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Exhibit 10.26
TRANSACT TECHNOLOGIES INCORPORATED
PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 20, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I.DEFINITIONS....................................................... 1
1.1 Definitions; Interpretation..................................... 1
ARTICLE II.ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS................ 5
2.1 Number of Shares and Price...................................... 5
ARTICLE III.CLOSING; CLOSING DELIVERIES..................................... 5
3.1 Closing......................................................... 5
3.2 Payment for and Delivery of Preferred Shares.................... 5
ARTICLE IV.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... 6
4.1 Existence; Qualification; Subsidiaries.......................... 6
4.2 Authorization and Enforceability; Issuance of Shares............ 6
4.3 Capitalization.................................................. 7
4.4 Private Sale; Voting Agreements................................. 7
4.5 Financial Statements; Disclosure................................ 7
4.6 Absence of Certain Changes...................................... 8
4.7 Litigation...................................................... 9
4.8 Licenses, Compliance with Law, Other Agreements, Etc............ 9
4.9 Third-Party Approvals........................................... 10
4.10 No Undisclosed Liabilities...................................... 10
4.11 Tangible Assets................................................. 10
4.12 Inventory....................................................... 10
4.13 Owned Real Property............................................. 10
4.14 Real Property Leases............................................ 10
4.15 Agreements...................................................... 11
4.16 Intellectual Property........................................... 11
4.17 Employees....................................................... 11
4.18 ERISA; Employee Benefits........................................ 11
4.19 Environment, Health and Safety.................................. 12
4.20 Transactions With Affiliates.................................... 12
4.21 Taxes........................................................... 12
4.22 Other Investors................................................. 13
4.23 Year 2000 Representations....................................... 13
4.24 Seniority....................................................... 13
4.25 Investment Company.............................................. 14
4.26 Certain Fees.................................................... 14
4.27 Solicitation Materials.......................................... 14
4.28 Form S-3 Eligibility............................................ 14
4.29 Listing and Maintenance Requirements Compliance................. 14
4.30 Registration Rights; Rights of Participation.................... 14
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ARTICLE V.REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.................. 15
5.1 Authorization and Enforceability................................ 15
5.2 Government Approvals............................................ 15
ARTICLE VI.COMPLIANCE WITH SECURITIES LAWS.................................. 15
6.1 Investment Intent of Purchasers................................. 15
6.2 Status of Preferred Shares and Warrants......................... 15
6.3 Sophistication and Financial Condition of Purchaser............. 15
6.4 Transfer of Preferred Shares, Warrants and Conversion Shares.... 15
ARTICLE VII.CONDITIONS PRECEDENT............................................ 16
7.1 Closing Deliveries to the Purchasers............................ 16
7.2 Closing Deliveries to the Company............................... 17
ARTICLE VIII.COVENANTS OF THE COMPANY....................................... 18
8.1 Restricted Actions.............................................. 18
8.2 Required Actions................................................ 18
8.3 Reservation of Common Stock..................................... 19
ARTICLE IX.SURVIVAL......................................................... 19
9.1 Survival........................................................ 19
ARTICLE X.INDEMNIFICATION................................................... 20
10.1 Indemnification................................................. 20
ARTICLE XI.GENERAL PROVISIONS............................................... 21
11.1 Right of First Offer............................................ 21
11.2 Standstill...................................................... 21
11.3 Successors and Assigns.......................................... 22
11.4 Entire Agreement................................................ 22
11.5 Notices......................................................... 22
11.6 Purchasers Fees and Expenses.................................... 23
11.7 Amendment and Waiver............................................ 23
11.8 Counterparts.................................................... 23
11.9 Headings........................................................ 23
11.10 Specific Performance............................................ 23
11.11 Remedies Cumulative............................................. 24
11.12 GOVERNING LAW................................................... 24
11.13 No Third Party Beneficiaries.................................... 24
11.14 Severability.................................................... 24
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Schedule 4.1 Existence, Qualifications, Subsidiaries
Schedule 4.2 Authorization and Enforceability; Issuance of Shares
Schedule 4.3 Capitalization
Schedule 4.6 Absence of Certain Changes
Schedule 4.7 Litigation
Schedule 4.9 Third-Party Approvals
Schedule 4.11 Tangible Assets
Schedule 4.16 Intellectual Property
Schedule 4.17 Employees
Schedule 4.19 Environment, Health and Safety
Schedule 4.21 Taxes
Schedule 4.22 Other Investors
Schedule 4.26 Certain Fees
Schedule 4.30 Registration Rights; Rights of Participation
Exhibit A Certificate of Designation
Exhibit B Warrant
Exhibit C Financial Statements
Exhibit D Registration Rights Agreement
Exhibit E Opinion of Counsel
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PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of
March 20, 2000 between TransAct Technologies Incorporated, a Delaware
corporation (the "COMPANY"), Advance Capital Partners, L.P., a Delaware limited
partnership, Advance Capital Offshore Partners, L.P., a Cayman Islands limited
partnership (each a "Purchaser" and together, the
"Purchasers" or "Advance").
The Purchasers desire to purchase from the Company, and the Company
desires to issue to the Purchasers, shares of Series B Cumulative Convertible
Preferred Stock $0.01 par value per share of the Company (the "SERIES B
PREFERRED") and Warrants to purchase shares of Common Stock (the "WARRANTS").
In consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, the parties
hereto agree as follows:
ARTICLE I.
DEFINITIONS
I.1 DEFINITIONS; INTERPRETATION.
(a) For purposes of this Agreement, the following terms have the
indicated meanings:
"ADVANCE" has the meaning set forth in the recitals hereof.
"AFFILIATE" of a person means any other person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such person.
"CERTIFICATE OF DESIGNATION" means the Certificate of Designation
designating the rights and preferences of the Series B Preferred adopted by the
Board of Directors of the Company and set forth as EXHIBIT A hereto.
"CLOSING" has the meaning set forth in Section 3.1.
"CLOSING DATE" has the meaning set forth in Section 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock of the Company, par value
$0.01 per share.
"COMPANY" has the meaning set forth in the recitals hereof.
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"CONFIDENTIAL INFORMATION" means any information concerning the
Company's business other than information that (i) was already known to the
Person having a duty to keep confidential such information on a nonconfidential
basis prior to the time of disclosure, (ii) is or becomes generally available to
the public through no act or omission of such Person or (iii) becomes available
to such Person on a nonconfidential basis from a source other than any party
hereto (or any agent or representative thereof) if such source was not under a
prohibition against disclosing the information to such Person.
"CONVERSION PRICE" has the meaning set forth in the Certificate of
Designation attached hereto as Exhibit A.
"CONVERSION SHARES" means shares of Common Stock issued or issuable
upon conversion of Preferred Shares.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of March 14,
2000, between the Company and Fleet National Bank.
"CURRENT BALANCE SHEET" means the audited balance sheet of the
Company dated December 31, 1999.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, state,
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial and administrative orders and
determinations and all common law concerning public health and safety, worker
health and safety, and pollution or protection of the environment, including
without limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or by-products, asbestos, polychlorinated
biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" has the meaning set forth in the Warrants.
