EXHIBIT 2
STOCK PURCHASE AGREEMENT dated as of September 22, 1995
by and among PENRIL DATACOMM NETWORKS, INC., a Delaware
corporation (the "Company"), PEQUOT PARTNERS FUND, L.P., a
Delaware limited partnership ("Partners"), PEQUOT ENDOWMENT FUND,
L.P., a Delaware limited partnership ("Endowment"), and PEQUOT
INTERNATIONAL FUND INC., a British Virgin Islands corporation
("International" and together with Partners and Endowment, the
"Investors").
W I T N E S S E T H :
WHEREAS, the Company wishes to issue to the Investors and
the Investors wish to purchase from the Company an aggregate of
1,465,000 shares of common stock, $.01 par value (the "Common
Stock"), of the Company;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements herein contained, the parties hereto agree as
follows:
1. ISSUANCE AND SALE OF COMMON STOCK.
1.1. ISSUANCE, PURCHASE AND SALE OF SHARES. Upon the
terms and subject to the conditions hereof, the Company has
authorized the issuance of 1,465,000 shares of Common Stock (the
"Shares").
1.2. AGREEMENT TO SELL AND PURCHASE THE COMMON STOCK.
Upon the terms and subject to the conditions hereof,
simultaneously with the execution and delivery of this Agreement,
the Company is issuing and selling to each Investor, and each
Investor is subscribing for and purchasing from the Company, the
number of Shares set forth opposite such Investor's name on
Schedule I hereto for an aggregate purchase price equal to the
dollar amount opposite such Investor's name on Schedule I hereto
(the "Purchase Price").
1.3. DELIVERIES. Simultaneously with the execution and
delivery of this Agreement, the following actions are being taken:
(a) The Company is issuing and delivering to
each Investor one or more certificates representing the number of
Shares set forth opposite such Investor's name on SCHEDULE I
hereto, each registered in the name of such Investor (the "Stock
Certificates"). Delivery of each such Stock Certificate to each
Investor is being made against payment to the Company by each
Investor of the Purchase Price, which is being paid by delivery of
a certified check or cashier's check payable to the order of the
Company or by a wire transfer in such amount to an account
previously designated by the Company.
(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, Xxxxxx &
Xxxxxxx, 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, Xxxxxxx &
Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
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
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operations, properties or prospects of the Company and its
Subsidiaries taken as a whole (a "Company Material Adverse
Effect").
2.2. SUBSIDIARIES. SCHEDULE 2.2. contains a true and
complete list of each corporation, partnership, joint venture,
business trust or other entity in which the Company, directly or
indirectly, has any ownership interest (collectively, the
"Subsidiaries"). Each of the outstanding shares of capital stock
of each of the Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and, except as set forth on SCHEDULE
2.2, is owned, directly or indirectly, by the Company free and
clear of any liens, pledges, security interests, claims or other
encumbrances other than liens imposed by law which are not
material to the business of the Company and its Subsidiaries taken
as a whole. Each of the Company's Subsidiaries is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. SCHEDULE 2.2 sets
forth the following information for each Subsidiary of the
Company: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or equity capital;
and (iii) the number of issued and outstanding shares of capital
stock or equity capital. Except for the interests in the
Subsidiaries, neither the Company nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity
or debt) in any corporation, partnership, joint venture, business
trust or other entity.
2.3. AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by the Company of this
Agreement and the Registration Rights Agreement and the issuance,
sale, and delivery of the Shares have been duly authorized by all
requisite corporate action by the Company. Each of this Agreement
and the Registration Rights Agreement constitutes a valid and
binding obligation of the Company, enforceable against the Company
in accordance with its terms. Upon payment by the Investors
pursuant to this Agreement, the Shares will be validly issued and
outstanding, fully paid and nonassessable with no personal
liability attaching to the ownership thereof, and are not subject
to preemptive or any other similar rights of the stockholders of
the Company or others except as contemplated hereby.
2.4 NO VIOLATION. The execution, delivery and
performance of this Agreement and the Registration Rights
Agreement, the issuance, sale, delivery of the Shares, the
consummation of the transactions contemplated hereby and thereby,
and compliance with the provisions hereof and thereof by the
Company will not (a) violate any provision of any law, statute,
rule or regulation, or any ruling, writ, injunction, order,
judgment or decree of any court, administrative agency or other
governmental body applicable to the Company or any of its
Subsidiaries, properties or assets or (b) conflict with or result
in any breach of any of the terms, conditions or provisions of, or
constitute (with due notice or lapse of time, or both) a default
(or give rise to any right of termination, cancellation or
acceleration) under the Certificate of Incorporation or the By-
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laws of the Company or any of its Subsidiaries or any note,
indenture, mortgage, lease agreement or other material contract,
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their
properties is bound or affected. No permit, authorization,
consent or approval of or by, or any notification of, or filing
with, any person (governmental or private) is required in
connection with the execution, delivery and performance by the
Company of this Agreement or the Registration Rights Agreement or
the issuance, sale or delivery of the Shares (other than such
notifications or filings required under applicable state
securities laws, if any, which shall be made on a timely basis).
