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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
Penril DataComm Networks, Inc.
(Name of Issuer)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
709352 10 8
(CUSIP Number)
Fried, Frank, Harris, Dawson-Samberg Capital
Shriver & Jacobson Management, Inc.
One New York Plaza 354 Pequot Ave.
New York, NY 10004 Southport, CT 06490
Attn: Robert C. Schwenkel, Esq. Attn: Judith A. Mack
(212) 859-8000 (203) 254-0091
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
September 22, 1995
(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 the 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 five percent or less of
such class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 13
<PAGE>
CUSIP NO. 709352 10 8 Page 2 of 13
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PEQUOT GENERAL PARTNERS (EIN # 06-1321556)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
CONNECTICUT
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7 SOLE VOTING POWER
636,000
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
636,000
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
636,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES /X/
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP NO. 709352 10 8 Page 3 of 13
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PEQUOT ENDOWMENT PARTNERS, L.P. (EIN # 06-1383498)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7 SOLE VOTING POWER
260,000
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
260,000
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
260,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES /x/
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.9%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
CUSIP NO. 709352 10 8 Page 4 of 13
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DS INTERNATIONAL PARTNERS, L.P. (EIN # 06-1324895)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEMS 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
7 SOLE VOTING POWER
569,000
8 SHARED VOTING POWER
0
9 SOLE DISPOSITIVE POWER
569,000
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
569,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES /x/
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.3%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER
This Statement on Schedule 13D relates to the Common Stock, par value
$0.01 per share (the "Common Stock"), of Penril DataComm Networks, Inc., a
Delaware corporation ("Penril"). The principal executive offices of Penril
are located at 1300 Quince Orchard Boulevard, Gaithersburg, Maryland 20878.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by Pequot General Partners, a Connecticut general
partnership ("General Partners"), Pequot Endowment Partners, L.P., a Delaware
limited partnership ("Endowment Partners"), and DS International Partners,
L.P., a Delaware limited partnership ("International Partners"). General
Partners, Endowment Partners and International Partners are sometimes referred
to herein individually as a "Reporting Person" and collectively as the
"Reporting Persons."
The Reporting Persons may be deemed to constitute a group as such term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Each of the Reporting Persons disclaims beneficial
ownership of the Common Stock beneficially owned by the other Reporting
Persons. Information with respect to each Reporting Person is given solely by
such Reporting Person and no Reporting Person has responsibility for the
accuracy or completeness of information supplied by any other Reporting
Person. The Reporting Persons have entered into a Joint Filing Agreement,
dated September 28, 1995, attached hereto as Exhibit 1.
ITEM 2. (a), (b), (c)
General Partners is a Connecticut general partnership whose sole business
is to serve as the general partner and investment manager of Pequot Partners
Fund, L.P., a Delaware limited partnership ("Pequot Partners"). Pequot
Partners invests and trades primarily in securities and financial instruments.
Information with respect to the identity and background of the partners of
General Partners is set forth on Schedule I attached hereto.
Endowment Partners is a Delaware limited partnership whose sole business
is to serve as the general partner and investment manager of Pequot Endowment
Fund, L.P., a Delaware limited partnership ("Pequot Endowment"). Pequot
Endowment invests and trades primarily in securities and financial
instruments. Information with respect to the identity and background of the
general partners of Endowment Partners is set forth on Schedule II attached
hereto.
International Partners is a Delaware limited partnership whose sole
business is to serve as the investment manager of Pequot International Fund
Inc., a British Virgin Islands corporation ("Pequot International"). Pequot
International invests and trades primarily in securities and financial
instruments. Information with respect to the identity and background of the
general partners of International Partners is set forth on Schedule III
attached hereto.
The address of the principal office of the Reporting Persons is 354
Pequot Avenue, Southport, Connecticut 06490.
Page 5 of 13
<PAGE>
ITEM 2. (d), (e)
During the last five years, neither any Reporting Person nor, to the best
knowledge of the applicable Reporting Person, any person identified in
Schedules I through III has (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding 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 2. (f)
To the best knowledge of the applicable Reporting Persons, all natural
persons identified in Schedules I through III are United States citizens.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
On September 22, 1995, Penril entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with Pequot Partners, Pequot Endowment and
Pequot International (each, an "Investor" and collectively, the "Investors")
providing for the purchase by (i) Pequot Partners of 636,000 shares of Common
Stock for an aggregate purchase price of $3,180,000; (ii) Pequot Endowment of
260,000 shares of Common Stock for an aggregate purchase price of $1,300,000;
and (iii) Pequot International of 569,000 shares of Common Stock for an
aggregate purchase price of $2,845,000. The funds for the purchase of shares
of Common Stock by each of the Investors were obtained from the contributions
of their respective partners or shareholders.
ITEM 4. PURPOSE OF TRANSACTION
Each of the Reporting Persons has acquired the Common Stock beneficially
owned by it as an investment and in the ordinary course of business. Each of
the Reporting Persons intends to review on a continuing basis its investment
in Penril, including Penril's business, financial condition and operating
results and general market and industry conditions and, based upon such
review, may acquire additional shares of Common Stock or dispose of shares of
Common Stock, in the open market, in privately negotiated transactions or
otherwise.
The Stock Purchase Agreement provides the Investors with, among other
things, a right of first offer with respect to any shares of Common Stock
Penril proposes to issue or sell (with certain exceptions set forth in the
Stock Purchase Agreement) at a price of less than the Market Value (as defined
in the Stock Purchase Agreement). The right of first offer terminates when
the Investors collectively own in the aggregate less than 10% of the issued
and outstanding Common Stock.
Pursuant to the Stock Purchase Agreement, the Board of Directors of
Penril will be increased by one person and, so long as the Investors
collectively own in the aggregate not less than 10% of the issued and
outstanding Common Stock, the Investors will be entitled to fill such vacancy
by designating one person to the Board of Directors and Penril will not change
the size of the Board of Directors, the classification of any director or
otherwise change or modify Article Seventh of its Certificate of Incorporation
or Sections 2 or 3 of its By-laws without the prior consent of the Investors.
Page 6 of 13
<PAGE>
The foregoing description of portions of the Stock Purchase Agreement is
not intended to be complete and is qualified in its entirety by the complete
text of the Stock Purchase Agreement, which is incorporated herein by
reference. A copy of the Stock Purchase Agreement is being filed herewith as
Exhibit 2.
Except as set forth above, no Reporting Person nor, to the best knowledge
of the applicable Reporting Person, any person identified in Schedules I
through III, has any plans or proposals which relate to or would result in the
types of transactions set forth in subparagraphs (a) through (j) of Item 4 of
Schedule D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) General Partners beneficially owns 636,000 shares of Common Stock,
representing 7.0% of the shares of Common Stock. Endowment Partners
beneficially owns 260,000 shares of Common Stock, representing 2.9% of the
shares of Common Stock. International Partners beneficially owns 569,000
shares of Common Stock, representing 6.3% of the shares of Common Stock. (The
foregoing calculations are based on 9,051,202 shares of Common Stock issued
and outstanding as of September 22, 1995, which includes 7,586,202 shares of
Common Stock outstanding prior to the issuance of Common Stock pursuant to the
Stock Purchase Agreement and 1,465,000 shares of Common Stock issued pursuant
to the Stock Purchase Agreement.)
The Reporting Persons may be deemed to constitute a group as such term is
used in Section 13(d)(3) of the Exchange Act. If the Reporting Persons were
deemed to constitute a group, the 1,465,000 shares of Common Stock
beneficially owned by the Reporting Persons in the aggregate would represent
16.2% of the issued and outstanding shares of Common Stock as of September 22,
1995. Each of the Reporting Persons disclaims beneficial ownership of the
Common Stock beneficially owned by the other Reporting Persons.
(b) The responses of each Reporting Person to Items 7 through 11 of the
cover pages of this Schedule 13D relating to beneficial ownership of the
shares of Common Stock are incorporated herein by reference.
(c) Except as set forth above, no Reporting Person nor, to the best
knowledge of the applicable Reporting Person, any person identified in
Schedules I through III, beneficially owns any shares of Common Stock or has
effected any transactions in shares of Common Stock during the preceding 60
days.
(d) Pequot Partners has the right to receive the proceeds from the sale
of 636,000 shares of Common Stock. Pequot Endowment has the right to receive
the proceeds from the sale of 260,000 shares of Common Stock. Pequot
International has the right to receive the proceeds from the sale of 569,000
shares of Common Stock.
(e) Not applicable.
Page 7 of 13
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
The response to Item 4 is incorporated by reference herein. Pursuant to
the Stock Purchase Agreement and the Registration Rights Agreement, dated as
of September 22, 1995 (the "Registration Rights Agreement"), by and among
Penril and the Investors, prior to December 31, 1995, Penril will file a
"shelf" registration statement (the "Shelf Registration") covering the Common
Stock purchased by the Investors, and Penril has agreed to keep such Shelf
Registration continuously effective for three years following the date on
which it is declared effective. If the Shelf Registration does not become
effective within 150 days after September 22, 1995 or does not remain
effective for the three year period, the Investors are entitled to require
Penril to effect up to two registrations of all or part of their Common Stock
at any time prior to the later of September 22, 1998 or 30 days after Penril
files its annual report for the fiscal year ending July 31, 1998. If the
Shelf Registration remains effective for the three year period, the Investors
are entitled to require Penril to effect one registration at any time after
such period until the later of September 22, 1999 or 30 days after Penril
files its annual report for the fiscal year ending July 31, 1999. In
addition, if Penril proposes to register any of its securities by registration
on Form S-1, S-2 or S-3, it will use its best efforts to effect the
registration of the Common Stock requested to be included in such registration
by the Investors.
Pursuant to the Stock Purchase Agreement, until the later of
(i) September 22, 1996 or (ii) the permanent waiver, following the resignation
or removal of the Investors' designee from the Board of Directors, of the
Investors' right of first offer and the right to designate a director (which
are both described in Item 4), the Investors may not (a) make or participate
in any proxy solicitation or seek to advise or influence any person or entity
with respect to the voting securities of Penril; (b) initiate or propose any
stockholder proposal with respect to Penril as described in Rule 14a-8 under
the Exchange Act; (c) make any public announcement with respect to, or submit
a proposal for, or offer of any extraordinary transaction involving Penril or
any subsidiary or division thereof or any of their securities or assets; (d)
otherwise act alone or in concert with others, to seek to control or influence
the management, Board of Directors or policies of Penril; or (e) form, join or
in any way participate in a "group" as defined in the Exchange Act, or advise,
assist or encourage any other person in connection with any of the foregoing.
The foregoing descriptions of portions of the Stock Purchase Agreement
and the Registration Rights Agreement are not intended to be complete and are
qualified in their entirety by the complete text of each of such documents,
both of which are incorporated herein by reference. Copies of such documents
are being filed herewith as Exhibits 2 and 3 respectively.
Except as set forth or incorporated by reference in this Statement, none
of the Reporting Persons nor, to the best knowledge of the applicable
Reporting Person, any person identified in Schedules I through III, has any
contracts, arrangements, understandings or relationships (legal or otherwise)
with any person with respect to any securities of Penril.
Page 8 of 13
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Joint Filing Agreement, dated September 28, 1995, by
and among General Partners, Endowment Partners and
International Partners.
Exhibit 2: Stock Purchase Agreement, dated as of September 22,
1995, by and among Penril, Pequot Partners, Pequot
Endowment and Pequot International.
Exhibit 3: Registration Rights Agreement, dated as of
September 22, 1995, by and among Penril, Pequot
Partners, Pequot Endowment and Pequot International.
Page 9 of 13
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
Dated: September 29, 1995
PEQUOT GENERAL PARTNERS
By: /s/ Arthur J. Samberg
Name: Arthur J. Samberg
Title: General Partner
PEQUOT ENDOWMENT PARTNERS, L.P.
By: /s/ Arthur J. Samberg
Name: Arthur J. Samberg
Title: General Partner
DS INTERNATIONAL PARTNERS, L.P.
By: /s/ Arthur J. Samberg
Name: Arthur J. Samberg
Title: General Partner
Page 10 of 13
<PAGE>
Schedule I
PARTNERS OF
PEQUOT GENERAL PARTNERS
Name Present Business Address Present Principal Occupation
Daniel C. Benton (1) Portfolio Manager(2)
Mark A. Broach (1) Portfolio Manager(2)
Sheila J. Clancy (1) Marketing Director(2)
Peter Dartley (1) Head Equity Trader(2)
Jonathan T. Dawson (1) Portfolio Manager(2)
Arthur J. Samberg (1) Portfolio Manager(2)
__________________________
(1) Dawson-Samberg Capital Management, Inc.
354 Pequot Avenue
Southport, CT 06490
(2) Principal occupation for Dawson-Samberg Capital Management, Inc.
Page 11 of 13
<PAGE>
Schedule II
GENERAL PARTNERS OF
PEQUOT ENDOWMENT PARTNERS, L.P.
Name Present Business Address Present Principal Occupation
Daniel C. Benton (1) Portfolio Manager (2)
Mark A. Broach (1) Portfolio Manager (2)
Peter Dartley (1) Head Equity Trader (2)
Jonathan T. Dawson (1) Portfolio Manager (2)
David Ross (1) Research Analyst (2)
Arthur J. Samberg (1) Portfolio Manager (2)
Olympic Equity Partners 399 Park Avenue Investment Partnership
New York, NY 10022
Porridge Partners I (1) Investment Partnership
__________________________
(1) Dawson-Samberg Capital Management, Inc.
