SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
Acrodyne Communications, Inc.
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(Name of Issuer)
Common Stock, $0.01 par value
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(Title of Class of Securities)
00500E104
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(CUSIP Number)
Scorpion-Acrodyne Investors, LLC
505 Park Avenue, 12th Floor
New York, NY 10022
(212) 207-9020
c/o Kevin R. McCarthy
with a copy to:
John E. Lowe
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
(312) 715-4020
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 7, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Schedule 13D, and is filing this Schedule
because of Rule 13d-1(b)(3) or (4), check the following
box. / /
Note: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule
13d-1(a) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for
a reporting person's initial filing on this form with
respect to the subject class of securities, and for any
subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover
page shall not be deemed to be "filed" for the purpose of
Section 18 of the Securities Exchange Act of 1934 ("Act")
or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions
of the Act (however, see the Notes). <PAGE>
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1. Name of Reporting Person:
Scorpion-Acrodyne Investors, LLC
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2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) /X/
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3. SEC Use Only
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4. Source of Funds: WC
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5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f):
/ /
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6. Citizenship or Place of Organization: Delaware
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Number of 7. Sole Voting Power: 605,000(1)
Shares ------------------------------------------
Beneficially 8. Shared Voting Power: 0
Owned By ------------------------------------------
Each 9. Sole Dispositive Power: 605,000(1)
Reporting ------------------------------------------
Person 10. Shared Dispositive Power: 0
With
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11. Aggregate Amount Beneficially Owned by Each
Reporting Person:
605,000(1)
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12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares:
/ /
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13. Percent of Class Represented by Amount
in Row (11): 11.0%
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14. Type of Reporting Person: CO
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(1) Power is exercised through its members. Arabella,
S.A. is an 81.82% member of Scorpion-Acrodyne
Investors, LLC. <PAGE>
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1. Name of Reporting Person:
Arabella, S.A.
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2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) /X/
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3. SEC Use Only
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4. Source of Funds: Not Applicable
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5. Check box if Disclosure of Legal Proceedings is
Required Pursuant to Items 2(e) or 2(f):
/ /
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6. Citizenship or Place of Organization: Luxembourg
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Number of 7. Sole Voting Power: 0
Shares ------------------------------------------
Beneficially 8. Shared Voting Power: 605,000(1)
Owned By ------------------------------------------
Each 9. Sole Dispositive Power: 0
Reporting ------------------------------------------
Person 10. Shared Dispositive Power: 605,000(1)
With
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11. Aggregate Amount Beneficially Owned by Each
Reporting Person:
605,000(1)
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12. Check Box if the Aggregate Amount in Row (11)
Excludes Certain Shares:
/ /
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13. Percent of Class Represented by Amount
in Row (11): 11.0%
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14. Type of Reporting Person: CO
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(1) Solely in its capacity as an 81.82% member of
Scorpion-Acrodyne Investors, LLC. <PAGE>
Item 1. Security and Issuer.
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This statement relates to the shares of common
stock, $0.01 par value per share (the "Shares") of
Acrodyne Communications, Inc. (the "Issuer"). The
principal executive offices of the Issuer are located at
516 Township Line Road, Blue Bell, PA 19422.
Item 2. Identity and Background.
-----------------------
(a) This Schedule 13D is filed by Scorpion-Acrodyne
Investors, LLC, a Delaware limited liability company
("Scorpion") and Arabella, S.A. ("Arabella", and,
together with Scorpion, the "Reporting Persons"). The
Reporting Persons are making this single, joint filing
because they may be deemed to constitute a "group" within
the meaning of Section 13(d)(3) of the Act, although
neither the fact of this filing nor anything contained
herein shall be deemed to be an admission by the
Reporting Persons that a group exists.
(b)-(c)
Scorpion is a Delaware limited liability company,
the principal business of which is the purchase, sale,
exchange, acquisition and holding of investment
securities. The principal business address of Scorpion,
which also serves as its principal office, is 505 Park
Avenue, 12th Floor, New York, NY 10022.
Arabella is a Luxembourg corporation, whose shares
are traded on the Luxembourg Stock Exchange. Arabella's
principal business is the purchase, sale, exchange,
acquisition and holding of investment securities.
Arabella's principal business address is RC B49756, 35
Rue Glesener, L-1631 Luxembourg.
Scorpion is managed by its members. Arabella owns an
81.82% membership interest in Scorpion. No other member
of Scorpion owns in excess of a 5% membership interest in
Scorpion.
The executive officers of Arabella are Michel El-
Khoury, Chairman and Pierre Caland, Managing Director
(CEO).
The directors of Arabella are Mr. El-Khoury, Mr.
Caland, Nuno Brandolini, Jacques Loesch, and Alfred
Wiederkehr.
Mr. El-Khoury's principal business address is c/o
N.E.C.B. Centre Sofil, Achrafieh-Beirut Lebanon. <PAGE>
Mr. Caland s principal business address is c/o
N.E.C.B. 25 Avenue Pierre Premier de Serbie, Paris,
France 75016.
Mr. Brandolini's principal business address is c/o
Scorpion Holdings, Inc., 505 Park Avenue, 12th Floor, New
York, NY 10022.
Mr. Loesch's principal business address is c/o
Loesch & Wolter 11, rue Goethe B.P. 1107 L-L1011,
Luxembourg Grand Duche de Luxembourg.
Mr. Wiederkehr's principal business address is c/o
Wiederkehr Forster Bahnhofstrasse 44 P.O. Box 6040 8023
Zurich, Switzerland.
(d) None of the entities or persons identified in
this Item 2 has, during the last five years, been
convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the entities or persons identified in
this Item 2 has, during the last five years, been a party
to a civil proceeding of a judicial or administrative
body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with
respect to such laws.
(f) Mr. El-Khoury is a citizen of Lebanon. Mr.
Caland is a citizen of France. Mr. Brandolini is a
citizen of Italy. Mr. Loesch is a citizen of Luxembourg.
Mr. Wiederkehr is a citizen of Switzerland.
Item 3. Source and Amount of
Funds or Other Consideration.
----------------------------
The Purchased Shares (as defined herein) and
Warrants (as defined herein) were purchased by Scorpion
from the Issuer for $1,100,000 in cash. The source of
such funds was working capital of Scorpion. No portion of
such funds was borrowed.
Item 4. Purpose of Transaction.
----------------------
On November 7, 1997, pursuant to a Subscription
Agreement dated as of November 3, 1997 (the "Subscription
Agreement"), Scorpion purchased from the Issuer 440,000
Shares (the "Purchased Shares") and warrants to purchase
165,000 Shares ("Warrants"). The aggregate consideration <PAGE>
for the Shares and the Warrants was $1,100,000. Pursuant
to a Warrant dated as of November 6, 1997, the Warrants
are exercisable for five years from the date of issuance
and are exercisable at an exercise price of $3.00 per
Share.
The Subscription Agreement provides that Scorpion,
together with certain other purchasers of Shares and
warrants to purchase Shares who are party to the
Subscription Agreement (collectively with Scorpion, the
"Investor Group"), for so long as the Investor Group owns
beneficially not less than 10% of the outstanding Shares
(on a fully-diluted basis), will be entitled to nominate
one director (out of five directorships)for election as a
member of the Board of Directors of the Issuer. The
Subscription Agreement also provides that the slate of
nominees to be directors of the Issuer will include two
additional nominees who are not affiliated with
management of the Issuer or with the Investor Group,
which nominees shall be selected with the consent of the
Investor Group, which will not be unreasonably withheld.