2.5. CAPITALIZATION. As of the date hereof, and
immediately prior to the consummation of the transactions
contemplated hereby and before giving effect to such transactions,
the authorized capital stock of the Company consists of 100,000
shares of Serial Preferred Stock, $.01 par value, none of which is
issued and outstanding, and 20,000,000 shares of Common Stock, of
which 7,586,202 shares are issued and outstanding (exclusive of
treasury stock). As of the date hereof, other than options to
purchase an aggregate of 1,599,618 shares of Common Stock
outstanding under the Company's 1986 Incentive Plan, adopted on
October 8, 1986, and the Non-Employee Directors' Stock Option
Plan, adopted on December 9, 1987, and except as contemplated by
this Agreement, there are no outstanding warrants, options,
agreements, convertible securities or other commitments pursuant
to which the Company is or may become obligated to issue any
shares of the capital stock or other securities of the Company,
except for the proposed sale (the "Proposed Sale") of 50,000
shares of Common Stock to a third party investor on or prior to
October 15, 1995 at a per share price of not less than $5.00. As
of the date hereof, except as contemplated by this Agreement and
the Registration Rights Agreement, there are, no preemptive or
similar rights to purchase or otherwise acquire shares of the
capital stock of the Company pursuant to any provision of law, the
Certificate of Incorporation or By-laws (in each case, as amended
and in effect on the date hereof), or any agreement to which the
Company is a party; and, except as contemplated by this Agreement
and the Registration Rights Agreement, the Company is not a party
to any agreement, restriction or encumbrance (such as a right of
first refusal, right of first offer, proxy, voting agreement,
voting trust, registration rights agreement, stockholders'
agreement, etc.) with respect to the sale or voting of any shares
of capital stock of the Company (whether outstanding or issuable
upon conversion or exercise of outstanding securities). The
transactions contemplated by this Agreement and the Registration
Rights Agreement will not cause any anti-dilution protection
provisions given by the Company to any person or entity (including
without limitation, any stockholder, lender, warrant holder,
lessor and/or licensee) to become operative.
2.6. SEC DOCUMENTS. The Company has filed all
registration statements, reports, proxy statements or information
statements (collectively, the "SEC Reports") required to be filed
by the Company with the Securities and Exchange Commission (the
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"SEC") since July 31, 1992. Except as set forth on SCHEDULE 2.6,
as of their respective dates, each SEC Report (including exhibits
and any amendments thereto), filed by the Company with the SEC,
(i) was prepared in all material respects in accordance with the
applicable requirements of the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the
"Securities Exchange Act"), as the case may be, and the respective
rules and regulations promulgated thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or
incorporated by reference into the SEC Reports (including the
related notes and schedules) fairly presents the consolidated
financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of income, retained
earnings and cash flows of the Company included in or incorporated
by reference into the SEC Reports (including any related notes and
schedules) fairly presents the results of operations, retained
earnings or cash flows, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except as noted therein. As of the date hereof, the
Company is eligible to file registration statements under the
Securities Act on Form S-3 and the Company is not aware of any
facts or circumstances which would cause it to fail to meet the
eligibility requirements for use of Form S-3.
2.7 Projections. Each of (i) the detailed monthly
financial forecast in the form of an income statement and a
balance sheet for each of the Company, Electro-Metrics, Inc.,
Technipower, Inc. and Perfect Power Systems, Inc. for the fiscal
year ending July 31, 1996 and (ii) the Forecast Income Statements
for the Company and the Penril Datability Networks Division for
the fiscal years ending on July 31, 1995 through 1998,
(collectively, the "Projections") delivered to the Investors,
discloses all material assumptions made with respect to general
economic, financial and market conditions used in formulating such
Projections. To the knowledge of the Company, no facts exist
which would result in any material change in any of such
Projections. The Projections are based upon reasonable estimates
and assumptions, all of which are fair in light of current
conditions, have been prepared on the basis of the assumptions
stated therein, and reflect the reasonable estimate of the Company
of the results of operations, assets, liabilities and other
information projected therein.
2.8. LITIGATION; UNDISCLOSED LIABILITIES. (a) Except
as disclosed in the SEC Reports, there are no actions, suits or
proceedings pending against the Company or any of its Subsidiaries
or any of their respective directors or executive officers in
their capacity as such or, to the best knowledge of the Company,
threatened against the Company or any of its Subsidiaries or any
of their respective directors or executive
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officers, at law or in equity, or before or by any federal or
state commission, board, bureau, agency or instrumentality, that,
individually or in the aggregate, are or could reasonably be
expected to be material to the Company and its Subsidiaries taken
as a whole.
(b) Except as set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1994 or the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1995, except for the matters disclosed in the Company's
news release, dated September 19, 1995 and except for the
treatment of Technipower, Inc. as a discontinued operation, the
Company has no liability of any nature (matured or unmatured,
fixed or contingent) which has or could reasonably be expected to
have a Company Material Adverse Effect.