"FINANCIAL STATEMENTS" means (i) the unaudited balance sheets of the
Company for the quarterly periods ended March 27, 1999, June 26, 1999 and
September 25, 1999, each as included in a quarterly report of the Company on
Form 10-Q as filed with the SEC pursuant to the Exchange Act, (ii) the audited
balance sheet of the Company as included in the annual report of the Company on
Form 10-K for the fiscal year ended December 31, 1998, as filed with the SEC
pursuant to the Exchange Act and (iii) the related unaudited and audited, as
applicable, statements of income and consolidated cash flow for the quarterly
and fiscal year-to-date periods then ended, each as included in the Company's
applicable quarterly report or annual report on Form 10-Q and Form 10-
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K, as applicable, as filed with the SEC pursuant to the Exchange Act, and (iv)
the Current Balance Sheet, all of which are attached as EXHIBIT C hereto.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time, consistently applied.
"GOVERNMENTAL AGENCY" means any federal, state, local, foreign or
other governmental agency, instrumentality, commission, authority, board or body
and Nasdaq.
"INCLUDES" and "INCLUDING" mean includes and including, without
limitation.
"INTELLECTUAL PROPERTY" means all patents, patent applications and
inventions; all trademarks, service marks, trade dress, trade names and
corporate names and all goodwill associated therewith; all registered
copyrights; all registrations, applications and renewals for any of the
foregoing; all trade secrets, Confidential Information, know-how, technical and
computer data, documentation and software, financial, business and marketing
plans, customer and supplier lists and all other intellectual property rights;
and all copies and tangible embodiments of the foregoing.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" or "KNOW" when used with respect to the Company means
the knowledge of (i) Bart Shuldman; (ii) Richard Cote; (iii) Lucy Staley; (iv)
John Cygielnick; (v) Michael Kumpf; (vi) Mark Goebel; (vii) Steve DeMartino;
(viii) Catherine Dawson; or (ix) James Stetson, which the Company represents are
the only "executive officers" as defined in the Exchange Act.
"LIABILITY" means any liability or obligation (whether absolute or
contingent, liquidated or unliquidated or due or to become due).
"LIEN" means any lien, mortgage, pledge, security interest,
restriction, charge or other encumbrance.
"MATERIAL ADVERSE CHANGE" means any material adverse change in the
business, condition (financial or otherwise), prospects or results of operations
of the Company and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on (i)
the business, condition (financial or otherwise), prospects or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) the
transactions contemplated hereby or by the Related Documents.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past practice (including with respect to quantity, quality and
frequency).
"PERMITTED LIENS" means (i) liens for taxes not yet due and taxes
for which adequate provision is made in the Current Balance Sheet, (ii) purchase
money security interests in
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supplies and equipment, (iii) precautionary liens filed by lessors with respect
to leased equipment, and (iv) encumbrances which are not substantial in amount,
do not materially detract from the value of the property subject thereto, and do
not materially impair the use of the property subject thereto or the operation
of the Company's business.
"PERSON" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization or other
entity.
"PUBLIC SALE" means any sale pursuant to a registration under
Section 5 of the Securities Act or any sale pursuant to Rule 144 of the
Securities Act.
"PLAN" means any employee benefit plan (as defined in Section 3(3)
of ERISA), subject to Title IV of ERISA or the minimum funding requirements of
Section 412 of the Code, maintained or contributed to by the Company, its
predecessor or any Subsidiary at any time during the 5-calendar years
immediately preceding the date of this Agreement.
"PREFERRED SHARES" has the meaning set forth in Section 2.1.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between the Company and the Purchasers in the form of EXHIBIT D
hereto.
"RELATED DOCUMENTS" means all documents and instruments to be
executed or adopted by the Company in connection herewith, including the
Certificate of Designation, the Preferred Shares, the Warrants and the
Registration Rights Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES B PREFERRED" has the meaning set forth in the recitals
hereof.
"SUBSIDIARY" means any corporation, limited liability company,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by the Company or (ii) if a partnership, limited liability company,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled, directly
or indirectly, by the Company. For purposes hereof, the Company shall be deemed
to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if the Company, directly or
indirectly, is allocated a majority of partnership, limited liability company,
association or other business entity gains or losses, or is or controls the
managing director or general partner of such partnership, limited liability
company, association or other business entity.
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"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"TAX RETURNS" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"WARRANTS" shall mean the common stock purchase warrants issued and
delivered by the Company on the Closing Date, in substantially the form of
Exhibit B hereto, and each common stock warrant issued and delivered in
substitution or exchange for any such warrant.
(b) The words "HEREIN", "HEREOF" and "HEREUNDER" refer to this
Agreement as a whole and not to any particular article, section or other
subdivision of this Agreement.
ARTICLE II.
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS
II.1 NUMBER OF SHARES AND PRICE. On the terms and subject to the
conditions of this Agreement, at the Closing, the Company shall issue to the
Purchasers, 4,000 shares of Series B Preferred (the "PREFERRED SHARES") and
Warrants to purchase 44,444 shares of Common Stock for an aggregate purchase
price of $4 million.
ARTICLE III.
CLOSING; CLOSING DELIVERIES
III.1 CLOSING. The closing of the transactions contemplated hereby
(the "CLOSING") shall take place at 10:00 a.m. on April 7, 2000, at the offices
of Kirkland & Ellis, New York, New York or at such other time, place and/or date
as shall be agreed upon by the parties hereto. The date upon which the Closing
occurs is referred to herein as the "CLOSING DATE".
III.2 PAYMENT FOR AND DELIVERY OF PREFERRED SHARES. At the Closing,
the Company shall issue and deliver to the Purchasers stock certificates for the
Preferred Shares duly registered in the name of each Purchaser, and duly
executed Warrants executed in favor of each Purchaser exercisable for the
Purchaser's pro rata share of 44,444 shares of Common Stock, against payment by
such Purchaser, by wire transfer of immediately-available funds to the account
designated by the Company, of the Purchaser's pro rata share of the purchase
price set forth in Section 2.1.
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ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser as
follows:
IV.1 EXISTENCE; QUALIFICATION; SUBSIDIARIES. The Company and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has full corporate
power and authority to conduct its business and own and operate its properties
as now conducted, owned and operated. The copies of the Certificate of
Incorporation and By-Laws of the Company and all amendments thereto previously
delivered to the Purchasers are true, correct and complete copies of such
documents. The Company and each Subsidiary is licensed or qualified as a foreign
corporation and is in good standing in all jurisdictions where such Person is
required to be so licensed or qualified, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse
Effect. Except as set forth on SCHEDULE 4.1, the Company has no Subsidiaries and
owns no capital stock or other securities of, and has not made any other
investment in, any other entity. All of the issued shares of capital stock of
each Subsidiary have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or adverse claims other than liens
securing the obligations under the Credit Agreement.
IV.2 AUTHORIZATION AND ENFORCEABILITY; ISSUANCE OF SHARES.
