EXHIBIT 10.1
PREFERRED STOCK PURCHASE AGREEMENT
Between
SIRROM CAPITAL CORPORATION
(d/b/a TANDEM CAPITAL)
And
TELTRONICS, INC.
February 25, 1998
Table of Contents
ARTICLE I - SALE AND PURCHASE OF STOCK 1
Section 1.1 Description of Series B Preferred Stock.. . . . . .1
Section 1.2 Commitment; Closing Date. . . . . . . . . . . . . .2
Section 1.3 Commitment Fee. . . . . . . . . . . . . . . . . . .2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
Section 2.1 Corporate Status. . . . . . . . . . . . . . . . . .2
Section 2.2 Capitalization. . . . . . . . . . . . . . . . . . .3
Section 2.3 Authorization; Absence of Conflicts . . . . . . . .4
Section 2.4 Validity and Binding Effect.. . . . . . . . . . . .4
Section 2.5 Financial Statements. . . . . . . . . . . . . . . .4
Section 2.6 SEC Reports.. . . . . . . . . . . . . . . . . . . .5
Section 2.7 Absence of Changes. . . . . . . . . . . . . . . . .5
Section 2.8 No Defaults.. . . . . . . . . . . . . . . . . . . .5
Section 2.9 Compliance With Law.. . . . . . . . . . . . . . . .6
Section 2.10 Litigation.. . . . . . . . . . . . . . . . . . . .6
Section 2.11 Taxes. . . . . . . . . . . . . . . . . . . . . . .6
Section 2.12 Certain Transactions.. . . . . . . . . . . . . . .6
Section 2.13 Title to Property. . . . . . . . . . . . . . . . .7
Section 2.14 Intellectual Property. . . . . . . . . . . . . . .7
Section 2.15 Debt.. . . . . . . . . . . . . . . . . . . . . . .7
Section 2.16 Material Contracts.. . . . . . . . . . . . . . . .8
Section 2.17 Environmental Matters. . . . . . . . . . . . . . .8
Section 2.18 Accounting Matters.. . . . . . . . . . . . . . . .9
Section 2.19 Distributions to Company.. . . . . . . . . . . . .9
Section 2.20 Prior Sales. . . . . . . . . . . . . . . . . . . .9
Section 2.21 Regulatory Compliance. . . . . . . . . . . . . . .9
Section 2.22 Margin Regulations.. . . . . . . . . . . . . . . .9
Section 2.24 Limited Offering.. . . . . . . . . . . . . . . . 10
Section 2.25 Registration Rights. . . . . . . . . . . . . . . 10
Section 2.26 Insurance. . . . . . . . . . . . . . . . . . . . 10
Section 2.27 Governmental Consents. . . . . . . . . . . . . . 10
Section 2.28 Employees. . . . . . . . . . . . . . . . . . . . 10
Section 2.29 ERISA. . . . . . . . . . . . . . . . . . . . . . 11
Section 2.30 Fees/Commissions.. . . . . . . . . . . . . . . . 11
Section 2.31 Disclosure.. . . . . . . . . . . . . . . . . . . 11
Section 2.32 Survival.. . . . . . . . . . . . . . . . . . . . 12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER 12
Section 3.1 Corporate Status. . . . . . . . . . . . . . . . . 12
Section 3.2 Authorization.. . . . . . . . . . . . . . . . . . 12
Section 3.3 Validity and Binding Effect.. . . . . . . . . . . 12
Section 3.4 Accredited Investor Status; Purchase for
Investment. . . . . . . . . . . . . . . . . . . . 12
Section 3.5 Legends on Certificates.. . . . . . . . . . . . . 13
Section 3.6 Survival. . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF PURCHASER 13
Section 4.1 Representations and Warranties. . . . . . . . . . 13
Section 4.2 Officer's Certificate.. . . . . . . . . . . . . . 14
Section 4.3 Satisfactory Proceedings; Secretary's Certificate.14
Section 4.4 Legal Opinion.. . . . . . . . . . . . . . . . . . 14
Section 4.5 Authorization Agreement.. . . . . . . . . . . . . 14
Section 4.6 Certificate of Designations.. . . . . . . . . . . 14
Section 4.7 Registration Rights Agreement.. . . . . . . . . . 14
Section 4.8 The Company's Existence and Authority.. . . . . . 14
Section 4.9 Senior Secured Loan Agreement; Subordinated
Debentures; Warrants. . . . . . . . . . . . . . . 15
Section 4.10 Intercreditor Agreement. . . . . . . . . . . . . 15
Section 4.11 Required Consents. . . . . . . . . . . . . . . . 15
Section 4.12 Expenses.. . . . . . . . . . . . . . . . . . . . 15
Section 4.13 Waiver of Conditions.. . . . . . . . . . . . . . 15
ARTICLE V - COVENANTS OF COMPANY 16
Section 5.1 Use of Proceeds.. . . . . . . . . . . . . . . . . 16
Section 5.2 Dividends; Repurchase of Series B Preferred Stock.16
Section 5.3 Corporate Existence, Etc. . . . . . . . . . . . . 16
Section 5.4 Maintenance, Etc. . . . . . . . . . . . . . . . . 16
Section 5.5 Nature of Business. . . . . . . . . . . . . . . . 16
Section 5.6 Insurance.. . . . . . . . . . . . . . . . . . . . 17
Section 5.7 Taxes, Claims for Labor and Materials.. . . . . . 17
Section 5.8 Compliance with Laws, Agreements, Etc.. . . . . . 17
Section 5.9 ERISA Matters.. . . . . . . . . . . . . . . . . . 17
Section 5.10 Books and Records; Rights of Inspection. . . . . 17
Section 5.11 Reports. . . . . . . . . . . . . . . . . . . . . 18
Section 5.12 Annual Plan. . . . . . . . . . . . . . . . . . . 19
Section 5.13 Board of Directors; Observer Rights. . . . . . . 19
Section 5.14 Further Assurances.. . . . . . . . . . . . . . . 20
ARTICLE VI - AMENDMENTS, WAIVERS AND CONSENTS 20
Section 6.1 Consent Required. . . . . . . . . . . . . . . . . 20
Section 6.2 Effect of Amendment or Waiver.. . . . . . . . . . 20
ARTICLE VII - INTERPRETATION OF AGREEMENT; DEFINITIONS 20
Section 7.1 Definitions.. . . . . . . . . . . . . . . . . . . 20
Section 7.2 Accounting Principles.. . . . . . . . . . . . . . 22
ARTICLE VIII - MISCELLANEOUS 23
Section 8.1 Expenses; Stamp Tax Indemnity.. . . . . . . . . . 23
Section 8.2 Powers and Rights Not Waived; Remedies Cumulative.23
Section 8.3 Notices.. . . . . . . . . . . . . . . . . . . . . 23
Section 8.4 Successors and Assigns. . . . . . . . . . . . . . 24
Section 8.5 Survival of Covenants and Representations.. . . . 24
Section 8.6 Severability. . . . . . . . . . . . . . . . . . . 24
Section 8.7 Governing Law.. . . . . . . . . . . . . . . . . . 25
Section 8.8 Captions; Counterparts. . . . . . . . . . . . . . 25
Section 8.9 Entire Agreement. . . . . . . . . . . . . . . . . 25
Section 8.10 Specific Performances. . . . . . . . . . . . . . 25
Section 8.11 Attorneys' Fees. . . . . . . . . . . . . . . . . 25
Section 8.12 Disclosure Statement.. . . . . . . . . . . . . . 25
1
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
entered into the 25th day of February, 1998, is by and among
TELTRONICS, INC., a Delaware corporation (the "Company"); and
SIRROM CAPITAL CORPORATION, d/b/a TANDEM CAPITAL, a Tennessee
corporation (the "Purchaser", sometimes referred to herein as
"Tandem").
