpose
Agreement attached as Exhibit A thereto and the Registration Rights Agreement
attached as Exhibit B thereto, is attached as Exhibit 1 hereto.
Page 5 of 27
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SIGNATURE
---------
After reasonable inquiry and to the best of my knowledge and belief, I
hereby certify that the information set forth in this statement is true,
complete and correct.
LYDALL, INC.
By: /s/ Mary Adamowicz
-----------------------------------
Mary Adamowicz
General Counsel
and Secretary
Date: April 4, 1996
Page 6 of 27
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SCHEDULE A
----------
Item 2: Identity and Background of Directors, Executive Officers and
Controlling Persons of Lydall, Inc.
-----------------------------------
1. (a) Lee A. Asseo
(Director)
(b-c) Present Principal Occupation and Business Address:
Chairman of the Board and Chief Executive Officer
The Whiting Company
One Howard Street
Burlington, Vermont 05401
(f) Citizenship:
U.S.A.
2. (a) Paul S. Buddenhagen
(Director)
(b-c) Present Principal Occupation and Business Address:
Vice President
Mercer Management Consulting, Inc.
33 Hayden Avenue
Lexington, Massachusetts 02173
(f) Citizenship:
U.S.A.
3. (a) Carole F. Butenas
(Director and Officer)
(b-c) Present Principal Occupation and Business Address:
Vice President-Investor Relations
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
Page 7 of 27
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4. (a) Samuel P. Cooley
(Director)
(b-c) Present Principal Occupation and Residential Address:
Retired
17 Braintree Drive
West Hartford, Connecticut 06117
(f) Citizenship:
U.S.A.
5. (a) W. Leslie Duffy
(Director)
(b-c) Present Principal Occupation and Business Address:
Attorney
Cahill, Gordon & Reindel
80 Pine Street, 19th Floor
New York, New York 10005
(f) Citizenship:
U.S.A.
6. (a) Leonard R. Jaskol
(Chairman of the Board of Directors, President and Chief Executive
Officer)
(b-c) Present Principal Occupation and Business Address:
President and Chief Executive Officer
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
7. (a) William P. Lyons
(Director)
(b-c) Present Principal Occupation and Business Address:
Chairman
JVL, Corp.
Page 8 of 27
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6451 West Main Street
Morton Grove, Illinois 60053
President
William P. Lyons & Co., Inc.
101 East 52nd Street, 11th Floor
New York, New York 10022
(f) Citizenship:
U.S.A.
8. (a) William J. Rankin
(Director and Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
9. (a) Joel Schiavone
(Director)
(b-c) Present Principal Occupation and Business Address:
Chief Executive Officer and President
The Schiavone Corporation
230 Old Gate Lane
Milford, Connecticut 06460
(f) Citizenship:
U.S.A.
10. (a) Roger M. Widmann
(Director)
(b-c) Present Principal Occupation and Business Address:
Senior Managing Director
Castle, Harlan & Widmann Energy Partners LLC.
150 East 58th Street
Page 9 of 27
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New York, New York 10155
(f) Citizenship:
U.S.A.
11. (a) Albert E. Wolf
(Director)
(b-c) Present Principal Occupation and Business Address:
Chairman of the Board and Director of Checkpoint Systems, Inc.
101 Wolf Road
Mid-Atlantic Park
P.O. Box 188
Thorofare, New Jersey 08086
(f) Citizenship:
U.S.A.
12. (a) John E. Hanley
(Officer)
(b-c) Present Principal Occupation and Business Address:
Vice President-Finance and Treasurer
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
13. (a) Alan J. Gnann
(Officer)
(b-c) Present Principal Occupation and Business Address:
Vice President-Corporate Development
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
Page 10 of 27
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14. (a) Mary Adamowicz
(Officer)
(b-c) Present Principal Occupation and Business Address:
General Counsel and Secretary
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
15. (a) Raymond S. Lanzi
(Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
16. (a) Elliott F. Whitely
(Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
17. (a) James P. Carolan
(Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
Page 11 of 27
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One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
18. (a) Christopher R. Skomorowski
(Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
19. (a) John J. Worthington
(Officer)
(b-c) Present Principal Occupation and Business Address:
Division President
Lydall, Inc.