354 Pequot Avenue
Southport, CT 06490
(2) Principal occupation for Dawson-Samberg Capital Management, Inc.
Page 12 of 13
<PAGE>
Schedule III
GENERAL PARTNERS OF
DS INTERNATIONAL PARTNERS, L.P.
Name Present Business Address Present Principal Occupation
Daniel C. Benton (1) Portfolio Manager(2)
Sheila J. Clancy (1) Marketing Director(2)
Peter Dartley (1) Head Equity Trader(2)
Jonathan T. Dawson (1) Portfolio Manager(2)
Arthur J. Samberg (1) Portfolio Manager(2)
__________________________
(1) Dawson-Samberg Capital Management, Inc.
354 Pequot Avenue
Southport, CT 06490
(2) Principal occupation for Dawson-Samberg Capital Management, Inc.
Page 13 of 13
<PAGE>
INDEX OF EXHIBITS
Exhibit 1: Joint Filing Agreement, dated September 28, 1995, by and among
General Partners, Endowment Partners and International Partners.
Exhibit 2: Stock Purchase Agreement, dated as of September 22, 1995, by and
among Penril, Pequot Partners, Pequot Endowment and Pequot
International.
Exhibit 3: Registration Rights Agreement, dated as of September 22, 1995,
by and among Penril, Pequot Partners, Pequot Endowment and
Pequot International.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Exhibit 1
---------
JOINT FILING AGREEMENT
----------------------
This will confirm the agreement by and among all the
undersigned that the Schedule 13D filed on or about this date and
any amendments thereto with respect to the beneficial ownership by
the undersigned of shares of the Common Stock of Penril DataComm
Networks, Inc. is being filed on behalf of each of the
undersigned.
Dated: September 28, 1995
PEQUOT GENERAL PARTNERS
By: /s/ Arthur J. Samberg
-----------------------------
Name: Arthur J. Samberg
Title: General Partner
PEQUOT ENDOWMENT PARTNERS, L.P.
By: /s/ Arthur J. Samberg
-----------------------------
Name: Arthur J. Samberg
Title: General Partner
DS INTERNATIONAL PARTNERS, L.P.
By: /s/ Arthur J. Samberg
-----------------------------
Name: Arthur J. Samberg
Title: General Partner
<PAGE>
EXHIBIT 2
STOCK PURCHASE AGREEMENT dated as of September 22, 1995
by and among PENRIL DATACOMM NETWORKS, INC., a Delaware
corporation (the "Company"), PEQUOT PARTNERS FUND, L.P., a
Delaware limited partnership ("Partners"), PEQUOT ENDOWMENT FUND,
L.P., a Delaware limited partnership ("Endowment"), and PEQUOT
INTERNATIONAL FUND INC., a British Virgin Islands corporation
("International" and together with Partners and Endowment, the
"Investors").
W I T N E S S E T H :
WHEREAS, the Company wishes to issue to the Investors and
the Investors wish to purchase from the Company an aggregate of
1,465,000 shares of common stock, $.01 par value (the "Common
Stock"), of the Company;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as
follows:
1. ISSUANCE AND SALE OF COMMON STOCK.
1.1. ISSUANCE, PURCHASE AND SALE OF SHARES. Upon the
terms and subject to the conditions hereof, the Company has
authorized the issuance of 1,465,000 shares of Common Stock (the
"Shares").
1.2. AGREEMENT TO SELL AND PURCHASE THE COMMON STOCK.
Upon the terms and subject to the conditions hereof,
simultaneously with the execution and delivery of this Agreement,
the Company is issuing and selling to each Investor, and each
Investor is subscribing for and purchasing from the Company, the
number of Shares set forth opposite such Investor's name on
Schedule I hereto for an aggregate purchase price equal to the
dollar amount opposite such Investor's name on Schedule I hereto
(the "Purchase Price").
1.3. DELIVERIES. Simultaneously with the execution and
delivery of this Agreement, the following actions are being taken:
(a) The Company is issuing and delivering to
each Investor one or more certificates representing the number of
Shares set forth opposite such Investor's name on SCHEDULE I
hereto, each registered in the name of such Investor (the "Stock
Certificates"). Delivery of each such Stock Certificate to each
Investor is being made against payment to the Company by each
Investor of the Purchase Price, which is being paid by delivery of
a certified check or cashier's check payable to the order of the
Company or by a wire transfer in such amount to an account
previously designated by the Company.
<PAGE>
(b) A registration rights agreement (the
"Registration Rights Agreement") between the Company and the
Investors, in the form of Exhibit A hereto, is being executed and
delivered by each of the Company and the Investors.
(c) The Company is delivering to the Investors
(i) long form and bring down certificates of good standing for the
Company for the states of Delaware and Maryland; (ii) resolutions
of the Board of Directors in form and substance satisfactory to
the Investors authorizing the execution, delivery and performance
of this Agreement, the Registration Rights Agreement and the
transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Shares; (iii) the by-laws of the
Company; and (iv) an incumbency certificate; in each case
certified by the Secretary of the Company as of the Closing Date,
which certification shall be satisfactory in form and substance to
the Investors and shall state that the resolutions of the Board of
Directors and the by-laws certified thereby are in full force and
effect and have not been amended, modified, revoked or rescinded.
(d) The Company is causing to be delivered to
the Investors an opinion from Benesch, Friedlander, Coplan &
Aronoff, addressed to the Investors, dated as of the date hereof,
as to the matters set forth in EXHIBIT B hereto.
1.4. THE CLOSING. The closing (the "Closing")
hereunder with respect to the transactions contemplated hereby is
taking place simultaneously with the execution and delivery of
this Agreement at the offices of Fried, Frank, Harris, Shriver &
Jacobson, One New York Plaza, New York, New York 10004.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to each Investor as
follows:
2.1. ORGANIZATION AND GOOD STANDING; POWER AND
AUTHORITY; QUALIFICATIONS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to (i) own or lease and operate its properties and to
carry on its business as presently conducted and as currently
proposed to be conducted and (ii) execute and deliver and perform
this Agreement and the Registration Rights Agreement and to issue
and sell the Shares to the Investors. Each of the Company and its
Subsidiaries (as hereinafter defined) is qualified as a foreign
corporation in, and is in good standing under the laws of, each
jurisdiction where the character of the property owned or leased
or the nature of the activities conducted by the Company or such
Subsidiary makes such qualification necessary and in which the
failure to so qualify would have a material adverse effect on the
business, financial position, results of
2
<PAGE>
operations, properties or prospects of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse
Effect").
2.2. SUBSIDIARIES. SCHEDULE 2.2. contains a true and
complete list of each corporation, partnership, joint venture,
business trust or other entity in which the Company, directly or
indirectly, has any ownership interest (collectively, the
"Subsidiaries"). Each of the outstanding shares of capital stock
of each of the Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and, except as set forth on SCHEDULE
2.2, is owned, directly or indirectly, by the Company free and
clear of any liens, pledges, security interests, claims or other
encumbrances other than liens imposed by law which are not
material to the business of the Company and its Subsidiaries taken
as a whole. Each of the Company's Subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. SCHEDULE 2.2 sets
forth the following information for each Subsidiary of the
Company: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or equity capital;
and (iii) the number of issued and outstanding shares of capital
stock or equity capital. Except for the interests in the
Subsidiaries, neither the Company nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business
trust or other entity.
2.3. AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement and the issuance,
sale, and delivery of the Shares have been duly authorized by all
requisite corporate action by the Company. Each of this Agreement
and the Registration Rights Agreement constitutes a valid and
binding obligation of the Company, enforceable against the Company
in accordance with its terms. Upon payment by the Investors
pursuant to this Agreement, the Shares will be validly issued and
outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, and are not subject
to preemptive or any other similar rights of the stockholders of
the Company or others except as contemplated hereby.
2.4 NO VIOLATION. The execution, delivery and
performance of this Agreement and the Registration Rights
Agreement, the issuance, sale, delivery of the Shares, the
consummation of the transactions contemplated hereby and thereby,
and compliance with the provisions hereof and thereof by the
Company will not (a) violate any provision of any law, statute,
rule or regulation, or any ruling, writ, injunction, order,
judgment or decree of any court, administrative agency or other
governmental body applicable to the Company or any of its
Subsidiaries, properties or assets or (b) conflict with or result
in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default
(or give rise to any right of termination, cancellation or
acceleration) under the Certificate of Incorporation or the By-
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laws of the Company or any of its Subsidiaries or any note,
indenture, mortgage, lease agreement or other material contract,
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their
properties is bound or affected. No permit, authorization,
consent or approval of or by, or any notification of, or filing
with, any person (governmental or private) is required in
connection with the execution, delivery and performance by the
Company of this Agreement or the Registration Rights Agreement or
the issuance, sale or delivery of the Shares (other than such
notifications or filings required under applicable state
securities laws, if any, which shall be made on a timely basis).
2.5. CAPITALIZATION. As of the date hereof, and
immediately prior to the consummation of the transactions
contemplated hereby and before giving effect to such transactions,
the authorized capital stock of the Company consists of 100,000
shares of Serial Preferred Stock, $.01 par value, none of which is
issued and outstanding, and 20,000,000 shares of Common Stock, of
which 7,586,202 shares are issued and outstanding (exclusive of
treasury stock). As of the date hereof, other than options to
purchase an aggregate of 1,599,618 shares of Common Stock
outstanding under the Company's 1986 Incentive Plan, adopted on
October 8, 1986, and the Non-Employee Directors' Stock Option
Plan, adopted on December 9, 1987, and except as contemplated by
this Agreement, there are no outstanding warrants, options,
agreements, convertible securities or other commitments pursuant
to which the Company is or may become obligated to issue any
shares of the capital stock or other securities of the Company,
except for the proposed sale (the "Proposed Sale") of 50,000
shares of Common Stock to a third party investor on or prior to
October 15, 1995 at a per share price of not less than $5.00. As
of the date hereof, except as contemplated by this Agreement and
the Registration Rights Agreement, there are, no preemptive or
similar rights to purchase or otherwise acquire shares of the
capital stock of the Company pursuant to any provision of law, the
Certificate of Incorporation or By-laws (in each case, as amended
and in effect on the date hereof), or any agreement to which the
Company is a party; and, except as contemplated by this Agreement
and the Registration Rights Agreement, the Company is not a party
to any agreement, restriction or encumbrance (such as a right of
first refusal, right of first offer, proxy, voting agreement,
voting trust, registration rights agreement, stockholders'
agreement, etc.) with respect to the sale or voting of any shares
of capital stock of the Company (whether outstanding or issuable
upon conversion or exercise of outstanding securities). The
transactions contemplated by this Agreement and the Registration
Rights Agreement will not cause any anti-dilution protection
provisions given by the Company to any person or entity (including
without limitation, any stockholder, lender, warrant holder,
lessor and/or licensee) to become operative.
2.6. SEC DOCUMENTS. The Company has filed all
registration statements, reports, proxy statements or information
statements (collectively, the "SEC Reports") required to be filed
by the Company with the Securities and Exchange Commission (the
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"SEC") since July 31, 1992. Except as set forth on SCHEDULE 2.6,
as of their respective dates, each SEC Report (including exhibits
and any amendments thereto), filed by the Company with the SEC,
(i) was prepared in all material respects in accordance with the
applicable requirements of the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the
"Securities Exchange Act"), as the case may be, and the respective
rules and regulations promulgated thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or
incorporated by reference into the SEC Reports (including the
related notes and schedules) fairly presents the consolidated
financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of income, retained
earnings and cash flows of the Company included in or incorporated
by reference into the SEC Reports (including any related notes and
schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except as noted therein. As of the date hereof, the
Company is eligible to file registration statements under the
Securities Act on Form S-3 and the Company is not aware of any
facts or circumstances which would cause it to fail to meet the
eligibility requirements for use of Form S-3.
2.7 Projections. Each of (i) the detailed monthly
financial forecast in the form of an income statement and a
balance sheet for each of the Company, Electro-Metrics, Inc.,
Technipower, Inc. and Perfect Power Systems, Inc. for the fiscal
year ending July 31, 1996 and (ii) the Forecast Income Statements
for the Company and the Penril Datability Networks Division for
the fiscal years ending on July 31, 1995 through 1998,
(collectively, the "Projections") delivered to the Investors,
discloses all material assumptions made with respect to general
economic, financial and market conditions used in formulating such
Projections. To the knowledge of the Company, no facts exist
which would result in any material change in any of such
Projections. The Projections are based upon reasonable estimates
and assumptions, all of which are fair in light of current
conditions, have been prepared on the basis of the assumptions
stated therein, and reflect the reasonable estimate of the Company
of the results of operations, assets, liabilities and other
information projected therein.
2.8. LITIGATION; UNDISCLOSED LIABILITIES. (a) Except
as disclosed in the SEC Reports, there are no actions, suits or
proceedings pending against the Company or any of its Subsidiaries
or any of their respective directors or executive officers in
their capacity as such or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any
of their respective directors or executive
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officers, at law or in equity, or before or by any federal or
state commission, board, bureau, agency or instrumentality, that,
individually or in the aggregate, are or could reasonably be
expected to be material to the Company and its Subsidiaries taken
as a whole.