W I T N E S S E T H:
WHEREAS, on February 13, 1997, the Company issued and sold
to Tandem its 11% Subordinated Convertible Debenture due February
13, 2002, in the principal amount of $4,250,000 (the "11%
Convertible Debentures"), pursuant to the terms and conditions of
that certain Debenture Purchase Agreement dated February 13,
1997, between the Company and Tandem (the "1997 Debenture
Purchase Agreement");
WHEREAS, for good and valid corporate purposes, the Company
wishes to repurchase the 11% Convertible Debentures and Tandem is
willing to sell to the Company the 11% Convertible Debentures in
consideration for $4,250,000;
WHEREAS, in order to obtain the funds to repurchase the 11%
Convertible Debentures and to obtain additional capital for use
in connection with its business, (a) the Company desires to issue
and sell certain preferred stock of the Company for $2,500,000,
and Purchaser is willing to purchase such shares of preferred
stock from the Company, on the terms on conditions set forth
herein, (b) the Company desires to issue and sell its 12%
Subordinated Secured Debentures, due February 13, 2002, in the
principal amount of $1,750,000 (the "New Debentures"), and the
Purchaser is willing to purchase the New Debentures, on the terms
and conditions set forth in that certain Debenture Purchase
Agreement between the Company and Tandem dated the date hereof
(the "1998 Debenture Purchase Agreement"), and (c) Tandem is
willing to make a secured loan to the Company in the amount of
$1,280,000, on the terms and conditions set forth in that certain
Loan and Security Agreement among the Company, certain
Subsidiaries of the Company and Tandem, dated the date hereof
(the "Tandem Loan Agreement").
NOW, THEREFORE, in mutual consideration of the premises and
the respective representations, warranties, covenants and
agreements contained herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF STOCK
Section 1.1 Description of Series B Preferred Stock.
The Company has authorized the issue and sale of 25,000
shares of its Series B Convertible Preferred Stock (the "Series B
Preferred Stock") having the rights and preferences set forth in
the Company's proposed Certificate of Designations Establishing
Series of Shares and Articles of Amendment in the form attached
hereto as Exhibit A (the "Certificate of Designations"), for a
purchase price of $100.00 per share, or an aggregate purchase
price of $2,500,000.00. The Certificate of Designations shall be
filed with the Secretary of State of Delaware on or before the
2
Closing Date (as defined below). The terms which are capitalized
herein shall have the meanings set forth in Section 7 hereof
unless the context shall otherwise require.
Section 1.2 Commitment; Closing Date.
Subject to the terms and conditions hereof and on the basis
of the representations and warranties hereinafter set forth, the
Company agrees to issue and sell to Purchaser, and Purchaser
agrees to purchase from the Company, 25,000 shares of Series B
Preferred Stock for a purchase price of $2,500,000.00.
Delivery of a single certificate representing the Series B
Preferred Stock will be made at the office of ▇▇▇▇▇▇▇▇ & ▇▇▇,
PLC, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
against payment therefor by federal funds wire transfer in
immediately available funds and to the accounts and in the
amounts in accordance with the Company's wire instructions set
forth on Exhibit B hereto, or by the surrender by Purchaser of
11% Convertible Debentures, in an amount equal to the purchase
price hereunder, at 10:00 a.m., Nashville time, on February 25,
1998, or such other date as the Company and Purchaser shall
agree, but no later than February 27, 1998 (the "Closing Date").
The stock certificate to be delivered to Purchaser on the Closing
Date will be registered in Purchaser's name or in the name of
such nominee as Purchaser may specify at least 24 hours prior to
the date fixed for delivery.
Section 1.3 Commitment Fee.
The Company agrees to pay, on or before the Closing Date, a
commitment fee to Purchaser in the amount of $12,500.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as
follows:
Section 2.1 Corporate Status.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has the corporate power to own and operate its
properties, to carry on its business as now conducted and to
enter into and to perform its obligations under this Agreement,
the Registration Rights Agreement, to be dated as of the Closing
Date, by and between the Company and Purchaser (the "Registration
Rights Agreement"), and any other document executed and delivered
by the Company in connection herewith or therewith (collectively,
the "Operative Documents"). The Company is qualified to do
business and is in good standing in each state or other
jurisdiction in which such qualification is necessary under
applicable provisions of law. The states or other jurisdictions
in which the Company is so qualified are set forth on Schedule
2.1(a) hereto.
(b) Schedule 2.1(b) sets forth a complete list of each
corporation, partnership, joint venture, limited liability
company or other business organization in which the Company owns,
directly or indirectly, any capital stock or other equity
interest (the "Subsidiary" or, collectively, the "Subsidiaries"),
or with respect to which the Company or any Subsidiary, alone or
in combination with others, is in a control position, which list
shows the jurisdiction of incorporation or other organization and
the percentage of stock or other equity interest of each
Subsidiary owned by the
3
Company. Each Subsidiary is duly organized, validly existing and
in good standing under the laws of the jurisdiction of incorporation
or other organization as indicated on Schedule 2.1(b), each has all
requisite power and authority and holds all material licenses,
permits and other required authorizations from government
authorities necessary to own its properties and assets and to conduct
its business as it is now being conducted, and is qualified to do
business as a foreign corporation (or business organization) and is
in good standing in every jurisdiction in which such qualification is
necessary under applicable provisions of law. All of the
outstanding shares of capital stock, or other equity interest, of
each Subsidiary owned, directly or indirectly, by the Company
have been validly issued, are fully paid and nonassessable, and
are owned by the Company free and clear of all liens, charges,
security interests or encumbrances.
Section 2.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 40,000,000 shares of common stock, par value $.001 per share
(the "Common Stock"), of which 3,415,513 shares are issued and
outstanding, and (ii) 5,000,000 shares of non-voting common
stock, par value $.001 per share (the "Non-Voting Common Stock"),
none of which are issued and outstanding, and (iii) 5,000,000
shares of undesignated preferred stock, with rights and
preferences to be fixed by the Board of Directors in accordance
with the corporate laws of the State of Delaware and the
Company's Restated Certificate of Incorporation, as amended (the
"Restated Certificate"), and 250,000 shares designated as Series
A Preferred Stock bearing the rights and preferences set forth in
the Restated Certificate of which 100,000 shares are issued and
outstanding. All shares of Common Stock and Series A Preferred
Stock outstanding have been validly issued and are fully paid and
nonassessable. As of the Closing Date, the authorized Series A
Preferred Stock shall have been decreased to 100,000 shares and
25,000 shares of the undesignated preferred stock shall have been
designated as "Series B Convertible Preferred Stock" with the
rights, preferences and limitations set forth in the Certificate
of Designations. Except as listed on Schedule 2.2(a), there are
no statutory or contractual pre-emptive rights, rights of first
refusal, antidilution rights or any similar rights held by any
party with respect to the issuance of the Series B Preferred
Stock or the issuance of Common Stock upon the conversion thereof.
(b) The Company has not granted, or agreed to grant or
issue, any options, warrants or rights to purchase or acquire
from the Company any shares of capital stock of the Company,
there are no securities outstanding or committed to be issued by
the Company or any Subsidiary which are convertible into or
exchangeable for any shares of capital stock or other securities
of the Company, and there are no contracts, commitments,
agreements, understandings, arrangements or restrictions as to
which the Company is a party, or by which it is bound, relating
to any shares of capital stock or other securities of the
Company, whether or not outstanding except for (i) the shares of
Series B Preferred Stock to be issued pursuant to this Agreement,
(ii) the conversion privileges of the holders of the Series B
Preferred Stock to be issued pursuant to this Agreement, with
respect to which an aggregate of at least 909,091 shares of
Common Stock have been reserved for issuance upon such
conversion, (iii) the Stock Purchase Warrant to purchase 525,000
shares of Common Stock (the "Debenture Warrants") to be issued
pursuant to the 1998 Debenture Purchase Agreement, (iv) the Stock
Purchase Warrant to purchase 365,000 shares of Common Stock (the
"Loan Warrants") to be issued to Tandem pursuant to the Tandem
Loan Agreement; and (v) such options, warrants and other rights
to acquire capital stock of the Company, together with relevant
exercise prices and dates, set forth on Schedule 2.2(b). Except
as set forth on Schedule 2.2(b), all such shares have been duly
reserved for issuance, have been duly and validly authorized and
upon issuance in accordance with the terms of the respective
instruments, will be validly issued, fully paid and nonassessable.
4
(c) The Series B Preferred Stock that is being purchased by
the Purchaser, when issued, sold, and delivered in accordance
with the terms of this Agreement for the consideration expressed
herein, will be duly and validly issued, fully paid, and
nonassessable, and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. The Common Stock
issuable upon conversion of the Series B Preferred Stock being
purchased under this Agreement has been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of
the Certificate of Designations, will be duly and validly issued,
fully paid, and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under applicable
state and federal securities laws.
Section 2.3 Authorization; Absence of Conflicts.