2.9. ABSENCE OF CERTAIN CHANGES. Since April 30, 1995
the Company has conducted its business only in the ordinary course
consistent with past practice and there has not been (a) except
for the matters disclosed in the Company's news release, dated
September 19, 1995 any event or events which, individually or in
the aggregate, have or could reasonably be expected to have a
Company Material adverse Effect, (b) any declaration, setting
aside or payment of any dividend or other distribution with
respect to its capital stock or any redemption or repurchase of
any shares of its capital stock, (c) any material change in its
accounting principles, practices or methods, (d) any asset or
property of the Company made subject to a lien of any kind, (e)
any waiver of any valuable right of the Company, or the
cancellation of any material debt or claim held by the Company,
(f) any sale, assignment or transfer of any tangible or intangible
assets of the Company, except in the ordinary course of business,
(g) any loan by the Company to any officer, director, employee,
consultant or shareholder of the Company, or any agreement or
commitment therefor (other than advances to such persons in the
ordinary course of business in connection with travel and travel
related expenses), (h) except as set forth on SCHEDULE 2.9, any
increase in the salaries or other compensation payable to any
officer, director or employee of the Company or any of its
Subsidiaries (except for normal increases in the ordinary course
of business consistent with past practice) or any increase in, or
addition to, other benefits to which any officer, director or
employee may be entitled (except as required by the terms of plans
as in effect on the date of this Agreement or as required by law),
(i) any incurrence of indebtedness for borrowed money (except in
the ordinary course of business consistent with past practice),
(j) except as set forth on SCHEDULE 2.9, any amendment to,
termination or threat of termination of any material right or
agreement to which the Company is a party, (k) any material
adverse change or threat of a material adverse change in the
Company's or any of its Subsidiaries' relations with, or any loss
or threat of loss of, any of the Company's important suppliers or
customers or (l) any material damage, destruction or loss,
whether or not covered by insurance, adversely affecting the
properties, business or prospects of the Company and its
Subsidiaries taken as a whole, or any deterioration in the
operating condition of the
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assets of the Company and its Subsidiaries which would have a
Company Material Adverse Effect.
2.10. TAXES. (a) Except as set forth on SCHEDULE
2.10, the Company and each of its Subsidiaries (i) have timely
filed all federal, state, local and foreign tax returns required
to be filed by any of them prior to the date of this Agreement and
all such returns are complete in all material respects, (ii) have
paid or accrued all Taxes (as hereinafter defined) that may be due
and payable with respect to such returns and (iii) have properly
accrued in all material respects all Taxes for such periods
subsequent to the periods covered by such returns. "Taxes," for
purposes of this Agreement, means any taxes, assessments, duties,
fees, levies, imposts, deductions, withholdings, including,
without limitation, income, gross receipts, ad valorem, value
added, excise, real or personal property, asset, sales, use,
license, payroll, transaction, capital, net worth and franchise
taxes, estimated taxes, withholding, employment, social security,
workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, windfall profits, transfer and
gains taxes, or other governmental charges of any nature
whatsoever imposed by any government or taxing authority of any
country or political subdivision of any country and any
liabilities with respect thereto, including any penalties,
additions to tax, fines or interest thereon, and includes any
liability of the Company or any of its Subsidiaries arising under
any tax sharing agreement to which the Company or any of its
Subsidiaries is or has been a party.
(b) As of the close of the Company's taxable
year ended July 31, 1994, the Company and its Subsidiaries had a
consolidated net operating loss carryover for federal income tax
purposes of not less than $1,500,000. There are no limitations
pursuant to Section 382 of the Code or any of the provisions of
Treasury Regulation Section 1502-21 on the ability of the Company
and its Subsidiaries to utilize the net operating loss carryovers
described in the preceding sentence, and the ability of the
Company and its Subsidiaries to utilize such net operating loss
carryovers will not become subject to any such limitation by
reason of this Agreement or any of the transactions contemplated
hereby.
2.11. EMPLOYEE BENEFIT PLAN; LABOR AND EMPLOYMENT
MATTERS. (a) To the best knowledge of the Company, with respect
to each Company Benefit Plan (as hereinafter defined) (i) the
Company and each Subsidiary have performed all obligations
required to be performed by them under each Company Benefit Plan
and Employee Agreement (as hereinafter defined) and neither the
Company nor any Subsidiary is in default under or in violation of,
any Company Benefit Plan; (ii) each Company Benefit Plan has been
established and maintained in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA (as hereinafter
defined) and the Internal Revenue Code of 1986, as amended, and
any regulations promulgated or proposed thereunder (collectively,
the "Code"); (iii)
7
each Company Benefit Plan intended to qualify under Section 401 of
the Code is, and since its inception has been, so qualified and a
determination letter has been issued by the IRS to the effect that
each such Company Benefit Plan is so qualified and that each trust
forming a part of any such Company Benefit Plan is exempt from tax
pursuant to Section 501(a) of the Code and no circumstances exist
which would adversely affect this qualification or exemption and
(iv) no non-exempt "prohibited transaction," within the meaning of
Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Benefit Plan, Employee Agreement, or
against any Company Benefit Plan or against the assets of any
Company Benefit Plan.
(b) None of the Company, any Subsidiary, or any
ERISA Affiliate (as hereinafter defined) presently sponsors,
maintains, contributes to, nor is the Company, any Subsidiary or
any ERISA Affiliate required to contribute to, nor has the
Company, any Subsidiary nor any ERISA Affiliate ever sponsored,
maintained, contributed to, or been required to contribute to, a
Pension Plan (as hereinafter defined).
(c) Except as disclosed on Schedule 2.11(c),
the execution of, and the performance of the transactions
contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an
event under any Company Benefit Plan, Employee Agreement, trust or
loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee (as hereinafter defined).
No payment or benefit which will or may be made by the Company,
any Subsidiary, any Investor or any of their respective affiliates
with respect to any Employee will be characterized as an "excess
parachute payment," within the meaning of Section 280G(b)(1) of
the Code.
(d) No work stoppage or labor strike against
the Company or any Subsidiary by Employees is pending or
threatened. Neither the Company nor any Subsidiary (i) is
involved in or threatened with any labor dispute, grievance, or
litigation relating to labor matters involving any Employees,
including, without limitation, violation of any federal, state or
local labor, safety or employment laws (domestic or foreign),
charges of unfair labor practices or discrimination complaints;
(ii) has engaged in any unfair labor practices within the meaning
of the National Labor Relations Act; or (iii) is presently, nor
has been in the past a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees
and no such agreement or contract is currently being negotiated by
the Seller or any of its affiliates. No Employees are currently
represented by any labor union for purposes of collective
bargaining and no activities the purpose of which is to achieve
such representation of all or some of such Employees are
threatened or ongoing.