(b) Except as set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1994 or the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1995, except for the matters disclosed in the Company's
news release, dated September 19, 1995 and except for the
treatment of Technipower, Inc. as a discontinued operation, the
Company has no liability of any nature (matured or unmatured,
fixed or contingent) which has or could reasonably be expected to
have a Company Material Adverse Effect.
2.9. ABSENCE OF CERTAIN CHANGES. Since April 30, 1995
the Company has conducted its business only in the ordinary course
consistent with past practice and there has not been (a) except
for the matters disclosed in the Company's news release, dated
September 19, 1995 any event or events which, individually or in
the aggregate, have or could reasonably be expected to have a
Company Material adverse Effect, (b) any declaration, setting
aside or payment of any dividend or other distribution with
respect to its capital stock or any redemption or repurchase of
any shares of its capital stock, (c) any material change in its
accounting principles, practices or methods, (d) any asset or
property of the Company made subject to a lien of any kind, (e)
any waiver of any valuable right of the Company, or the
cancellation of any material debt or claim held by the Company,
(f) any sale, assignment or transfer of any tangible or intangible
assets of the Company, except in the ordinary course of business,
(g) any loan by the Company to any officer, director, employee,
consultant or shareholder of the Company, or any agreement or
commitment therefor (other than advances to such persons in the
ordinary course of business in connection with travel and travel
related expenses), (h) except as set forth on SCHEDULE 2.9, any
increase in the salaries or other compensation payable to any
officer, director or employee of the Company or any of its
Subsidiaries (except for normal increases in the ordinary course
of business consistent with past practice) or any increase in, or
addition to, other benefits to which any officer, director or
employee may be entitled (except as required by the terms of plans
as in effect on the date of this Agreement or as required by law),
(i) any incurrence of indebtedness for borrowed money (except in
the ordinary course of business consistent with past practice),
(j) except as set forth on SCHEDULE 2.9, any amendment to,
termination or threat of termination of any material right or
agreement to which the Company is a party, (k) any material
adverse change or threat of a material adverse change in the
Company's or any of its Subsidiaries' relations with, or any loss
or threat of loss of, any of the Company's important suppliers or
customers or (l) any material damage, destruction or loss,
whether or not covered by insurance, adversely affecting the
properties, business or prospects of the Company and its
Subsidiaries taken as a whole, or any deterioration in the
operating condition of the
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assets of the Company and its Subsidiaries which would have a
Company Material Adverse Effect.
2.10. TAXES. (a) Except as set forth on SCHEDULE
2.10, the Company and each of its Subsidiaries (i) have timely
filed all federal, state, local and foreign tax returns required
to be filed by any of them prior to the date of this Agreement and
all such returns are complete in all material respects, (ii) have
paid or accrued all Taxes (as hereinafter defined) that may be due
and payable with respect to such returns and (iii) have properly
accrued in all material respects all Taxes for such periods
subsequent to the periods covered by such returns. "Taxes," for
purposes of this Agreement, means any taxes, assessments, duties,
fees, levies, imposts, deductions, withholdings, including,
without limitation, income, gross receipts, ad valorem, value
added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and
gains taxes, or other governmental charges of any nature
whatsoever imposed by any government or taxing authority of any
country or political subdivision of any country and any
liabilities with respect thereto, including any penalties,
additions to tax, fines or interest thereon, and includes any
liability of the Company or any of its Subsidiaries arising under
any tax sharing agreement to which the Company or any of its
Subsidiaries is or has been a party.
(b) As of the close of the Company's taxable
year ended July 31, 1994, the Company and its Subsidiaries had a
consolidated net operating loss carryover for federal income tax
purposes of not less than $1,500,000. There are no limitations
pursuant to Section 382 of the Code or any of the provisions of
Treasury Regulation Section 1502-21 on the ability of the Company
and its Subsidiaries to utilize the net operating loss carryovers
described in the preceding sentence, and the ability of the
Company and its Subsidiaries to utilize such net operating loss
carryovers will not become subject to any such limitation by
reason of this Agreement or any of the transactions contemplated
hereby.
2.11. EMPLOYEE BENEFIT PLAN; LABOR AND EMPLOYMENT
MATTERS. (a) To the best knowledge of the Company, with respect
to each Company Benefit Plan (as hereinafter defined) (i) the
Company and each Subsidiary have performed all obligations
required to be performed by them under each Company Benefit Plan
and Employee Agreement (as hereinafter defined) and neither the
Company nor any Subsidiary is in default under or in violation of,
any Company Benefit Plan; (ii) each Company Benefit Plan has been
established and maintained in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA (as hereinafter
defined) and the Internal Revenue Code of 1986, as amended, and
any regulations promulgated or proposed thereunder (collectively,
the "Code"); (iii)
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each Company Benefit Plan intended to qualify under Section 401 of
the Code is, and since its inception has been, so qualified and a
determination letter has been issued by the IRS to the effect that
each such Company Benefit Plan is so qualified and that each trust
forming a part of any such Company Benefit Plan is exempt from tax
pursuant to Section 501(a) of the Code and no circumstances exist
which would adversely affect this qualification or exemption and
(iv) no non-exempt "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Benefit Plan, Employee Agreement, or
against any Company Benefit Plan or against the assets of any
Company Benefit Plan.
(b) None of the Company, any Subsidiary, or any
ERISA Affiliate (as hereinafter defined) presently sponsors,
maintains, contributes to, nor is the Company, any Subsidiary or
any ERISA Affiliate required to contribute to, nor has the
Company, any Subsidiary nor any ERISA Affiliate ever sponsored,
maintained, contributed to, or been required to contribute to, a
Pension Plan (as hereinafter defined).
(c) Except as disclosed on Schedule 2.11(c),
the execution of, and the performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any Company Benefit Plan, Employee Agreement, trust or
loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee (as hereinafter defined).
No payment or benefit which will or may be made by the Company,
any Subsidiary, any Investor or any of their respective affiliates
with respect to any Employee will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of
the Code.
(d) No work stoppage or labor strike against
the Company or any Subsidiary by Employees is pending or
threatened. Neither the Company nor any Subsidiary (i) is
involved in or threatened with any labor dispute, grievance, or
litigation relating to labor matters involving any Employees,
including, without limitation, violation of any federal, state or
local labor, safety or employment laws (domestic or foreign),
charges of unfair labor practices or discrimination complaints;
(ii) has engaged in any unfair labor practices within the meaning
of the National Labor Relations Act; or (iii) is presently, nor
has been in the past a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees
and no such agreement or contract is currently being negotiated by
the Seller or any of its affiliates. No Employees are currently
represented by any labor union for purposes of collective
bargaining and no activities the purpose of which is to achieve
such representation of all or some of such Employees are
threatened or ongoing.
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(e) None of the Employees listed on SCHEDULE
2.11(e) has threatened to resign or announced his resignation and,
to the best knowledge of the Company, no third party may assert
any valid claim against the Company, the Investors or any of the
Designated Persons (as hereinafter defined) with respect to (i)
the continued employment by, or association with, the Company, of
any of the present officers or employees of or consultants to the
Company (collectively, the "Designated Persons") or (ii) the use,
in connection with any business presently conducted or proposed to
be conducted by the Company or any of the Designated Persons of
any information which the Company or any of the Designated Persons
would be prohibited from using under any prior agreements or
arrangements or any legal considerations applicable to unfair
competition, trade secrets or proprietary information.
(f) For purposes of this Agreement, the
following terms shall have the following meanings: "Benefit Plan"
means each plan, program, policy, payroll practice, contract,
agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock
related awards, fringe benefits or other employee benefits of any
kind, including, without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA. "Company Benefit
Plan" means each Benefit Plan (other than an Employee Agreement)
which is now or previously has been sponsored, maintained,
contributed to, or required to be contributed to, by the Company,
any Subsidiary or any ERISA Affiliate for the benefit of any
Employee, and pursuant to which the Company, any Subsidiary or any
ERISA Affiliate has or may have any liability, contingent or
otherwise (all of which Company Benefit Plans are listed on
SCHEDULE 2.11(f)). "Employee" means each current, former, or
retired employee, officer, consultant, independent contractor,
agent or director of the Company or any Subsidiary. "Employee
Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or
contract between the Company or any Subsidiary and any Employee
pursuant to which the Company or any Subsidiary has or may have
any liability, contingent or otherwise (all of which Employee
Agreements are listed on SCHEDULE 2.11(f)). "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" means each business or entity which is a member
of a "controlled group of corporations," under "common control" or
an "affiliated service group" with the Company within the meaning
of Section 414(b), (c) or (m) of the Code, or required to be
aggregated with the Company under Section 414(o) of the Code, or
is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA. "Pension Plan" means each Company
Benefit Plan which is a pension plan subject to Title IV of ERISA.
2.12. INTELLECTUAL PROPERTY RIGHTS. (a) The Company
owns or has the right to use all Intellectual Property Rights (as
hereinafter defined) necessary, required or desirable for the
conduct of its business as presently conducted or as presently
proposed to be conducted. The material licenses, patents,
trademarks, patent applications and trade
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names of the Company and its Subsidiaries are identified on
SCHEDULE 2.12 (collectively, the "Requisite Rights").
(b) Except as disclosed on SCHEDULE 2.12, to
the knowledge of the Company no product, service or process
manufactured, marketed, sold or used, or proposed to be
manufactured, marketed, sold or used, by the Company violates, or
will violate, any license or knowingly infringes upon, or will
infringe upon, any Intellectual Property Rights or assumed name of
another; and there is no pending or threatened claim or litigation
against the Company (nor does there exist any basis therefor)
contesting the validity of or the right to use any of the
foregoing, nor has the Company received any notice that any of the
Requisite Rights or the operation or proposed operation of the
Company's business conflicts, or will conflict, with the asserted
rights of others, nor does there exist any basis for any such
conflict.
As used herein, the term "Intellectual Property Rights" means all
industrial and intellectual property rights, including, without
limitation, Proprietary Technology (as hereinafter defined),
patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark
applications, copyrights, know-how, certificates of public
convenience and necessity, franchises, licenses, trade secrets,
proprietary processes and formulae. As used herein, "Proprietary
Technology" means all source and object code, algorithms,
architecture, structure, display screens, layouts, processes,
inventions, trade secrets, know-how, development tools and other
proprietary rights owned by the Company, pertaining to any product
or service manufactured, marketed or sold, or proposed to be
manufactured, marketed or sold (as the case may be), by the
Company, or used, employed or exploited in the development,
license, sale, marketing, distribution or maintenance thereof, and
all documentation and media constituting, describing or relating
to the above, including, without limitation, manuals, memoranda,
know-how, notebooks, patents and patent applications, trademarks
and trademark applications, copyrights and copyright applications,
records and disclosures.
2.13. TITLE TO PROPERTIES; INSURANCE. The Company and
its Subsidiaries have good and valid title to, or, in the case of
property leased by any of them as lessee, a valid leasehold
interest in, their respective properties (whether real, personal
or mixed) and assets, free of all liens and encumbrances other
than those referred to in the financial statements of the Company
(or the notes thereto) for the fiscal year ended July 31, 1994 or
the quarter ended April 30, 1995, included in the SEC Reports,
except in each case for such defects in title and such other liens
and encumbrances which are disclosed in the SEC Reports or which
do not in the aggregate materially detract from the value to the
Company of the properties and assets of the Company and its
Subsidiaries taken as a whole. The Company and its Subsidiaries
maintain insurance in such amounts (to the extent available in the
public market), including self-insurance, retainage and deductible
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arrangements, and of such a character as is reasonable for
companies engaged in the same or similar business.
2.14. NO DEFAULTS. The Company is not in default (a)
under its Certificate of Incorporation or By-laws, (b) under any
indenture, mortgage, lease, purchase or sales order, or any other
contract, agreement or instrument to which the Company is a party
or by which the Company or any of its respective properties is
bound or affected, which default or defaults would, in the
aggregate, have a Company Material Adverse Effect or (c) with
respect to any order, writ, injunction or decree of any court of
any Federal, state, municipal or other domestic or foreign
governmental department, commission, board, bureau, agency or
instrumentality, which default or defaults would, in the
aggregate, have a Company Material Adverse Effect. There exists
no condition, event or act which constitutes, or which after
notice, lapse of time or both, would constitute, a default under
any of the foregoing, which default would have a Company Material
Adverse Effect.
2.15. COMPLIANCE WITH LAW. (a) Except as disclosed on
SCHEDULE 2.15, to the best knowledge of the Company, the Company
(i) is and has been in compliance in all material respects with
all Federal, state, local and foreign laws, rules, ordinances,
codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders applicable to it, its
business and the ownership of its assets, including, but not
limited to Environmental Laws (as hereinafter defined), and (ii)
has all Federal, state, local and foreign governmental licenses,
permits and qualifications material to and necessary in the
conduct of its business, such licenses, permits and qualifications
are in full force and effect, and, to the best knowledge of the
Company, no violations have been recorded in respect of any such
licenses, permits and qualifications, no proceeding is pending or
threatened to revoke or limit any such license, permit or
qualification and there is no reason why any such license, permit
or qualification would not be renewed in the ordinary course.