The Company has full legal right, power and authority to
enter into and perform its obligations under this Agreement and
any of the other Operative Documents without the consent or
approval of any other person, firm, governmental agency or other
legal entity except as set forth on Schedule 2.3, each of which
will be obtained prior to Closing. The execution and delivery of
this Agreement, the issuance of the shares of Series B Preferred
Stock hereunder, the execution and delivery of each other
document in connection herewith or therewith to which the Company
is a party, and the performance by the Company of its obligations
hereunder and/or thereunder are within the corporate powers of
the Company and have been duly authorized by all necessary
corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will
not contravene or conflict with (a) the Articles of Incorporation
or Bylaws, as amended, of the Company, (b) any material agreement
to which the Company or any of its Subsidiaries is a party or by
which any of them or their properties is bound, or constitute a
default thereunder, or result in the creation or imposition of
any lien, charge, security interest, or encumbrance of any nature
upon any of the property or assets of the Company or any of its
Subsidiaries pursuant to the terms of any such agreement or
instrument, or (c) violate any provision of law or any applicable
judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement,
the Operative Documents and any other document executed and
delivered by Purchaser in connection herewith or therewith, is
duly authorized to act on behalf of the Company.
Section 2.4 Validity and Binding Effect.
Each of the Operative Documents is the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms.
Section 2.5 Financial Statements.
The consolidated financial statements of the Company and
its Subsidiaries for the fiscal years ended December 31, 1994,
December 31, 1995, and December 31, 1996, and the unaudited
consolidated financial statements as of and for the nine-month
period ended September 30, 1997, and the related notes, copies of
which the Company previously has delivered to Purchaser, fairly
present the financial position, results of operations, cash flows
and changes in stockholders' equity of the Company and its
consolidated Subsidiaries, at the respective dates of and for the
periods to which they apply in such financial statements and have
been prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods
indicated, subject, in the case of interim financial statements, to
normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, have a Materially Adverse
Effect) and the absence of notes (that, if presented, would not
differ materially from those included in the most recent audited
financial
5
statements). No financial statements of any other
person(s) are required by GAAP to be included in the consolidated
financial statements of the Company.
Section 2.6 SEC Reports.
The Company's Common Stock is listed on the NASDAQ Small Cap
Market and has been duly registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The symbol for the Company's Common Stock is "TELT". Since January
1, 1995, the Company has timely filed all reports, registrations,
proxy or information statements and all other documents, together
with any amendments required to be made thereto, required to be
filed with the SEC under the Securities Act and the Exchange Act
(collectively, the "SEC Reports"). The Company previously has
furnished to Purchaser true copies of all the SEC Reports, together
with all exhibits thereto that Purchaser has requested, and the
Company's annual report to stockholders for the year ended December
31, 1996, which annual report meets the requirements of Rule 14a-3
or 14e-3 under the Exchange Act (the "Annual Report"). The
financial statements contained in the SEC Reports fairly presented
(or will fairly present, as the case may be) the financial position
of the Company as of the dates mentioned and the results of
operations, changes in stockholders' equity and changes in
financial position or cash flows for the periods then ended in
conformity with GAAP applied on a consistent basis throughout the
periods involved. As of their respective dates, the SEC Reports
complied (or will comply, as the case may be) in all material
respects with all rules and regulations promulgated by the SEC and
did not (or will not, as the case may be) contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
Section 2.7 Absence of Changes.
Except as set forth on Schedule 2.7, since September 30, 1997,
(i) neither the Company nor any of its Subsidiaries has incurred
any liabilities or obligations, direct or contingent, or entered
into any transactions, not in the ordinary course of business, that
are material to the Company or any of its Subsidiaries, (ii)
neither the Company nor any of its Subsidiaries has purchased any
of its outstanding capital stock or declared, or paid any dividend
or other distribution or payment in respect of its capital stock,
(iii) there has not been any change in the authorized or issued
capital stock, long-term debt or short-term debt of the Company,
and (iv) there has not been any Materially Adverse Effect in or
affecting the business, operations, properties, prospects, assets,
or condition (financial or otherwise) of the Company or any
Subsidiary, and no event has occurred or circumstance exists that
may result in such a Materially Adverse Effect.
Section 2.8 No Defaults.
Except as set forth on Schedule 2.8 and except where a default
or event of default does not and would not constitute a Materially
Adverse Effect, no default or event of default by the Company or
any Subsidiary exists under this Agreement or under any instrument
or agreement to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary or its respective properties
may be bound or, to the knowledge of the Company, affected, and no
event has occurred and is continuing that with notice or the
passage of time or both would constitute a default or event of
default thereunder.
6
Section 2.9 Compliance With Law.
To the Company's knowledge, the Company and its Subsidiaries
are in compliance with all federal, state and local laws,
regulations, decrees and orders applicable to them (including but
not limited to occupational and health standards and controls,
antitrust, monopoly, restraint of trade or unfair competition),
except to the extent that noncompliance, in the aggregate, cannot
reasonably be expected to cause a Materially Adverse Effect.
Section 2.10 Litigation.
Except as set forth on Schedule 2.10, there is no litigation,
arbitration, claim, proceeding or investigation pending or
threatened in writing in which the Company or any Subsidiary is a
party or to which any of its respective properties or assets is the
subject which, if determined adversely to the Company or such
Subsidiary, would individually or in the aggregate have a
Materially Adverse Effect.
Section 2.11 Taxes.
Except as set forth on Schedule 2.11, the Company and its
Subsidiaries have filed or caused to be filed all federal, state
and local income, excise and franchise tax returns required to be
filed (except for returns that have been appropriately extended),
and have paid, or provided for the payment of, all taxes shown to
be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on it by
any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good
faith by appropriate proceedings, for which appropriate amounts
have been reserved), and the Company does not know of any proposed
assessment for additional taxes or any basis therefor. No tax
liens have been filed against the Company, or its Subsidiaries or
any of their properties. The Company's federal income tax
liability has been finally determined by the Internal Revenue
Service and satisfied for all taxable years up to and including the
taxable year ended December 31, 1991, or closed by applicable
statutes of limitation.
Section 2.12 Certain Transactions.
Except as set forth on Schedule 2.12(i) and except as to
indebtedness incurred in the ordinary course of business and
approved by the Board of Directors of the Company, neither the
Company nor any Subsidiary is indebted, directly or indirectly, to
any of its officers or directors, or to their respective spouses or
children, in excess of an aggregate amount of $60,000, and none of
the officers or directors or any members of their immediate
families are indebted to the Company or any Subsidiary in excess of
an aggregate amount of $60,000 or have any direct or indirect
ownership interest in any firm or corporation with which the
Company or any Subsidiary is affiliated or with which the Company
has a business relationship, or any firm or corporation which
competes with the Company or any Subsidiary, except that an officer
and/or director of the Company may own no more than 1.0% of the
outstanding stock of any publicly traded company which competes
directly with the Company. Except as set forth on Schedule
2.12(ii), no officer or director of the Company or any Subsidiary
or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company or
any Subsidiary. Except as set forth on Schedule 2.12(iii), neither
the Company nor any Subsidiary is a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
7
Section 2.13 Title to Property.
The Company and each Subsidiary has good and marketable title
to all real and personal property owned by it, free and clear of
all liens, security interests, pledges, encumbrances, equities
claims and restrictions of every kind and nature whatsoever, except
as disclosed on Schedule 2.13 and except for such liens, security
interests, pledges, encumbrances, equities claims and restrictions
which are not in the aggregate material to the business, operations
or financial condition of the Company and its Subsidiaries taken as
a whole. Any real property and buildings held under lease by the
Company or any Subsidiary are held under valid existing and
enforceable leases, and no default has occurred or is continuing
thereunder might result in any Materially Adverse Effect, and the
Company and each Subsidiary enjoys peaceful and undisturbed
possession under all such leases, except as disclosed on Schedule
2.13 or which are not material and do not interfere with the use to
be made of such buildings or property by the Company or any
Subsidiary.
Section 2.14 Intellectual Property.