One Colonial Road
Manchester, Connecticut 06040
(f) Citizenship:
U.S.A.
Page 12 of 27
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EXHIBIT INDEX
-------------
Page In
Exhibit Sequentially
Number Description Numbered Copy
- ------- ----------- -------------
1 Settlement Agreement, dated March 25, 1996, by and
among Lydall and Corcap.
Page 13 of 27
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SETTLEMENT AGREEMENT
--------------------
THIS SETTLEMENT AGREEMENT (this "Agreement") is entered into as of this 25th
day of March, 1996 between Lydall, Inc., a Delaware corporation ("Lydall"), and
Corcap, Inc., a Nevada corporation ("Corcap").
WHEREAS, Lydall and Corcap entered into a certain Post-Distribution
Agreement dated as of July 1, 1988, which was thereafter amended by Amendments
Nos. 1, 2 and 3 thereto (herein, as so amended, called the "Post-Distribution
Agreement"); and
WHEREAS, the Post-Distribution Agreement provides for the allocation of
certain obligations and liabilities between Lydall and Corcap; and
WHEREAS, Lydall and Corcap have been in dispute over certain of their
obligations and liabilities under the Post-Distribution Agreement; and
WHEREAS, in order to resolve those disputes without further controversy
Lydall is prepared to relinquish its net claim against Corcap exceeding $800,000
in exchange for the prompt receipt from Corcap of the shares of CompuDyne
Corporation Common Stock described below; and
WHEREAS, Lydall and Corcap wish to clarify certain provisions of the Post-
Distribution Agreement relating to Corcap's indemnification of Lydall against
environmental claims;
NOW, THEREFORE, in consideration of the premises and the mutual promises set
forth below, the parties agree as follows:
1. Disputes Settled. Lydall has entered into two separate settlement
----------------
agreements with the Internal Revenue Service which have settled federal tax
issues, one for tax years 1983, 1984,
Page 14 of 27
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1985 and 1986, and one for tax years 1987, 1988 and 1989 (such settlement
agreements are herein called the "IRS Settlements"). As a result of the IRS
Settlements, Lydall claims that Corcap owes it $881,365 under the Post-
Distribution Agreement. Separately, as a result of certain retrospective
insurance adjustments made through December 31, 1995 (herein called the
"Insurance Adjustments"), Lydall acknowledges owing Corcap $60,279 under the
Post-Distribution Agreement, although Lydall believes that that amount would be
substantially reduced in the near future by further credits. Lydall and Corcap
hereby agree that all obligations of Corcap to Lydall under the Post-
Distribution Agreement arising out of the IRS Settlements and all obligations of
Lydall to Corcap under the Post-Distribution Agreement arising out of the
Insurance Adjustments shall be settled and released by this Settlement
Agreement.
2. Settlement of Certain Corcap Obligations. In settlement and release of
----------------------------------------
all obligations of Corcap to Lydall under the Post-Distribution Agreement
arising out of the IRS Settlements, Corcap and Lydall agree that simultaneously
with the execution of this Agreement:
(a) Corcap shall transfer to Lydall 120,000 restricted shares of
CompuDyne Corporation Common Stock, par value $.75 per share, (the "Restricted
Shares") now owned by and registered in the name of Corcap. The date of such
transfer is referred to herein as the "Transfer Date".
(b) Lydall shall execute and deliver to Corcap an Investment Purpose
Agreement in the form of Exhibit A attached hereto, evidencing Lydall's intent
to acquire and hold the Restricted Shares for investment in compliance with
applicable securities laws and regulations.
(c) Corcap shall deliver to Lydall a written commitment by CompuDyne
Corporation ("CompuDyne") in the form of Exhibit B attached hereto providing
that CompuDyne shall, upon request by Lydall (i) after expiration of two years
from the Transfer
Page 15 of 27
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Date or (ii) after receipt by Lydall of written notice by CompuDyne to Lydall
that CompuDyne proposes to register any other shares of CompuDyne Corporation
Common Stock (or securities convertible into or exchangeable or exercisable for
CompuDyne Corporation Common Stock), undertake and complete all such
registration of the Restricted Shares (or any of them) under applicable
securities laws and regulations as may be necessary or appropriate to permit the
sale by Lydall at the time in question of the Restricted Shares (or any of them)
in the public market in compliance with applicable securities laws and
regulations.