In the Subscription Agreement, Scorpion agreed that,
without the prior written consent of the Issuer, it will
not during the period ending on November 6, 1998, (i)
offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant or purchase or
otherwise transfer or dispose of, directly or indirectly,
any Shares or any securities convertible into or
exercisable or exchangeable for Shares, or (ii) enter
into any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of ownership
of Shares. In addition, in the Subscription Agreement,
Scorpion agreed that, for a period of two years and six
months from the date of the Subscription Agreement,
neither it nor any of its affiliates will, without the
prior written consent of the Issuer or its Board of
Directors, (i) in any manner acquire, attempt to acquire,
offer to acquire or agree to acquire, directly or
indirectly, by purchase or otherwise, greater than a
49.9% interest in the voting securities (including direct
or indirect rights to acquire any voting securities) of
the Issuer or any subsidiary thereof, or of any successor
to or person in control of the Issuer; (ii) make or in
any way participate in, directly or indirectly, any
"solicitation" of "proxies" to vote, or seek to advise or
influence any person or entity with respect to the voting
of, any voting securities of the Issuer; (iii) nominate
for election or otherwise cause to be elected directors
constituting a majority of the entire Board of Directors
of the Issuer; (iv) make any public announcement with
respect to a proposal for, or offer of, any extraordinary
transaction involving the Issuer or its securities or <PAGE>
assets; (v) form, join or in any way participate in a
"group" in connection with any of the foregoing; or (vi)
take any action which might require the Issuer to make a
public announcement regarding the possibility of a
business combination or merger or other transaction.
The Subscription Agreement further contains
provisions requiring the Issuer to register the Purchased
Shares and the Shares into which the Warrants are
exercisable for resale, subject to the limitations
contained therein.
The foregoing descriptions of the Subscription
Agreement, and the Warrant are qualified in their
entirety by reference to the texts of such documents,
which are filed as Exhibits B and C and incorporated
herein by reference.
The Reporting Persons acquired the Purchased Shares
and Warrants reported herein for investment purposes.
Consistent with such purposes, the Reporting Persons have
had, and may have in the future, discussions based on
publicly available information with management of the
Issuer concerning the Issuer's recent operating history
as well as the Issuer's general business outlook and
prospects. In addition, the Investor Group's designee on
the Board of Directors of the Issuer will take such
actions as are consistent with such person's role as a
director of the Issuer.
Depending on market conditions and other factors
that each may deem material to its investment decision,
and subject to the limitations set forth in the
Subscription Agreement, the Reporting Persons may
purchase additional Shares in the open market or in
private transactions or may dispose of all or a portion
of the Shares that such Reporting Persons now own or
hereafter may acquire.
Except as set forth in this Item 4, the Reporting
Persons have no present plans or proposals that relate to
or that would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D of the
Act.
Item 5. Interest in Securities of the Issuer.
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(a) The aggregate number of Shares that Scorpion
owns beneficially, pursuant to Rule 13d-3 of the Act, is
605,000 (including 165,000 Shares subject to purchase
upon exercise of the Warrants), which constitutes
approximately 11.0% of the outstanding Shares (including
such 165,000 Shares), based on 5,310,270 Shares <PAGE>
outstanding, as reported by the Issuer in its Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997.
Because of its position as the holder of an 81.82%
membership interest in Scorpion, Arabella may, pursuant
to Rule 13d-3 of the Act, be deemed to be the beneficial
owner of the Shares owned directly by Scorpion.
To the best of the knowledge of each of the
Reporting Persons, other than as set forth above, none of
the persons named in Item 2 hereof is the beneficial
owner of any Shares.
(b) Acting through its members, Scorpion has the
sole power to vote or to direct the vote and to dispose
or to direct the disposition of 605,000 Shares (including
165,000 Shares subject to purchase upon exercise of the
Warrants).
In its capacity as the holder of an 81.82%
membership interest in Scorpion, Arabella may be deemed
to share power to vote or to direct the vote and to
dispose or to direct the disposition of the Shares owned
directly by Scorpion.
(c) Except as set forth in Item 4 above, to the
best of the knowledge of each of the Reporting Persons,
none of the persons named in response to paragraph (a) of
this Item 5 has effected any other transactions in Shares
during the past sixty (60) days.
(d) Each of the Reporting Persons affirms that no
person other than such Reporting Person has the right to
receive or the power to direct the receipt of
distributions with respect to, or the proceeds from the
sale of, the Shares owned by such Reporting Person.
(e) It is inapplicable for the purposes herein to
state the date on which the Reporting Persons ceased to
be the owners of more than five percent (5%) of the
outstanding Shares.
Item 6. Contracts, Arrangements, Under-
standings or Relationships with
Respect to Securities of the Issuer.
-----------------------------------
Except as set forth herein or in the Exhibits filed
herewith, there are no contracts, arrangements,
understandings or relationships of the type required to
be disclosed in response to Item 6 of Schedule 13D of the
Act with respect to the Shares owned by the Reporting
Persons. <PAGE>
Item 7. Materials to be Filed as Exhibits.
---------------------------------
Exhibit A Agreement pursuant to Rule
13d-1(f)(1)(iii)
Exhibit B Subscription Agreement
Exhibit C Warrant <PAGE>
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
Dated: March 4, 1998
SCORPION-ACRODYNE INVESTORS, LLC
By: /s/ Kevin R. McCarthy
----------------------
Kevin R. McCarthy
one of its members
ARABELLA, S.A.
By: /s/ Pierre Caland
----------------------
Pierre Caland
Its: Administrateur-Delegue
<PAGE>
EXHIBIT A
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Pursuant to Rule 13d-1(f)(1)(iii) of Regulation
13D-G of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, the
undersigned agree that the statement to which this
Exhibit is attached is filed on behalf of each of them in
the capacities set forth below.
Dated: March 4, 1998
SCORPION-ACRODYNE INVESTORS, LLC
By: /s/ Kevin R. McCarthy
----------------------
Kevin R. McCarthy
one of its members
ARABELLA, S.A.
By: /s/ Pierre Caland
----------------------
Pierre Caland
Its: Administrateur-Delegue
<PAGE>
EXHIBIT B
SUBSCRIPTION AGREEMENT
NOTE: THREE COMPLETED AND EXECUTED COPIES OF THIS
SUBSCRIPTION AGREEMENT MUST BE RETURNED, AND THE
ENTIRE PURCHASE PRICE FOR THE COMMON
STOCK SUBSCRIBED FOR MUST BE PAID AS SET FORTH HEREIN,
TO SUBSCRIBE FOR THIS OFFERING.
Number of Shares of Common Stock,
$0.01 par value, at $2.50 per Share: 800,000
Aggregate Purchase Price: $2,000,000
* * * * * * * * *
SUBSCRIPTION AGREEMENT, dated as of November 3,
1997, by and among Acrodyne Communications, Inc., a
Delaware corporation (the "Company"), and each entity
whose name appears on Schedule 1 hereto (each an
"Investor" and collectively the "Investor Group").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company desires to sell to the Investor
Group, and the Investor Group desires to purchase from
the Company, an aggregate of 800,000 shares of the
Company's Common Stock, par value $0.01 per share (the
"Common Stock"), at a purchase price of $2.50 per share;
and
WHEREAS, the Company is described in the Company's
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996 and its Quarterly Reports on Form 10-
QSB for the periods ended March 31, 1997 and June 30,
1997 (collectively the "Reports") as filed with the
Securities and Exchange Commission (the "Commission");
NOW, THEREFORE, the parties hereto agree as follows:
1. Subscription and Payment.
Subject to the terms and conditions herein set
forth, each Investor severally hereby subscribes for that
number of shares of Common Stock appearing opposite its
name on Schedule 1 and shall deliver to the Company at
the Closing (as defined below) the aggregate purchase
price appearing in Schedule 1 payable in immediately
available funds. <PAGE>
2. Closing.
The closing (the "Closing") of the purchase and sale
of the Common Stock (the "Offering") shall occur on
November 6, 1997 or the earliest date thereafter on which
the closing conditions specified in Sections 7 and 8 of
this Agreement shall have been satisfied or waived (any
such date, the "Closing Date"); provided, however, that
if the Closing has not occurred by November 7, 1997, then
this Agreement shall terminate and the Closing shall not
take place. At the Closing, the Company will deliver to
each Investor one executed copy of this Agreement with
a stock certificate representing the Investor's ownership
of the Common Stock subscribed for hereby and a Warrant as
described in Section 6(d).