Except as set forth in Schedule 2.14, the Company is the
lawful owner or has a valid right to use the Proprietary
Information in its business free and clear of any claim, right,
trademark, patent or copyright protection of any third party. The
Company has good and marketable title to or has a valid right to
use all patents, trademarks, trade names, service marks, copyrights
or other intangible property rights, and registrations or
applications for registration thereof, owned by the Company or any
Subsidiary or used or required by the Company or any Subsidiary in
the operation of its business as presently being conducted, which
are listed on Schedule 2.14(b)(i), except as set forth on Schedule
2.14(b)(ii). The Company has no knowledge of any infringements or
conflict with asserted rights of others with respect to copyrights,
patents, trademarks, service marks, trade names, trade secrets or
other intangible property rights or know-how which would
individually or in the aggregate have a Materially Adverse Effect.
To the Company's knowledge, no products or processes of the Company
infringe or conflict with any rights of patent or copyright, or any
discovery, invention, product or process, that is the subject of a
patent or copyright application or registration known to the
Company. The Company follows such procedures as the Company deems
necessary or appropriate to provide reasonable protection of the
Company's trade secrets and proprietary rights in intellectual
property of all kinds. To the knowledge of the Company, no person
employed by or affiliated with the Company has employed or proposes
to employ any trade secret or any information or documentation
proprietary to any former employer, and to the knowledge of the
Company, no person employed by or affiliated with the Company has
violated any confidential relationship that such person may have
had with any third person, in connection with the development,
manufacture or sale of any product or proposed product or the
development or sale of any service or proposed service of the
Company.
Section 2.15 Debt.
Schedule 2.15(i) sets forth (i) a complete and correct list of
all loans, credit agreements, indentures, purchase agreements,
promissory notes and other evidences of indebtedness, Guaranties,
capital leases and other instruments, agreements and arrangements
presently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of
letters of credit or for acceptance financing) in respect of which
the Company, any Subsidiary or any of their properties is in any
manner directly or contingently obligated; (ii) a correct statement
of the maximum principal or face amounts of the credit in question
that are outstanding and that can be outstanding; and (iii) a
correct statement of all liens, pledges or security interests of
any nature given or agreed to be given as security therefor or in
connection therewith. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company
under the
8
Operative Documents will not result in any breach of, or
constitute a default under, or require the consent of any person
under, any loan, credit agreement, indenture, purchase agreement,
promissory note or other evidences of indebtedness, Guaranty,
capital lease or other instrument, agreement or arrangement set
forth on Schedule 2.15(i), except as set forth on Schedule
2.15(ii).
Section 2.16 Material Contracts.
Schedule 2.16(i) sets forth a complete and correct list of (a)
all contracts, agreements and other documents pursuant to which the
Company or any Subsidiary either (i) receives revenues or (ii)
makes payment to any third Person(s), in excess of $100,000 per
fiscal year, and (b) all contracts or other agreements required to
be filed by the Company with the SEC as an exhibit pursuant to Item
601(b)(10) of Regulation S-K under the Securities Act (each
instrument identified in Schedule 2.16 individually being an
"Applicable Contract" and collectively the "Applicable Contracts").
Each Applicable Contract is in full force and effect as of the date
hereof and the Company knows of no reason why such Applicable
Contracts would not remain in full force and effect pursuant to the
terms thereof. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company
under the Operative Documents will not result in any breach of, or
constitute a default under, or require the consent of any person
under, any Applicable Contract set forth on Schedule 2.16, except
as set forth on Schedule 2.16(ii).
Section 2.17 Environmental Matters.
The Company and each of its Subsidiaries have duly complied in
all material respects with, and its business, operations, assets,
equipment, property, leaseholds or other facilities of each are in
compliance in all material respects with, the provisions of all
federal, state and local environmental, health, and safety laws,
codes and ordinances, and all rules and regulations promulgated
thereunder. The Company and each of its Subsidiaries have been
issued and will maintain all required federal, state and local
permits, licenses, certificates and approvals relating to (i) air
emissions; (ii) discharges to surface water or groundwater;
(iii) noise emissions; (iv) solid or liquid waste disposal; (v) the
use, generation, storage, transportation or disposal of toxic or
hazardous substances or wastes (which shall include any and all
such materials listed in any federal, state or local law, code or
ordinance and all rules and regulations promulgated thereunder as
hazardous or potentially hazardous); or (vi) other environmental,
health or safety matters. Neither the Company nor any Subsidiary
has received notice of, or knows of, or suspects facts which might
constitute any material violations of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any
rules or regulations promulgated thereunder with respect to its
businesses, operations, assets, equipment, property, leaseholds, or
other facilities. Except in accordance with a valid governmental
permit, license, certificate or approval, there has been no
emission, spill, release or discharge into or upon (a) the air;
(b) soils, or any improvements located thereon; (c) surface water
or groundwater; or (d) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any toxic or
hazardous substances or wastes at or from the premises owned or
occupied by the Company or its Subsidiaries. There has been no
complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to
(I) air emissions; (II) spills, releases or discharges to soils or
improvements located thereon, surface water, groundwater or the
sewer, septic system or waste treatment, storage or disposal
systems servicing the premises; (III) noise emissions; (IV) solid
or liquid waste disposal; (V) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or
waste; or (VI) other environmental, health or safety matters
affecting the Company or any of its Subsidiaries or their
respective businesses, operations, assets, equipment, property,
leaseholds or other facilities. Neither the Company nor any
Subsidiary has any material indebtedness, obligation or liability
(absolute or
9
contingent, matured or not matured), with respect to
the storage, treatment, cleanup or disposal of any solid wastes,
hazardous wastes or other toxic or hazardous substances (including
without limitation any such indebtedness, obligation, or liability
with respect to any current regulation, law or statute regarding
such storage, treatment, cleanup or disposal).
Section 2.18 Accounting Matters.
The books of account, minute books, stock record books and
other records of the Company and its Subsidiaries are complete and
correct, have been maintained in accordance with sound business
practices and accurately and fairly reflect the transactions and
dispositions of the assets of the Company. The Company and each of
its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain accountability for the assets of the Company and
each of its Subsidiaries; (iii) access to the assets of the Company
and each of its Subsidiaries is permitted only in accordance with
management's general or specific authorization; and (iv) the
recorded accountability for assets of the Company and each of its
Subsidiaries are compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
Section 2.19 Distributions to Company.
No Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from
making any other distributions on such Subsidiary's capital stock,
from repaying to the Company any loans or advances to such
Subsidiary or from transferring any of such Subsidiary's property
or assets to the Company or any other Subsidiary of the Company.
The Company is not prohibited from paying cash dividends to the
holders of the Series B Preferred Stock except as set forth in
Schedule 2.19.
Section 2.20 Prior Sales.
All offers and sales by the Company of its capital stock since
January 1, 1995, were at all relevant times (i) exempt from the
registration requirements of the Securities Act or were duly
registered under the Securities Act, and (ii) were duly registered
or were the subject of an available exemption from the registration
requirements of all applicable state securities or Blue Sky laws.
Section 2.21 Regulatory Compliance.
The conduct of the business and the ownership of the assets of
the Company and its Subsidiaries does not require any license,
permit, approval, waiver or other authorization of any federal,
state or local governmental or regulatory body, and except as set
forth on Schedule 2.21, such business is not subject to the
regulation of any federal, state or local government or regulatory
body by reason of the nature of the business being conducted (as
distinct from regulation common to commercial enterprises in
general). All licenses, permits and authorizations set forth on
Schedule 2.21 are in full force and effect.
Section 2.22 Margin Regulations.
The Company is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock. No
proceeds received pursuant to this Agreement will be used
10
to purchase or carry any equity security of a class which is
registered pursuant to Section 12 of the Exchange Act.
Section 2.23 1940 Act Compliance.
The Company is an "eligible portfolio company" as such term is
defined in Section 2(a)(46) of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and the issuance and sale
by the Company of the Series B Preferred Stock does not constitute
a "public offering" as such term is used in Section 55(a)(1)
thereof.
Section 2.24 Limited Offering.
Subject in part to the truth and accuracy of Purchaser's
representations set forth in this Agreement, the offer, sale and
issuance of the Series B Preferred Stock are exempt from the
registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf has taken or
will take any action hereafter that would cause the loss of such
exemption.
Section 2.25 Registration Rights.
Except as described in Schedule 2.25, the Company is not under
any obligation to register under the Securities Act, as amended,
any of its presently outstanding securities or any of its
securities that may subsequently be issued.
Section 2.26 Insurance.
The Company has maintained, and has caused each Subsidiary to
maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business
in such forms and amounts and against such risks, casualties and
contingencies as are customary for corporations of comparable size
and condition (financial and otherwise) engaged in the same or a
similar business and owning and operating similar properties.