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(e) None of the Employees listed on SCHEDULE
2.11(e) has threatened to resign or announced his resignation and,
to the best knowledge of the Company, no third party may assert
any valid claim against the Company, the Investors or any of the
Designated Persons (as hereinafter defined) with respect to (i)
the continued employment by, or association with, the Company, of
any of the present officers or employees of or consultants to the
Company (collectively, the "Designated Persons") or (ii) the use,
in connection with any business presently conducted or proposed to
be conducted by the Company or any of the Designated Persons of
any information which the Company or any of the Designated Persons
would be prohibited from using under any prior agreements or
arrangements or any legal considerations applicable to unfair
competition, trade secrets or proprietary information.
(f) For purposes of this Agreement, the
following terms shall have the following meanings: "Benefit Plan"
means each plan, program, policy, payroll practice, contract,
agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock
related awards, fringe benefits or other employee benefits of any
kind, including, without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA. "Company Benefit
Plan" means each Benefit Plan (other than an Employee Agreement)
which is now or previously has been sponsored, maintained,
contributed to, or required to be contributed to, by the Company,
any Subsidiary or any ERISA Affiliate for the benefit of any
Employee, and pursuant to which the Company, any Subsidiary or any
ERISA Affiliate has or may have any liability, contingent or
otherwise (all of which Company Benefit Plans are listed on
SCHEDULE 2.11(f)). "Employee" means each current, former, or
retired employee, officer, consultant, independent contractor,
agent or director of the Company or any Subsidiary. "Employee
Agreement" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar agreement or
contract between the Company or any Subsidiary and any Employee
pursuant to which the Company or any Subsidiary has or may have
any liability, contingent or otherwise (all of which Employee
Agreements are listed on SCHEDULE 2.11(f)). "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended.
"ERISA Affiliate" means each business or entity which is a member
of a "controlled group of corporations," under "common control" or
an "affiliated service group" with the Company within the meaning
of Section 414(b), (c) or (m) of the Code, or required to be
aggregated with the Company under Section 414(o) of the Code, or
is under "common control" with the Company, within the meaning of
Section 4001(a)(14) of ERISA. "Pension Plan" means each Company
Benefit Plan which is a pension plan subject to Title IV of ERISA.
2.12. INTELLECTUAL PROPERTY RIGHTS. (a) The Company
owns or has the right to use all Intellectual Property Rights (as
hereinafter defined) necessary, required or desirable for the
conduct of its business as presently conducted or as presently
proposed to be conducted. The material licenses, patents,
trademarks, patent applications and trade
9
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 xxxx
applications, copyrights, know-how, certificates of public
convenience and necessity, franchises, licenses, trade secrets,
proprietary processes and formulae. As used herein, "Proprietary
Technology" means all source and object code, algorithms,
architecture, structure, display screens, layouts, processes,
inventions, trade secrets, know-how, development tools and other
proprietary rights owned by the Company, pertaining to any product
or service manufactured, marketed or sold, or proposed to be
manufactured, marketed or sold (as the case may be), by the
Company, or used, employed or exploited in the development,
license, sale, marketing, distribution or maintenance thereof, and
all documentation and media constituting, describing or relating
to the above, including, without limitation, manuals, memoranda,
know-how, notebooks, patents and patent applications, trademarks
and trademark applications, copyrights and copyright applications,
records and disclosures.
2.13. TITLE TO PROPERTIES; INSURANCE. The Company and
its Subsidiaries have good and valid title to, or, in the case of
property leased by any of them as lessee, a valid leasehold
interest in, their respective properties (whether real, personal
or mixed) and assets, free of all liens and encumbrances other
than those referred to in the financial statements of the Company
(or the notes thereto) for the fiscal year ended July 31, 1994 or
the quarter ended April 30, 1995, included in the SEC Reports,
except in each case for such defects in title and such other liens
and encumbrances which are disclosed in the SEC Reports or which
do not in the aggregate materially detract from the value to the
Company of the properties and assets of the Company and its
Subsidiaries taken as a whole. The Company and its Subsidiaries
maintain insurance in such amounts (to the extent available in the
public market), including self-insurance, retainage and deductible
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arrangements, and of such a character as is reasonable for
companies engaged in the same or similar business.
2.14. NO DEFAULTS. The Company is not in default (a)
under its Certificate of Incorporation or By-laws, (b) under any
indenture, mortgage, lease, purchase or sales order, or any other
contract, agreement or instrument to which the Company is a party
or by which the Company or any of its respective properties is
bound or affected, which default or defaults would, in the
aggregate, have a Company Material Adverse Effect or (c) with
respect to any order, writ, injunction or decree of any court of
any Federal, state, municipal or other domestic or foreign
governmental department, commission, board, bureau, agency or
instrumentality, which default or defaults would, in the
aggregate, have a Company Material Adverse Effect. There exists
no condition, event or act which constitutes, or which after
notice, lapse of time or both, would constitute, a default under
any of the foregoing, which default would have a Company Material
Adverse Effect.