(b) For purposes of this Agreement,
"ENVIRONMENTAL LAWS" means, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601, ET SEQ.; the Emergency Planning and Community Right-to
Know Act of 1986, 42 U.S.C. section 11001, ET SEQ.; the Resource
Conservation and Recovery Act, 42 U.S.C. section 6901, ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. section 2601, ET SEQ.; the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
section 136, ET SEQ.; the Clean Air Act, 42 U.S.C. section 7401,
ET SEQ.; the Clean Water Act (Federal Water Pollution Control Act),
33 U.S.C. section 1251, ET SEQ.; the Safe Drinking Water Act,
42 U.S.C. section 300f, ET SEQ.; the Occupational Safety and Health Act,
29 U.S.C. section 641, ET SEQ.; the Hazardous Materials Transportation
Act, 49 U.S.C. section 1801, ET SEQ.; as any of the above statutes have
been or may be amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other foreign,
federal, state or local law, statute, ordinance, rule or
regulation governing environmental
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matters, as the same have been or may be amended from time to
time, including any common law cause of action providing any right
or remedy with respect to environmental matters, and all
applicable judicial and administrative decisions, orders, and
decrees relating to environmental matters.
2.16. RELATED PARTY TRANSACTIONS. Except as disclosed
in the SEC Reports or on Schedule 2.16, there are no contracts,
arrangements or transactions in effect between the Company or any
of its Subsidiaries, on the one hand, and any officer, director or
5% stockholder of the Company, or any affiliate or immediate
family member of any of the foregoing persons, on the other hand.
2.17. USE OF PROCEEDS. The net proceeds received by
the Company from the sale of the Shares will be used by the
Company to repay indebtedness in an aggregate amount of $1,500,000
and for general working capital purposes and expenses incurred in
connection with this Agreement.
2.18. OFFERING EXEMPTION. Assuming the representations
and warranties in Section 3.3 are true and correct, the offering
and sale of the Shares pursuant hereto is exempt from registration
under the Securities Act and the aforesaid offering and sale is
also exempt from registration under applicable state securities
and "blue sky" laws.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor represents and warrants as to itself to the Company
as follows:
3.1. ORGANIZATION; POWER AND AUTHORITY; AUTHORIZATION;
ENFORCEABLE OBLIGATIONS. The Investor is a limited partnership,
or in the case of International, a corporation, duly organized,
validly existing under the laws of the jurisdiction of its
formation having all partnership or corporate power and authority,
as the case may be, and all necessary licenses and permits
required to carry on its business as now conducted and to enter
into and perform this Agreement. The execution, delivery and
performance by the Investor of this Agreement and the Registration
Rights Agreement has been duly authorized by all necessary action
on the part of the Investor. Each of this Agreement and the
Registration Rights Agreement constitutes a valid and binding
agreement of such Investor enforceable against such Investor in
accordance with its terms.
3.2. NO VIOLATION. The execution, delivery and
performance of this Agreement and the Registration Rights
Agreement and the consummation of the transactions contemplated
hereby and thereby, and compliance with the provisions hereof and
thereof by the Investor will not violate (a) any provision of any
law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or
other governmental body applicable to the Investor or any of its
properties or assets or (b) conflict with or result in any breach
of any of the terms,
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conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under the Investor's
partnership agreement or any note, indenture, mortgage, lease
agreement or other contract, agreement or instrument to which the
Investor is a party or by which any of them or any of their
properties is bound or affected. No permit, authorization,
consent or approval of or by, or any notification of, or filing
with, any person (governmental or private) is required in
connection with the execution, delivery and performance by the
Investor of this Agreement or the Registration Rights Agreement.
3.3. SECURITIES ACT REPRESENTATIONS. (a) The Investor
is acquiring its Shares for its own account, for investment and
not with a view to the distribution thereof within the meaning of
the Securities Act. The Investor is an "Accredited Investor" (as
defined in Rule 501(a) under the Securities Act).
(b) Each Investor acknowledges and agrees that
the Shares have not been registered under the Securities Act or
the securities laws of any state and that they may be sold or
otherwise disposed of only in one or more transactions registered
under the Securities Act and, where applicable, such laws or
transactions as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such
laws are available. Each Investor acknowledges that, except as
provided in the Registration Rights Agreement, such Investor has
no right to require the Company to register the Shares. Each
Investor understands and agrees that the Shares are subject to
stop transfer orders and each Stock Certificate shall bear the
following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS."
4. COVENANTS AND AGREEMENTS.
4.1. BOARD MEMBERSHIP. (a) The Board of Directors of
the Company shall take all necessary action to increase the size
of the Board of Directors by one and to fill the vacancy created
thereby by electing the person designated by the following
Investor (the "Designating Investor"); Partners, so long as it
holds Shares and thereafter International so long as it holds
Shares and thereafter Endowment; within 10 days after
13
<PAGE>
such designation, to the Board of Directors as a Class II director
and, so long as any Investors hold shares of Common Stock
representing 10% of all shares of the Common Stock then
outstanding (exclusive of any treasury stock), at each subsequent
annual meeting for the election of directors of Class II, the
Designating Investor will be entitled to propose (and the Board of
Directors will elect to fill the vacancy or the Company will
nominate and recommend, as the case may be) one person as a member
of the Company's Board of Directors; PROVIDED, that the
Designating Investor shall be entitled to designate (and the
Company will nominate and recommend) as a member of the Board of
Directors any person reasonably acceptable to the Board of
Directors of the Company. In the event of any vacancy arising by
reason of the resignation, death, removal (including, but not
limited to, a resignation pursuant to Section 4.1(c) hereof) or
inability to serve of the Designating Investor's nominee, the
Designating Investor shall be entitled, subject to the foregoing
proviso, to designate a successor to fill such vacancy until the
next annual meeting for the election of Class II directors. The
Company agrees that if the Designating Investor's nominee is not
elected, the Designating Investor will be entitled to have one
observer selected by the Designating Investor present at all
meetings of the Board of Directors and such observer shall have
the same access to information concerning the business and
operations of the Company and its Subsidiaries and at the same
time as directors of the Company and shall be entitled to
participate in discussions and consult with the Board of
Directors, without voting.
(b) Without the prior consent of the Investors,
the Company shall not change the size of the Board of Directors,
the classification of any director or otherwise change or modify
Article Seventh of the Company's Certificate of Incorporation or
Sections 2 or 3 of the Company's By-laws.
(c) The Designating Investor shall use its best
efforts to cause their designee to provide to the Company in
connection with disclosures required in filings with the SEC such
information as is required by Items 401 through 405 of Regulation
S-K or any successor or new rule or regulation promulgated by the
SEC with respect to the disclosure of information relating to
directors. If, notwithstanding the Designating Investor's best
efforts, the Designating Investor's designee fails to provide such
information, subject to applicable law, the Designating Investor
shall cause such designee to resign from the Board of Directors
and the Designating Investor shall not be entitled to designate
such designee as a member of the Board of Directors, but shall
continue to be entitled to designate another person (subject to
the provisions of Section 4.1(a)) as a member of the Board of
Directors.
(d) All rights and obligations pursuant to this
Section 4.1 terminate when the Investors collectively own in the
aggregate less than ten percent of the issued and outstanding
Common Stock (exclusive of any treasury stock) or any Investor
fails to comply with the terms of this Agreement.
14
<PAGE>
4.2. RIGHT OF FIRST OFFER. (a) Except for (i) shares
of Common Stock issued or sold to employees or directors of the
Company pursuant to an existing Benefit Plan or any new Benefit
Plan adopted by the Company in good faith, (ii) the Proposed Sale,
(iii) a public offering of Common Stock by the Company or (iv) the
issuance or transfer of shares of Common Stock to unaffiliated
third parties in connection with licensing or similar arrangements
consistent with past practice, in the event that the Company
proposes to issue or sell any shares of Common Stock or securities
convertible into or exercisable for shares of Common Stock and the
purchase price for such shares of Common Stock, or the conversion
price or exercise price for the shares of Common Stock into which
such securities are convertible or for which such securities are
exercisable, as the case may be, shall be less than the Market
Value (as hereinafter defined) on the date notice is given
pursuant to clause (i) below:
(i) the Company shall give each of the
Investors written notice of its intent to issue or sell such
shares of Common Stock or other securities, specifying the
number thereof to be sold, the purchase price and the terms
and conditions of such sale and offering;
(ii) if, within 5 Business Days (as hereinafter
defined) after receipt of the notice given pursuant to
clause (i) above one or more Investors shall not have
accepted such offer in writing with respect to any shares of
Common Stock or other securities specified in such notice,
then the Company shall be free to issue or sell to any third
party such shares of Common Stock or other securities with
respect to which such offer has not been accepted at a price
equal to or above the purchase price and on other terms and
conditions no less favorable to the Company than those
specified in such notice at any time within 45 days of the
expiration of such 5-Business Day period; provided that if
such shares of Common Stock shall be sold to an officer,
director or an affiliate of the Company, either (x) the
material facts as to such officer's, director's or
affiliate's relationship and as to the sale of Common Stock
are disclosed or are known to the Board of Directors, and
the Board of Directors in good faith authorizes the sale by
the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less
than a quorum, or (y) the material facts as to such
officer's, director's or affiliate's relationship and as to
the sale of Common Stock are disclosed or are known to the
shareholders entitled to vote thereon, and the sale is
specifically approved in good faith by vote of the
shareholders, or (z) the sale of Common Stock is fair to the
Company as of the time it is authorized, approved or
ratified, by the Board of Directors or the shareholders;
(iii) if the Company shall not have consummated
such issuance or sale within the 45-day period referred to
in clause (ii) above, then the Company
15
<PAGE>
may not thereafter sell such Shares or other securities
without complying again with the provisions of this
Section 4.2; and
(iv) if one or more Investors shall have
accepted such offer in whole or in part within 5 Business
Days after receipt of the notice given pursuant to clause
(i) above, then such Investor or Investors shall purchase
such shares of Common Stock and/or other securities as to
which such offer has been accepted as promptly as is
reasonably practicable.
(b) For purposes of this Section 4.2, "Market
Value" means (1) if the Common Stock is quoted on the National
Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System (the "National Market System") or
is listed on one or more stock exchanges, the average of the
closing sales prices of a share of Common Stock on the National
Market System if quoted thereon or on the primary national or
regional stock exchange on which such shares are listed or (2) if
the Common Stock is not so quoted or listed but is traded in the
over-the-counter market (other than the National Market System),
the average of the closing bid and asked prices of a share of
Common Stock, in the case of clauses (1) and (2), for the 20
trading days (or such lesser number of trading days as the Common
Stock shall have been so listed, quoted or traded) next preceding
the date of measurement or (3) if the Common Stock is not so
quoted or listed and is not traded in the over-the-counter market,
the fair market value of a share of Common Stock shall be
determined reasonably and in good faith by the Board of Directors
of the Company. "Business Day" means a day on which federal or
state chartered banking institutions located in the State of
Connecticut are authorized by law to close.
(c) All rights and obligations pursuant to this
Section 4.2 terminate when the Investors collectively own in the
aggregate less than ten percent of the issued and outstanding
Common Stock (exclusive of any treasury stock) or any Investor
fails to comply with the terms of this Agreement.
4.3. USE OF PROCEEDS. The Company shall apply the net
proceeds from the sale of the Shares as provided in Section 2.17
hereof.
4.4. STANDSTILL. Subject to the continued compliance
of the Company with the terms of this Agreement and the
Registration Rights Agreement, so long as any obligations of the
Company remain pursuant to this Agreement or the Registration
Rights Agreement, until the later to occur of the expiration of
(i) a period of 12 months from the date of this Agreement or (ii)
the permanent waiver effected in compliance with Section 10.5
hereof, following the resignation or removal of the Investor's
designee from the Board of Directors, of the Investors' rights
under Section 4.1 and 4.2 hereof, none of the Investors will,
without the prior written consent of the Company's Board of
Directors:
16
<PAGE>
(a) make, or in any way participate, directly
or indirectly, in any solicitation of proxies or consents (as such
terms are used in the rules of the SEC), or seek to advise or
influence any person or entity, with respect to the voting of any
voting securities of the Company;
(b) initiate or propose any stockholder
proposal with respect to the Company as described in Rule 14a-8
under the Securities Exchange Act;
(c) make any public announcement with respect
to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transaction involving the Company or
any Subsidiary or division thereof or any of their securities or
assets (it being acknowledged that informal discussions with the
Board of Directors shall not be a breach of this provision);
(d) otherwise act alone or in concert with
others, to seek to control or influence the management, Board of
Directors or policies of the Company (provided, however, that
nothing herein shall restrict the Investors from exercising their
rights pursuant to Section 4.1 hereof and the rights of their
designee on the Board of Directors under applicable law and the
Company's Certificate of Incorporation and By-laws); or
(e) form, join or in any way participate in a
"group" as defined in the Securities Exchange Act, or advise,
assist or encourage any other person in connection with any of the
foregoing.
Each Investor shall promptly advise the Company of any
inquiry or proposal made to such Investor with respect to any of
the foregoing.