3. Termination of Offering.
The Investor understands and agrees that it will not
be entitled to exercise the rights of a shareholder of
the Company until an appropriate certificate representing
the Common Stock for which it has subscribed has been
issued to it on the day of the Closing. If (a) the
Company shall have reasonably determined that an event
has occurred or a condition exists which could materially
and adversely affect the business or proposed business of
the Company and that such possibility warrants
termination of the Offering, (b) the conditions to the
Closing of the Offering are not satisfied or (c) the
Company elects to terminate the Offering, the Offering
will be terminated, and the Company will not issue the
Common Stock and the Company will not be entitled to
payment of the purchase price for the Common Stock.
4. Representations and Warranties by Investor.
Each Investor hereby severally represents and
warrants to the Company that:
(a) it is an "accredited investor" as that
term is defined in Rule 501(a) under the Securities
Act of 1933, as amended (the "Act");
(b) it has the requisite knowledge and
experience in financial and business matters to be
capable of evaluating the merits and risks of an
investment in the Company;
(c) it understands that the Common Stock
involves risk of loss of such Investor's investment;
(d) its financial situation is such that such
Investor is able to bear the economic risks of its <PAGE>
investment made hereby and at the present time and
in the foreseeable future could afford a complete
loss of such investment;
(e) it has received and carefully read the
Reports and has evaluated the risks of investing in
the Company;
(f) it has been given the opportunity to ask
questions of, and receive answers from, the Company
concerning the terms and conditions of the Offering
and to obtain additional information necessary to
verify the accuracy of the information contained in
the Reports or such other information as it desired
in order to evaluate its investment;
(g) in making its decision to purchase the
Common Stock herein subscribed for, it has relied
solely upon the Reports, certain other written
materials provided by the Company including, without
limitation current backlog reports (such other
materials, collectively the "Materials"), and the
representations, warranties, agreements,
undertakings and acknowledgments of the Company in
this Agreement and independent investigations made
by it;
(h) it understands that an investment in the
Company involves certain risks and it has taken full
cognizance of and understands such risks;
(i) it understands that the Common Stock has
not been registered under the Act and agrees that
the Common Stock may not be sold, offered for sale,
transferred, pledged, hypothecated or otherwise
disposed of except in compliance with the Act and
subject to the terms of this Subscription Agreement;
(j) it understands that no federal or state
agency has made any finding or determination as to
the fairness for investment in, or any
recommendation or endorsement of, the Common Stock;
(k) the Common Stock herein subscribed for is
being acquired by it in good faith solely for its
own account, for investment purposes and not with a
view to subdivision, distribution or resale. It
will not sell or otherwise dispose of any shares of
the Common Stock, unless:
i) it shall have advised the Company in
writing that it intends to dispose of such
shares of Common Stock in a manner to be
described in such advice, and counsel <PAGE>
reasonably acceptable to the Company shall have
delivered to the Company an opinion that
registration is not required under the Act or
under any applicable securities laws of any
jurisdiction; or
ii) a registration statement on an
appropriate form under the Act, or a post-
effective amendment to such registration
statement, covering the proposed sale or other
disposition of such shares of Common Stock
shall be in effect under the Act and such
shares of Common Stock or the proposed sale or
other disposition thereof shall have been
registered or qualified under applicable
securities laws of any jurisdiction.
Each Investor undertakes to notify the Company as
soon as practicable of any material change in any
representation, warranty or other information relating to
the Investor set forth herein which occurs prior to the
Closing in order to insure compliance of the Investor
with the terms of this Agreement.
Each Investor acknowledges and agrees that the
certificates representing the Common Stock shall bear the
following legend (unless not required under the Act):
"The securities represented by this certificate
have not been registered under the Securities
Act of 1933 and may not be sold, exchanged,
hypothecated or transferred in any manner
except in compliance with that certain
Subscription Agreement dated as of November 3,
1997 between the Company and the Investors
named therein."
Each Investor also acknowledges that the Company may
place a stop transfer order against transfer of the
Common Stock, if necessary in the Company's reasonable
judgment in order to assure compliance by the Investor
with the terms of this Agreement.
If the Investor is a partnership, corporation, trust
or other entity, the Investor represents and warrants
that (i) the individual executing this Agreement has
appropriate authority to act on behalf of the Investor
and (ii) the Investor was not specifically formed to
acquire the Common Stock subscribed for hereby. If the
Investor is a partnership, the Investor further
represents that the funds to make this investment were
not derived from additional capital contributions of the
partners of such partnership made solely for the purpose
of enabling such partnership to purchase the Common Stock <PAGE>
and that such partnership was not formed solely for the
purpose of enabling such partnership to purchase the
Common Stock.
The foregoing representations, warranties,
agreements, undertakings and acknowledgments are made by
the Investor with the intent that they be relied upon in
determining its suitability as a purchaser of Common
Stock.
5. Representations and Warranties of the Company.
The Company represents and warrants to each Investor
that:
(a) The Company has duly filed with the
Commission all reports required by the Securities
Exchange Act of 1934 (the "Exchange Act"). The
Company has furnished to the Investor a true and
correct copy of the Reports. The Reports do not, as
of the date on which each was signed, contain any
untrue statement of a material fact or omit to state
a material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. The
Materials were prepared in good faith from the
Company's records maintained in the ordinary course
of business, except that the Company makes no
representations or warranties with respect to any
projections or forecasts contained in the Materials.
(b) The financial statements (including the
related notes) of the Company included in the
Reports present fairly the financial position of the
Company as of the dates indicated and its results of
operations for the periods specified therein,
subject, in all cases, to the qualifications stated
in the Reports. All such financial statements have
been prepared in accordance with generally accepted
accounting principles on a basis consistently
applied, subject, in all cases, to the
qualifications stated in the Reports.
(c) The Company has been duly organized and
validly existing as a corporation in good standing
under the laws of its jurisdiction of organization,
with full power and authority (corporate and other)
to own its properties and conduct its business as
described in the Reports, and is duly qualified to
do business as a foreign corporation and is in good
standing in each jurisdiction in which the character
of the business conducted by it or the location of
the properties owned or leased by it makes such
licenses, certificates and permits from governmental <PAGE>
authorities necessary for the conduct of its
business as described in the Reports.
(d) The authorized capital stock of the
Company consists of (i) 1,000,000 shares of
Preferred Stock, par value $1.00 per share, of which
6,500 shares are issued and outstanding at October
15, 1997, and (ii) 10,000,000 shares of Common
Stock, par value $.01 per share, of which 4,500,270
shares are issued and outstanding at October 15,
1997. At October 15, 1997, there are outstanding
stock options and warrants exercisable for a total
of 1,215,000 shares of Common Stock. Schedule 2
hereto accurately sets forth the Company's issued
and outstanding capital stock and all securities
convertible into capital stock. The Company has all
requisite power and authority to issue, sell and
deliver the Common Stock in accordance with and upon
the terms and conditions set forth in this
Agreement; and all corporate action required to be
taken by the Company for the due and proper
authorization, issuance, sale and delivery of the
Common Stock has been validly and sufficiently
taken. The shares of Common Stock are being
subscribed for hereby will be, when issued, duly
authorized, validly issued, fully paid and
nonassessable.