2.15. COMPLIANCE WITH LAW. (a) Except as disclosed on
SCHEDULE 2.15, to the best knowledge of the Company, the Company
(i) is and has been in compliance in all material respects with
all Federal, state, local and foreign laws, rules, ordinances,
codes, consents, authorizations, registrations, regulations,
decrees, directives, judgments and orders applicable to it, its
business and the ownership of its assets, including, but not
limited to Environmental Laws (as hereinafter defined), and (ii)
has all Federal, state, local and foreign governmental licenses,
permits and qualifications material to and necessary in the
conduct of its business, such licenses, permits and qualifications
are in full force and effect, and, to the best knowledge of the
Company, no violations have been recorded in respect of any such
licenses, permits and qualifications, no proceeding is pending or
threatened to revoke or limit any such license, permit or
qualification and there is no reason why any such license, permit
or qualification would not be renewed in the ordinary course.
(b) For purposes of this Agreement,
"ENVIRONMENTAL LAWS" means, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601, ET SEQ.; the Emergency Planning and Community Right-to
Know Act of 1986, 42 U.S.C. section 11001, ET SEQ.; the Resource
Conservation and Recovery Act, 42 U.S.C. section 6901, ET SEQ.; the
Toxic Substances Control Act, 15 U.S.C. section 2601, ET SEQ.; the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.
section 136, ET SEQ.; the Clean Air Act, 42 U.S.C. section 7401,
ET SEQ.; the Clean Water Act (Federal Water Pollution Control Act),
33 U.S.C. section 1251, ET SEQ.; the Safe Drinking Water Act,
42 U.S.C. section 300f, ET SEQ.; the Occupational Safety and Health Act,
29 U.S.C. section 641, ET SEQ.; the Hazardous Materials Transportation
Act, 49 U.S.C. section 1801, ET SEQ.; as any of the above statutes have
been or may be amended from time to time, all rules and regulations
promulgated pursuant to any of the above statutes, and any other foreign,
federal, state or local law, statute, ordinance, rule or
regulation governing environmental
11
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,
12
conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration) under the Investor's
partnership agreement or any note, indenture, mortgage, lease
agreement or other contract, agreement or instrument to which the
Investor is a party or by which any of them or any of their
properties is bound or affected. No permit, authorization,
consent or approval of or by, or any notification of, or filing
with, any person (governmental or private) is required in
connection with the execution, delivery and performance by the
Investor of this Agreement or the Registration Rights Agreement.
3.3. SECURITIES ACT REPRESENTATIONS. (a) The Investor
is acquiring its Shares for its own account, for investment and
not with a view to the distribution thereof within the meaning of
the Securities Act. The Investor is an "Accredited Investor" (as
defined in Rule 501(a) under the Securities Act).
(b) Each Investor acknowledges and agrees that
the Shares have not been registered under the Securities Act or
the securities laws of any state and that they may be sold or
otherwise disposed of only in one or more transactions registered
under the Securities Act and, where applicable, such laws or
transactions as to which an exemption from the registration
requirements of the Securities Act and, where applicable, such
laws are available. Each Investor acknowledges that, except as
provided in the Registration Rights Agreement, such Investor has
no right to require the Company to register the Shares. Each
Investor understands and agrees that the Shares are subject to
stop transfer orders and each Stock Certificate shall bear the
following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO
THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS."
4. COVENANTS AND AGREEMENTS.
4.1. BOARD MEMBERSHIP. (a) The Board of Directors of
the Company shall take all necessary action to increase the size
of the Board of Directors by one and to fill the vacancy created
thereby by electing the person designated by the following
Investor (the "Designating Investor"); Partners, so long as it
holds Shares and thereafter International so long as it holds
Shares and thereafter Endowment; within 10 days after
13
such designation, to the Board of Directors as a Class II director
and, so long as any Investors hold shares of Common Stock
representing 10% of all shares of the Common Stock then
outstanding (exclusive of any treasury stock), at each subsequent
annual meeting for the election of directors of Class II, the
Designating Investor will be entitled to propose (and the Board of
Directors will elect to fill the vacancy or the Company will
nominate and recommend, as the case may be) one person as a member
of the Company's Board of Directors; PROVIDED, that the
Designating Investor shall be entitled to designate (and the
Company will nominate and recommend) as a member of the Board of
Directors any person reasonably acceptable to the Board of
Directors of the Company. In the event of any vacancy arising by
reason of the resignation, death, removal (including, but not
limited to, a resignation pursuant to Section 4.1(c) hereof) or
inability to serve of the Designating Investor's nominee, the
Designating Investor shall be entitled, subject to the foregoing
proviso, to designate a successor to fill such vacancy until the
next annual meeting for the election of Class II directors. The
Company agrees that if the Designating Investor's nominee is not
elected, the Designating Investor will be entitled to have one
observer selected by the Designating Investor present at all
meetings of the Board of Directors and such observer shall have
the same access to information concerning the business and
operations of the Company and its Subsidiaries and at the same
time as directors of the Company and shall be entitled to
participate in discussions and consult with the Board of
Directors, without voting.
(b) Without the prior consent of the Investors,
the Company shall not change the size of the Board of Directors,
the classification of any director or otherwise change or modify
Article Seventh of the Company's Certificate of Incorporation or
Sections 2 or 3 of the Company's By-laws.