(a) The Company has full power and authority and has taken all
required corporate and other action necessary to permit it to execute and
deliver this Agreement and the Related Documents and to carry out the terms
hereof and thereof and to issue and deliver the Preferred Shares, the Conversion
Shares (including adoption of the Certificate of Designation), the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants, and none of
such actions will violate any provision of the Certificate of Incorporation of
the Company, the By-Laws of the Company or of any applicable law, regulation,
order, judgment or decree or rule of the stock exchange where the Company's
Common Stock is listed, or, except as set forth on SCHEDULE 4.2, result in the
breach of or constitute a default (or an event which, with notice or lapse of
time or both would constitute a default) under any material agreement,
instrument or understanding to which the Company is a party or by which it is
bound or by which it will become bound as a result of the transaction
contemplated by this Agreement. This Agreement and each of the Related Documents
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent limited
by (i) applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws of general application related to the enforcement of creditor's rights
generally and (ii) general principles of equity.
(b) The Preferred Shares and Warrants have been duly authorized and,
when issued and delivered in accordance with this Agreement, will be validly
issued and outstanding. The Preferred Shares and Warrants and, when issued, the
Conversion Shares and the shares of Common Stock issuable upon exercise of the
Warrants, will be fully paid and nonassessable. The Conversion Shares and the
shares of Common Stock issuable upon exercise of the Warrants have been duly
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reserved for issuance upon conversion of the Preferred Shares or exercise of the
Warrants and, when so issued, will be duly authorized, validly issued and
outstanding, fully paid and nonassessable shares of Common Stock. Neither the
issuance and delivery of the Preferred Shares or Warrants nor the issuance and
delivery of any Conversion Shares upon conversion of any Preferred Shares or
shares of Common Stock issuable upon exercise of the Warrants is subject to any
preemptive right of any stockholder of the Company or to any right of first
refusal or other similar right in favor of any Person which has not been waived.
IV.3 CAPITALIZATION. As of the Closing, and upon the acceptance for
filing of the Certificate of Designation, the authorized capital stock of the
Company shall consist of (i) 20,000,000 shares of Common Stock, par value $0.01
per share, of which 5,580,600 shares are outstanding, 444,444 shares are
reserved for issuance upon conversion of the Preferred Shares, 923,900 shares
are reserved for issuance upon the exercise of certain stock options and
warrants, and 44,444 shares are reserved for issuance upon the exercise of the
Warrants and (ii) 5,000,000 shares of Preferred Stock, par value $0.01 per
share, of which 200,000 shares are designated as Series A Preferred Stock and
8,000 shares are designated Series B Preferred Stock. At the time of the
Closing, all of the outstanding capital stock will be validly issued, fully paid
and nonassessable and will have been issued in compliance with all applicable
securities laws (including the provisions of the Securities Act and the rules
and regulations promulgated thereunder). Except as set forth on SCHEDULE 4.3, as
of the Closing, the Company has not granted or issued any options, convertible
securities, warrants, calls, pledges, transfer restrictions (except restrictions
imposed by federal and state securities laws), liens, rights of first offer,
rights of first refusal, antidilution provisions or commitments of any character
relating to any issued or unissued shares of capital stock of the Company other
than as contemplated in the Related Documents. Except as contemplated by this
Agreement and the Related Documents or as set forth in SCHEDULE 4.3, there are
no preemptive or other preferential rights applicable to the issuance and sale
of securities of the Company, including the Preferred Shares.
IV.4 PRIVATE SALE; VOTING AGREEMENTS. Assuming the accuracy of the
representations and warranties made by recipients of the Company's capital stock
made in connection with the acquisition of such capital stock, the Company has
not violated any applicable federal or state securities laws in connection with
the offer, sale and issuance of any of its capital stock. Subject to the
accuracy of the Purchaser's representations contained herein, neither the offer,
sale and issuance of the Preferred Shares and Warrants hereunder nor the
issuance and delivery of any Preferred Shares, Warrants or Conversion Shares or
shares of Common Stock issuable upon exercise of the Warrants upon conversion of
any Preferred Shares or exercise of the Warrants requires registration under the
Securities Act or any state securities laws.
IV.5 FINANCIAL STATEMENTS; DISCLOSURE.
(a) The Financial Statements (together with the notes thereto, as
applicable), (i) are true, correct and complete in all material respects, (ii)
are in accordance with the books and records of the Company and (iii) fairly
present, in all material respects, the financial condition and results of
operations of the Company as of the dates and for the periods indicated, in
accordance with
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GAAP except that the unaudited balance sheets and related financial statements
do not contain an auditors' opinion and do not contain footnotes and are subject
to normal year-end audit adjustments.
(b) As of its filing date, each document filed with the SEC by the
Company, as amended or supplemented prior to the Closing Date, if applicable,
pursuant to the Securities Act and/or the Exchange Act (i) complied in all
material respects with the applicable requirements of the Securities Act and/or
Exchange Act and (ii) did not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each final registration statement filed with the SEC by the Company
pursuant to the Securities Act, as of the date such statement became effective
(i) complied in all material respects with the applicable requirements of the
Securities Act and (ii) did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading (in the case of any prospectus, in
light of the circumstances under which they were made).
IV.6 ABSENCE OF CERTAIN CHANGES.
(a) Except as set forth on SCHEDULE 4.6 since the date of the
Current Balance Sheet, neither the Company nor any Subsidiary has:
(A) incurred any Liabilities other than current Liabilities
incurred, or obligations under contracts entered into, in the Ordinary
Course of Business and for individual amounts not greater than $100,000;
(B) paid, discharged or satisfied any claim, Lien or
Liability, other than any claim, Lien or Liability (A) reflected or
reserved against on the Current Balance Sheet and paid, discharged or
satisfied in the Ordinary Course of Business since the date of the Current
Balance Sheet or (B) incurred and paid, discharged or satisfied since the
date of the Current Balance Sheet, in each case in the Ordinary Course of
Business;
(C) sold, leased, assigned or otherwise transferred any of
its assets, tangible or intangible (other than sales of inventory in the
Ordinary Course of Business and use of supplies in the Ordinary Course of
Business);
(D) permitted any of its assets, tangible or intangible,
to become subject to any Lien (other than any Permitted Lien);
(E) written off as uncollectible any accounts receivable
other than (1) in the Ordinary Course of Business, or (2) for amounts not
greater than $50,000;
(F) terminated or amended or suffered the termination or
amendment of, other than in the Ordinary Course of Business, or failed to
perform in all material respects all of its obligations or suffered or
permitted any material default to exist under, any material agreement,
license or permit;
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(G) suffered any damage, destruction or loss of tangible
property (whether or not covered by insurance) which in the aggregate
exceeds $50,000;
(H) made any loan (other than intercompany advances) to any
other Person (other than advances to employees in the Ordinary Course of
Business which do not exceed $5,000 individually or $25,000 in the
aggregate);
(I) canceled, waived or released any debt, claim or right
in an amount or having a value exceeding $50,000;
(J) paid any amount to or entered into any agreement,
arrangement or transaction with any Affiliate (including its officers,
directors and employees) outside the Ordinary Course of Business and which
was not approved by a majority of the Company's disinterested directors;
(K) declared, set aside, or paid any dividend or
distribution with respect to its capital stock or redeemed, purchased or
otherwise acquired any of its capital stock;
(L) other than in the Ordinary Course of Business, granted
any increase in the compensation of any officer or employee or made any
other change in employment terms of any officer or employee;
(M) made any change in any method of accounting or
accounting practice;
(N) to the Company's knowledge, suffered or caused any other
occurrence, event or transaction outside the Ordinary Course of Business
which has had or will have a Material Adverse Effect; or
(O) agreed, in writing or otherwise, to any of the
foregoing.