(e) Except as set forth in this Agreement, or
as described in the Reports, subsequent to the
respective dates as of which information is given in
the Reports, the Company has not incurred any
material liability or obligation, direct or
contingent, or entered into any material
transaction, whether or not in the ordinary course
of business, and there has not been any material
change on a consolidated basis in the capital stock,
or any material increase in the short-term debt or
long-term debt, or any material adverse change in
the condition (financial or other), business, key
personnel, properties or results of operations of
the Company.
(f) The Company is not in violation of its
Certificate of Incorporation or Bylaws or in default
in the performance of any material obligation
contained in any material agreement, indenture or
other instrument. The performance by the Company of
its obligations under this Agreement and the
consummation of the transactions herein contemplated
will not conflict with or result in a breach of the
Certificate of Incorporation or Bylaws of the
Company, or any material agreement, indenture or
other instrument to which the Company is a party or <PAGE>
by which it is bound, or any law, rule,
administrative regulation or decree of any court or
governmental authority having jurisdiction over the
Company or its properties, or result in the creation
or imposition of any material lien, charge, claim or
encumbrance upon any property or asset of the
Company. Except as required by the Act and
applicable state securities or blue sky laws, no
consent, approval, authorization or order of any
court or governmental authority is required in
connection with the consummation of the transactions
contemplated by this Agreement. The rights granted
to the Investor hereunder do not in any way conflict
with and are not inconsistent with any rights
granted to the holders of the Company's securities
or debt instruments.
(g) The Common Stock subscribed for hereunder,
when issued, will conform to the description thereof
contained in the Reports. Except as described in
the Reports or as set forth in this Agreement, there
are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction
upon the voting or transfer of, any shares of Common
Stock pursuant to the Company's Certificate of
Incorporation or Bylaws or any agreement or other
instrument to which the Company is a party.
(h) The Company has full right, power and
authority to enter into this Agreement and this
Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal,
valid and binding agreement of the Company
enforceable against the Company in accordance with
its terms.
(i) Except as otherwise stated in the Reports,
(A) the Company has good and marketable title (in
fee simple, in the case of real property), free and
clear of all liens and encumbrances, to all of the
material real and personal property described in the
Report as being owned by it, except for any liens
and encumbrances which are not material in the
aggregate and do not materially interfere with the
conduct of the business of the Company, and (B) has
valid leases to the material real property described
in the Reports as under lease to it with such
exceptions as do not materially interfere with the
conduct of the business of the Company.
(j) Except as set forth in the Reports, there
are no actions, suits or proceedings pending before
or by any court or governmental agency or authority,
or any arbitrator, which seek to restrain or <PAGE>
prohibit the consummation of the transactions
contemplated hereby or which might reasonably be
expected to result in any material adverse change in
the condition (financial or other), business or
results of operations of the Company and, to the
best of the Company's knowledge, no such action,
suit or proceeding has been threatened.
(k) The Company is not in violation of any
law, ordinance, governmental rule or regulation or
court degree to which it may be subject and the
Company has not failed to obtain any license,
permit, franchise or other governmental
authorization necessary to the ownership of its
property or to the conduct of its business, which
violation or failure to obtain is likely to have a
material adverse effect on the condition (financial
or other), business or results of operations of the
Company.
(l) No person other than Scorpion Holdings,
Inc. ("Scorpion") is entitled to receive any
commission, fee or compensation from the Company for
services rendered as placement agent in connection
with the offer or sale of the Common Stock pursuant
to the Offering.
6. Covenants of the Company.
The Company covenants with the Investor that:
(a) The Company will apply the net proceeds
from the sale of the Common Stock to working capital
and other general corporate purposes.
(b) The Company undertakes to notify the
Investor as soon as practical of any material change
in any representation, warranty or other information
relating to the Company set forth herein which
occurs prior to the Closing.
(c) Neither the Company nor any of its
employees or other persons directly or indirectly
affiliated with it will engage in any activity that
would jeopardize the status of the Offering as an
exempt transaction under the Act or under the laws
of any state in which the Offering is made.
(d) At Closing, the Company shall issue to the
Investors identified in Schedule 1 warrants for the
purchase of up to 300,000 shares of Common Stock,
exercisable for five (5) years after the Closing
Date at a warrant exercise price of $3.00 per share
of Common Stock, in the form of the Warrant <PAGE>
Agreement attached hereto as Exhibit A (such
warrants, the "Investor Warrants").
(e) At Closing, in consideration for Scorpion
Holdings Inc.'s ("Scorpion") introduction to the
Investor Group the Company shall sell to S-A
Partners for $2,000 warrants for the purchase of up
to 200,000 shares of Common Stock, exercisable for
five (5) years after the Closing Date at a warrant
exercise price of $3.00 per share of Common Stock,
in the form of the Warrant Agreement attached hereto
as Exhibit A (such warrants, the "Scorpion Warrants"
and, collectively with the Investor Warrants, the
"Warrants").
(f) At Closing, the Company shall enter into a
financial advisory agreement with Scorpion in the
form of Exhibit B attached hereto.
(g) For so long as the Investor Group owns
beneficially not less than 10% of the Common Stock
of the Company issued and outstanding on a fully
diluted basis (assuming the exercise or conversion
of all securities exercisable or convertible into
Common Stock): (i) the Company's Board of Directors
shall consist of five (5) directors, (ii) the
Investor Group shall be entitled to nominate one (1)
director for election as a member of the Board of
Directors of the Company at the annual meeting of
stockholders or any other meeting at which directors
are elected, and the Company shall include such
nominee in the slate of nominee directors
recommended for election by the incumbent directors
and management; and (iii) the Company shall include
in such slate of nominee directors at least two (2)
nominees who are not affiliated with the Company's
management or with the Investor Group and who shall
be selected with the consent of the Investor Group,
whose consent shall not be unreasonably or
arbitrarily withheld. The Company shall be entitled
to rely on instructions received by Investors
representing a majority of the Common Stock held by
the Investor Group.
7. Conditions of Investor Obligations.
The Investor's obligations under this Agreement are
subject to the accuracy of the representations and
warranties of the Company made in Section 5 hereof in all
material respects, to the performance by the Company of
its other obligations under this Agreement to be
performed at or prior to the Closing and to the following
further conditions: <PAGE>
(a) At the Closing, the Investor shall have
received the favorable opinion of counsel to the
Company, dated the Closing Date and in form and
substance satisfactory to the Investor, to the
effect that:
i) The Company has been duly organized
and is validly existing as a corporation in
good standing under the laws of its
jurisdiction of organization, with full power
and authority to own its properties and conduct
its business as described in the Reports, and
is duly qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction in which the location of the
properties owned or leased by it, as known by
such counsel, makes such qualification
materially necessary.
ii) The authorized capital stock of the
Company consists of 1,000,000 shares of
preferred stock, par value $1.00 per share, and
10,000,000 shares of Common Stock, par value
$.01 per share. The Company has all requisite
power and authority to issue, sell and deliver
the Common Stock subscribed for hereby in
accordance with and upon the terms and
conditions set forth in this Agreement; and all
corporate action required to be taken by the
Company for the due and proper authorization,
issuance, sale and delivery of such Common
Stock has been validly and sufficiently taken.