(c) The Designating Investor shall use its best
efforts to cause their designee to provide to the Company in
connection with disclosures required in filings with the SEC such
information as is required by Items 401 through 405 of Regulation
S-K or any successor or new rule or regulation promulgated by the
SEC with respect to the disclosure of information relating to
directors. If, notwithstanding the Designating Investor's best
efforts, the Designating Investor's designee fails to provide such
information, subject to applicable law, the Designating Investor
shall cause such designee to resign from the Board of Directors
and the Designating Investor shall not be entitled to designate
such designee as a member of the Board of Directors, but shall
continue to be entitled to designate another person (subject to
the provisions of Section 4.1(a)) as a member of the Board of
Directors.
(d) All rights and obligations pursuant to this
Section 4.1 terminate when the Investors collectively own in the
aggregate less than ten percent of the issued and outstanding
Common Stock (exclusive of any treasury stock) or any Investor
fails to comply with the terms of this Agreement.
14
4.2. RIGHT OF FIRST OFFER. (a) Except for (i) shares
of Common Stock issued or sold to employees or directors of the
Company pursuant to an existing Benefit Plan or any new Benefit
Plan adopted by the Company in good faith, (ii) the Proposed Sale,
(iii) a public offering of Common Stock by the Company or (iv) the
issuance or transfer of shares of Common Stock to unaffiliated
third parties in connection with licensing or similar arrangements
consistent with past practice, in the event that the Company
proposes to issue or sell any shares of Common Stock or securities
convertible into or exercisable for shares of Common Stock and the
purchase price for such shares of Common Stock, or the conversion
price or exercise price for the shares of Common Stock into which
such securities are convertible or for which such securities are
exercisable, as the case may be, shall be less than the Market
Value (as hereinafter defined) on the date notice is given
pursuant to clause (i) below:
(i) the Company shall give each of the
Investors written notice of its intent to issue or sell such
shares of Common Stock or other securities, specifying the
number thereof to be sold, the purchase price and the terms
and conditions of such sale and offering;
(ii) if, within 5 Business Days (as hereinafter
defined) after receipt of the notice given pursuant to
clause (i) above one or more Investors shall not have
accepted such offer in writing with respect to any shares of
Common Stock or other securities specified in such notice,
then the Company shall be free to issue or sell to any third
party such shares of Common Stock or other securities with
respect to which such offer has not been accepted at a price
equal to or above the purchase price and on other terms and
conditions no less favorable to the Company than those
specified in such notice at any time within 45 days of the
expiration of such 5-Business Day period; provided that if
such shares of Common Stock shall be sold to an officer,
director or an affiliate of the Company, either (x) the
material facts as to such officer's, director's or
affiliate's relationship and as to the sale of Common Stock
are disclosed or are known to the Board of Directors, and
the Board of Directors in good faith authorizes the sale by
the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less
than a quorum, or (y) the material facts as to such
officer's, director's or affiliate's relationship and as to
the sale of Common Stock are disclosed or are known to the
shareholders entitled to vote thereon, and the sale is
specifically approved in good faith by vote of the
shareholders, or (z) the sale of Common Stock is fair to the
Company as of the time it is authorized, approved or
ratified, by the Board of Directors or the shareholders;
(iii) if the Company shall not have consummated
such issuance or sale within the 45-day period referred to
in clause (ii) above, then the Company
15
may not thereafter sell such Shares or other securities
without complying again with the provisions of this
Section 4.2; and
(iv) if one or more Investors shall have
accepted such offer in whole or in part within 5 Business
Days after receipt of the notice given pursuant to clause
(i) above, then such Investor or Investors shall purchase
such shares of Common Stock and/or other securities as to
which such offer has been accepted as promptly as is
reasonably practicable.
(b) For purposes of this Section 4.2, "Market
Value" means (1) if the Common Stock is quoted on the National
Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System (the "National Market System") or
is listed on one or more stock exchanges, the average of the
closing sales prices of a share of Common Stock on the National
Market System if quoted thereon or on the primary national or
regional stock exchange on which such shares are listed or (2) if
the Common Stock is not so quoted or listed but is traded in the
over-the-counter market (other than the National Market System),
the average of the closing bid and asked prices of a share of
Common Stock, in the case of clauses (1) and (2), for the 20
trading days (or such lesser number of trading days as the Common
Stock shall have been so listed, quoted or traded) next preceding
the date of measurement or (3) if the Common Stock is not so
quoted or listed and is not traded in the over-the-counter market,
the fair market value of a share of Common Stock shall be
determined reasonably and in good faith by the Board of Directors
of the Company. "Business Day" means a day on which federal or
state chartered banking institutions located in the State of
Connecticut are authorized by law to close.
(c) All rights and obligations pursuant to this
Section 4.2 terminate when the Investors collectively own in the
aggregate less than ten percent of the issued and outstanding
Common Stock (exclusive of any treasury stock) or any Investor
fails to comply with the terms of this Agreement.
4.3. USE OF PROCEEDS. The Company shall apply the net
proceeds from the sale of the Shares as provided in Section 2.17
hereof.