(b) Since the date of the Current Balance Sheet there has been no
Material Adverse Change.
IV.7 LITIGATION. Except as set forth in Schedule 4.7, as of the date
hereof no claim, suit, proceeding or investigation is pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any officer or director thereof or the Company's and the
Subsidiaries' business which if decided adversely to any such person could have
a Material Adverse Effect.
IV.8 LICENSES, COMPLIANCE WITH LAW, OTHER AGREEMENTS, ETC. The
Company and each Subsidiary have all material franchises, permits, licenses and
other rights to allow it to conduct its business and is not in violation in any
material respects of any order or decree of any court, or of any law, order or
regulation of any Governmental Agency, or of the provisions of any material
contract or agreement to which it is a party or by which it is bound, and
neither this Agreement nor the Related Documents nor the transactions
contemplated hereby or thereby will
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result in any such violation, except where the failure to have any such
franchise, permit or license or any such violation would not in the aggregate be
expected to have a Material Adverse Effect. The Company's and the Subsidiaries'
business has been conducted in all material respects in compliance with all
federal, state and local laws, ordinances, rules and regulations, except where
such violations, defaults or noncompliance would not in the aggregate have a
Material Adverse Effect.
IV.9 THIRD-PARTY APPROVALS. Assuming the accuracy of the
representations and warranties of the Purchasers contained in this Agreement,
except as set forth on SCHEDULE 4.9, the Company is not required to obtain any
order, consent, approval or authorization of, or to make any declaration or
filing with, any Governmental Agency or other third party (including under any
state securities or "blue sky" laws) in connection with the execution and
delivery of this Agreement or the Related Documents, or the consummation of the
transactions contemplated hereby or thereby to occur on the Closing Date, except
for (i) filings on Form D under the Securities Act, and (ii) any consents,
approvals or authorizations the failure to obtain which would not in the
aggregate have a Material Adverse Effect.
IV.10 NO UNDISCLOSED LIABILITIES. To the Company's knowledge,
neither the Company nor any of its Subsidiaries has any Liabilities except (i)
as and to the extent of the amounts reflected or reserved against on the Current
Balance Sheet (excluding the footnotes thereto), (ii) liabilities and
obligations incurred in the Ordinary Course of Business since the date thereof,
(iii) such other liabilities that in the aggregate will not result in a Material
Adverse Effect, and (iv) Liabilities under the Credit Agreement (as defined
therein).
IV.11 TANGIBLE ASSETS. The Company and its Subsidiaries own or lease
all tangible assets used or reasonably necessary in connection with the conduct
of its business. Other than the Liens imposed pursuant to the Credit Agreement,
all material tangible assets are free from any Liens (other than Permitted
Liens), are free from any material defects, have been maintained in accordance
with normal industry practice and any regulatory standard or procedure to which
such assets are subject, are in good operating condition and repair in all
material respects (subject to normal wear and tear) and are suitable in all
material respects for the purposes for which such assets are used or proposed to
be used, other than Liens, defects and wear and tear which in the aggregate
would not be expected to have a Material Adverse Effect.
IV.12 INVENTORY. All inventory of the Company and its Subsidiaries,
whether reflected on the Current Balance Sheet or otherwise, consists of a
quality and quantity usable or salable in the Ordinary Course of Business,
subject to the reserves set forth on the Current Balance Sheet and subject to
normal rates of defect or obsolescence not inconsistent with the Company's
historical experience.
IV.13 OWNED REAL PROPERTY. The Company and its Subsidiaries own
no real property.
IV.14 REAL PROPERTY LEASES. There exists no event of default (nor,
to the Company's knowledge, any event which with notice or lapse of time would
constitute an event of default) with respect to the Company, any Subsidiary and,
to the Company's knowledge, with
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respect to any other party thereto under any agreement pursuant to which the
Company is the lessee or lessor of any real property, except for such defaults
and defects in enforceability as would not in the aggregate be expected to have
a Material Adverse Effect, and all such agreements are in full force and effect
and enforceable against the lessor or lessee in accordance with their terms
except for such defaults and defects in enforceability as would not in the
aggregate be expected to have a Material Adverse Effect.
IV.15 AGREEMENTS. Neither the Company nor any Subsidiary is in
default, nor to the knowledge of the Company is there any basis for a valid
claim of default, and to the Company's knowledge no event has occurred which,
with notice or lapse of time, would constitute a default, under any agreement,
arrangement or understanding to which the Company or any Subsidiary is a party,
and to the knowledge of the Company no other Person is in default under any such
agreement, in each case other than defaults which in the aggregate would not be
expected to have a Material Adverse Effect. Additionally, neither the Company
nor any Subsidiary is party to any agreement the performance of which in
accordance with its terms (including any termination provision thereof) would be
expected to have a Material Adverse Effect (which term, for the purposes of this
sentence only, shall not include the prospects of the Company and its
Subsidiaries taken as a whole).
IV.16 INTELLECTUAL PROPERTY. SCHEDULE 4.16 sets forth a complete
list of (i) all patented or registered Intellectual Property owned by the
Company, and all applications to register or patent any such Company
Intellectual Property; and (ii) all trade names and material unregistered
trademarks used by the Company in connection with its business. The Company owns
and possesses all right, title and interest in and to, or has a valid and
enforceable license to use, the Intellectual Property necessary for the
operation of its business as currently conducted and as currently proposed to be
conducted, and no claim by any third party contesting the validity,
enforceability, use or ownership of such Intellectual Property has been made or,
to the knowledge of the Company, is threatened. To the Company's knowledge, the
Company has not infringed or misappropriated the Intellectual Property of any
third party.
IV.17 EMPLOYEES. Except as set forth on SCHEDULE 4.17, since the
date of the Current Balance Sheet, no key employees and no group of employees
has terminated, or to the knowledge of the Company plans to terminate,
employment with the Company or any Subsidiary, as applicable. Except as set
forth on SCHEDULE 4.17, the Company is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strike, material grievance,
material claim of unfair labor practice or other collective bargaining dispute.