Section 2.27 Governmental Consents.
No consent, approval, qualification, order or authorization
of, or filing with, any local, state, or federal governmental
authority is required on the part of the Company in connection with
the Company's valid execution, delivery, or performance of this
Agreement or the offer, sale or issuance of the Series B Preferred
Stock by the Company.
Section 2.28 Employees.
Schedule 2.28 sets forth the number of full-time employees and
full-time equivalent employees of the Company and each Subsidiary
as of the most recent payroll date, which date is set forth
therein. To the best of the Company's knowledge, there is no
strike, labor dispute or union organization activities pending or
threatened between it and its employees. Except as set forth on
Schedule 2.28, none of the Company's employees belongs to any union
or collective bargaining unit. To the best of its knowledge, the
Company has complied in all material respects with all applicable
state and federal equal opportunity and other laws related to
employment. To the best of the Company's knowledge, no employee of
the Company is or will be in violation of any judgment, decree, or
order, or any term of any employment contract, patent disclosure
agreement, or other
11
contract or agreement relating to the relationship of any such
employee with the Company, or any other party, because of the nature
of the business conducted or presently proposed to be conducted by
the Company or to the use by the employee of his or her best efforts
with respect to such business. Except as disclosed in Schedule 2.28,
the Company is not a party to or bound by any employment contract,
deferred compensation agreement, bonus plan, incentive plan, profit
sharing plan, retirement agreement, or other employee compensation
agreement. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate their employment
with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. Except as
described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and as described in Schedule 2.28, subject
to general principles related to wrongful termination of employees,
the employment of each officer and employee of the Company is
terminable at the will of the Company.
Section 2.29 ERISA.
The Company is in compliance in all material respects with all
applicable provisions of Title IV of the Employee Retirement Income
Security Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88
Stat. 829, 29 U.S.C.A. Section 1001 et seq. (1975), as amended from time
to time ("ERISA"). Except as disclosed in Schedule 2.29, neither a
reportable event nor a prohibited transaction (as defined in ERISA)
has occurred and is continuing with respect to any "pension plan"
(as such term is defined in ERISA, a "Plan"); no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated;
no circumstances exist which constitute grounds entitling the
Pension Benefit Guaranty Corporation (together with any entity
succeeding to or all of its functions, the "PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the
Company nor any commonly controlled entity (as defined in ERISA)
has completely or partially withdrawn from a multiemployer plan (as
defined in ERISA); the Company and each commonly controlled entity
has met its minimum funding requirements under ERISA with respect
to all of its Plans and the present fair market value of all Plan
property exceeds the present value of all vested benefits under
each Plan, as determined on the most recent valuation date of the
Plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of
the Company or any commonly controlled entity to the PBGC or the
Plan under Title IV or ERISA; and neither the Company nor any
commonly controlled entity has incurred any liability to the PBGC
under ERISA.
Section 2.30 Fees/Commissions.
The Company has not agreed to pay any finder's fee,
commission, origination fee or other fee or charge to any person or
entity with respect to or as a result of the consummation of the
transactions contemplated hereunder, except for the processing fee
due to Purchaser pursuant to Section 1.3 hereof.
Section 2.31 Disclosure.
No representation or warranty given as of the date hereof by
the Company contained in this Agreement or any Schedule attached
hereto or any statement in any document, certificate or other
instrument furnished or to be furnished to the Purchaser pursuant
hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or
omits or will (as of the time so furnished) omit to state any
material fact which is necessary in order to make the statements
contained herein or therein not misleading.
12
Section 2.32 Survival.
The representations and warranties of the Company contained in
this Agreement shall survive in accordance with Section 8.5 hereof
until this Agreement terminates.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents to the Company, as follows:
Section 3.1 Corporate Status.
Purchaser is a corporation duly organized and validly existing
under the laws of the State of Tennessee and has the requisite
power and authority to own and operate its properties, to carry on
its business as now conducted and to enter into and to perform its
obligations under this Agreement and any other document executed or
delivered by Purchaser in connection herewith.
Section 3.2 Authorization.
Purchaser has full legal right, power and authority to enter
into and perform its obligations under this Agreement, the
Registration Rights Agreement, and any other document executed and
delivered by Purchaser in connection herewith, without the consent
or approval of any other person, firm, governmental agency or other
legal entity. The execution and delivery of this Agreement and any
other document executed and delivered by Purchaser in connection
herewith, and the performance by Purchaser of its obligations
hereunder and/or thereunder are within the corporate or
organizational powers of Purchaser, and do not and will not
contravene or conflict with (a) the organizational documents of
Purchaser, (b) any material agreement to which Purchaser is a party
or by which it or any of its properties is bound, or constitute a
default thereunder, or result in the creation or imposition of any
lien, charge, security interest or encumbrance of any nature upon
any of the property or assets of Purchaser pursuant to the terms of
any such agreement or instrument, or (c) violate any provision of
law or any applicable judgment, ordinance, regulation or order of
any court or governmental agency. The person(s) executing this
Agreement and any other document executed and delivered by
Purchaser in connection herewith, is duly authorized to act on
behalf of Purchaser.
Section 3.3 Validity and Binding Effect.
This Agreement and any other document executed and delivered
by Purchaser in connection herewith are the legal, valid and
binding obligations of the Purchaser, enforceable against it in
accordance with their respective terms.
Section 3.4 Accredited Investor Status; Purchase for Investment.
Purchaser is a registered investment company under the
Investment Company Act and as such is, and at the Closing Date will
be, an "accredited investor" under Rule 501(a) under the Securities
Act. Purchaser is acquiring the Series B Preferred Stock for its
own account, for investment, and not with a view to the
distribution or resale thereof, in whole or in part, in violation
of the Securities Act or any applicable state securities law, and
Purchaser has no present intention of selling, negotiating or
otherwise disposing of the Series B Preferred Stock, it being
understood that
13
Purchaser intends to transfer and assign, without consideration,
the Series B Preferred Stock and all of Purchaser's rights and
obligations under this Agreement and the Operative Documents to one
or more Wholly-owned Subsidiaries of Purchaser, which Wholly-owned
Subsidiaries are and will also be "accredited investors" under
Rule 501(a). Purchaser is an "institutional investor" as defined
under Section 48-2-102 of the Tennessee Securities Act of 1980 for
purposes of the exemption set forth under Section 48-2-103(b)(3)
of such act.
Section 3.5 Legends on Certificates.
Purchaser understands that the certificates representing the
Series B Preferred Stock (or the Common Stock issued upon
conversion of the Series B Preferred Stock) shall bear the
following or similar legend and that appropriate stock transfer
instructions will be entered in the stock records of the Company:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE
SECURITIES LAW. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR RESALE IN
CONNECTION WITH THE DISTRIBUTION THEREOF. NO
DISPOSITION OF THE SHARES MAY BE MADE IN THE ABSENCE OF
(1) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (2) AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH DISPOSITION WITHOUT
REGISTRATION IS IN COMPLIANCE WITH THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAW.
Section 3.6 Survival.
The representations and warranties of Purchaser contained in
this Agreement shall survive the termination of this Agreement in
accordance with Section 8.5 hereof.
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to purchase and pay for the Series
B Preferred Stock on the Closing Date shall be subject to the
fulfillment on or before the Closing Date of each of the following
conditions:
Section 4.1 Representations and Warranties.
The representations and warranties of the Company contained in
this Agreement and in any Schedule hereto or any document or
instrument delivered to Purchaser or their representatives
hereunder, shall have been true and correct when made and shall be
true and correct as of the Closing Date as if made on such date,
except to the extent such representations and warranties expressly
relate to a specific date. The Company shall have duly performed
all of the covenants and agreements to be performed by it hereunder
on or prior to the Closing Date.
14
Section 4.2 Officer's Certificate.
The Company shall have delivered to Purchaser a certificate,
dated the Closing Date, signed by the President of the Company
substantially in the form attached hereto as Exhibit C.
Section 4.3 Satisfactory Proceedings; Secretary's Certificate.
All proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance
to Purchaser and Purchaser's counsel, and the Company shall have
delivered to Purchaser a certificate, dated the Closing Date,
signed by the Secretary of the Company substantially in the form
attached hereto as Exhibit D.
Section 4.4 Legal Opinion.