Upon payment by the Investor at the Closing of
the purchase price for the shares of Common
Stock subscribed for hereby, such Common Stock
will be, upon issuance and delivery thereof
duly authorized, validly issued, fully paid and
nonassessable. There are no preemptive or
other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer
of, any shares of Common Stock pursuant to the
Company's Certificate of Incorporation, By-laws
or any agreement or other instrument known to
such counsel to which the Company is a party
except as described in the Reports.
iii) The execution and delivery of this
Agreement and the consummation of the
transactions contemplated hereby do not result
in a violation of, or constitute a default
under, the Certificate of Incorporation or
Bylaws of the Company, or any material
agreement, indenture or other instrument known
to such counsel to which the Company is a party <PAGE>
or by which it may be bound, or to which any
property of the Company is subject, nor will
the performance by the Company of its
obligations hereunder violate any law, rule,
administrative regulation or decree known to
such counsel of any court, or any governmental
agency or authority having jurisdiction over
the Company or its properties, or, to the
knowledge of such counsel, result in the
creation or imposition of any material lien,
charge, claim or encumbrance upon any property
or asset of the Company. No consent, approval,
authorization or other order of any court,
governmental agency or authority is required in
connection with the consummation of the
transactions contemplated by this Agreement,
except such as have been obtained or as are
contemplated hereunder.
iv) The Company has full legal right,
power and authority to enter into this
Agreement. This Agreement has been validly
authorized, executed and delivered by the
Company and constitutes a legal, valid and
binding agreement of the Company, enforceable
in accordance with its terms, subject to the
effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and similar laws relating to or
affecting creditors' rights generally and court
decisions with respect thereto (provided that
no opinion need be expressed with respect to
the application of equitable principles in any
proceeding, whether at law or in equity).
In expressing such opinion, such counsel may state
(i) that, as to questions of fact not independently
established by such counsel, such counsel has relied on
certificates of the Company or its officers and of public
officials, (ii) that such opinion is limited to the
General Corporation Law of the State of Delaware, the
laws of the United States and the laws of the state in
which such counsel maintains its principal office, and
(iii) that, when reference is made in such opinion to
"knowledge" or to what is "known" to such counsel, such
reference means the actual knowledge of only those
attorneys who have given substantive attention to the
representation of the Company and the preparation and
negotiation of this Agreement.
(b) At the Closing the Investor shall have
received a certificate, dated the date thereof and
signed by the Chairman of the Board and President of
the Company to the effect that: <PAGE>
i) The representations and warranties of
the Company in this Agreement are true and
correct in all material respects, as if made at
and as of the Closing Date, and the Company has
complied with all the agreements and satisfied
all the conditions on its part to be performed
or satisfied at or prior to the Closing Date;
and
ii) The signer of said certificate has
examined the Reports and after giving effect to
all amendments or supplements thereto, on the
Closing Date, such Reports do not include any
untrue statement of a material fact or omit to
state any material fact necessary to make the
statements therein not misleading.
If any of the conditions specified in this Section 7
have not been fulfilled in all material respects when and
as required by this Agreement to be fulfilled, the
Investor may cancel this Agreement and all its
obligations under this Agreement by notifying the Company
of such cancellation in writing or by telegram or by
facsimile at any time at or before the Closing and any
such cancellation will be without liability or obligation
of any party to any other party (except in the case of
willful breach).
8. Conditions of Obligations of the Company.
The obligations of the Company under this Agreement
are subject to the accuracy of the representations and
warranties of the Investor made in Section 4 hereof in
all material respects and to the performance by the
Investor of its other obligations under this Agreement to
be performed at or prior to the Closing.
If any of the conditions specified in this Section 8
have not been fulfilled in all material respects when and
as required by this Agreement to be fulfilled, the
Company may cancel this Agreement and all its obligations
under this Agreement by notifying the Investor of such
cancellation in writing or by telegram at any time at or
before the Closing and any such cancellation will be
without liability or obligation of any party to any other
party (except in the case of willful breach).
9. Special Covenants of Investor Group.
(a) Each Investor hereby severally agrees
that, without the prior written consent of the
Company, it will not during the period ending on the
first (1st) anniversary of the Closing, (i) offer,
pledge, sell, contract to sell, sell any option or <PAGE>
contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock
or any securities convertible into or exercisable or
exchangeable for Common Stock, or (ii) enter into
any swap or other agreement that transfers, in whole
or in part, any of the economic consequences of
ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such
other securities, in cash or otherwise.
(b) Each Investor and Scorpion agrees that,
for a period of two years and six (6) months from
the date hereof, neither they nor any of their
affiliates will, without the prior written consent
of the Company or its Board of Directors: (i) in
any manner, acquire, attempt to acquire, offer to
acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, greater than a
49.9% interest in the voting securities (including
direct or indirect rights to acquire any voting
securities) of the Company or any subsidiary
thereof, or of any successor to or person in control
of the Company; (ii) make or in any way participate
in, directly or indirectly, any "solicitation" of
"proxies" (as such terms are used in the proxy rules
of the Securities and Exchange Commission) to vote,
or seek to advise or influence any person or entity
with respect to the voting of, any voting securities
of the Company; (iii) nominate for election or
otherwise cause to be elected directors constituting
a majority of the entire Board of Directors of the
Company; (iv) make any public announcement with
respect to a proposal for, or offer of (with or
without conditions) any extraordinary transaction
involving the Company or its securities or assets;
(v) form, join or in any way participate in a
"group" (as defined in Section 13(d)(3) of the
Exchange Act) in connection with any of the
foregoing or (vi) take any action which might
require the Company to make a public announcement
regarding the possibility of a business combination
or merger or other transaction. Investor and
Scorpion also agree during such period not to
request the Company or any of its representatives,
directly or indirectly, to amend or waive any
provision of this paragraph (including this
sentence). Investor and Scorpion will promptly
advise the Company of any inquiry or proposal made
to them with respect to any of the foregoing. For
the purposes of this Section 9(b), each Investor and <PAGE>
Scorpion shall be deemed to be affiliated and their
ownership of Common Stock aggregated.
10. Registration Rights.
(a) "Registration Period" means the period
between the date of this Agreement and the earlier
of (i) the date on which all of the shares of Common
Stock and the Common Stock into which the Warrants
are exercisable (collectively the "Registrable
Securities") have been sold in transactions where
the transferee is not subject to securities law
resale restrictions (or is subject to securities law
resale restrictions solely because it is an
"affiliate" of the Company under the Securities Act
and the Rules promulgated thereunder), or (ii) the
date on which the Registrable Securities (in the
opinion of Investor's counsel) may be immediately
sold without registration and free of restrictions
on transfer.
(b) "Registration Statement" means a
registration statement of the Company filed with the
Securities and Exchange Commission (the "SEC") under
the Securities Act.
(c) The term "register", "registered", and
"registration" refer to a registration effected by
preparing and filing a Registration Statement in
compliance with the Securities Act and applicable
rules and regulations thereunder and pursuant to
Rule 415 under the Securities Act, and the
declaration or ordering of effectiveness of such
Registration Statement by the SEC.
(d) The Company represents and warrants that
it meets the requirements for the use of Form S-3
and the Company shall file all reports required to
be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the
use of Form S-3.
(e) Within ninety (90) days following the
Closing Date, the Company will prepare and file a
Registration Statement on Form S-3 with the SEC,
registering all of the Registrable Securities for
resale. To the extent allowable under the
Securities Act and the Rules promulgated thereunder,
the Registration Statement shall include the
Registrable Securities and such indeterminate number
of additional share of Common Stock as may become
issuable pursuant to this Agreement and/or upon
exercise of the Warrants (i) to prevent dilution
resulting from stock splits, stock dividends or <PAGE>
similar transactions. The Registration Statement
(and each amendment or supplement thereto) shall be
provided to, and subject to the reasonable approval
of, the Investors and their counsel. The Company
shall use its best efforts to cause such
Registration Statement to be declared effective by
the SEC as soon as practicable after filing. Such
best efforts shall include, but not be limited to,
promptly responding to all comments received from
the staff of the SEC. Should the Company receive
notification from the SEC that the Registration
Statement will receive no action or no review from
the SEC, the Company shall cause such Registration
Statement to become effective within five (5)
business days of such SEC notification. Once
declared effective by the SEC, the Company shall
cause such Registration Statement to remain
effective throughout the Registration Period.