Except as set forth on Schedule 4.17, to the knowledge of the Company there is
no organizational effort being made or threatened by or on behalf of any labor
union with respect to its employees. To the Company's knowledge, the Company has
not committed any unfair labor practice or materially violated any federal,
state or local law or regulation regulating employers or the terms and
conditions of its employees' employment, including laws regulating employee
wages and hours, employment discrimination, employee civil rights, equal
employment opportunity and employment of foreign nationals, except for such
violations as would not in the aggregate be expected to have a Material Adverse
Effect.
IV.18 ERISA; EMPLOYEE BENEFITS. Each Plan that is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal
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Revenue Service or has timely filed for a favorable determination letter from
the Internal Revenue Service and no event has occurred since the date of the
last determination letter that could reasonably be expected to materially
adversely affect the qualified status of such Plan. Each Plan is in full force
and effect and has been administered in all material respects in accordance with
its terms and is and has been, and each plan administrator and fiduciary of a
Plan is acting and has been acting, in compliance in all material respects with
all applicable requirements of the Code and ERISA (including the funding,
reporting and disclosure and prohibited transaction provisions thereof) and
other applicable laws, regulations and rulings in connection with each such
Plan. No Plan has been terminated or partially terminated. The Company has no
Plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA. The Company or one of its Subsidiaries has made, accrued or provided for
all contributions required under each Plan. To the knowledge of the Company, no
event has occurred or is reasonably expected to occur with respect to any
employee pension benefit plan of the Company or any member of the Company's
controlled group (within the meaning of Section 414 of the Code), which could
reasonably be expected to directly or indirectly result in any material
liability (other than liability arising in the ordinary course) to the Company
or any member of its controlled group pursuant to Title IV of ERISA or Section
412 of the Code. No Plan has incurred an "accumulated funding deficiency" within
the meaning of Section 412 of the Code or Section 302 of ERISA.
IV.19 ENVIRONMENT, HEALTH AND SAFETY.
Except as set forth on SCHEDULE 4.19,
(a) The Company (as used in this Section 4.19, Company shall include
the Company's Subsidiaries) has complied and is in compliance in all material
respects with all Environmental and Safety Requirements that are applicable to
the Company's business.
(b) The Company has not received any written notice, report or other
information ......regarding any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to the Company or
its facilities and arising under Environmental and Safety Requirements.
(c) The Company has not, either expressly or by operation of law,
assumed or undertaken any liability, including without limitation any obligation
for corrective or remedial action, of any other Person relating to Environmental
and Safety Requirements.
IV.20 TRANSACTIONS WITH AFFILIATES. Except as disclosed in filings
made by the Company with the SEC pursuant to the Securities Act and the Exchange
Act, neither the Company nor any Subsidiary is party to any agreement,
arrangement or transaction with any Affiliate which is material to the Company's
and its Subsidiaries business, taken as a whole.
IV.21 TAXES.
Except as set forth on SCHEDULE 4.21,
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(a) Each of the Company and its Subsidiaries has filed all Tax
Returns that it was required to file, and has paid all Taxes shown thereon as
owing, except where the failure to file Tax Returns or to pay Taxes would not in
the aggregate have a Material Adverse Effect.
(b) None of the Company and its Subsidiaries (A) has been a member
of an affiliated group filing a consolidated federal Tax Return (other than a
group the common parent of which was the Company) or (B) has any Liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(c) Each of the Company and its Subsidiaries has withheld and paid
in all material respects all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(d) There is no dispute or claim concerning any Tax Liability of any
of the Company and its Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any of the directors and officers (and
employees responsible for Tax matters) of the Company and its Subsidiaries has
knowledge based upon personal contact with any agent of such authority and which
is material to the Company and its Subsidiaries taken as a whole.
IV.22 OTHER INVESTORS. Set forth on SCHEDULE 4.22 is a list of all
shareholders of the Company who as of the date hereof and to the Company's
knowledge, based upon SEC filings of shareholders, after giving effect to the
terms hereof, own more than 5% of the fully diluted common equity of the Company
and sets forth such percentage ownership.
IV.23 YEAR 2000 REPRESENTATIONS.
(a) None of the computer software, computer firmware, computer
hardware (whether general or special purpose) or other similar or related items
of automated, computerized or software systems that are used or relied on by the
Company or by any of its Subsidiaries in the conduct of their respective
businesses has malfunctioned, ceased to function, generated incorrect data or
produced incorrect results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries or (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
(b) None of the products and services sold, licensed, rendered, or
otherwise provided by the Company or by any of its Subsidiaries in the conduct
of their respective businesses has malfunctioned, ceased to function, generated
incorrect data or produced incorrect results when processing, providing or
receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries; and, accordingly, neither the
Company nor any of its Subsidiaries is or has been subject to any claim, demand,
action, suit, liability, damage, material loss, or material expense arising
from, or related to, circumstances where such products and services
malfunctioned, ceased to function, generated incorrect data, or produced
incorrect results when processing, providing or
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receiving (i) date-related data from, into and between the twentieth and
twenty-first centuries or (ii) date-related data in connection with any valid
date in the twentieth and twenty-first centuries.
IV.24 SENIORITY. No class of equity securities of the Company is
senior or pari passu to the Preferred Shares in right of payment, whether upon
liquidation, dissolution or otherwise.
IV.25 INVESTMENT COMPANY. The Company is not, and is not controlled
by or under common control with an affiliate of, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
IV.26 CERTAIN FEES. Other than fees and expenses due and payable to
McFarland Dewey Securities Co. L.P. as listed on SCHEDULE 4.26, no fees or
commissions will be payable by the Company to any broker, financial advisor,
finder, investment banker, or bank with respect to the transactions contemplated
by this Agreement. The Purchasers shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of McFarland Dewey
Securities Co. L.P. or other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement. The Company shall indemnify and hold harmless each of the Purchasers,
its employees, officers, directors, agents and partners, and their respective
affiliates (as such term is defined under Rule 405 promulgated under the
Securities Act), from and against all claims, losses, damages, costs (including
the costs of preparation and attorney's fees) and expenses suffered in respect
to any such claimed or existing fees.
IV.27 SOLICITATION MATERIALS. The Company has not (i) distributed
any offering materials in connection with the offering and sale of the Preferred
Shares other than the disclosure materials delivered to Purchasers (the
"Disclosure Materials") or (ii) solicited any offer to buy or sell the Preferred
Shares by means of any form of general solicitation or advertising.
IV.28 FORM S-3 ELIGIBILITY. As of the date hereof, the Company is
eligible to register securities for resale with the SEC under Form S-3
promulgated under the Securities Act.
IV.29 LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. (A) The
Company has not received notice (written or oral) from the Nasdaq Stock Market's
National Market that the Company is not in compliance with the listings or
maintenance requirements of such Exchange.
(B) Upon conversion of the Preferred Shares into shares of Common
Stock and upon exercise of the Warrants, all Conversion Shares and shares of
Common Stock issuable upon exercise of the Warrants shall be listed on the
Nasdaq Stock Market's National Market.