Purchaser shall have received the opinion of ▇▇▇▇▇ & ▇▇▇▇▇,
counsel for the Company, dated the Closing Date, addressed to
Purchaser, in form and substance satisfactory to Purchaser's
counsel, and covering the matters set forth in Exhibit E hereto.
Section 4.5 Authorization Agreement.
The Company shall have delivered to Purchaser an Authorization
Agreement for Pre-Authorized Payments (Debit), dated the Closing
Date, executed by a duly authorized officer of the Company, in the
form attached hereto as Exhibit F.
Section 4.6 Certificate of Designations.
The Certificate of Designations shall have been accepted by
the Office of the Secretary of State of Delaware as filed.
Section 4.7 Registration Rights Agreement.
The Company shall have executed and delivered to Purchaser the
Registration Rights Agreement.
Section 4.8 The Company's Existence and Authority.
The Company shall have delivered to Purchaser the following
certificates of public officials, in each case as of a date within
ten (10) days of the Closing Date:
(a) the certificate of incorporation of the Company and each
of the Subsidiaries, certified by the Secretary of State or other
appropriate official in the jurisdiction in which each such entity
is incorporated;
(b) a certificate as to the legal existence and subsistence
of the Company and each of the Subsidiaries issued by the Secretary
of State or other appropriate official in the jurisdiction in which
each such entity is incorporated; and
15
(c) a certificate as to the qualification to do business as
a foreign corporation in good standing of the Company and each of
the Subsidiaries, as appropriate, issued by the Secretary of State
or other appropriate official in each jurisdiction listed in
Schedule 2.1(a).
Section 4.9 Senior Secured Loan Agreement; Subordinated
Debentures; Warrants.
(a) Pursuant to the terms of the Tandem Loan Agreement, the
Company shall have borrowed from Tandem $1,280,000, and the Company
shall have issued to Tandem the Loan Warrants to purchase 365,000
shares of Common Stock.
(b) Pursuant to the terms of the 1998 Debenture Purchase
Agreement, the Company shall have sold to Tandem, and Tandem shall
have purchased from the Company, the Company's 12% Subordinated
Secured Debenture due February 13, 2002, in the principal amount of
$1,750,000, and the Company shall have issued to Tandem the
Debenture Warrants to purchase 525,000 shares of Common Stock.
(c) If payment of the purchase price shall be made by
delivery of the Company's 11% Convertible Debentures, Purchaser
shall have been paid all interest accrued thereon to the Closing
Date.
Section 4.10 Intercreditor Agreement
The Company shall have executed and delivered to Purchaser an
Intercreditor Agreement among the Company, its Subsidiaries,
Purchaser and The CIT Group/Credit Finance, Inc., in the form
attached hereto as Exhibit G.
Section 4.11 Required Consents.
Any consents or approvals required to be obtained from any
third party, including any holder of indebtedness or any
outstanding security of the Company, and any amendments of
agreements which shall be necessary to permit the consummation of
the transactions contemplated hereby on the Closing Date, including
the consents set forth on Schedule 2.3, shall have been obtained
and all such consents or amendments shall be satisfactory in form
and substance to Purchaser and Purchaser's counsel.
Section 4.12 Expenses.
The Company shall have reimbursed Purchaser for all fees and
expenses as provided in Section 8.1 herein.
Section 4.13 Waiver of Conditions.
If on the Closing Date the Company fails to tender to
Purchaser the Series B Preferred Stock to be issued to Purchaser on
such date or if the conditions specified in this Article IV have
not been fulfilled, Purchaser may thereupon elect to be relieved of
all further obligations under this Agreement. Without limiting the
foregoing, if the conditions specified in this Article IV have not
been fulfilled, Purchaser may waive compliance by the Company with
any such condition to such extent as Purchaser, in Purchaser's sole
discretion, may determine. Nothing in this Section 4.13 shall
operate to relieve the Company of any of its obligations hereunder
or to waive any of Purchaser's rights against the Company.
16
ARTICLE V - COVENANTS OF COMPANY
From and after the Closing Date and continuing so long as
Purchaser holds any shares of the Series B Preferred Stock:
Section 5.1 Use of Proceeds.
The Company shall use the proceeds of the sale of the Series B
Preferred Stock, together with the proceeds from the sale of the
New Debentures, only for the purposes of repurchasing the
outstanding 11% Convertible Debentures.
Section 5.2 Dividends; Repurchase of Series B Preferred Stock.
The Company shall declare and pay the Preferred Dividends (as
that term is defined in the Certificate of Designations) no later
than the respective dates set forth in the Certificate of
Designations, provided the Company may lawfully declare and pay a
dividend on such dates and further provided that the payments of
such dividends shall not be prohibited under the Tandem Loan
Agreement and/or the Loan and Security Agreement dated October 28,
1994 among the Company, certain subsidiaries of the Company, and
the CIT Group/Credit Finance, Inc., as amended from time to time.
Section 5.3 Corporate Existence, Etc.
The Company will preserve and keep in force and effect, and
will cause each Subsidiary to preserve and keep in force and
effect, its corporate existence and good standing in the state of
incorporation thereof, its qualification and good standing as a
foreign corporation in each jurisdiction where such qualification
is required by applicable law except where the failure to so
qualify would not have a Materially Adverse Effect and all licenses
and permits necessary to the proper conduct of its business.
Section 5.4 Maintenance, Etc.
The Company will maintain, preserve and keep, and will cause
each Subsidiary to maintain, preserve and keep, its properties and
assets which are used in the conduct of its business (whether owned
in fee or pursuant to a leasehold interest) in good repair and
working order and from time to time will make all necessary
repairs, replacements, renewals and additions so that at all times
the efficiency thereof shall be maintained.
Section 5.5 Nature of Business.
Neither the Company nor any Subsidiary will engage in any
business if, as a result, the general nature of the business, taken
on a consolidated basis, which would then be engaged in by the
Company and its Subsidiaries would be substantially changed from
the general nature of the business engaged in by the Company and
its Subsidiaries on the date of this Agreement.
17
Section 5.6 Insurance.
The Company will maintain, and will cause each Subsidiary to
maintain, insurance coverage by financially sound and reputable
insurers with respect to their respective properties and business
in such forms and amounts and against such risks, casualties and
contingencies as are customary for corporations of comparable size
and condition (financial and otherwise) engaged in the same or a
similar business and owning and operating similar properties.
Section 5.7 Taxes, Claims for Labor and Materials.
The Company will promptly pay and discharge, and will cause
each Subsidiary promptly to pay and discharge, (i) all lawful
taxes, assessments and governmental charges or levies imposed upon
the property or business of the Company or such Subsidiary,
respectively, (ii) all trade accounts payable in accordance with
usual and customary business terms, and (iii) all claims for work,
labor or materials, which if unpaid might become a lien or charge
upon any property of the Company or such Subsidiary; provided the
Company or such Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (a) the
validity, applicability or amount thereof is being contested in
good faith by appropriate actions or proceedings which will prevent
the forfeiture or sale of any property of the Company or such
Subsidiary or any material interference with the use thereof by the
Company or such Subsidiary, and (b) the Company or such Subsidiary
shall set aside on its books, reserves deemed by it to be adequate
with respect thereto.
Section 5.8 Compliance with Laws, Agreements, Etc.
Except where failure to do so does not and would not have a
Materially Adverse Effect, the Company shall maintain its business
operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws,
regulations and ordinances, and such laws, regulations and
ordinances of foreign jurisdictions, governing such business
operations and the use and ownership of such property, and (ii) all
agreements, licenses, franchises, indentures and mortgages to which
the Company is a party or by which the Company or any of its
properties is bound. Without limiting the foregoing, the Company
shall pay all of its indebtedness promptly and substantially in
accordance with the terms thereof.
Section 5.9 ERISA Matters.
If the Company has in effect, or hereafter institutes, a
pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable
during such period as any such Plan shall be in effect: (i)
throughout the existence of the Plan, the Company's contributions
under the Plan will meet the minimum funding standards required by
ERISA and the Company will not institute a distress termination of
the Plan; and (ii) the Company will send to Purchaser a copy of any
notice of a reportable event (as defined in ERISA) required by
ERISA to be filed with the Labor Department or the PBGC, at the
time that such notice is so filed.
Section 5.10 Books and Records; Rights of Inspection.