5. TRANSFER TAXES. The Company agrees that it will pay,
and will hold the Investor harmless from any and all liability
with respect to any stamp or similar taxes which may be determined
to be payable in connection with the execution and delivery and
performance of this Agreement or any modification, amendment or
alteration of the terms or provisions of this Agreement, and that
it will similarly pay and hold the Investors harmless from all
issue taxes in respect of the issuance of the Shares to the
Investors.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS, ETC. All representations, warranties and statements
contained in any agreement, certificate or other instrument
delivered by the Company pursuant to this Agreement (including,
but not limited to the Registration Rights Agreement) or in
connection with the transactions contemplated by this Agreement
shall constitute representations and warranties by the Company
under this Agreement. All representations and warranties made or
deemed to be made hereunder by the Company or the Investors shall
survive the Closing until the later of (i) the filing of the
Company's Annual Report on Form 10-K for the fiscal year
17
<PAGE>
ended July 31, 1995 or (ii) the expiration of a period of six
months from the date hereof or, with respect to representations or
warranties deemed to be made hereunder pursuant to the previous
sentence, for such longer period, if any, for which the agreement,
certificate or instrument wherein such representation, warranty or
statement is made, is effective by its terms. All agreements and
covenants contained herein and in the Registration Rights
Agreement shall survive indefinitely until, by their respective
terms, they are no longer operative.
7. INDEMNIFICATION. (a) The Company agrees to
indemnify and save harmless each Investor and its officers,
directors, partners, employees and agents and each person who
controls the Investor within the meaning of the Securities Act or
the Securities Exchange Act, from and against any and all costs,
expenses (including attorney's fees), damages or other liabilities
resulting from any breach by the Company of this Agreement or the
Registration Rights Agreement or (subject to Section 2.6 of the
Registration Rights Agreement) any legal, administrative or other
proceedings arising out of the transactions contemplated hereby
(other than such costs, expenses, damages or other liabilities
resulting, directly or indirectly, (i) from the breach by such
Investor of any of its agreements contained herein or (ii) from
the gross negligence or willful misconduct of such Investor or any
of its officers, directors, partners, employees or agents, or any
person who controls such Investor within the meaning of the
Securities Act or Securities Exchange Act.
(b) Each Investor severally, but not jointly,
agrees to indemnify and save harmless the Company and its
officers, directors, employees and agents and each person who
controls the Company within the meaning of the Securities Act or
the Securities Exchange Act, from and against any and all costs,
expenses (including attorney's fees), damages or other liabilities
resulting from any breach by such Investor of its representations,
warranties and covenants contained in this Agreement or any legal,
administrative or other proceedings arising out of the
transactions contemplated hereby (other than such costs, expenses,
damages or other liabilities resulting, directly or indirectly,
(i) from the breach by the Company of any of its agreements
contained herein or (ii) from the gross negligence or willful
misconduct of the Company or any of its officers, directors,
employees or agents or any person who controls the Company within
the meaning of the Securities Act or the Securities Exchange Act).
(c) Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this
Section 7, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action or
proceeding; PROVIDED, HOWEVER, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding
subsections of this Section 7, except to the
18
<PAGE>
extent that the indemnifying party is actually prejudiced by such
failure to give notice, and shall not relieve the indemnifying
party from any liability which it may have to the indemnified
party otherwise than under this Section 7. In case any such
action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and,
unless in the opinion of outside counsel to the indemnified party
a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if
the defendants in any such action or proceeding include both the
indemnified party and the indemnifying party and if in the opinion
of outside counsel to the indemnified party there may be legal
defenses available to such indemnified party and/or other
indemnified parties which are different from or in addition to
those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to
defend such action or proceeding on behalf of such indemnified
party or parties; PROVIDED, HOWEVER, that the indemnifying party
shall be obligated to pay for only one counsel for all indemnified
parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof
and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party
for any legal expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation (unless the first proviso in the preceding sentence
shall be applicable). No indemnifying party shall be liable for
any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent
of the indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification
provided for in this Section 7 shall for any reason be held by a
court to be unavailable to an indemnified party under subsection
(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under subsection (a) or (b) hereof, the
indemnified party and the indemnifying party under subsection (a)
or (b) hereof shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same),
(i) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss,
claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations, or (ii) if
the allocation provided by clause (i) above is not permitted by
applicable law or if the
19
<PAGE>
allocation provided in this clause (ii) provides a greater amount
to the indemnified party than clause (i) above, in such proportion
as shall be appropriate to reflect not only the relative fault but
also the relative benefits received by the indemnifying party and
the indemnified party from the offering of the securities covered
by such registration statement as well as any other relevant
equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this
Section 7(c) were to be determined by pro rata allocation or by
any other method of allocation which does not take into account
the equitable considerations referred to in the preceding sentence
of this Section 7(c). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The
Investors' obligations to contribute as provided in this
subsection (c) are several and not joint and shall be in
proportion to the relative value of the respective number of
shares of Common Stock then held by them. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment
for any settlement of any action or claim effected without such
Person's consent, which consent shall not be unreasonably
withheld.
(e) INDEMNIFICATION PAYMENTS. The
indemnification and contribution required by this Section 7 shall
be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred;
PROVIDED, HOWEVER, that such periodic payments shall only be made
upon delivery of an agreement to the indemnifying party by the
indemnified party to repay the amounts advanced to the extent it
is ultimately determined that the indemnified party is not
entitled to indemnification pursuant to this Section 7 or
otherwise. The parties hereto agree that for each of them such
agreement shall be deemed to be contained herein.
8. SPECIFIC PERFORMANCE; REMEDIES. (a) The Investors,
on the one hand, and the Company, on the other hand, acknowledge
and agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof in any
court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or in equity.
(b) In case any one or more of the
representations, warranties, covenants and/or agreements set forth
in this Agreement shall have been breached by the a party hereto,
each of the other parties may proceed to protect and enforce its
rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of
any such covenant or agreement contained in this Agreement.
20
<PAGE>
9. EXPENSES. Except as otherwise provided herein, the
Company and the Investors shall each pay all costs and expenses
incurred by each of them or on its behalf in connection with this
Agreement and the transactions contemplated hereby, including,
without limiting the generality of the foregoing, fees and
expenses of its own financial consultants, accountants and
counsel; provided, that the Company shall pay the Investors' costs
and expenses in connection with this Agreement in an aggregate
amount not exceeding $20,000.
10. MISCELLANEOUS.
10.1. SUCCESSORS AND ASSIGNS. This Agreement shall
bind and inure to the benefit of and be binding upon the Company
and the Investors and the respective successors, assigns, heirs
and personal representatives of the Company and the Investors.
This Agreement may not be assigned by the Company. Each Investor
shall be entitled to assign its rights under this Agreement.
10.2. TRANSFER OF SECURITIES. Each Investor shall be
entitled to transfer all or any part of the Shares purchased by it
hereunder to any person in compliance with the provisions of the
Securities Act and the rules and regulations promulgated
thereunder.
10.3. ENTIRE AGREEMENT. This Agreement and the
Registration Rights Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof
contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
10.4. NOTICES. All notices, requests, consents and
other communications hereunder to any party shall be deemed to be
sufficient if contained in a written instrument delivered in
person or sent by telecopy, nationally-recognized overnight
courier or first class registered or certified mail, return
receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties:
(a) If to any Investor, to it at:
345 Pequot Avenue
PO Box 760
Southport, Connecticut 06490-0577
Attention: Arthur J. Samberg
Telecopier: (203) 255-2558
21
<PAGE>
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
Telecopier: (212) 859-8587
(b) If to the Company, to it at:
Penril DataComm Networks, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20810
Attention: Chairman
With a copy to:
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Richard D. Margolis, Esq.
Telecopier: (216) 363-4588
All such notices, requests, consents and other communications
shall be deemed to have been given when received.
10.5. AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended, or any of the provisions
hereof waived, temporarily or permanently, except pursuant to the
written consent of the Company and Investors holding a majority of
the Shares then held by the Investors.
10.6. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together shall
constitute one and the same instrument.
10.7. HEADINGS. Headings of the Articles and Sections
of this Agreement are for convenience only, and shall be given no
substantive or interpretive effect whatsoever.
10.8. INTERPRETATION. In this Agreement, unless the
context otherwise requires, words describing the singular number
shall include the plural and vice versa,
22
<PAGE>
and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and
partnerships and vice versa.
10.9. WAIVERS. Except as provided in this Agreement,
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 in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
10.10. SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement
or otherwise affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.11. GOVERNING LAW; JURISDICTION. (a) This Agreement
shall be construed and enforced in accordance with and governed by
the laws of the State of Delaware, without giving effect to the
conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and
unconditionally consents to the jurisdiction of the courts of
Delaware in respect of the interpretation and enforcement of the
provisions of this Agreement, and hereby agrees that service of
process in any such action, suit or proceeding against the other
party with respect to this Agreement may be made upon it in any
manner permitted by the laws of Delaware or the federal laws of
the United States.
10.12. PUBLIC ANNOUNCEMENTS. The Company and the
Investors shall, subject to their respective legal obligations
(including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby
and in making any filings with any federal or state governmental
or regulatory agency or with any national securities exchange with
respect thereto.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed
this agreement as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By: /s/ Henry D. Epstein
--------------------------------
Title: President, Chairman, and CEO
PEQUOT PARTNERS FUND, L.P.
By: Pequot General Partners,
its general partner
By: /s/ Arthur J. Samberg
--------------------------------
Managing Partner
PEQUOT ENDOWMENT FUND, L.P.
By: Pequot Endowment Partners, L.P.,
its general partner
By: /s/ Arthur J. Samberg
--------------------------------
Managing Partner
PEQUOT INTERNATIONAL FUND INC.
By: /s/ Arthur J. Samberg
--------------------------------
Name: Arthur J. Samberg
Title: General Partner
<PAGE>
SCHEDULE I
TO
STOCK PURCHASE AGREEMENT
- - ------------------------------------------------------------------
INVESTOR # SHARES OF COMMON AGGREGATE PURCHASE
STOCK PRICE
- - ------------------------------------------------------------------
Pequot Partners Fund, L.P. 636,000 $3,180,000
- - ------------------------------------------------------------------
Pequot Endowment Fund, L.P. 260,000 $1,300,000
- - ------------------------------------------------------------------
Pequot International Fund Inc. 569,000 $2,845,000
- - ------------------------------------------------------------------
TOTALS 1,465,000 $7,325,000
- - ------------------------------------------------------------------
<PAGE>
EXHIBIT 3
REGISTRATION RIGHTS AGREEMENT, dated as of September
22, 1995, by and among PENRIL DATACOMM NETWORKS, INC., a Delaware
corporation ("the Company"), PEQUOT PARTNERS FUND, L.P., a
Delaware limited partnership ("Partners"), PEQUOT INTERNATIONAL
FUND, INC., a British Virgin Islands corporation
("International"), and PEQUOT ENDOWMENT FUND, L.P., a Delaware
limited partnership ("Endowment"); (Partners, International and
Endowment are herein individually referred to as an "Investor" and
collectively as the "Investors").
The Company and the Investors have entered into a
Stock Purchase Agreement (the "Purchase Agreement"), dated as of
the date hereof, pursuant to which the Investors have purchased
from the Company an aggregate of 1,465,000 shares of Common Stock
(as hereinafter defined).
The parties hereto desire to provide certain
registration rights with respect to the shares of Common Stock
purchased pursuant to the Purchase Agreement.
Accordingly, the parties hereto agree as follows:
1. DEFINITIONS. As used herein, unless the context
otherwise requires, the following terms have the following
respective meanings:
"Certificate of Incorporation" means the Restated
Certificate of Incorporation of the Company, as amended or
restated hereafter from time to time.
"Commission" means the Securities and Exchange
Commission or any other Federal agency at the time administering
the Securities Act.
"Common Stock" means any shares of Common Stock, par
value $.01 per share, of the Company now or hereafter authorized
to be issued, and any and all securities of any kind whatsoever of
the Company which may be issued on or after the date hereof in
respect of, or in exchange for, shares of Common Stock pursuant to
a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules
and regulations of the Commission thereunder, all as the same
shall be in effect at the time. Reference to a particular section
of the Exchange Act shall include a reference to the comparable
section, if any, of any such similar Federal statute.
"Holders" means the Investors and any Persons who have
acquired the Common Stock from the Investors in accordance with
the provisions of the Purchase
<PAGE>
Agreement, other than Persons who have acquired such Common Stock
in connection with a public offering.
"Person" means a corporation, an association, a
partnership, an organization, a business, a trust, an individual,
or any other entity or organization, including a government or
political subdivision or an instrumentality or agency thereof.