IV.30 REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as
described on Schedule 4.30 hereto, (A) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the SEC or any other
governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right
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to participate in the transactions contemplated by this Agreement or any other
related document which has not been waived.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby represents and warrants to the Company as
follows:
V.1 AUTHORIZATION AND ENFORCEABILITY. Such Purchaser has taken all
action necessary to permit it to execute and deliver this Agreement and the
other documents and instruments to be executed by it pursuant hereto and to
carry out the terms hereof and thereof. This Agreement and each such other
document and instrument, when duly executed and delivered by such Purchaser,
will constitute a valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.
V.2 GOVERNMENT APPROVALS. Such Purchaser is not required to obtain
any order, consent, approval or authorization of, or to make any declaration or
filing with, any Governmental Agency in connection with the execution and
delivery of this Agreement and the other documents and instruments to be
executed by it pursuant hereto or the consummation of the transactions
contemplated hereby and thereby, except for such order, consent, approval,
authorization, declaration or filing as which has been or will be obtained or
made.
ARTICLE VI.
COMPLIANCE WITH SECURITIES LAWS
VI.1 INVESTMENT INTENT OF PURCHASERS. Each Purchaser represents and
warrants to the Company that it is acquiring the Preferred Shares and Warrants
for its own account, with no present intention of selling or otherwise
distributing the same to the public.
VI.2 STATUS OF PREFERRED SHARES AND WARRANTS. Each Purchaser has
been informed by the Company that the Preferred Shares and Warrants have not
been and will not be registered under the Securities Act or under any state
securities laws and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering.
VI.3 SOPHISTICATION AND FINANCIAL CONDITION OF PURCHASER. Each
Purchaser represents and warrants to the Company that it is an "Accredited
Investor" as defined in Regulation D under the Securities Act and that it
considers itself to be an experienced and sophisticated investor and to have
such knowledge and experience in financial and business matters as are necessary
to evaluate the merits and risks of an investment in the Preferred Shares and
the Warrants.
VI.4 TRANSFER OF PREFERRED SHARES, WARRANTS AND CONVERSION
SHARES.
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(a) Preferred Shares, Warrants, Conversion Shares and shares of
Common Stock issuable upon exercise of the Warrants may be transferred pursuant
to (i) public offerings registered under the Securities Act, (ii) Rule 144 of
the SEC (or any similar rule then in force), (iii) to an Affiliate of the
transferor, or (iv) subject to the conditions set forth in Section 6.4(b), any
other legally-available means of transfer.
(b) In connection with any transfer of any Preferred Shares,
Warrants, Conversion Shares or shares of Common Stock issuable upon exercise of
the Warrants (other than a transfer described in Section 6.4(a)(i), (ii) or
(iii)), the holder of such shares shall deliver written notice to the Company
describing in reasonable detail the proposed transfer, together with an opinion
of counsel (Kirkland & Ellis or such other counsel which, to the Company's
reasonable satisfaction, is knowledgeable in securities law matters) to the
effect that such transfer may be effected without registration of such shares
under the Securities Act. The holder of the shares being transferred shall not
consummate the transfer until (i) the prospective transferee has confirmed to
the Company in writing its agreement to be bound by the provisions of this
Section 6.4 or (ii) such holder shall have delivered to the Company an opinion
of such counsel that no subsequent transfer of such Preferred Shares or
Conversion Shares shall require registration under the Securities Act. Promptly
upon receipt of any opinion described in clause (ii) of the preceding sentence,
the Company shall prepare and deliver in connection with the consummation of the
proposed transfer, new certificates for the Preferred Shares or Conversion
Shares being transferred that do not bear the legend set forth in Section
6.4(c).
(c) Except as provided in Section 6.4(b), until transferred pursuant
to clauses (a)(i) or (a)(ii) above, each certificate for Preferred Shares,
Warrants, Conversion Shares or shares of Common Stock issuable upon exercise of
the Warrants shall be imprinted with a legend substantially in the following
form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON APRIL 7, 2000 AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAW. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN THE PREFERRED
STOCK PURCHASE AGREEMENT DATED AS OF MARCH 20, 2000 BETWEEN THE
ISSUER (THE "COMPANY"). THE COMPANY RESERVES THE RIGHT TO REFUSE ANY
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS
SHALL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN
REQUEST TO THE COMPANY.
ARTICLE VII.
CONDITIONS PRECEDENT
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VII.1 CLOSING DELIVERIES TO THE PURCHASERS. The following documents
and items shall be delivered to the Purchasers at or prior to the Closing:
(a) Evidence acceptable to the Purchasers of adoption by the
Company of the Certificate of Designation;
(b) A fully executed and delivered counterpart of the Registration
Rights Agreement;
(c) A fully executed and delivered Warrant in the form EXHIBIT B
hereto dated as of the Closing Date;
(d) The written opinion of Shipman & Goodwin LLP, counsel for the
Company, in the form of EXHIBIT E hereto dated as of the Closing Date;
(e) certificates of a duly authorized officer of the Company dated
as of the Closing Date:
(A) stating that the following conditions have been
satisfied as of the Closing Date,
(i) the representations and warranties of the Company
contained herein and in any writing delivered pursuant hereto shall
be true and correct when made and at and as of the time of the
Closing;
(ii) no action, suit, investigation or proceeding shall
be pending or threatened before any court or Governmental Agency to
restrain, prohibit, collect damages as a result of or otherwise
challenge this Agreement or any Related Document or any transaction
contemplated hereby or thereby;
(iii) All acts or covenants required hereunder to be
performed by the Company prior to the Closing shall have been fully
performed by it;
(iv) No Material Adverse Change shall have occurred
between the date of the Current Balance Sheet and the Closing Date;
and
(B) setting forth the resolutions of the board of directors
of the Company authorizing the execution and delivery of this Agreement
and the Related Documents (including the Certificate of Designation) and
the consummation of the transactions contemplated hereby and thereby and
certifying that such resolutions were duly adopted and have not been
rescinded or amended;
(f) such other documents relating to the transactions contemplated
hereby as Purchasers may reasonably request.
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VII.2 CLOSING DELIVERIES TO THE COMPANY. At Closing, each Purchaser
will deliver to the Company the aggregate purchase price for the Preferred
Shares purchased by it.
ARTICLE VIII.
COVENANTS OF THE COMPANY
VIII.1 RESTRICTED ACTIONS. Without the prior written consent of
the holders of a majority of the then outstanding Preferred Shares, the Company
shall not, and shall not permit any Subsidiary to:
(a) become subject to any agreement or instrument which by its terms
would (under any circumstances) restrict the Company's right to comply with the
terms of this Agreement or any of the Related Documents;
(b) use the proceeds from the sale of the Preferred Shares and
Warrants other than (i) primarily for acquisitions of assets or businesses
reasonably related to the Company's existing business, and repayment of
indebtedness, and (ii) the remainder for other working capital purposes of the
Company;
(c) enter into any transaction including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service, with any Affiliate, except for transactions (including any investments,
loans or advances by or to any Affiliate) conducted in good faith, the terms of
which are fair and reasonable to the Company. Any such transactions in excess of
$100,000 per occurrence or $250,000 in the aggregate ($250,000/$500,000 in the
case of transactions with a wholly owned subsidiary) must be approved by the
Board of Directors, including, in the event the relevant Affiliate is an entity
controlled by any director (although not a Subsidiary or a member of such
director's immediate family (in either case, the "Interested Director) a
majority of the directors other than the Interested Director;
(d) grant a stock option under any employee benefit plan or director
stock plan at an exercise price below the fair market value on the date of grant
of such option other than purchases for Common Stock, up to an aggregate of
50,000 shares, pursuant to the 2000 Employee Stock Purchase Plan; or
(e) expand the Company's Board of Directors to greater than six
members.