3. Settlement of Certain Lydall Obligations. Corcap and Lydall agree that
----------------------------------------
all obligations of Lydall to Corcap arising out of the Insurance Adjustments are
settled and released in consideration of Lydall's receipt of the Restricted
Shares and its acceptance of the other settlement provisions of Section 2 above.
4. Indemnification of Dayville Environmental Claims. Corcap acknowledges
------------------------------------------------
that under the Post-Distribution Agreement Corcap has obligations to indemnify
Lydall for certain environmental conditions. By way of clarifying the Post-
Distribution Agreement, and not in substitution or repeal of any provision
thereof, Corcap agrees that Corcap shall indemnify Lydall for all payments,
obligations, liabilities, charges, fees, response and remediation costs and
expenses paid, suffered or incurred by Lydall, regardless of to whom owed or
paid, including reasonable attorneys fees, resulting from, caused by or arising
out of:
(i) The presence of any Polluting Substance (as defined below) in or
upon the property now or formerly owned by Corcap in Dayville, Connecticut
and more particularly described in Exhibit C attached hereto (the "Dayville
Property";
(ii) The presence in or upon any other property of any Polluting
Substance which was at any time in or upon the Dayville Property; or
Page 16 of 27
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(iii) Any failure by Corcap, Lydall or any other person to comply
with the terms of (x) any federal, state or municipal statute, regulation or
ordinance governing the management, control or remediation of any Polluting
Substance which was at any time in or upon the Dayville Property, or (y) any
lawful order, consent agreement or other action of the Connecticut
Department of Environmental Protection or any other federal, state or
municipal government authority under any federal, state or municipal
statute, regulation or ordinance governing the management, control or
remediation of any Polluting Substance which was at any time in or upon the
Dayville Property.
As used herein, the term "Polluting Substance" shall include "hazardous waste"
as defined in Section 1004(5) of the federal Resource, Conservation and Recovery
Act of 1976, as amended ("RCRA"), 42 U.S.C. 6903(5), and the regulations adopted
thereunder; "hazardous constituents" as listed within Appendix VIII of 40 C.F.R.
Part 261; "hazardous substances" as defined in Section 101(14) of the federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), 42 U.S.C. (S) 9601(14); and "oil or petroleum", "chemical
liquids", and "solid, liquid or gaseous products" as those terms are defined in
Section 22a-448 of the Connecticut General Statutes.
5. Post-Distribution Agreement Continues. Except for the settlement and
-------------------------------------
release of those specific obligations described in Section 1 hereof and except
for those specific provisions of the Post-Distribution Agreement which by their
terms are no longer applicable, all obligations and liabilities of the parties
to each other under, and all terms and provisions of, the Post-Distribution
Agreement, as amended to this date, shall continue in full force and effect
after the execution of this Agreement.
Page 17 of 27
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6. Contingent Reinstatement of Debts. In the event that the consideration
---------------------------------
provided to Lydall under this Agreement is avoided in any Corcap bankruptcy
proceeding, Lydall and Corcap agree that (i) Corcap's debt to Lydall in respect
of the IRS Settlements shall be reinstated and (ii) Lydall's debt to Corcap in
respect of the Insurance Adjustments shall be reinstated. The parties further
agree that in the event of such reinstatement (i) Corcap's debt to Lydall in
respect of the IRS Settlements is $881,365 and Lydall's debt to Corcap in
respect of the Insurance Adjustments is not more than $60,279 and (ii) their
respective debts as a result of the IRS Settlements and the Insurance
Adjustments arise from the same contract and Lydall may partially recoup the
amount Corcap owes Lydall from the amount Lydall owes Corcap.
7. Notices. All notices or other communications hereunder shall be in
-------
writing, shall be delivered by Federal Express or other nationally recognized
overnight delivery service for next business day delivery, all charges prepaid,
shall be effective on the next business day following deposit with such delivery
service, and shall be addressed as follows:
If to Lydall:
Lydall, Inc.
One Colonial Road
Manchester, CT 06045
Attention: Vice President-Finance
If to Corcap:
Corcap, Inc.
120 Union Street
Willimantic, Connecticut 06226
Attention: President
or to such other address as either party shall have specified for itself by
written notice sent as herein provided to the other party.