"Registrable Securities" means (i) the shares of
Common Stock issued pursuant to the Purchase Agreement, and (ii)
any Common Stock issued with respect to the Common Stock referred
to in clause (i) by way of a stock dividend, stock split or
reverse stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or otherwise. As to any
particular Registrable Securities, such securities shall cease to
be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement (ii)
they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (iii)
they shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall have
been delivered by the Company and subsequent disposition of them
shall not require the registration under the Securities Act, or
(iv) they shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to
the registration and disposition of the Registrable Securities
pursuant to Section 2 hereof, including, without limitation, all
registration, filing and applicable national securities exchange
fees; all fees and expenses of complying with state securities or
blue sky laws (including fees and disbursements of counsel to the
underwriters or the Holders in connection with "blue sky"
qualification of the Registrable Securities and determination of
their eligibility for investment under the laws of the various
jurisdictions); all duplicating and printing expenses; all
messenger and delivery expenses; the fees and disbursements of
counsel for the Company and of its independent public accountants,
including the expenses of "cold comfort" letters or, in connection
with a registration pursuant to Section 2.3 only, any special
audits required by, or incident to, such registration; all fees
and disbursements of underwriters (other than underwriting
discounts and commissions); all transfer taxes; and the reasonable
fees and expenses of one counsel to the Holders; provided,
however, that Registration Expenses shall exclude and the Holders
shall pay underwriting discounts and commissions in respect of the
Registrable Securities being registered.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be
in effect at the time. References to a particular section of the
Securities Act shall include a reference to the comparable
section, if any, of any such similar Federal statute.
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2. SHELF REGISTRATION; REGISTRATION UNDER SECURITIES
ACT, ETC.
2.1 SHELF REGISTRATION. Prior to December 31,
1995, the Company shall file with the Commission, at the Company's
expense, a "shelf" registration statement on any appropriate form
pursuant to Rule 415 under the Act covering all Registrable
Securities (the "Shelf Registration"). The Company shall use its
best efforts to have the Shelf Registration declared effective as
promptly as practicable after such filing (but not later than 150
days after the date hereof) and to keep the Shelf Registration
continuously effective three years following the date on which the
Shelf Registration is declared effective (the "Shelf Registration
Period"). The Company shall, to the extent necessary, supplement
or amend the Shelf Registration (in each case, at the Company's
expense) to keep the Shelf Registration effective during the Shelf
Registration Period. The Company further agrees to supplement or
amend any Shelf Registration, as required by the registration form
utilized by the Company or by the instructions applicable to such
registration form or by the Securities Act or the rules and
regulations thereunder or as reasonably requested by any Holder.
The Company shall furnish to the Holders copies, in substantially
the form proposed to be used and/or filed, of any such supplement
or amendment at least 30 days prior to its being used and/or filed
with the Commission. The Company hereby consents to the use (in
compliance with applicable law) of the prospectus or any amendment
or supplement thereto by each of the selling Holders of
Registrable Securities in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any
amendment or supplement thereto. The Company shall pay all
Registration Expenses (other than fees and disbursements of
underwriters) incurred in connection with the Shelf Registration,
whether or not it becomes effective. In no event shall the Shelf
Registration include securities other than Registrable Securities,
unless the Holders of all Registrable Securities consent to such
inclusion. Nothing herein shall obligate the Company to incur or
pay for fees and disbursements of underwriters in connection with
a distribution under the Shelf Registration.
2.2 REGISTRATION ON REQUEST.
(a) REQUEST. Subject to the provisions
of Section 2.2(h) below, (i) if the Shelf Registration remains
continuously effective during the Shelf Registration Period in
accordance with the terms hereof, at any time or from time to time
after the expiration of the Shelf Registration Period and until
the later of (I) the date which is 30 days after the Company shall
have filed with the Commission its Annual Report on Form 10-K for
the fiscal year ending July 31, 1999 or (II) the fourth
anniversary hereof, or (ii) if for any reason the Shelf
Registration does not become effective within 150 days after the
date hereof or ceases to be effective at any time prior to the
expiration of the Shelf Registration Period, at any time or from
time to time after the date which is 150 days from the date hereof
(if the Shelf Registration fails to become
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effective) or the date on which the Shelf Registration ceases to
be effective, as the case may be, and until the later of (x) the
date which is 30 days after the Company shall have filed with the
Commission its Annual Report on Form 10-K for the fiscal year
ending July 31, 1998 or (y) the third anniversary hereof, the
Holders, individually and jointly, of not less than 50% of the
Registrable Securities (the "Initiating Holders") shall have the
right to require the Company to effect the registration under the
Securities Act of all or part of the Registrable Securities held
by such Initiating Holders, by delivering a written request
therefor to the Company specifying the number of shares of
Registrable Securities and the intended method of distribution.
The Company shall promptly give written notice of such requested
registration to all other Holders, and thereupon the Company
shall, as expeditiously as possible, use its best efforts to (A)
effect the registration under the Securities Act (including by
means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested in such request and if the Company
is then eligible to use such a registration) of the Registrable
Securities which the Company has been so requested to register by
the Initiating Holders, and all other Registrable Securities which
the Company has been requested to register by any other Holder
(together with the Initiating Holders, the "Selling Holders") by
written request given to the Company within 10 days after the
giving of written notice by the Company, all to the extent
necessary to permit distribution in accordance with the intended
method of distribution set forth in the written request or
requests delivered by the Selling Holders, and (B) if requested by
the Selling Holders, obtain acceleration of the effective date of
the registration statement relating to such registration.
(b) REGISTRATION OF OTHER SECURITIES.
Whenever the Company shall effect a registration pursuant to this
Section 2.2 in connection with an underwritten offering by any
Selling Holders of Registrable Securities, no securities other
than Registrable Securities shall be included among the securities
covered by such registration (i) if the managing underwriter of
such offering shall have advised the Company and the Selling
Holders in writing that the inclusion of such other securities
would adversely affect such offering or (ii), if such offering is
not an underwritten offering, unless the Selling Holders of not
less than 50% of all Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of
such other securities.
(c) REGISTRATION STATEMENT FORM.
Registrations under this Section 2.2 shall be on such appropriate
registration form of the Commission as shall be selected by the
Company and as shall be reasonably acceptable to the Selling
Holders. The Company agrees to include in any such registration
statement all information which, in the opinion of counsel to the
Selling Holders and counsel to the Company, is required to be
included.
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<PAGE>
(d) EXPENSES. The Company shall pay all
Registration Expenses in connection with any registration
requested pursuant to this Section 2.2.
(e) EFFECTIVE REGISTRATION STATEMENT. A
registration requested pursuant to this Section 2.2 shall not be
deemed to have been effected (including for purposes of paragraph
(h) of this Section 2.2) (i) unless a registration statement with
respect thereto has become effective and has been kept
continuously effective for a period of at least 120 days (or such
shorter period which shall terminate when all the Registrable
Securities covered by such registration statement have been sold
pursuant thereto), (ii) if after it has become effective, such
registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental
agency or court for any reason not attributable to the Selling
Holders and has not thereafter become effective, or (iii) if the
conditions to closing specified in the underwriting agreement, if
any, entered into in connection with such registration are not
satisfied for any reason not attributable to the Selling Holders
or waived.
(f) SELECTION OF UNDERWRITERS. The
underwriters of each underwritten offering of the Registrable
Securities so to be registered shall be selected by the Selling
Holders and shall be reasonably satisfactory to the Company.
(g) PRIORITY IN REQUESTED REGISTRATION.
If the managing underwriter of any underwritten offering shall
advise the Company in writing (with a copy to each Selling Holder)
that, in its opinion, the number of Registrable Securities
requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable
to the Selling Holders, the Company will include in such
registration, to the extent of the number which the Company is so
advised can be sold in such offering, Registrable Securities
requested to be included in such registration, pro rata among the
Selling Holders requesting such registration on the basis of the
percentage of Registrable Securities of such Selling Holders
requesting so to be registered. In connection with any such
registration to which this Section 2.2(g) is applicable, no
securities other than Registrable Securities shall be covered by
such registration.
(h) LIMITATIONS ON REGISTRATION ON
REQUEST. Notwithstanding anything to the contrary contained
herein, the registration rights granted to the Holders in Section
2.2(a) are subject to the following limitations: (i) the Holders
shall be entitled to require the Company to, and the Company shall
be required to, effect no more than one registration pursuant to
Section 2.2(a)(i) hereof and no more than two registrations
pursuant to Section 2.2(a)(ii) hereof (provided, however, that the
aggregate offering value of the shares to be registered pursuant
to any such registration shall be at least $2,500,000 unless the
Holders then own shares with a value less than $2,500,000); (ii)
the Company shall not be required to effect a registration
pursuant to Section 2.2(a) if,
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<PAGE>
at the time the Initiating Holder or Holders deliver the request
therefor to the Company, the Company is not eligible to use Form
S-3 (or any successor or similar form); provided, however, that so
long as this Agreement is in effect the Company shall use its best
efforts to ensure that the Company is at all times from the date
hereof until the expiration of the Investors' right to request the
registration of Registrable Securities pursuant to Section 2.2(a)
hereof eligible to use Form S-3; (iii) the Company shall not be
required to effect a registration pursuant to Section 2.2(a) if,
with respect thereto, the managing underwriter, the Commission,
the Securities Act or the rules and regulations thereunder, or the
form on which the registration statement is to be filed, would
require the conduct of an audit other than the regular audit
conducted by the Company at the end of its fiscal year, but rather
the filing may be delayed until the completion of such regular
audit (unless the Holders agree to pay the expenses of the Company
in connection with such an audit other than the regular audit) and
(iv) the Holders shall not be entitled to require the Company to,
and the Company shall not be required to, effect a registration
pursuant to Section 2.2(a)(ii) within six (6) months following the
effective date of another registration pursuant to Section
2.2(a)(ii).
(i) POSTPONEMENT. The Company shall be
entitled once in any six-month period to postpone for a reasonable
period of time (but not exceeding 120 days) (the "Postponement
Period") the filing of any registration statement required to be
prepared and filed by it pursuant to this Section 2.2 if the
Company determines, in its reasonable judgment, that such
registration and offering would materially interfere with any
material financing, corporate reorganization or other material
transaction involving the Company or any subsidiary, or would
require premature disclosure thereof, and promptly gives the
Selling Holders written notice of such determination, containing a
general statement of the reasons for such postponement and an
approximation of the anticipated delay. If the Company shall so
postpone the filing of a registration statement, the Selling
Holders of more than 50% of the Registrable Securities to be
registered shall have the right to withdraw the request for
registration by giving written notice to the Company at any time
and, in the event of such withdrawal, such request shall not be
counted for purposes of the requests for registration to which the
Holders are entitled pursuant to this Section 2.2.
2.3 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE
SECURITIES. If the Company at any time prior to the expiration of
the Investors' right to request the registration of Registrable
Securities pursuant to Section 2.2(a) hereof proposes to register
any of its securities under the Securities Act by registration on
Form S-1, S-2 or S-3 or any successor or similar form(s) (except
registrations on such Form or similar form(s) solely for
registration of securities in connection with an employee benefit
plan or dividend reinvestment plan or a merger or consolidation),
whether or not for sale for its
6
<PAGE>
own account, it will each such time give prompt written notice to
the Holders of its intention to do so and of the Holders' rights
under this Section 2.3 and the Holders shall be entitled to
include, subject to the provisions of this Agreement, Registrable
Securities on the same terms and conditions as apply to other
comparable securities of the Company sold in connection with such
registration. Upon the written request of any Holder (a
"Requesting Holder"), specifying the maximum number of Registrable
Securities intended to be disposed of by such Requesting Holder),
made as promptly as practicable and in any event within 15 days
after the receipt of any such notice, the Company shall use its
best efforts to effect the registration under the Securities Act
of all Registrable Securities which the Company has been so
requested to register by the Requesting Holders; provided,
however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company
shall give written notice of such determination and its reasons
therefor to the Holders and (i) in the case of a determination not
to register, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but
not from any obligation of the Company to pay the Registration
Expenses in connection therewith), without prejudice, however, to
the rights of the Holders to request that such registration be
effected as a registration under Section 2.2 and (ii) in the case
of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities, for the same period
as the delay in registering such other securities. No
registration effected under this Section 2.3 shall relieve the
Company of its obligation to effect any registration upon request
under Section 2.2. The Company will pay all Registration Expenses
in connection with any registration of Registrable Securities
requested pursuant to this Section 2.3.
(b) RIGHT TO WITHDRAW. Any Requesting
Holder shall have the right to withdraw its request for inclusion
of Registrable Securities in any registration statement pursuant
to this Section 2.3 at any time by giving written notice to the
Company of its request to withdraw.
(c) PRIORITY IN INCIDENTAL REGISTRATIONS.
If the managing underwriter of any underwritten offering shall
inform the Company by letter of its belief that the number of
Registrable Securities requested to be included in such
registration, when added to the number of other securities to be
offered in such registration, would materially adversely affect
such offering, then the Company shall include in such
registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such
offering without materially adversely affecting such offering (the
"Section 2.3 Sale Amount"), (i) all of the securities proposed by
the Company to be sold for its own account; (ii) thereafter, to
the extent the Section 2.3 Sale Amount is not exceeded, the
Registrable Securities and the shares of Common Stock constituting
all or part of the 50,000 shares of Common Stock purchased by a
certain third
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<PAGE>
party investor in connection with the Proposed Sale (as defined in
the Purchase Agreement) requested by the Requesting Holders and
such third party investor to be included in such registration
pursuant to Section 2.3(a) pro rata among the Requesting Holders
and such third party investor on the basis of the percentage of
Registrable Securities and such shares of Common Stock of such
Requesting Holders and such third party investor requested to be
included in such registration; and (iii) thereafter, to the extent
the Section 2.3 Sale Amount is not exceeded, any other securities
of the Company requested to be included in such registration.
(d) PLAN OF DISTRIBUTION. Any
participation by the Holders in a registration by the Company
shall be in accordance with the Company's plan of distribution.