VIII.2 REQUIRED ACTIONS. For so long as at least 25% of the
Preferred Shares remain outstanding, the Company shall, and shall cause each
Subsidiary to:
(a) use its best efforts to at all times file all reports (including
annual reports, quarterly reports and the information, documentation and other
reports) required to be filed by the Company under the Exchange Act and Sections
13 and 15 of the rules and regulations adopted by the SEC thereunder, and the
Company shall use its best efforts to file each of such reports on a
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timely basis, and take such further action as any holder or holders of
Securities may reasonably request, all to the extent required to enable such
holders to sell Securities pursuant to Rule 144 adopted by the SEC under the
Securities Act (as such rule may be amended from time to time) or any similar
rule or regulation hereafter adopted by the SEC and to enable the Company to
register securities with the SEC on Form S-3 or any similar short-form
registration statement and upon the filing of each such report deliver a copy
thereof to each holder of the Preferred Shares (or, if the Company is no longer
subject to the requirements of the Exchange Act, provide reports in
substantially the same form and at the same times as would be required if it
were subject to the Exchange Act);
(b) use its best efforts to maintain at all times a valid listing
for the Common Stock on a national securities exchange or the Nasdaq Stock
Market's National Market;
(c) within fifteen (15) days after the Closing Date (but not before)
and at each subsequent election of directors (and each Purchaser agrees to use
its best efforts to) elect to the Board of Directors of the Company pursuant to
Section 6A of the Certificate of Designation (x) one individual designated by
the holders of the Preferred Shares until such time as the shares of Common
Stock into which the then-outstanding Preferred Shares held by Advance are
convertible when added to the then-outstanding shares of Common Stock held by
Advance that were issued upon conversions of Preferred Shares, in each case not
including any such shares distributed to its partners, represent (a) fifty
percent (50%) or less of the number of shares of Common Stock into which all of
the Preferred Shares issued pursuant to the Purchase Agreement were convertible
on the date they were issued, and (b) five percent (5%) or less of the number of
shares of Common Stock then outstanding on a fully diluted basis. At any time
after the holders of the Series B Preferred cease to have the right to elect a
member of the Company's Board of Directors, promptly (and in any event not more
than ten (10) business days) after a majority of the other directors request the
resignation of the director elected by the holders of the Series B Preferred,
such director shall resign from the Company's Board of Directors.
VIII.3 RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purposes of issuance upon conversion of the
Preferred Shares or exercise of the Warrants, such number of shares of Common
Stock as are issuable upon the conversion of all outstanding shares of the
Preferred Shares or exercise of the Warrants. All shares of Common Stock which
are so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all Taxes, liens and charges. The Company shall take
all such actions as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Common Stock may be listed (except for official notice of issuance
which shall be immediately transmitted by the Company upon issuance).
ARTICLE IX.
SURVIVAL
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IX.1 SURVIVAL. The representations and warranties of the parties
hereto contained herein, shall survive the Closing and expire on September 30,
2001.
ARTICLE X.
INDEMNIFICATION
X.1 INDEMNIFICATION.
(a) In consideration of each Purchaser's execution and delivery of
this Agreement and acquiring the Preferred Shares and Warrants hereunder and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
all of its officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses (including, without limitation, costs of
suit and reasonable attorneys' fees and expenses) in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought) (the "Indemnified Liabilities"), incurred
by the Indemnitees or any of them as a result of, or arising out of, or relating
to (a) the breach of any representation or warranty contained in this Agreement
or in any Related Document, or (b) the execution, delivery, performance or
enforcement of this Agreement and any other instrument, document or agreement
executed pursuant hereto by any of the Indemnitees. The Company shall reimburse
the Indemnitees for the Indemnified Liabilities as such Indemnified Liabilities
are incurred. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
(b) No claim may be made against the Company for indemnification
pursuant to this Section 10.1 with respect to any individual item of liability
or damage unless the aggregate of all such liabilities and damages of the
Purchaser with respect to this Section 10.1 shall have exceeded $40,000.00 (at
which point the Company shall be liable for all claims including the first
$40,000.00). The Purchaser shall not be indemnified pursuant to this Section
10.1 with respect to any individual item of liability or damage if the aggregate
of all liabilities and damages of the Purchaser for which the Purchaser has
received indemnification pursuant to this Section 10.1 shall have exceeded an
amount equal to $4,000,000.00. For the purpose of this Section 10.1(b), in
computing such individual or aggregate amounts of claims, the amount of each
claim shall be deemed to be an amount (i) net of any Tax benefit to the
Purchaser or any Affiliate thereof, (ii) net of any insurance proceeds and any
indemnity, contribution or other similar payment recovered by the Purchaser or
any Affiliate from any third party with respect thereto and (iii) net of any
reserves provided for the item in question in the Current Balance Sheet.
(c) Payments by the Company pursuant to Section 10.1 (a) shall be
limited to the amount of any liability or damage that remains after deducting
therefrom (i) any Tax benefit to the Purchaser or any Affiliate thereof and (ii)
any insurance proceeds and any indemnity, contribution
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or other similar payment recovered by the Purchaser or any Affiliate from any
third party with respect thereto and (iii) net of any reserves provided for the
item in question in the Current Balance Sheet with respect to the subject matter
in dispute.
(d) Notwithstanding anything to the contrary set forth herein, the
Purchaser shall not be entitled to be indemnified for any liability or damage
that arises out of (i) the Purchaser's gross negligence or willful misconduct,
or (ii) any decline in the price of the Company's Common Stock due solely to a
general market decline or events affecting the Company's lines of business
generally.
ARTICLE XI.
GENERAL PROVISIONS
XI.1 RIGHT OF FIRST OFFER.