4.4. STANDSTILL. Subject to the continued compliance
of the Company with the terms of this Agreement and the
Registration Rights Agreement, so long as any obligations of the
Company remain pursuant to this Agreement or the Registration
Rights Agreement, until the later to occur of the expiration of
(i) a period of 12 months from the date of this Agreement or (ii)
the permanent waiver effected in compliance with Section 10.5
hereof, following the resignation or removal of the Investor's
designee from the Board of Directors, of the Investors' rights
under Section 4.1 and 4.2 hereof, none of the Investors will,
without the prior written consent of the Company's Board of
Directors:
16
(a) make, or in any way participate, directly
or indirectly, in any solicitation of proxies or consents (as such
terms are used in the rules of the SEC), or seek to advise or
influence any person or entity, with respect to the voting of any
voting securities of the Company;
(b) initiate or propose any stockholder
proposal with respect to the Company as described in Rule 14a-8
under the Securities Exchange Act;
(c) make any public announcement with respect
to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transaction involving the Company or
any Subsidiary or division thereof or any of their securities or
assets (it being acknowledged that informal discussions with the
Board of Directors shall not be a breach of this provision);
(d) otherwise act alone or in concert with
others, to seek to control or influence the management, Board of
Directors or policies of the Company (provided, however, that
nothing herein shall restrict the Investors from exercising their
rights pursuant to Section 4.1 hereof and the rights of their
designee on the Board of Directors under applicable law and the
Company's Certificate of Incorporation and By-laws); or
(e) form, join or in any way participate in a
"group" as defined in the Securities Exchange Act, or advise,
assist or encourage any other person in connection with any of the
foregoing.
Each Investor shall promptly advise the Company of any
inquiry or proposal made to such Investor with respect to any of
the foregoing.
5. TRANSFER TAXES. The Company agrees that it will pay,
and will hold the Investor harmless from any and all liability
with respect to any stamp or similar taxes which may be determined
to be payable in connection with the execution and delivery and
performance of this Agreement or any modification, amendment or
alteration of the terms or provisions of this Agreement, and that
it will similarly pay and hold the Investors harmless from all
issue taxes in respect of the issuance of the Shares to the
Investors.
6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS, ETC. All representations, warranties and statements
contained in any agreement, certificate or other instrument
delivered by the Company pursuant to this Agreement (including,
but not limited to the Registration Rights Agreement) or in
connection with the transactions contemplated by this Agreement
shall constitute representations and warranties by the Company
under this Agreement. All representations and warranties made or
deemed to be made hereunder by the Company or the Investors shall
survive the Closing until the later of (i) the filing of the
Company's Annual Report on Form 10-K for the fiscal year
17
ended July 31, 1995 or (ii) the expiration of a period of six
months from the date hereof or, with respect to representations or
warranties deemed to be made hereunder pursuant to the previous
sentence, for such longer period, if any, for which the agreement,
certificate or instrument wherein such representation, warranty or
statement is made, is effective by its terms. All agreements and
covenants contained herein and in the Registration Rights
Agreement shall survive indefinitely until, by their respective
terms, they are no longer operative.
7. INDEMNIFICATION. (a) The Company agrees to
indemnify and save harmless each Investor and its officers,
directors, partners, employees and agents and each person who
controls the Investor within the meaning of the Securities Act or
the Securities Exchange Act, from and against any and all costs,
expenses (including attorney's fees), damages or other liabilities
resulting from any breach by the Company of this Agreement or the
Registration Rights Agreement or (subject to Section 2.6 of the
Registration Rights Agreement) any legal, administrative or other
proceedings arising out of the transactions contemplated hereby
(other than such costs, expenses, damages or other liabilities
resulting, directly or indirectly, (i) from the breach by such
Investor of any of its agreements contained herein or (ii) from
the gross negligence or willful misconduct of such Investor or any
of its officers, directors, partners, employees or agents, or any
person who controls such Investor within the meaning of the
Securities Act or Securities Exchange Act.
(b) Each Investor severally, but not jointly,
agrees to indemnify and save harmless the Company and its
officers, directors, employees and agents and each person who
controls the Company within the meaning of the Securities Act or
the Securities Exchange Act, from and against any and all costs,
expenses (including attorney's fees), damages or other liabilities
resulting from any breach by such Investor of its representations,
warranties and covenants contained in this Agreement or any legal,
administrative or other proceedings arising out of the
transactions contemplated hereby (other than such costs, expenses,
damages or other liabilities resulting, directly or indirectly,
(i) from the breach by the Company of any of its agreements
contained herein or (ii) from the gross negligence or willful
misconduct of the Company or any of its officers, directors,
employees or agents or any person who controls the Company within
the meaning of the Securities Act or the Securities Exchange Act).
(c) Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subsections of this
Section 7, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written
notice to the latter of the commencement of such action or
proceeding; PROVIDED, HOWEVER, that the failure of any indemnified
party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding
subsections of this Section 7, except to the
18
extent that the indemnifying party is actually prejudiced by such
failure to give notice, and shall not relieve the indemnifying
party from any liability which it may have to the indemnified
party otherwise than under this Section 7. In case any such
action or proceeding is brought against an indemnified party, the
indemnifying party shall be entitled to participate therein and,
unless in the opinion of outside counsel to the indemnified party
a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, to assume the defense
thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party; PROVIDED, HOWEVER, that if
the defendants in any such action or proceeding include both the
indemnified party and the indemnifying party and if in the opinion
of outside counsel to the indemnified party there may be legal
defenses available to such indemnified party and/or other
indemnified parties which are different from or in addition to
those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to
defend such action or proceeding on behalf of such indemnified
party or parties; PROVIDED, HOWEVER, that the indemnifying party
shall be obligated to pay for only one counsel for all indemnified
parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof
and approval by the indemnified party of such counsel, the
indemnifying party shall not be liable to such indemnified party
for any legal expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation (unless the first proviso in the preceding sentence
shall be applicable). No indemnifying party shall be liable for
any settlement of any action or proceeding effected without its
written consent. No indemnifying party shall, without the consent
of the indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification
provided for in this Section 7 shall for any reason be held by a
court to be unavailable to an indemnified party under subsection
(a) or (b) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the
amount paid or payable under subsection (a) or (b) hereof, the
indemnified party and the indemnifying party under subsection (a)
or (b) hereof shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating the same),
(i) in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand, and the
indemnified party on the other, which resulted in such loss,
claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations, or (ii) if
the allocation provided by clause (i) above is not permitted by
applicable law or if the
19
allocation provided in this clause (ii) provides a greater amount
to the indemnified party than clause (i) above, in such proportion
as shall be appropriate to reflect not only the relative fault but
also the relative benefits received by the indemnifying party and
the indemnified party from the offering of the securities covered
by such registration statement as well as any other relevant
equitable considerations. The parties hereto agree that it would
not be just and equitable if contributions pursuant to this
Section 7(c) were to be determined by pro rata allocation or by
any other method of allocation which does not take into account
the equitable considerations referred to in the preceding sentence
of this Section 7(c). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. The
Investors' obligations to contribute as provided in this
subsection (c) are several and not joint and shall be in
proportion to the relative value of the respective number of
shares of Common Stock then held by them. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment
for any settlement of any action or claim effected without such
Person's consent, which consent shall not be unreasonably
withheld.