(f) The Registration Statement (including any
amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not
contain any untrue statements of a material fact or
omit to state 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. The Company shall
prepare and file with the SEC such amendments
(including post-effective amendments) and
supplements to the Registration Statement and the
prospectus used in connection with the Registration
Statement as may be necessary to keep the
Registration Statement effective at all times during
the Registration Period and, during such period,
shall comply with the provisions of the Securities
Act with respect to the disposition of all
Registrable Securities of the Company covered by the
Registration Statement until such time as all of
such Registrable Securities have been disposed of in
accordance with the intended methods of disposition
by the sellers thereof as set forth in the
Registration Statement.
11. Indemnification. In the event any Registrable
Securities are included in a Registration Statement under
this Agreement:
(a) To the extent permitted by law, the
Company will indemnify and hold harmless each
Investor who holds such Registrable Securities, the
directors, if any, of such Investor, the officers,
if any, of such Investor, each person, if any, who
controls any Investor within the meaning of the
Securities Act or the Exchange Act, any underwriter <PAGE>
(as defined in the Securities Act) for the
Investors, the directors, if any, of such
underwriter and the officers, if any, of such
underwriter, and each person, if any, who controls
any such underwriter within the meaning of the
Securities Act or the Exchange Act (each, an
"Indemnified Person"), against any losses, claims,
damages, expenses or liabilities (joint or several)
(collectively "Claims") to which any of them become
subject under the Securities Act, the Exchange Act
or otherwise, insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any
of the following statements, omissions or violations
in the Registration Statement, or any post-effective
amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue
statement of a material fact contained in the
Registration Statement or any post-effective
amendment thereof or the omission or alleged
omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used
prior to the effective date of such Registration
Statement, or contained in the final prospectus (as
amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the
SEC) or the omission or alleged omission to state
therein any material fact necessary to make the
statements made therein, in light of the
circumstances under which the statements therein
were made, not misleading, or (iii) any violation or
alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law or
any rule or regulation (the matters in the foregoing
clauses ((i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set
forth in Section 11(c) with respect to the number of
legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling
person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection
with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in
this Section 11(a): (A) shall not apply to a Claim
arising out of or based upon a Violation which
occurs in reliance upon and in conformity with
information furnished in writing to the Company by
any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection <PAGE>
with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the
Company pursuant to this Agreement hereof; (B) with
respect to any preliminary prospectus shall not
inure to the benefit of any such person from whom
the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such
person) if the untrue statement or omission of
material fact contained in the preliminary
prospectus was corrected in the prospectus, as then
amended or supplemented, if a prospectus was timely
made available by the Company pursuant to this
Agreement; and (C) shall not apply to amounts paid
in settlement of any Claim if such settlement is
effected without the prior written consent of the
Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force
and effect regardless of any investigation made by
or on behalf of the Indemnified Persons and shall
survive the transfer of the Registrable Securities
by the Investors to this Agreement.
(b) In connection with any Registration
Statement in which an Investor is participating,
each such Investor, severally and not jointly,
agrees to indemnify and hold harmless, to the same
extent and in the same manner set forth in Section
11 (a), the Company, each of its directors, each of
its officers who signs the Registration Statement,
each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange
Act, any underwriter and any other stockholder
selling securities pursuant to the Registration
Statement or any of its directors or officers or any
person who controls such stockholder or underwriter
within the meaning of the Securities Act or the
Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against
any Claim to which any of them may become subject,
under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent
(and only to the extent) that such Violation occurs
in reliance upon and in conformity with written
information furnished to the Company by such
Investor expressly for use in connection with such
Registration Statement, and such Investor will
promptly reimburse any legal or other expenses
reasonably incurred by them in connection with
investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in
this Section 11(b) shall not apply to amounts paid <PAGE>
in settlement of any Claim if such settlement is
effected without the prior written consent of such
Investor, which consent shall not be unreasonably
withheld; provided further, however, that the
Investor shall be liable under this Section 11(b)
for only that amount of a Claim as does not exceed
the net proceeds to such Investor as a result of the
sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain
in full force and effect regardless of any
investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant
to this Agreement. Notwithstanding anything to the
contrary contained herein, the indemnification
agreement contained in this Section 11(b) with
respect to any preliminary prospectus shall not
inure to the benefit of any Indemnified Party if the
untrue statement or omission of material fact
contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as
then amended or supplemented.
(c) Promptly after receipt by an Indemnified
Person or Indemnified Party under this Section 11 of
notice of the commencement of any action (including
any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party
under this Section 11, deliver to the indemnifying
party a written notice of the commencement thereof
and this indemnifying party shall have the right to
participate in, and, to the extent the indemnifying
party so desires, jointly with any other
indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually
satisfactory to the indemnifying parties; provided,
however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own
counsel, with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying
party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to
actual or potential differing interests between such
Indemnified Person or Indemnified Party and other
party represented by such counsel in such
proceeding. The Company shall pay for only one
separate legal counsel for the Investors; such legal
counsel shall be selected by the Investors holding a
majority in interest of the Registrable Securities.
The failure to deliver written notice to the
indemnifying party within a reasonable time of the <PAGE>
commencement of any such action shall not relieve
such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this
Section 11, except to the extent that the
indemnifying party is prejudiced in its ability to
defend such action. The indemnification required by
this Section 11 shall be made by periodic payments
of the amount thereof during the course of the
investigation or defense, as such expense, loss,
damage or liability is incurred and is due and
payable. The provisions of this Section 11 shall
survive the termination of this Agreement.
12. Contribution. If the indemnification provided
for in Section 11 herein is unavailable to the
Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein (other than by
reason of the exceptions provided therein), then each
such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities as between the
Company on the one hand and any Investor on the other, in
such proportion as is appropriate to reflect the relative
fault of the Company and of such Investor in connection
with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative
fault of the Company on the one hand and of any Investor
on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact relates to information
supplied by the Company or by such Investor.
In no event shall the obligation of any Indemnifying
Party to contribute under this Section 12 exceed the
amount that such Indemnifying Party would have been
obligated to pay by way of indemnification if the
indemnification provided for under Sections 11(a) or
11(b) hereof had been available under the circumstances.
The Company and the Investors agree that it would
not be just and equitable if contribution pursuant to
this Section 12 were determined by pro rata allocation
(even if the Investors or the underwriters were treated
as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding
paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses <PAGE>
reasonably incurred by such Indemnified Party in
connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this
section, no Investor or underwriter shall be required to
contribute any amount in excess of the amount by which
(i) in the case of any Investor, the net proceeds
received by such Investor from the sale of Registrable
Securities or (ii) in the case of an underwriter, the
total price at which the Registrable Securities purchased
by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any
damages that such Investor or underwriter has otherwise
been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. 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.
13. Public Information. With a view to making
available to the Investors the benefits of Rule 144
promulgated under the Securities Act or any other similar
rule or regulation of the SEC that may at any time permit
the Investors to sell securities of the Company to the
public without registration ("Rule 144"), the Company
agrees to:
(a) File with the SEC in a timely manner and
make and keep available all reports and other
documents required of the Company under the Exchange
Act so long as the Company remains subject to such
requirements and the filing and availability of such
reports and other documents is required for the
applicable provisions of Rule 144; and
(b) Furnish to each Investor so long as such
Investor holds Registrable Securities, promptly upon
request, (i) a written statement by the Company that
it has complied with the reporting requirements of
Rule 144 and the Exchange Act, (ii) a copy of the
most recent annual or quarterly report of the
Company and such other reports and documents so
filed by the Company, and (iii) such other
information as may be reasonably requested to permit
the Investors to sell such securities pursuant to
Rule 144 without registration.