Page 18 of 27
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8. Benefit, Governing Law. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of Lydall and Corcap and their respective successors and
assigns. This Agreement may not be assigned by either party without the prior
written consent of the other party. This Agreement shall be governed by the laws
of the State of Connecticut.
IN WITNESS WHEREOF, Lydall and Corcap have caused this Agreement to be
executed as of the date first set forth above.
ATTEST: LYDALL, INC.
/s/ Mary Adamowicz By:/s/ John E. Hanley
- ------------------ ------------------
Secretary/Assistant Secretary John E. Hanley
Vice President-Finance and
Treasurer
Duly Authorized
ATTEST: CORCAP, INC.
/s/ Illegible By:/s/ Diane W. Burns
- ------------- ------------------
Secretary/Assistant Secretary Diane W. Burns
President
Duly Authorized
STATE OF CONNECTICUT )
: ss. March 19, 1996
COUNTY OF HARTFORD )
Personally appeared JOHN E. HANLEY, Vice President-Finance and Treasurer of
Lydall, Inc., as aforesaid, signer of the foregoing instrument, and acknowledged
the same to be his free act and deed as such officer and the free act and deed
of said corporation, before me.
/s/ Maureen Ogrean
------------------
Notary Public
My Commission Expires: Apr. 30, 1998
Page 19 of 27
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STATE OF CONNECTICUT )
: ss. 25 March 1996
COUNTY OF WINDHAM )
Personally appeared DIANE W. BURNS, President of Corcap, Inc., as aforesaid,
signer of the foregoing instrument, and acknowledged the same to be her free act
and deed as such officer and the free act and deed of said corporation, before
me.
/s/ Sarah J. Schenck
--------------------
Notary Public
My Commission Expires: Mar. 31, 2000
Page 20 of 27
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EXHIBIT A
---------
FORM OF INVESTMENT PURPOSE AGREEMENT
------------------------------------
THIS INVESTMENT PURPOSE AGREEMENT is made and entered into this 25th day of
March, 1996, by Lydall, Inc., a Delaware corporation ("Lydall"), for the benefit
of Corcap, Inc., a Nevada corporation ("Corcap").
WHEREAS, Lydall and Corcap have entered into a Settlement Agreement dated
this date; and
WHEREAS, Corcap is the owner of certain shares of capital stock of
CompuDyne Corporation, a Pennsylvania corporation ("CompuDyne"); and
WHEREAS, the Settlement Agreement provides for the transfer of 120,000
restricted shares of CompuDyne Corporation Common Stock, par value $.75 per
share, (the "Shares") by Corcap to Lydall: and
WHEREAS, the Settlement Agreement provides for the delivery of an
Investment Purpose Agreement by Lydall to Corcap;
NOW, THEREFORE, Lydall agrees as follows:
1. Lydall is an "accredited investor" as defined in Rule 501 under the
Securities Act of 1933, as amended (the "Act").
2. Lydall is receiving the Shares for Lydall's own account, with the
intention of holding the Shares for investment purposes only, with no present
intention of dividing or allowing others to participate in this investment or of
reselling, transferring, disposing or otherwise participating, directly or
indirectly, in a distribution of the Shares, and Lydall shall not make any sale,
transfer, disposition or other distribution of the Shares without registration
under the Act or under such other similar laws regarding the registration, sale,
disposition or distribution of securities of any other jurisdiction where
required to make such sale, transfer, disposition or distribution lawful (all
such other similar laws and the Act being herein collectively referred to as the
"Securities Laws"), or unless an exemption from registration is available under
the Securities Laws as described in an opinion from Lydall's counsel, Murtha,
Cullina, Richter and Pinney.
3. Lydall has received and reviewed CompuDyne's Annual Report on Form 10-
K for the year ended December 31, 1994 and all documents subsequently filed with
the Securities and Exchange Commission by CompuDyne under the Securities
Exchange Act of 1934, as amended, since such date. Lydall has been given an
opportunity to ask questions of officers of CompuDyne regarding such documents
which questions have been answered to Lydall's
Page 21 of 27
<PAGE>
satisfaction. Lydall has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares and is able to bear the economic risks of such investment.