(e) INDEMNIFICATION PAYMENTS. The
indemnification and contribution required by this Section 7 shall
be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred;
PROVIDED, HOWEVER, that such periodic payments shall only be made
upon delivery of an agreement to the indemnifying party by the
indemnified party to repay the amounts advanced to the extent it
is ultimately determined that the indemnified party is not
entitled to indemnification pursuant to this Section 7 or
otherwise. The parties hereto agree that for each of them such
agreement shall be deemed to be contained herein.
8. SPECIFIC PERFORMANCE; REMEDIES. (a) The Investors,
on the one hand, and the Company, on the other hand, acknowledge
and agree that irreparable damage would occur in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction to prevent breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof in any
court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or in equity.
(b) In case any one or more of the
representations, warranties, covenants and/or agreements set forth
in this Agreement shall have been breached by the a party hereto,
each of the other parties may proceed to protect and enforce its
rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of
any such covenant or agreement contained in this Agreement.
20
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:
000 Xxxxxx Xxxxxx
XX Xxx 000
Xxxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telecopier: (000) 000-0000
21
With a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
Telecopier: (000) 000-0000
(b) If to the Company, to it at:
Penril DataComm Networks, Inc.
0000 Xxxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Chairman
With a copy to:
Benesch, Friedlander, Xxxxxx & Xxxxxxx
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telecopier: (000) 000-0000
All such notices, requests, consents and other communications
shall be deemed to have been given when received.
10.5. AMENDMENTS. The terms and provisions of this
Agreement may not be modified or amended, or any of the provisions
hereof waived, temporarily or permanently, except pursuant to the
written consent of the Company and Investors holding a majority of
the Shares then held by the Investors.
10.6. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together shall
constitute one and the same instrument.
10.7. HEADINGS. Headings of the Articles and Sections
of this Agreement are for convenience only, and shall be given no
substantive or interpretive effect whatsoever.
10.8. INTERPRETATION. In this Agreement, unless the
context otherwise requires, words describing the singular number
shall include the plural and vice versa,
22
and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and
partnerships and vice versa.
10.9. WAIVERS. Except as provided in this Agreement,
no action taken pursuant to this Agreement, including, without
limitation, any investigation by or on behalf of any party, shall
be deemed to constitute a waiver by the party taking such action
of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or
be construed as a waiver of any prior or subsequent breach of the
same or any other provision hereunder.
10.10. SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement
or otherwise affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as
to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.11. GOVERNING LAW; JURISDICTION. (a) This Agreement
shall be construed and enforced in accordance with and governed by
the laws of the State of Delaware, without giving effect to the
conflicts of law principles thereof.
(b) Each of the parties hereto irrevocably and
unconditionally consents to the jurisdiction of the courts of
Delaware in respect of the interpretation and enforcement of the
provisions of this Agreement, and hereby agrees that service of
process in any such action, suit or proceeding against the other
party with respect to this Agreement may be made upon it in any
manner permitted by the laws of Delaware or the federal laws of
the United States.
10.12. PUBLIC ANNOUNCEMENTS. The Company and the
Investors shall, subject to their respective legal obligations
(including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby
and in making any filings with any federal or state governmental
or regulatory agency or with any national securities exchange with
respect thereto.
23
IN WITNESS WHEREOF, the parties hereto have duly executed
this agreement as of the date first above written.
PENRIL DATACOMM NETWORKS, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Title: President, Chairman, and CEO
PEQUOT PARTNERS FUND, L.P.
By: Pequot General Partners,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Managing Partner
PEQUOT ENDOWMENT FUND, L.P.
By: Pequot Endowment Partners, L.P.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Managing Partner
PEQUOT INTERNATIONAL FUND INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: General Partner
SCHEDULE I
TO
STOCK PURCHASE AGREEMENT
------------------------------------------------------------------
INVESTOR # SHARES OF COMMON AGGREGATE PURCHASE
STOCK PRICE
------------------------------------------------------------------
Pequot Partners Fund, L.P. 636,000 $3,180,000
------------------------------------------------------------------
Pequot Endowment Fund, L.P. 260,000 $1,300,000
------------------------------------------------------------------
Pequot International Fund Inc. 569,000 $2,845,000
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TOTALS 1,465,000 $7,325,000
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