2.4 REGISTRATION PROCEDURES. If and whenever
the Company is required to use its best efforts to effect the
registration of any Registrable Securities under the Securities
Act as provided in Sections 2.1, 2.2 and 2.3 hereof, the Company
shall as expeditiously as possible:
(a) prepare and file with the Commission as soon
as practicable the requisite registration statement to
effect such registration (and shall include all
financial statements required by the Commission to be
filed therewith) and thereafter use its best efforts
to cause such registration statement to become
effective; PROVIDED, HOWEVER, that before filing such
registration statement (including all exhibits) or any
amendment or supplement thereto or comparable
statements under securities or blue sky laws of any
jurisdiction, the Company shall furnish such documents
to each Holder selling Registrable Securities covered
by such registration statement and each underwriter,
if any, participating in the offering of the
Registrable Securities and their respective counsel,
which documents will be subject to the review and
comments of each such Holder, each underwriter and
their respective counsel (but as to all such Holders,
not more than one counsel); and PROVIDED FURTHER, that
(i) as to registration pursuant to Section 2.1 or 2.2
hereof, the Company may discontinue any registration
of its securities which are not Registrable Securities
and, (ii) as to registration pursuant to Section 2.3
hereof, the Company may discontinue any registration
of its securities, in each case at any time prior to
the effective date of the registration statement
relating thereto;
(b) notify each Holder selling Registrable
Securities covered by such registration statement of
the Commission's requests for
8
<PAGE>
amending or supplementing the registration statement
and the prospectus, and prepare and file with the
Commission such amendments and supplements to such
registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective and to comply with
the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered
by such registration statement for such period as
shall be required for the disposition of all of such
Registrable Securities in accordance with the intended
method of distribution thereof; PROVIDED that, except
with respect to any such registration statement filed
pursuant to Rule 415 under the Securities Act (other
than in connection with the Shelf Registration), such
period need not exceed 120 days;
(c) furnish, without charge, to each Holder
selling Registrable Securities covered by such
registration statement and each underwriter such
number of conformed copies of such registration
statement and of each such amendment and supplement
thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such
registration statement (including each preliminary
prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities
Act, in conformity with the requirements of the
Securities Act, and such other documents, as such
Holders and such underwriters may reasonably request;
(d) use its best efforts (i) to register or
qualify all Registrable Securities and other
securities covered by such registration statement
under such securities or blue sky laws of such States
of the United States of America where an exemption is
not available and as any Holder or Holders selling
Registrable Securities covered by such registration
statement or any managing underwriter shall reasonably
request, (ii) to keep such registration or
qualification in effect for so long as such
registration statement remains in effect, and (iii) to
take any other action which may be reasonably
necessary or advisable to enable the Holders to
consummate the disposition in such jurisdictions of
the securities to be sold by such Holder or Holders;
PROVIDED, HOWEVER, that the Company shall not for any
purpose be required to execute a general consent to
service of process or to qualify to do business as a
foreign corporation in any jurisdiction where it is
not so qualified;
9
<PAGE>
(e) use its best efforts to cause all
Registrable Securities covered by such registration
statement to be registered with or approved by such
other Federal or state governmental agencies or
authorities as may be necessary in the opinion of
counsel to the Company and counsel to any Holder or
Holders selling Registrable Securities covered by such
registration statement to consummate the disposition
of such Registrable Securities;
(f) furnish to each Holder selling Registrable
Securities covered by such registration statement and
each underwriter, if any, participating in the
offering of the securities covered by such
registration statement, a signed counterpart of
(i) an opinion of counsel for the Company,
and
(ii) a "comfort" letter signed by the
independent public accountants who have certified
the Company's financial statements included or
incorporated by reference in such registration
statement,
covering substantially the same matters with respect
to such registration statement (and the prospectus
included therein) and, in the case of the accountants'
comfort letter, with respect to events subsequent to
the date of such financial statements, as are
customarily covered in opinions of issuer's counsel
and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of
securities (and dated the dates such opinions and
comfort letters are customarily dated) and, in the
case of the legal opinion, such other legal matters,
and, in the case of the accountants' comfort letter,
such other financial matters, as such Holder or
Holders, or the underwriters, may reasonably request;
(g) promptly notify the Holders selling
Registrable Securities covered by such registration
statement and each managing underwriter, if any,
participating in the offering of the securities
covered by such registration statement (i) when such
registration statement, any pre-effective amendment,
the prospectus or any prospectus supplement related
thereto or post-effective amendment to such
registration statement has been filed, and, with
respect to such registration statement or any post
effective amendment, when the same has become
effective; (ii) of any request by the Commission for
amendments or supplements to such registration
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<PAGE>
statement or the prospectus related thereto or for
additional information; (iii) of the issuance by the
Commission of any stop order suspending the
effectiveness of such registration statement or the
initiation of any proceedings for that purpose; (iv)
of the receipt by the Company of any notification with
respect to the suspension of the qualification of any
of the Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at
any time when a prospectus relating thereto is
required to be delivered under the Securities Act or,
in the case of the Shelf Registration, at any time
during the Shelf Registration Period, upon discovery
that, or upon the happening of any event as a result
of which, the prospectus included in such registration
statement, as then in effect, includes an untrue
statement of a material fact or omits to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading, in the light of the circumstances under
which they were made, and in the case of this clause
(v), at the request of any Holder or Holders selling
Registrable Securities covered by such registration
statement promptly prepare and furnish to such Holder
or Holders and each managing underwriter, if any,
participating in the offering of the Registrable
Securities, a reasonable number of copies of a
supplement to or an amendment of such prospectus as
may be necessary so that, as thereafter delivered to
the purchasers of such securities, such prospectus
shall not include an untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading in the light of the
circumstances under which they were made; and (vi) at
any time when the representations and warranties of
the Company contemplated by Section 2.5(a) or (b)
hereof cease to be true and correct;
(h) otherwise comply with all applicable rules
and regulations of the Commission, and make available
to its security holders, as soon as reasonably
practicable, an earnings statement covering the period
of at least twelve months beginning with the first
full calendar month after the effective date of such
registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder,
and promptly furnish to the Holders a copy of any
amendment or supplement to such registration statement
or prospectus;
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<PAGE>
(i) provide and cause to be maintained a
transfer agent and registrar (which, in each case, may
be the Company) for the Common Stock from and after a
date not later than the effective date of such
registration;
(j) (i) use its best efforts to cause all
Registrable Securities covered by such registration
statement to be quoted on the National Market System
("National Market System") of the National Association
of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the
Commission if the quoting of such Registrable
Securities is then permitted under NASDAQ rules; or
(ii) if no similar securities of the Company are then
so quoted, use its bests efforts to (x) secure
designation of all such Registrable Securities as a
NASDAQ National Market System security or (y) failing
that, cause all such Registrable Securities to be
listed on a national securities exchange or (z)
failing that, to secure NASDAQ authorization for such
shares and, without limiting the generality of the
foregoing, to arrange for at least two market makers
to register as such with respect to such shares with
the National Association of Securities Dealers, Inc.;
(k) deliver promptly to counsel to the Holders
selling Registrable Securities covered by such
registration statement and each underwriter, if any,
participating in the offering of the Registrable
Securities, copies of all correspondence between the
Commission and the Company, its counsel or auditors
and all memoranda relating to discussions with the
Commission or its staff with respect to such
registration statement;
(l) use its best efforts to obtain the
withdrawal of any order suspending the effectiveness
of the registration statement;
(m) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the
registration statement;
(n) make available its employees and personnel
and otherwise provide reasonable assistance to the
underwriters (taking into account the needs of the
Company's businesses) in their marketing of
Registrable Securities; and
(o) in the case of a Shelf Registration, upon
the occurrence of any event or the discovery of any
facts, each as contemplated by
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Section 2.4(g)(v) hereof, use its best efforts to
prepare a supplement or post-effective amendment to
the registration statement or the related prospectus
or any document incorporated therein by reference or
file any other required documents so that, thereafter,
such prospectus will not contain at the time of such
delivery any untrue statement of a material fact or
omit to state a material fact necessary to make the
statements therein, in light of the circumstances
under which they were made, not misleading.
The Company may require the Holders selling Registrable Securities
covered by such registration statement to furnish the Company such
information regarding the Holders and the distribution of the
Registrable Securities as the Company may from time to time
reasonably request in writing. In the event of a registration
effected pursuant to Section 2.1, 2.2(a) or 2.3(a) hereof, if a
Holder fails to provide such information and the failure by such
Holder to furnish such information would prevent or unreasonably
delay the registration statement relating to such registration
from being declared effective by the Commission, the Company may
exclude such Holder's Registrable Securities from such
registration, which right of the Company shall, in the case of a
registration effected pursuant to Section 2.1 or 2.2(a) hereof, be
subject to the consent of the Holders of more than 50% of the
Registrable Securities to be included in such registration (other
than such Holder's Registrable Securities).
The Holders agree that upon receipt of any notice from
the Company of the happening of any event of the kind described in
paragraph (g)(iii) or (v) of this Section 2.4, each of the Holders
will discontinue its disposition of Registrable Securities
pursuant to the registration statement relating to such
Registrable Securities until, in the case of paragraph (g)(v) of
this Section 2.4, its receipt of the copies of the supplemented or
amended prospectus contemplated by paragraph (g)(v) of this
Section 2.4 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than
permanent file copies, then in its possession, of the prospectus
relating to such Registrable Securities current at the time of
receipt of such notice. If the disposition by the Holders of
their securities is discontinued pursuant to the foregoing
sentence, the Company shall extend the period of effectiveness of
the registration statement by the number of days during the period
from and including the date of the giving of notice to and
including the date when the Holders shall have received copies of
the supplemented or amended prospectus contemplated by paragraph
(g)(v) of this Section 2.4; and, if the Company shall not so
extend such period, the Holders' request pursuant to which such
registration statement was filed shall not be counted for purposes
of the requests for registration to which the Holders are entitled
pursuant to Section 2.2 hereof.
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2.5 UNDERWRITTEN OFFERINGS.
(a) REQUESTED UNDERWRITTEN OFFERINGS. If
requested by the underwriters for any underwritten offering by the
Selling Holders pursuant to a registration requested under Section
2.2, the Company shall enter into a customary underwriting
agreement with such underwriter or underwriters. Such
underwriting agreement shall be reasonably satisfactory in form
and substance to the Selling Holders and shall contain such
representations and warranties by, and such other agreements on
the part of, the Company and such other terms as are generally
prevailing in agreements of that type, including, without
limitation, such customary provisions relating to indemnification
and contribution as shall be agreed to by the Company. The
Selling Holders shall be parties to such underwriting agreement
and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters
shall also be made to and for the benefit of the Selling Holders
and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement be
conditions precedent to the obligations of the Selling Holders.
No Selling Holder shall be required to make any representations or
warranties to or agreements with the Company or the underwriters
other than representations, warranties or agreements regarding
such Selling Holder, its ownership of and title to the Registrable
Securities, and its intended method of distribution; and any
liability of any Selling Holder to any underwriter or other Person
under such underwriting agreement shall be limited to liability
arising from misstatements in or omissions from its
representations and warranties and shall be limited to an amount
equal to the net proceeds that it derives from such registration.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS.
In the case of a registration pursuant to Section 2.3 hereof, if
the Company shall have determined to enter into any underwriting
agreements in connection therewith, all of the Requesting Holders'
Registrable Securities to be included in such registration shall
be subject to such underwriting agreements. The Requesting
Holders may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters
shall also be made to and for the benefit of the Requesting
Holders and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement
be conditions precedent to the obligations of the Requesting
Holders. No Requesting Holder shall be required to make any
representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or
agreements regarding such Requesting Holder, its ownership of and
title to the Registrable Securities, and its intended method of
distribution; and any liability of any Requesting Holder to any
underwriter or other Person under such underwriting agreement
shall be limited to liability arising from misstatements in or
omissions from its representations and
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warranties and shall be limited to an amount equal to the net
proceeds that it derives from such registration.
2.6 PREPARATION; REASONABLE
INVESTIGATION. In connection with the preparation and filing of
each registration statement under the Securities Act pursuant to
this Agreement, the Company will give the participating Holders,
their underwriters, if any, and their respective counsel,
accountants and other representatives and agents the opportunity
to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission,
and, to the extent practicable, each amendment thereof or
supplement thereto, and give each of them such access to its books
and records and such opportunities to discuss the business of the
Company with its officers and employees and the independent public
accountants who have certified its financial statements, and
supply all other information reasonably requested by each of them,
as shall be necessary or appropriate, in the opinion of the
participating Holders' and such underwriters' respective counsel,
to conduct a reasonable investigation within the meaning of the
Securities Act.