4. Lydall understands and agrees that stop transfer instructions will be
given to CompuDyne's transfer agent or the officer in charge of its stock
records and noted on the appropriate records of CompuDyne to the effect that the
Shares may not be transferred out of Lydall's name unless the Shares so
transferred have been registered or an exemption from such registration is
available as provided for in Section 2 above. Lydall further agrees that there
will be placed on the certificates for the Shares, or any substitutions
therefor, a legend stating in substance as follows, and Lydall understands and
agrees that CompuDyne may refuse to permit the transfer of the Shares out of
Lydall's name and that the Shares must be held indefinitely in the absence of
compliance with the terms of such legend:
"The shares evidenced by this certificate have not been registered under
the Securities Act of 1933, as amended, or the securities laws of any other
jurisdiction and may not be transferred, nor will any assignee or endorsee
hereof be recognized as an owner hereof by CompuDyne Corporation for any
purpose, unless a registration statement under the Securities Act of 1933,
as amended, and under the securities laws of such other jurisdictions as
may be necessary, with respect to such shares shall then be in effect or
unless an exemption from such registration with respect to any proposed
transfer or disposition of such shares shall be available as described in
an opinion from the holder's counsel which opinion shall be reasonably
acceptable to CompuDyne Corporation."
IN WITNESS WHEREOF, Lydall has caused this Investment Purpose Agreement to
be executed on the date first set forth above.
ATTEST: LYDALL, INC.
/s/ Mary Adamowicz By:/s/ John E. Hanley
- ----------------------------- -------------------------------
Secretary/Assistant Secretary John E. Hanley
Vice President-Finance and
Treasurer
Duly Authorized
Page 22 of 27
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EXHIBIT B
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
-------------------------------------
This REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into this 25th
day of March, 1996 between CompuDyne Corporation, a Pennsylvania corporation
("CompuDyne"), and Lydall, Inc., a Delaware corporation ("Lydall").
WHEREAS, Lydall and Corcap, Inc., a Nevada corporation ("Corcap"), have
entered into a certain Settlement Agreement dated this date which settles
certain matters between Lydall and Corcap; and
WHEREAS, prior to the transfer of CompuDyne shares contemplated by the
Settlement Agreement, Corcap held 428,881 shares of the Common Stock, par value
$.75 per share, of CompuDyne; and
WHEREAS, the Settlement Agreement provides for the transfer of 120,000
restricted shares of CompuDyne Corporation Common Stock, par value $.75 per
share, (the "Shares") by Corcap to Lydall in settlement of certain matters; and
WHEREAS, the Settlement Agreement provides for a commitment by CompuDyne to
register the Shares if registration shall be necessary to effectuate Lydall's
sale of the Shares in the public market; and
WHEREAS, Lydall has relied upon the undertakings of CompuDyne in entering
into and accepting the terms of the Settlement Agreement with Corcap and
agreeing to take the Shares in settlement, and would not have entered into the
Settlement Agreement without the undertakings by CompuDyne in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and of the agreements by
Lydall in the Settlement Agreement to settle certain claims it has against
Corcap, and for other good and valuable consideration, receipt of which is
hereby acknowledged by CompuDyne, CompuDyne and Lydall agree as follows:
1. Registration at Lydall's Request. If, at any time after two years from
--------------------------------
the date hereof, Lydall requests CompuDyne to effectuate the registration of any
of the Shares under the Securities Act of 1933 (which Act together with any
similar Federal statute in force in the future is hereinafter referred to as the
"Act"), CompuDyne shall (a) as expeditiously as possible use its best efforts to
effect registration under the Act of all of the Shares which CompuDyne has been
requested to register; (b) use its best efforts to have the Registration
Statement for such Shares declared effective; (c) notify Lydall promptly after
it shall receive notice thereof, of the time when such Registration Statement
has become effective or any supplement to any prospectus forming a part of such
Registration Statement has been filed; (d) notify Lydall promptly of any
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request by the Securities and Exchange Commission (hereinafter referred to as
the "Commission") for the amending or supplementing of such Registration
Statement or prospectus or for additional information; (e) prepare and file with
the Commission, promptly upon Lydall's request, any amendments or supplements to
