SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
DATE OF REPORT: SEPTEMBER 22, 1995
Commission File No. 1-7886
PENRIL DATACOMM NETWORKS, INC.
A Delaware Corporation
IRS Employer Identification No. 34-1028216
1300 Quince Orchard Blvd., Gaithersburg, Maryland 20878
Telephone - (301) 417-0552
ITEM 2. Acquisition or Disposition of Assets
On September 22, 1995, the registrant sold an aggregate of
1,465,000 shares of its Common Stock, par value $0.01, to Pequot
Partners Fund, L.P. (636,000 shares) Pequot International Fund
Inc. (569,000 shares) and Pequot Endowment Fund, L.P. (260,000
shares). The sale price was $5.00 per share and the gross
proceeds were $7,325,000. In connection with the transaction,
the registrant agreed that it will add to its Board of Directors
a qualified person designated by Pequot Partners Fund, L.P. The
sale price of the shares was determined by arms-length
negotiation between the registrant and representatives of the
purchasers. The per share price was arrived at by applying to
the then current market price of the registrant's common stock on
the NASDAQ National Market System a discount to reflect the fact
that a large block was being sold and that since the shares are
not presently registered under the Securities Act of 1933, they
are not readily saleable in the open market.
ITEM 7. Financial Statements, Pro Forma Financial Statements
and Exhibits
(a) Financial Statements of Businesses Acquired.
None
(b) Pro Forma Financial Information.
None
(c) Exhibits.
4. (1) Stock Purchase Agreement dated as of
September 22, 1995 among Registrant and
Pequot Partners Fund, L.P., Pequot
International Fund Inc. and Pequot Endowment
Fund, L.P.
(2) Registration Rights Agreement dated as of
September 22, 1995 among Registrant and
Pequot Partners Fund, L.P., International
Fund Inc. and Pequot Endowment Fund, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PENRIL DATACOMM NETWORKS, INC.
By: \s\Richard D. Rose
------------------------------
Richard D. Rose, Vice President,
Chief Financial Officer
October 6, 1995
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.
(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 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-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 "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 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 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) 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.
(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
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 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. 9601, et seq.; the
Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. 11001, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et
seq.; the Toxic Substances Control Act, 15 U.S.C.
2601, et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act, 7 U.S.C. 136, et seq.; the
Clean Air Act, 42 U.S.C. 7401, et seq.; the Clean
Water Act (Federal Water Pollution Control Act), 33
U.S.C. 1251, et seq.; the Safe Drinking Water Act,
42 U.S.C. 300f, et seq.; the Occupational Safety and
Health Act, 29 U.S.C. 641, et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. 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 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, 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. 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 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.
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 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:
(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 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 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
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.
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
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, 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.
IN WITNESS WHEREOF, the parties hereto have duly executed
this agreement as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By:
Title:
PEQUOT PARTNERS FUND, L.P.
By: Pequot General Partners,
its general partner
By:
Managing Partner
PEQUOT ENDOWMENT FUND, L.P.
By: Pequot Endowment
Partners, L.P.,
Its general partner
By:
Managing Partner
PEQUOT INTERNATIONAL FUND INC.
By:
Name:
Title:
Schedule I
to
Stock Purchase Agreement
# Shares of Aggregate
Investor Common Stock Purchase 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
--------- ---------
TOTAL 1,465,000 $7,325,000
September 25, 1995 - 3:57pm - JRO
CLE2 - 166861.1B - 03780\418
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 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.
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 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.
(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, 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 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 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 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;
(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
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;
(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 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.
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
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, 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 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 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.
(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
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
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 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.
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.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By:
_______________________________
Title:
PEQUOT PARTNERS FUND, L.P.
By: PEQUOT GENERAL PARTNERS,
its general partner
By:
_____________________________
Managing Partner
PEQUOT ENDOWMENT FUND, L.P.
By: PEQUOT ENDOWMENT PARTNERS,
L.P.,
its general partner
By:
____________________________
Managing Partner
PEQUOT INTERNATIONAL FUND INC.
By:
____________________________
Name:
Title:
78340
September 25, 1995 - 4:20pm - JRE
CLE2 - 166859.1B - 03780\418
28