The Company will keep, and will cause each Subsidiary to keep,
proper books of record and account in which full and correct
entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company or such
Subsidiary, in accordance with GAAP consistently maintained. The
Company shall permit a representative of Purchaser to visit any of
its properties and inspect its corporate books and financial
records, and will discuss its accounts, affairs
18
and finances with a representative of Purchaser, during reasonable
business hours, at all such times as Purchaser may reasonably request.
Section 5.11 Reports.
The Company will furnish to Purchaser the following (provided
that this obligation shall be deemed satisfied if the Company
delivers the following to Purchaser in connection with either the
1998 Debenture Purchase Agreement or the Tandem Loan Agreement):
(a) Monthly Statements. Within twenty (20) days of the
end of each month, beginning the month of March 1998, monthly
internal financial reports which at a minimum shall consist of a
balance sheet of the Company as of the close of such month and
related statement of income and cash flows for the one month period
then ended, as well as any additional financial reports for such
period (i) distributed to directors of the Company or (ii)
routinely prepared with respect to the Company and the Subsidiaries
subsequent to the date hereof;
(b) Quarterly Statements. As soon as available and in
any event within thirty (30) days after the end of each quarterly
fiscal period (except the last) of each fiscal year, copies of:
(i) consolidated and consolidating balance
sheets of the Company and Subsidiaries as of the close
of the three-month period then ended, setting forth in
comparative form the consolidated figures at the end of
the preceding fiscal year,
(ii) consolidated and consolidating statements
of income and retained earnings of the Company and
Subsidiaries for the three-month period then ended,
setting forth in comparative form the consolidated
figures for the corresponding period of the preceding
fiscal year, and
(iii) consolidated and consolidating
statements of cash flows of the Company and Subsidiaries
for the portion of the fiscal year ending with such
three-month period, setting forth in comparative form
the consolidated figures for the corresponding period of
the preceding fiscal year,
all in reasonable detail and certified as complete and correct by
an authorized financial officer of the Company;
(c) Annual Statements. As soon as available and in any
event within ninety (90) days after the close of each fiscal year
of the Company, copies of:
(i) consolidated and consolidating balance
sheets of the Company and Subsidiaries as of the close
of such fiscal year, and
(ii) consolidated and consolidating statements
of income and retained earnings and cash flows of the
Company and Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated
figures for the preceding fiscal year, all in reasonable detail and
accompanied by an unqualified report thereon of a firm of
independent public accountants of recognized national standing;
19
(d) Audit Reports. Promptly upon receipt thereof, one
copy of each interim or special audit made by independent
accountants of the books of the Company or any Subsidiary;
(e) SEC and Other Reports. Promptly upon their
becoming available, one copy of each financial statement, report,
notice or proxy statement sent by the Company to stockholders
generally and of each periodic or current report, and any
registration statement or prospectus filed by the Company or any
Subsidiary with any securities exchange or the SEC or any successor
agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any
governmental agency, federal or state, having jurisdiction over the
Company or any of its Subsidiaries. The Company specifically
covenants to timely file each such item required to be filed with
the SEC and each state requiring securities laws filings;
(f) Press Releases. Promptly upon its release, a copy
of each press release issued by the Company; and
(g) Requested Information. With reasonable promptness,
such financial data and other information relating to the business
of the Company as Purchaser may from time to time reasonably
request.
Section 5.12 Annual Plan.
The Board of Directors shall adopt and the Company will
furnish to Purchaser, in such manner and form as approved by the
Board of Directors of the Company, no later than the first day of
each fiscal year, a financial plan for the Company, which shall
include at least a projection of income and expenses (including
capital expenditures) and a projected cash flows statement for each
month in such fiscal year, and a projected balance sheet as of the
end of each month in such fiscal year (the "Annual Plan"). The
Annual Plan may only be amended or revised, in any material manner,
with the approval of the Board of Directors. The Company shall
promptly furnish to Purchaser each amendment or revision to the
Annual Plan.
Section 5.13 Board of Directors; Observer Rights.
(a) For so long as any shares of the Series B Preferred
Stock shall remain outstanding, and in addition to any rights to
elect one or more directors pursuant to the Certificate of
Designations, upon request of Purchaser, the Company shall invite
one (1) representative of Purchaser to attend, at the Company's
expense, all meetings of the Company's Board of Directors and all
committees of the Company's Board of Directors in a nonvoting
capacity and, in this respect, shall give such representative
copies of all notices and meeting agenda in advance of such
meetings and shall permit such representative to review all
documents and other materials provided to directors at such
meetings. The Company shall also provide Purchaser, in advance,
with copies of all actions proposed to be taken by the Board of
Directors in lieu of meeting. Notwithstanding anything herein to
the contrary, this provision shall not apply to a Purchaser if such
Purchaser exercises identical observer rights to attend meetings of
the Board of Directors pursuant to the 1998 Debenture Purchase
Agreement and/or the Tandem Loan Agreement.
(b) At any time or from time to time after the Closing Date
upon the request of Purchaser, the Board of Directors of the
Company shall promptly (i) cause the size of the Board of Directors
of the Company to be increased by one (1) director to five (5)
directors (unless a vacancy
20
on the Board of Directors shall already exist) and (ii) fill the
vacancy created thereby (or such existing vacancy) by electing
as director a person who shall not be an Affiliate of or associated
with any of the Company, its current directors or the Purchaser
and who shall be mutually agreed upon by the three directors who
are not affiliated with the Purchaser and the Purchaser.
(c) Purchaser and the Company agree that, upon the Closing
hereunder, ▇▇▇▇▇ ▇▇▇▇▇▇ shall be the director elected by the
holders of the Series B Preferred Stock pursuant to the Certificate
of Designation.
Section 5.14 Further Assurances.
The Company will take all actions reasonably requested by
Purchaser to effect the transactions contemplated by this Agreement
and the other Operative Documents.
ARTICLE VI - AMENDMENTS, WAIVERS AND CONSENTS
Section 6.1 Consent Required.
Any term, covenant, agreement or condition of this Agreement
may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company
shall have obtained the consent in writing of the holders of at
least 50% of the outstanding Series B Preferred Stock.
Section 6.2 Effect of Amendment or Waiver.
Any such amendment or waiver shall apply equally to all of the
holders of the Series B Preferred Stock and shall be binding upon
them, upon each future holder of any Series B Preferred Stock and
upon the Company. No such amendment or waiver shall extend to or
affect any obligation not expressly amended or waived or impair any
right consequent thereon.
ARTICLE VII - INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 7.1 Definitions.
Unless the context otherwise requires, the terms hereinafter
set forth when used herein shall have the following meanings and
the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"Affiliate" shall mean any Person (a) which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b)
which beneficially owns or holds 5% or more of any class of the
Voting Stock of the Company or (c) 5% or more of the Voting Stock
(or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by
the Company or a Subsidiary.
"Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which banks in Tennessee are authorized to
close.
21
The term "control" (including the terms "controlling,"
"controlled by" and "under common control") shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person, whether
through the ownership of Voting Stock, by contract, or otherwise.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be
construed to also refer to any successor sections.
"Guaranties" by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing,
or in effect guaranteeing, any Indebtedness, dividend or other
obligation of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement,
contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any property or assets constituting
security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness or obligation, (ii) to
maintain working capital or other balance sheet condition or (iii)
otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, or (c) to lease
property or to purchase Securities or other property or services
primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to
make payment of the Indebtedness or obligation, or (d) otherwise to
assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all
computations made under this Agreement, a Guaranty in respect of
any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for
borrowed money which has been guaranteed, and a Guaranty in respect
of any other obligation or liability or any dividend shall be
deemed to be Indebtedness equal to the maximum aggregate amount of
such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic
material, substance or waste, pollutant or contaminant which is
regulated under any statute, law, ordinance, rule or regulation of
any local, state, regional or Federal authority having jurisdiction
over the property of the Company and its Subsidiaries or its use,
including but not limited to any material, substance or waste which
is: (a) defined as a hazardous substance under Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. Section 1317.1) as
amended; (b) regulated as a hazardous waste under Section 1004 or
Section 3001 of the Federal Solid Waste Disposal Act, as amended by
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) as amended; (c) defined as a hazardous substance under
Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) as
amended; or (d) defined or regulated as a hazardous substance or
hazardous waste under any rules or regulations promulgated under
any of the foregoing statutes.
The term "knowledge of the Company" shall mean, with respect
to a particular fact or other matter if a director or executive
officer of the Company or any Subsidiary is actually, or has been,
aware of such fact or other matter, after reasonable inquiry under
the circumstances.