such Registration Statement or prospectus which, in the opinion of counsel for
Lydall concurred in by counsel for CompuDyne, may be necessary or advisable in
connection with the distribution of the securities by Lydall; (f) prepare and
promptly file with the Commission and promptly notify Lydall of the filing of
such amendment or supplement to such Registration Statement or prospectus as may
be necessary to correct any statements or omission if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading; (g) in case Lydall or any underwriter for Lydall is required to
deliver a prospectus, at a time when the prospectus then in effect may no longer
be used under the Act, prepare promptly upon request such amendment or
amendments to such Registration Statement and such prospectus or prospectuses as
may be necessary to permit compliance with the requirements of Section 10 of the
Act; (h) not file any amendment or supplement to the Registration Statement or
prospectus to which Lydall shall reasonably object after having been furnished a
copy at a reasonable time prior to the filing thereof; (i) advise Lydall
promptly after it shall receive notice or obtain knowledge thereof of the
issuance of any stop order by the Commission suspending the effectiveness of any
such Registration Statement or of the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued; (j) use its best efforts to qualify the Shares for transfer under the
securities laws of up to ten states as Lydall may designate, except that it
shall not be required in connection therewith or as a condition thereof to
execute a general consent to service or to qualify to do business in any such
states; (k) furnish to Lydall as soon as available copies of any such
Registration Statement and each preliminary or final prospectus, or supplement
required to be prepared pursuant to this Section 1, all in such quantities as
Lydall may from time to time reasonably request; (1) take all action necessary
in connection with the qualification of the Shares (or any of them) under the
laws of up to ten states in which counsel for Lydall reasonably determines that
such qualification is necessary in order for Lydall to sell the Shares (or any
of them) in the public market; and (m) take all such other action as, in the
opinion of counsel for Lydall concurred in by counsel for CompuDyne, may be
reasonably necessary or appropriate in order for Lydall to sell the Shares (or
any of them) in the public market in compliance with all applicable laws. Lydall
may request CompuDyne to effectuate the registration of any of the Shares in
accordance with the preceding sentence only once.
CompuDyne may include in such Registration Statement other shares of its
Common Stock which may be newly issued shares or shares held by other
shareholders. Notwithstanding the foregoing, if Lydall intends to sell the
Shares through one or more underwriters and the underwriters or the
representative of the underwriters advises Lydall in writing that marketing
factors require a limitation on the number of shares to be underwritten, then
such Registration Statement shall exclude such other shares of Common Stock to
be sold for the account of CompuDyne or any other shareholders.
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<PAGE>
At any time 180 days after the effective date of the Registration
Statement registering the Shares (or any of them), CompuDyne may deregister any
Shares not yet sold.
2. Piggyback Registration Rights.
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(a) Right to Piggyback. Whenever CompuDyne proposes to register any
------------------
shares of CompuDyne Corporation Common Stock (or securities convertible into or
exchangeable or exercisable for CompuDyne Corporation Common Stock) under the
Act, whether for CompuDyne's account or for the account of any other person (a
"Proposed Registration"), and the registration form to be used may be used for
the registration of the Shares (a "Piggyback Registration"), CompuDyne shall
give prompt written notice to Lydall of CompuDyne'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 CompuDyne will, subject to paragraph
(b) below, include in such Piggyback Registration all the Shares (or any of
them) with respect to which Lydall shall give CompuDyne written request for
inclusion therein within 15 business days after receipt of CompuDyne's written
notice. Except as may otherwise be provided in this Agreement, the Shares (or
any of them) with respect to which such request for registration has been
received will be registered by CompuDyne and offered to the public pursuant to
this Agreement on the same terms and subject to the same conditions applicable
to the registration in a Proposed Registration of such shares of CompuDyne
Corporation Common Stock (or securities convertible into or exchangeable or
exercisable for CompuDyne Corporation Common Stock) to be sold by CompuDyne or
by the person selling under such Proposed Registration.