2.7 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The
Company agrees that in the event of any registration of any
securities of the Company under the Securities Act, the Company
shall, and hereby does, indemnify and hold harmless each Holder,
its respective directors, officers, partners, agents and
affiliates and each other Person who participates as an
underwriter in the offering or sale of such securities and each
other Person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities, joint or several, to
which such Holder or any such director, officer, partner, agent or
affiliate or underwriter or controlling Person may become subject
under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities, joint or several (or actions or
proceedings, whether commenced or threatened, in respect thereof),
arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any
registration statement under which such securities were registered
under the Securities Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein in light of
the circumstances in which they were made not misleading, or (iii)
any violation by the Company of any Federal, state or common law
rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with
any such registration, and the Company shall reimburse such Holder
and each such director, officer, partner, agent or affiliate,
underwriter and controlling Person for any legal or any other
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim,
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liability, action or proceeding; PROVIDED that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly
executed by or on behalf of the Holders or underwriter, as the
case may be, specifically stating that it is for use in the
preparation thereof; and PROVIDED, FURTHER, that the Company shall
not be liable to any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be
then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or
omission was corrected in such final prospectus. Such indemnity
shall remain in full force regardless of any investigation made by
or on behalf of either Holder or any such director, officer,
partner, agent or affiliate or controlling Person and shall
survive the transfer of such securities by such Holder.
(b) INDEMNIFICATION BY THE HOLDERS. As a
condition to including any Registrable Securities in any
registration statement, the Company shall have received an
undertaking reasonably satisfactory to it from each Holder so
including any Registrable Securities to indemnify and hold
harmless (in the same manner and to the same extent as set forth
in paragraph (a) of this Section 2.7) the Company, and each
director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning
of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, but only to the extent such
statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information
furnished to the Company through an instrument duly executed by
such Holder specifically stating that it is for use in the
preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement; PROVIDED, HOWEVER, that the liability of such
indemnifying party under this Section 2.7(b) shall be limited to
the amount of net proceeds received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall
remain in full force and effect, regardless of any investigation
made
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by or on behalf of the Company or any such director, officer or
controlling Person and shall survive the transfer of such
securities by such Holder.
(c) NOTICES OF CLAIMS, ETC. Promptly
after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim
referred to in the preceding subsections of this Section 2.7, such
indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the
latter of the commencement of such action or proceeding; PROVIDED,
HOWEVER, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subsections of this Section 2.7,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve
the indemnifying party from any liability which it may have to the
indemnified party otherwise than under this Section 2.7. In case
any such action or proceeding is brought against an indemnified
party, the indemnifying party shall be entitled to participate
therein and, unless in the opinion of outside counsel to the
indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to
assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action or
proceeding include both the indemnified party and the indemnifying
party and if in the opinion of outside counsel to the indemnified
party there may be legal defenses available to such indemnified
party and/or other indemnified parties which are different from or
in addition to those available to the indemnifying party, the
indemnified party or parties shall have the right to select
separate counsel to defend such action or proceeding on behalf of
such indemnified party or parties; PROVIDED, HOWEVER, that the
indemnifying party shall be obligated to pay for only one counsel
for all indemnified parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such
indemnified party for any legal expenses subsequently incurred by
the latter in connection with the defense thereof other than
reasonable costs of investigation (unless the first proviso in the
preceding sentence shall be applicable). No indemnifying party
shall be liable for any settlement of any action or proceeding
effected without its written consent. No indemnifying party
shall, without the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification
provided for in this Section 2.7 shall for any reason be held by a
court to be unavailable to an indemnified party under subsection
(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under
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<PAGE>
subsection (a) or (b) hereof, the indemnified party and the
indemnifying party under subsection (a) or (b) hereof shall
contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred
in connection with investigating the same), (i) in such proportion
as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and the indemnified party on
the other, which resulted in such loss, claim, damage or
liability, or action in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other
relevant equitable considerations, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law or
if the allocation provided in this clause (ii) provides a greater
amount to the indemnified party than clause (i) above, in such
proportion as shall be appropriate to reflect not only the
relative fault but also the relative benefits received by the
indemnifying party and the indemnified party from the offering of
the securities covered by such registration statement as well as
any other relevant equitable considerations. The parties hereto
agree that it would not be just and equitable if contributions
pursuant to this Section 2.7(d) were to be determined by pro rata
allocation or by any other method of allocation which does not
take into account the equitable considerations referred to in the
preceding sentence of this Section 2.7(d). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The Holders' obligations to contribute as provided in this
subsection (d) are several and not joint and shall be in
proportion to the relative value of their respective Registrable
Securities covered by such registration statement. In addition,
no Person shall be obligated to contribute hereunder any amounts
in payment for any settlement of any action or claim effected
without such Person's consent, which consent shall not be
unreasonably withheld. Notwithstanding anything in this
subsection (d) to the contrary, no indemnifying party (other than
the Company) shall be required to contribute any amount in excess
of the net proceeds received by such party from the sale of the
Registrable Securities in the offering to which the losses,
claims, damages or liabilities of the indemnified parties relate.
(e) OTHER INDEMNIFICATION.
Indemnification and contribution similar to that specified in the
preceding subsections of this Section 2.7 (with appropriate
modifications) shall be given by the Company and the Holders with
respect to any required registration or other qualification of
securities under any Federal, state or blue sky law or regulation
of any governmental authority other than the Securities Act. The
indemnification agreements contained in this Section 2.7 shall be
in addition to any other rights to indemnification or contribution
which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any indemnified party
and shall survive the transfer of any of the Registrable
Securities by any of the Holders.
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<PAGE>
(f) INDEMNIFICATION PAYMENTS. The
indemnification and contribution required by this Section 2.7
shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred;
provided, however, that such periodic payments shall only be made
upon delivery to the indemnifying party of an agreement by the
indemnified party to repay the amounts advanced to the extent it
is ultimately determined that the indemnified party is not
entitled to indemnification pursuant to this Section 2.7 or
otherwise. The parties hereto agree that for each of them such
agreement shall be deemed to be contained herein.
2.8 UNLEGENDED CERTIFICATES. In connection
with the offering of any Registrable Securities registered
pursuant to this Section 2, the Company shall (i) facilitate the
timely preparation and delivery to the Holders and the
underwriters, if any, participating in such offering, of
unlegended certificates representing ownership of such Registrable
Securities being sold in such denominations and registered in such
names as requested by the Holders or such underwriters and (ii)
instruct any transfer agent and registrar of such Registrable
Securities to release any stop transfer orders with respect to any
such Registrable Securities.
2.9 LIMITATION ON SALE OF SECURITIES. (a)
Until the expiration of the Investors' right to request the
registration of Registrable Securities pursuant to Section 2.2(a)
hereof, each Holder of Registrable Securities agrees in connection
with an underwritten public offering by the Company, not to effect
any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any Registrable Securities,
and not to effect any such public sale or distribution of any
other equity security of the Company or of any security
convertible into or exchangeable or exercisable for any equity
security of the Company (in each case, other than as part of such
underwritten public offering) during the 15 days prior to, and
during the 90-day period (or such longer period, not in excess of
180 days, as may be reasonably requested by the underwriter of
such offering) beginning on, the effective date of such
registration statement (except as part of such registration)
provided that each Holder of Registrable Securities has received
written notice of such registration at least 15 days prior to such
effective date.
(b) If any registration of Registrable Securities
shall be in connection with an underwritten public offering, the
Company agrees (x) not to effect any public sale or distribution
of any of its equity securities or of any security convertible
into or exchangeable or exercisable for any equity security of the
Company (other than any such sale or distribution in connection
with any employee stock option or other benefit plan) during the
15 days prior to, and during the 90-day period (or such longer
period, not in excess of 180 days, as may be reasonably requested
by the underwriter of such offering) beginning on, the effective
date of such registration statement (except as part of such
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<PAGE>
registration) and (y) that any agreement entered into after the
date of this Agreement pursuant to which the Company issues or
agrees to issue any privately placed equity securities shall
contain a provision under which holders of such securities agree
not to effect any public sale or distribution of any such
securities during the period referred to in the foregoing clause
(x), including any sale pursuant to Rule 144 under the Securities
Act (except as part of such registration, if permitted).
2.10 NO REQUIRED SALE. Nothing in this
Agreement shall be deemed to create an independent obligation on
the part of any of the Holders to sell any Registrable Securities
pursuant to any effective registration statement.
3. RULE 144. The Company shall take all actions
reasonably necessary to enable holders of Registrable Securities
to sell such securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule
144, or (b) any similar rule or regulation hereafter adopted by
the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be
filed by the Exchange Act. Upon the request of any Holder, the
Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
4. AMENDMENTS AND WAIVERS. This Agreement may not
be modified or amended, or any of the provisions hereof waived,
temporarily or permanently, except pursuant to the written consent
of the Holders of more than 50% of the Registrable Securities and
the Company.
5. ADJUSTMENTS. In the event of any change in the
capitalization of the Company as a result of any stock split,
stock dividend, reverse split, combination, recapitalization,
merger, consolidation, or otherwise, the provisions of this
Agreement shall be appropriately adjusted.
6. NOTICE. All notices and other communications
hereunder shall be in writing and, unless otherwise provided
herein, shall be deemed to have been given when received by the
party to whom such notice is to be given at its address set forth
below, or such other address for the party as shall be specified
by notice given pursuant hereto:
(a) If to any Holder, to it at:
345 Pequot Avenue
PO Box 760
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Southport, Connecticut 06490-0577
Attention: Arthur J. Samberg
With a copy to:
Fried, Frank, Harris, Shriver
& Jacobson
One New York Plaza
New York, New York 10004
Attention: Robert C. Schwenkel, Esq.
(b) If to the Company, to it at:
Penril DataComm Networks, Inc.
1300 Quince Orchard Boulevard
Gaithersburg, Maryland 20810
Attention: Chairman
With a copy to:
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Attention: Richard D. Margolis, Esq.
7. ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns.
This Agreement may not be assigned by the Company. Any Holder
may, at its election, at any time or from time to time, assign its
rights under this Agreement, in whole or in part, to any
transferee of Registrable Securities.
8. REMEDIES. The parties hereto agree that money
damages or other remedy at law would not be sufficient or adequate
remedy for any breach or violation of, or a default under, this
Agreement by them and that, in addition to all other remedies
available to them, each of them shall be entitled to an injunction
restraining such breach, violation or default or threatened
breach, violation or default and to any other equitable relief,
including without limitation specific performance, without bond or
other security being required. In any action or proceeding
brought to enforce any provision of this Agreement (including the
indemnification provisions thereof), the successful party shall
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<PAGE>
be entitled to recover reasonable attorneys' fees in addition to
its costs and expenses and any other available remedy.
9. NO INCONSISTENT AGREEMENTS. The Company will
not, on or after the date of this Agreement, enter into any
agreement with respect to its securities which is inconsistent
with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, other than any
customary lock-up agreement with the underwriters in connection
with any registration and offering by the Company of its
securities to the public (an "Offering") effected hereunder,
pursuant to which the Company shall agree not to register for
sale, and the Company shall agree not to sell or otherwise dispose
of, Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock, for a specified period following
such Offering. As of the date hereof, the Company does not have
any registration rights outstanding to any Person other than the
registration rights granted pursuant to this Agreement. The
rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with any other agreements to which
the Company is a party or by which it is bound. The Company
further agrees that if any other registration rights agreement
entered into after the date of this Agreement with respect to any
of its securities contains terms which are more favorable to, or
less restrictive on, the other party thereto than the terms and
conditions contained in this Agreement are (insofar as they are
applicable) to the Holders, then the terms and conditions of this
Agreement shall immediately be deemed to have been amended without
further action by the Company or the Holders so that the Holders
shall be entitled to the benefit of any such more favorable or
less restrictive terms or conditions.
10. HEADINGS. Headings of the sections and
paragraphs of this Agreement are for convenience only and shall be
given no substantive or interpretive effect whatsoever.
11. GOVERNING LAW; JURISDICTION. (a) This
Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without giving
effect to the conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and
unconditionally consents to the jurisdiction of the courts of
Delaware in respect of the interpretation and enforcement of the
provisions of this Agreement, and hereby agrees that service of
process in any such action, suit or proceeding against the other
party with respect to this Agreement may be made upon it in any
manner permitted by the laws of Delaware or the federal laws of
the United States.
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12. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one
and the same instrument.
13. INVALIDITY OF PROVISION. The invalidity or
unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any restriction or
provision of this Agreement is held unreasonable, unlawful or
unenforceable in any respect, such restriction or provision shall
be interpreted, revised or applied in a manner that renders it
lawful and enforceable to the fullest extent possible under law.
14. FURTHER ASSURANCES. Each party hereto shall do
and perform or cause to be done and performed all further acts and
things and shall execute and deliver all other agreements,
certificates, instruments, and documents as any other party hereto
reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
15. ENTIRE AGREEMENT; EFFECTIVENESS. This Agreement
and the Purchase Agreement and the other writings referred to
herein or delivered in connection herewith contain the entire
agreement among the parties with respect to the subject matter
hereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By: /s/ Henry D. Epstein
----------------------------------
Title: President, Chairman, and CEO
PEQUOT PARTNERS FUND, L.P.
By: PEQUOT GENERAL PARTNERS,
its general partner
By: /s/ Arthur J. Samberg
----------------------------------
Managing Partner
PEQUOT ENDOWMENT FUND, L.P.
By: PEQUOT ENDOWMENT PARTNERS, L.P.,
its general partner
By: /s/ Arthur J. Samberg
----------------------------------
Managing Partner
PEQUOT INTERNATIONAL FUND INC.
By: /s/ Arthur J. Samberg
----------------------------------
Name: Arthur J. Samberg
Title: General Partner