14. Assignment of Registration Rights. The rights
to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically
assigned by the Investors to transferees or assignees of
all or any portion of such securities or Warrants
exercisable into Registrable Securities only if (i) the
Investor agrees in writing with the transferee or <PAGE>
assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable
time after such assignment, (ii) the Company is, within a
reasonable time after such transfer or assignment,
furnished with written notice of the name and address of
such transferee or assignee and the securities with
respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or
assignment the further disposition of such securities by
the transferee or assignee is restricted under the
Securities Act and applicable state securities laws, (iv)
at or before the time the Company received the written
notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company
to be bound by all of the provisions contained herein,
(v) such transfer shall have been made in accordance with
the applicable requirements of the Agreement, and (vi)
such transferee shall be an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated
under the Securities Act.
15. Expenses.
The reasonable legal and accounting fees and out-of-
pocket expenses of the Investor Group and Scorpion
incurred in connection with this Offering and the
transactions contemplated herein, aggregating up to a
total of $20,000, shall be borne by the Company. Subject
to the preceding sentence, each party hereto shall bear
its own legal and other expenses incurred in connection
with this Offering.
16. Notices.
(a) Any notice required to be given or
delivered to the Investor shall be mailed first
class, postage prepaid, return receipt requested, to
such Investor's address shown on the signature page
hereof with a copy to:
Robert T. Tucker, Esq.
61 Purchase Street
Rye, NY 10580
(b) Any notice required to be given or
delivered to the Company shall be mailed first
class, postage prepaid, return receipt requested,
to:
Acrodyne Communications, Inc.
516 Township Line Road
Blue Bell, PA 19422
Attn: President <PAGE>
with a copy to:
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attn: Stephan Haimo, Esq.
17. Survival of Representations and Warranties.
All representations and warranties and agreements
hereunder shall survive execution of this Agreement and
delivery of the Common Stock.
18. Governing Law. This Agreement and the rights
and obligations of the parties shall be governed by and
construed in accordance with the laws of the State of New
York applicable to contracts made and to be performed
wholly within that State.
19. Entire Agreement. This Agreement (including
all schedules and exhibits thereto) constitutes the
entire agreement among the parties hereto with respect to
the subject matter hereof. There are no restrictions,
promises, warranties or undertakings, other than those
set forth or referred to herein or therein. This
Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to
the subject matter hereof.
20. Amendment of Agreement. Provisions of this
Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the
written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this
Section 15 shall be binding upon the Investor and the
Company.
21. Severability. In the event that any provision
of this Agreement is invalid or unenforceable under any
applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision
hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of
any other provision hereof. <PAGE>
IN WITNESS WHEREOF, the undersigned has executed
this Subscription Agreement as of the date first above
written.
SCORPION-ACRODYNE INVESTORS LLC
Name of Subscriber
By: /s/ Kevin R. McCarthy
---------------------------
Name: Kevin R. McCarthy
Title: Managing Member
Address:
c/o Scorpion Holdings, Inc.
505 Park Avenue, 12th Floor
New York, NY 10022
Tax Identification Number:
---------------------------
The terms of the foregoing including
the subscription described therein are
agreed to and accepted as of the
date first above written:
ACRODYNE COMMUNICATIONS, INC.
By: /s/ A. Robert Mancuso
-----------------------------
Name: A. Robert Mancuso
Title: Chairman and President
The terms of the foregoing, insofar
as they relate to Scorpion Holdings, Inc.,
are agreed to and accepted as of the
date first above written:
SCORPION HOLDINGS, INC.
By: Kevin R. McCarthy
-----------------------------
Name: Kevin R. McCarthy
Title: President<PAGE>
EXHIBIT C
THE WARRANT REPRESENTED HEREBY AND THE SHARES OF COMMON
STOCK ISSUABLE UPON EXERCISE OF THE WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED OR
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE
SECURITIES LAWS, UNLESS THE COMPANY HAS RECEIVED THE
WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH COUNSEL IS OF THE OPINION THAT SUCH SALE,
ASSIGNMENT OR TRANSFER DOES NOT INVOLVE A TRANSACTION
REQUIRING THE REGISTRATION OF SUCH SECURITY UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES
LAWS.
Right to Purchase 165,000 Shares of Common Stock
of Acrodyne Communications, Inc.
ACRODYNE COMMUNICATIONS, INC.
Common Stock Purchase Warrant
ACRODYNE COMMUNICATIONS, INC., a Delaware
corporation (the "Company") having its principal
executive offices at 516 Township Line Road, Blue Bell,
Pennsylvania 19422, hereby certifies that, for value
received Scorpion-Acrodyne Investors LLC or assigns, (the
"Holder" or "Holders"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time
or from time to time before 5:00 P.M., New York time, on
November 7, 2002, One Hundred Sixty-Five Thousand
(165,000) fully paid and nonassessable shares of Common
Stock of the Company at an exercise price, subject to
adjustment, of Three Dollars ($3.00) per share (the
"Purchase Price").
As used herein the following terms, unless the
context otherwise requires, have the following respective
meanings:
(a) The term "Company" shall include Acrodyne
Communications, Inc. and any corporation which shall
succeed or assume the obligations of the Company
hereunder.
(b) The term "Common Stock" includes (a) the
Company's Common Stock, $.01 par value per share, as
authorized on the date hereof, (b) any other capital
stock of any class or classes (however designated)
of the Company, authorized on or after such date,
the holders of which shall have the right, without <PAGE>
limitation as to amount, either to all or to a share
of the balance of current dividends and liquidating
dividends after the payment of dividends and
distributions on any shares entitled to preference,
and (c) any other securities into which or for which
any of the securities described in (a) or (b) may be
converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of
assets or otherwise.
1. Exercise of Warrant.
1.1. Exercise. Commencing on the date of this
Warrant, or from time to time thereafter prior to the
expiration hereof, this Warrant may be exercised in whole
or in part by the holder hereof by surrender of this
Warrant, with the form of subscription at the end hereof
duly executed by such holder, to the Company at its
principal office, accompanied by payment, in cash or by
certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant
is then exercisable by the Purchase Price then in effect.
1.2. Trustee for Warrant Holders. In the event
that a bank or trust company shall have been appointed as
trustee for the holder of this Warrant pursuant to
Section 3.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed
pursuant to Section 11 and shall accept, in its own name
for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on
exercise of this Warrant pursuant to this Section 1.
2. Delivery of Stock Certificates on Exercise. As
soon as practicable after the exercise of this Warrant in
full or in part, and in any event within 10 days
thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the holder
hereof, or as such holder (upon payment by the Company of
any applicable transfer taxes) may direct, a certificate
or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder
shall be entitled on such exercise.
3. Adjustment for Reorganization, Consolidation,
or Merger.
3.1. Reorganization, Consolidation or Merger.
In case at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any
other person under any plan or arrangement contemplating <PAGE>
the dissolution of the Company, then, in each such case,
the holder of this Warrant, on the exercise hereof as
provided in Section 1 at any time after the consummation
of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be,
shall receive, in lieu of the Common Stock issuable on
such exercise prior to such consummation or such
effective date, the stock and other securities and
property (including cash) to which such holder would have
been entitled upon such consummation or in connection
with such dissolution, as the case may be, if such holder
had so exercised this Warrant, immediately prior thereto,
all subject to further adjustment thereafter as provided
in Section 4.