(b) Priority on Piggyback Registrations. If the managing underwriter or
-----------------------------------
underwriters, if any, advise Lydall in writing that in its or their opinion, or,
in the case of a Piggyback Registration not being underwritten, CompuDyne shall
reasonably determine (and notify Lydall of such determination), after
consultation with an investment banker or advisor of nationally recognized
standing, the number or kind of securities proposed to be sold in such
registration (including the Shares or any of them) will adversely affect the
success of such offering, CompuDyne will include in such registration the number
of securities, if any, which, in the opinion of such underwriter or
underwriters, or CompuDyne, as the case may be, can be sold as follows: (i)
first, the shares of CompuDyne Corporation Common Stock that CompuDyne proposes
to sell, (ii) second, the Shares (or any of them) requested to be included in
such registration by Lydall, (iii) third, other shares of CompuDyne Corporation
Common Stock held by persons other than Lydall requested to be included in such
registration.
(c) Lydall's Rights. If, at any time, CompuDyne, pursuant to paragraph
---------------
2(a), shall give written notice to Lydall of CompuDyne's intention to effect a
Piggyback Registration and if Lydall gives notice to CompuDyne of its election
to include all or a portion of the Shares in that Piggyback Registration as
provided in paragraph 2(a) hereof, CompuDyne shall have the duties and Lydall
shall have the rights described in paragraphs 1(c), 1(d), 1(e), 1(f), 1(h),
1(i), 1(j), 1(k), 1(1) and 1(m) with respect to the Piggyback Registration.
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<PAGE>
3. Costs and Expenses. CompuDyne will pay all costs and expenses incident
------------------
to the performance of its obligations under this Agreement, including the fees
and expenses of its counsel, the fees and expenses of its accountants and all
other costs and expenses incident to the preparation, printing and filing under
the Act of any such Registration Statement, each prospectus, and all amendments
and supplements thereof, the costs (including fees and disbursements of counsel)
incurred in connection with the qualification of the securities under the laws
of up to ten states in which counsel for Lydall reasonably determines that such
qualification is necessary in order for Lydall lawfully to sell the Shares (or
any of them) in the public market, and the cost of furnishing to Lydall copies
of any such Registration Statement, each preliminary prospectus, the final
prospectus and each amendment and supplement thereto.
4. Lydall's Duty to Cooperate and Indemnity. Lydall shall cooperate with
----------------------------------------
CompuDyne in any registration of all or a portion of the Shares, including
providing such information about itself and the Shares as may be required under
the Act and the rules and regulations promulgated thereunder. Lydall shall
indemnify CompuDyne for all liabilities, charges, fees (including reasonable
attorney's fees) and other costs CompuDyne may incur arising from any material
misrepresentation with respect to such information or omission to state a
material fact necessary to make such information not misleading in the
Registration Statement, any amendment thereto and any related preliminary
prospectus, prospectus, or prospectus supplement.
5. Cessation of Registration Rights and Obligations. Lydall's right to
------------------------------------------------
request CompuDyne to register the Shares under paragraph 1 and CompuDyne's
obligation to notify Lydall of a Proposed Registration under paragraph 2 shall
cease if Lydall is not required to register the Shares under the Act prior to
the sale of the Shares in the public market, as determined by counsel for Lydall
concurred in by counsel for CompuDyne, but in any event, such right and
obligation shall cease three years after the date hereof.
6. Notice. All notices or other communications hereunder shall be in
------
writing, shall be delivered by Federal Express or other nationally recognized
overnight delivery service for next business day delivery, all charges prepaid,
shall be effective on the next business day following deposit with such delivery
service, and shall be addressed as follows:
If to Lydall:
Lydall, Inc.
One Colonial Road
Manchester, CT 06045
Attention: Vice President-Finance
If to CompuDyne:
CompuDyne Corporation
120 Union Street
Willimantic, Connecticut 06226
Attention: President
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<PAGE>
or to such other address as either of the parties shall have specified for
itself by written notice sent as herein provided to the other party.
IN WITNESS WHEREOF, CompuDyne Corporation and Lydall, Inc. have caused this
Registration Rights Agreement to be executed on the date first set forth above.
ATTEST: COMPUDYNE CORPORATION
/s/ Diane W. Burns By:/s/ Martin Roenigk
- ----------------------------- ------------------------------
Secretary/Assistant Secretary Martin Roenigk
President and
Chief Executive Officer
Duly Authorized
ATTEST: LYDALL, INC.
/s/ Mary Adamowicz By:/s/ John E. Hanley
- ----------------------------- ------------------------------
Secretary/Assistant Secretary John E. Hanley
Vice President-Finance and
Treasurer
Duly Authorized
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