"Materially Adverse Effect" shall mean a materially adverse
effect upon the business, assets, liabilities, financial condition,
results of operations or business prospects, in each case of the
Company and its Subsidiaries taken as a whole, or upon the ability
of the Company to perform its obligations under this Agreement, the
Debentures or the other Operative Documents.
22
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, and a government or agency or
political subdivision thereof.
"Plan" means a "pension plan", as such term is defined in
ERISA, established or maintained by the Company or any ERISA
Affiliate or as to which the Company or any ERISA Affiliate
contributed or is a member or otherwise may have any liability.
"Proprietary Information" includes without limitation (i) any
computer software and related documentation, inventions, technical
and nontechnical data related thereto, and (ii) other
documentation, inventions and data related to patterns, plans,
methods, techniques, drawings, finances, customer lists, suppliers,
products, special pricing and cost information, designs, processes,
procedures, formulas, research data owned or used by the Company or
any Subsidiary or marketing studies conducted by the Company, all
of which the Company considers to be commercially important and
competitively sensitive and which generally has not been disclosed
to third parties other than customers in the ordinary course of
business.
"Purchaser" shall mean Sirrom Capital Corporation, d/b/a
Tandem Capital, a Tennessee corporation, and each transferee of
shares of Series B Preferred Stock who is entitled to the benefits
and subject to the obligations of this Agreement.
"Security" shall have the same meaning as in Section 2(1) of
the Securities Act of 1933, as amended.
The term "subsidiary" shall mean, as to any particular parent
corporation, any corporation of which more than 50% (by number of
votes) of the Voting Stock shall be owned by such parent
corporation and/or one or more corporations which are themselves
Subsidiaries of such parent corporation. The term "Subsidiary"
shall mean a subsidiary of the Company.
"Voting Stock" shall mean Securities of any class or classes
the holders of which are ordinarily, in the absence of
contingencies, entitled to elect a majority of the corporate
directors (or Persons performing similar functions).
"Wholly-owned" when used in connection with any Subsidiary
shall mean a Subsidiary of which all of the issued and outstanding
shares of stock (except shares required as directors' qualifying
shares) shall be owned by the Company and/or one or more of its
Wholly-owned Subsidiaries.
Section 7.2 Accounting Principles.
Where the character or amount of any asset or liability or
item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be
made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where such
principles are inconsistent with the requirements of this
Agreement.
23
ARTICLE VIII - MISCELLANEOUS
Section 8.1 Expenses; Stamp Tax Indemnity.
Whether or not the transactions herein contemplated shall be
consummated, the Company agrees to pay directly all of Purchaser's
out-of-pocket expenses in connection with (a) the entering into of
this Agreement, the 1998 Debenture Purchase Agreement, and the
Tandem Loan Agreement and the consummation of the transactions
contemplated hereby and thereby, including but not limited to the
reasonable fees, expenses and disbursements of Purchaser's counsel,
and (b) so long as Purchaser holds any of the Series B Preferred
Stock, all such expenses relating to any amendments, waivers or
consents pursuant to the provisions hereof (whether or not the same
are actually executed and delivered), including, without
limitation, any amendments, waivers or consents resulting from any
work-out, restructuring or similar proceedings relating to the
performance by the Company of its obligations under this Agreement.
The Company also agrees that it will pay and save Purchaser
harmless against any and all liability with respect to stamp and
other taxes, if any, which may be payable in connection with the
execution and delivery of this Agreement or the issuance of the
Series B Preferred Stock, whether or not any shares of Series B
Preferred Stock are then outstanding. The Company agrees to
protect and indemnify Purchaser against any liability for any and
all brokerage fees and commissions payable or claimed to be payable
to any Person retained by the Company in connection with the
transactions contemplated by this Agreement.
Section 8.2 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of the holder of any Series B
Preferred Stock in the exercise of any power or right shall operate
as a waiver thereof; nor shall any single or partial exercise of
the same preclude any other of further exercise thereof, or the
exercise of any other power or right, and the rights and remedies
of the holder of any Series B Preferred Stock are cumulative to and
are not exclusive of any rights or remedies any such holder would
otherwise have, and no waiver or consent shall extend to or affect
any obligation or right not expressly waived or consented to.
Section 8.3 Notices.
All communications provided for hereunder shall be in writing
and shall be delivered personally, or mailed by registered mail, or
by prepaid overnight air courier, or by facsimile communication, in
each case addressed:
If to Purchaser: Tandem Capital, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇, PLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ I.N. ▇▇▇▇▇▇▇▇, Esq.
24
If to Company: Teltronics, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
with a copy to: ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or such other address as the Purchaser or the subsequent holder of
any Series B Preferred Stock initially issued to Purchaser may
designate to the Company in writing, or such other address as the
Company may in writing designate to Purchaser or to a subsequent
holder of the Series B Preferred Stock initially issued to
Purchaser, provided, however, that a notice sent by overnight air
courier shall only be effective if delivered at a street address
designated for such purpose by such person and a notice sent by
facsimile communication shall only be effective if made by
confirmed transmission at a telephone number designated for such
purpose by such person or, in either case, as a Purchaser or a
subsequent holder of any Series B Preferred Stock initially issued
Purchaser may designate to the Company in writing or at a telephone
number herein set forth in the case of the Company.
Section 8.4 Successors and Assigns.
Purchaser's interest in this Agreement and the other Operative
Documents may be endorsed, assigned and/or transferred in whole or
in part by Purchaser, and any such holder and/or assignee of the
same shall succeed to and be possessed of the rights and powers of
Purchaser under all of the same to the extent transferred and
assigned. The Company shall not assign any of its rights nor
delegate any of its duties under this Agreement or any of the other
Operative Documents by operation of law or otherwise without the
prior express written consent of Purchaser, and in the event the
Company obtains such consent, this Agreement and the other
Operative Documents shall be binding upon such assignee.
Section 8.5 Survival of Covenants and Representations.
All representations and warranties made by the Company herein
and in any certificates delivered pursuant hereto, whether or not
in connection with the Closing Date, shall survive the closing and
the delivery of this Agreement and the Series B Preferred Stock.
All covenants made by the Company herein shall survive the closing
and delivery of this Agreement and the Operative Documents in
accordance with their respective terms.
Section 8.6 Severability.
Should any part of this Agreement for any reason be declared
invalid or unenforceable, such decision shall not affect the
validity of any remaining portion, which remaining portion shall
remain in force and effect as if this Agreement had been executed
with the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they
would have executed the remaining portion of this Agreement without
including therein any such part, parts or portion which may for any
reason, be hereafter declared invalid or unenforceable.
25
Section 8.7 Governing Law.
The corporate law of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by the internal law, and not the law of
conflicts, of Tennessee.
Section 8.8 Captions; Counterparts.
The descriptive headings of the various Sections or parts of
this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof. This
Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
Section 8.9 Entire Agreement.
This Agreement together with the Certificate of Designations
constitutes the entire agreement of the parties with regard to the
sale of the Series B Preferred Stock.
Section 8.10 Specific Performances.
Should the Company violate any of Sections 5.11, 5.12, and
5.13 of this Agreement, then, in addition to all legal and
equitable remedies available to the Purchaser, the provisions
thereof shall be enforceable by specific performance and injunctive
relief. The parties agree and stipulate that the right of
Purchaser to obtain specific performance, injunctive relief, or
both, are specifically bargained for due to the mutual recognition
that the amount of actual damages arising from violation of the
covenants in Sections 5.11, 5.12, and 5.13 will be difficult or
impossible to ascertain both now and in the future and that such
violation will cause irreparable harm to Purchaser.
Section 8.11 Attorneys' Fees.
If legal action is commenced to enforce any provision of this
Agreement, the prevailing party in such action shall be entitled to
recover its attorneys' fees through all appellate levels in
addition to any other relief that may be granted.
Section 8.12 Disclosure Statement.
The disclosures contained in the Disclosure Statement attached
hereto with respect to any section number hereof shall be deemed to
constitute the contents of the schedule of such number referenced
herein.
[SIGNATURE PAGE TO PREFERRED STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Series
B Preferred Stock Purchase Agreement to be executed and delivered
by their duly authorized officers as of the date first written
above.
COMPANY:
TELTRONICS, INC.
By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
PURCHASER:
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: ▇▇▇▇▇ ▇▇▇▇▇▇
Its: Vice President