(a) At least 30 days prior to making any transfer of any Preferred
Shares, Warrants, Conversion Shares or shares of Common Stock issuable upon
exercise of the Warrants (other than a Public Sale or a transfer to Affiliates
or partners of the holder of such shares) (a "Transfer"), the holder of such
shares being transferred (the "Transferring Shareholder") shall deliver a
written notice (an "Offer Notice") to the Company. The Offer Notice shall
disclose in reasonable detail the proposed number of Preferred Shares, Warrants,
Conversion Shares and shares of Common Stock to be transferred (the "Transfer
Shares"), the proposed terms and conditions of the Transfer and the identity of
the prospective transferee(s) (if known). The Company may elect to purchase all
(but not less than all) of the Transfer Shares specified in the Offer Notice at
the price and on the terms specified therein by delivering written notice of
such election to the Transferring Shareholder as soon as practical but in any
event within fourteen (14) days after the delivery of the Offer Notice (the
"Election Period"). If the Company elects to purchase the Transfer Shares, the
transfer of such shares shall be consummated as soon as practical after the
delivery of the election notice(s) to the Transferring Shareholder, but in any
event within 15 days after the expiration of the Election Period. To the extent
that the Company has not elected to purchase all of the Transfer Shares being
offered, the Transferring Shareholder may, within 90 days after the expiration
of the Election Period and subject to the provisions of subparagraph (c) below,
transfer such Transfer Shares to one or more third parties at a price no less
than 95% of the price per share specified in the Offer Notice and on other terms
no more favorable to the transferees thereof than offered to the Company in the
Offer Notice. Any Transfer Shares not transferred within such 90-day period
shall be reoffered to the Company under this paragraph 11.1(a) prior to any
subsequent Transfer. The purchase price specified in any Offer Notice shall be
payable solely in cash at the closing of the transaction.
(b) The restrictions set forth in this paragraph 11.1 shall not
apply with respect to any Transfer by any Shareholder, among its Affiliates or
partners; provided that the restrictions contained in this paragraph 5 shall
continue to be applicable to the Transfer Shares after any such Transfer and
provided further that the transferees of such Transfer Shares shall have agreed
in writing to be bound by the provisions of this Agreement affecting the
Transfer Shares so transferred.
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XI.2 STANDSTILL. So long as the holders of Preferred Shares
beneficially own 12.5% or more of the Common Stock then outstanding (on a
fully-diluted basis), the holders of Preferred Shares shall be precluded from
purchasing any other security of the Company (except by conversion of the
Preferred Shares, the exercise of the Warrants, or purchases from Affiliates
through Transfers permitted pursuant to Section 11.1 above) without the prior
approval of the Board of Directors. For purposes of this provision, a Person
will be deemed to be a beneficial owner of Common Stock whenever such Person has
the right to acquire directly or indirectly such Common Stock (upon conversion
or exercise in connection with a transfer of securities or otherwise, but
disregarding any restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected.
XI.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective successors and assigns,
including each subsequent holder of Preferred Shares or Conversion Shares.
Except as otherwise specifically provided herein, this Agreement shall not be
assignable by any party without the prior written consent of the other parties
hereto.
XI.4 ENTIRE AGREEMENT. This Agreement and the other writings
referred to herein or delivered pursuant hereto constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior arrangements or understandings.
XI.5 NOTICES. All notices, requests, consents and other
communications provided for herein shall be in writing and shall be (i)
delivered in person, (ii) transmitted by telecopy, (iii) sent by first-class,
registered or certified mail, postage prepaid, or (iv) sent by reputable
overnight courier service, fees prepaid, to the recipient at the address or
telecopy number set forth below, or such other address or telecopy number as may
hereafter be designated in writing by such recipient. Notices shall be deemed
given upon personal delivery, seven days following deposit in the mail as set
forth above, upon acknowledgment by the receiving telecopier or one day
following deposit with an overnight courier service.
(a) If to the Company:
TransAct Technologies Incorporated
7 Laser Lane
Wallingford, CT 06492
Attention: Bart C. Shuldman
with a copy to:
Shipman & Goodwin LLP
One American Row
Hartford, CT 06103
Telecopy: (860) 251-5900
Attention: John E. Kreitler, Esq.
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(b) If to Advance:
Advance Capital Partners, L.P.
660 Madison Avenue
15th Floor
New York, New York 10021
Telecopy: (212) 835-2020
Attention: Jeffrey T. Leeds
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, New York 10022
Telecopy: (212) 446-4900
Attention: Joshua N. Korff, Esq.
XI.6 PURCHASERS FEES AND EXPENSES. The Company shall reimburse the
Purchasers for the reasonable fees and expenses of Kirkland & Ellis incurred in
connection with the documentation, negotiation and consummation of the
transactions contemplated by this Agreement and the Related Documents (including
any future amendments or waivers thereto) and for reasonable fees and expenses
related to the purchase of Preferred Stock and Warrants hereunder incurred by
the Purchasers. Purchasers will use their best efforts to limit the
fees/expenses for special counsel to $50,000.
XI.7 AMENDMENT AND WAIVER. No amendment of any provision of this
Agreement shall be effective, unless the same shall be in writing and signed by
the Company and the holders of greater than 50% of the Preferred Shares. Any
failure of the Company to comply with any provision hereof may only be waived in
writing by the holders of greater than 50% of the Preferred Shares and any
failure of any holder of Preferred Shares to comply with any provision hereof
may only be waived in writing by the Company. No such waiver shall operate as a
waiver of, or estoppel with respect to, any subsequent or other failure. No
failure by any party to take any action against any breach of this Agreement or
default by any other party shall constitute a waiver of such party's right to
enforce any provision hereof or to take any such action.
XI.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
XI.9 HEADINGS. The headings of the various sections of this
Agreement have been inserted for reference only and shall not be deemed to be a
part of this Agreement.
XI.10 SPECIFIC PERFORMANCE. The Company, on the one hand, and the
Purchasers, on the other hand, acknowledges that money damages would not be a
sufficient remedy for any breach of this Agreement. It is accordingly agreed
that the parties shall be entitled to specific
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performance and injunctive relief as remedies for any such breach, these
remedies being in addition to any of the remedies to which they may be entitled
at law or equity.
XI.11 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
XI.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF
DELAWARE WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICT OR CHOICE OF LAWS OF THE
STATE OF DELAWARE OR OF ANY OTHER JURISDICTION THAT WOULD RESULT IN THE
APPLICATION OF ANY LAWS OTHER THAN THOSE OF THE STATE OF DELAWARE.
XI.13 NO THIRD PARTY BENEFICIARIES. Except as specifically set forth
or referred to herein, nothing herein is intended or shall be construed to
confer upon any person or entity other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement.
XI.14 SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
* * * * *
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IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement as of the date first above written.
TRANSACT TECHNOLOGIES INCORPORATED
By: /s/ Bart C. Shuldman
-----------------------------------------
Name: Bart C. Shuldman
Title: CEO and President
ADVANCE CAPITAL PARTNERS, L.P.
By: Advance Capital Associates, L.P.,
its General Partner
By: Advance Capital Management, LLC,
its General Partner
By: /s/ Jeffrey T. Leeds
-----------------------------------------
Name: Jeffrey T. Leeds
Title: Principal
ADVANCE CAPITAL OFFSHORE PARTNERS, L.P.
By: Advance Capital Offshore Associates, LDC,
its General Partner
By: Advance Capital Associates, L.P.,
its Majority Shareholder
By: Advance Capital Management, LLC,
its General Partner
By: /s/ Jeffrey T. Leeds
-----------------------------------------
Name: Jeffrey T. Leeds
Title: Principal