3.2. Dissolution. In the event of any
dissolution of the Company following the transfer of all
or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other
securities and property (including cash, where
applicable) receivable by the holder of the Warrant after
the effective date of such dissolution pursuant to this
Section 3 to a bank or trust company, as trustee for the
holder of the Warrant and shall promptly notify each
holder of the Warrants of the occurrence of any events
specified in this Section 3.
3.3. Continuation of Terms. Upon any
reorganization, consolidation, merger or transfer (and
any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to
all securities and other property receivable on the
exercise of this Warrant after the consummation of such
reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the
case may be, and shall be binding upon the issuer of any
such stock or other securities, including, in the case of
any such transfer, the person acquiring all or
substantially all of the properties or assets of the
Company, whether or not such person shall have expressly
assumed the terms of this Warrant.
4. Adjustments for Stock Dividends and Stock
Splits. In the event that the Company shall (i) issue
additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock, or
(iii) combine its outstanding shares of the Common stock
into a smaller number of shares of the Common Stock,
then, in each such event, the Purchase Price shall,
simultaneously with the happening of such event, be
adjusted by multiplying the then prevailing Purchase <PAGE>
Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be
the number of shares of Common Stock outstanding
immediately after such event, and the product so obtained
shall hereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted
in the same manner upon the happening of any successive
event or events described herein in this Section 4. The
holder of this Warrant shall thereafter, on the exercise
hereof as provided in Section 1, be entitled to receive
that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock which
would otherwise (but for the provisions of this Section
4) be issuable on such exercise, by a fraction of which
(i) the numerator is the Purchase Price which would
otherwise (but for the provisions of this Section 4) be
in effect, and (ii) the denominator is the Purchase Price
in effect on the date of such exercise.
5. Notices of Record Date, Etc. In case:
(a) the Company shall take a record of
the holders of its Common Stock (or other securities at
the time receivable upon the exercise of the Warrant) for
the purpose of entitling them to receive any dividend
(other than a cash dividend payable out of earned
surplus) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of
any class or any other securities, or to receive any
other right; or
(b) of any capital reorganization of the
Company (other than a stock split or reverse stock
split), any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with
or into another corporation (other than a merger for
purposes of change of domicile) or any conveyance of all
or substantially all of the assets of the Company to
another corporation; or
(c) of any voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, and in each such case, the Company shall mail or
cause to be mailed to the Holder at the time outstanding
a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or
(ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place,
and the time, if any, is to be fixed, as to which the <PAGE>
holders of record of Common Stock (or such other
securities at the time receivable upon the exercise of
the Warrant) shall be entitled to exchange their shares
of Common Stock (or such other securities) for securities
or other property deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice
shall be mailed at least twenty (20) days prior to the
date therein specified and this Warrant may be exercised
prior to said date during the term of the Warrant no
later than five days prior to said date.
6. No Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this
Warrant, but will at all times in good faith
assist in the carrying out of all such terms
and in the taking of all such action as may be necessary
or appropriate in order to protect the rights of the
holder of this Warrant. Without limiting the generality
of the foregoing, the Company (a) will not increase the
par value of any shares of stock receivable on the
exercise of the Warrant above the amount payable therefor
on such exercise, and (b) will take all such action as
may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of this
Warrant from time to time outstanding.
7. Reservation of Stock Issuable on Exercise of
Warrant. The Company will at all times reserve and keep
available, solely for issuance and delivery on the
exercise of the Warrant, all shares of Common Stock from
time to time issuable on the exercise of the Warrant.
8. Exchange of Warrant. On surrender for
exchange of this Warrant, properly endorsed, to the
Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such
holder or as such holder (on payment by such holder of
any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of
shares of Common Stock for which the Warrant or Warrants
may still be exercised.
9. Replacement of Warrant. On receipt of evidence
reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or <PAGE>
security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company
at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor.
10. Warrant Agent. The Company may, by written
notice to each holder of a Warrant, appoint an agent for
the purpose of issuing the Common Stock on the exercise
of the Warrant pursuant to Section 1, exchanging this
Warrant pursuant to Section 8, and replacing this Warrant
pursuant to Section 9, or any of the foregoing, and
thereafter any such issuance, exchange or replacement, as
the case may be, shall be made at, such office by such
agent.
11. Negotiability; Restrictions on Transfer;
Warrant Holder Not Deemed Stockholder. This Warrant is
issued upon the following terms, to all of which each
holder or owner hereof by the taking hereof consents and
agrees:
(a) No holder of this Warrant shall, as
such, be entitled to vote or to receive dividends or to
be deemed the holder of any class of security that may at
any time be issuable upon exercise of the Warrant for any
purpose whatsoever, nor shall anything contained herein
be construed to confer upon such holder, as such, any of
the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of
stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise),
or to receive notice of meetings, or to receive dividends
or subscription rights, until such holder shall have
exercised the Warrant and been issued shares of Common
Stock in accordance with the provisions hereof; and
(b) Neither this Warrant nor any shares
of Common Stock purchased pursuant to this Warrant have
been registered under the Securities Act of 1933.
Therefore, the Company may require, as a condition of
allowing the transfer or exchange of this Warrant or such
shares, that the holder or transferee of this Warrant or
such shares, as the case may be, furnish to the Company
an opinion of counsel reasonably acceptable to the
Company to the effect that such transfer or exchange may
be made without registration under the Securities Act of
1933. The certificates evidencing the Common Stock
issued on the exercise of the Warrant shall bear a legend
to the effect that the certificates have not been
registered under the Securities Act of 1933. <PAGE>
12. Further Assurances. The Company undertakes
generally to execute all such agreements and other
instruments and to do all such other acts as are
necessary or appropriate (including, but not limited to,
authorizing and issuing additional shares of stock of the
Company) to give full effect to the terms, conditions and
provisions of this Warrant and make it binding on the
Company.
13. Notices. All notices and other communications
between the Company and the holder of this Warrant shall
be mailed by first class mail, postage prepaid, at such
addresses listed above, or as may have been subsequently
furnished to the other party in writing.
14. Miscellaneous. This Warrant and any term
hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party
against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall
be construed and enforced in accordance with and governed
by the laws of the State of New York. The headings in
this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms
hereof. This Warrant is being executed as an instrument
under seal. The invalidity or unenforceability of any
provision thereof shall in no way affect the validity or
enforceability of any other provision.
15. Expiration. The right to exercise this Warrant
shall expire at 5:00 P.M., New York time, November 7,
2002. <PAGE>
Dated: November 6, 1997 ACRODYNE COMMUNICATIONS, INC.
By: /s/ A. Robert Mancuso
-------------------------
Name: A. Robert Mancuso
Title: Chairman and
President
(Seal) <PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ACRODYNE COMMUNICATIONS, INC.
The undersigned, the holder of the within
Warrant, hereby irrevocably elects to exercise this
Warrant for, and to purchase thereunder, _____ shares of
Common Stock of ACRODYNE COMMUNICATIONS, INC. and
herewith makes payment of $__________ therefor, and
requests that the certificates for such shares be issued
in the name of, and delivered to, ________________, whose
address is ________________________.
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address) <PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby
sells, assigns, and transfers unto the right represented
by the within Warrant to purchase _____ shares of Common
Stock of ACRODYNE COMMUNICATIONS, INC. to which the
within Warrant relates, and appoints __________ Attorney
to transfer ACRODYNE COMMUNICATIONS, INC. such right on
the books of ACRODYNE COMMUNICATIONS, INC. with full
power of substitution in the premises.
Dated:
(Signature must conform to
name of holder as specified
on the face of the Warrant)
(Address)
Signed in the presence of: <PAGE>
