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EXHIBIT 10.23
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SECURITIES PURCHASE AGREEMENT
among
THE PURCHASERS NAMED HEREIN
and
FIREARMS TRAINING SYSTEMS, INC., as Issuer
Dated as of November 13, 1998
Preferred Stock and Warrants
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of November 13, 1998
among FIREARMS TRAINING SYSTEMS, INC., a Delaware corporation (the "Company"),
and each of the parties listed on Schedule 1 annexed hereto (each, a
"Purchaser," and collectively, the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company proposes to issue and sell (i) an
aggregate of 18,182 shares (the "Preferred Shares") of its Series A Preferred
Stock having the rights, powers, privileges and preferences set forth in the
Certificate of Designations thereof attached hereto as Exhibit A (the "Preferred
Stock") and (ii) warrants in the form attached hereto as Exhibit B to purchase
an aggregate of 2,909,120 shares of the Company's common stock (the "Warrants"
and together with the Preferred Shares, the "Purchased Securities"); and
WHEREAS, the Purchasers have severally agreed to purchase from
the Company the Purchased Securities set forth opposite the name of each such
Purchaser on Schedule 1 attached hereto, on the terms and subject to the
conditions set forth herein below;
NOW, THEREFORE, in consideration of the promises and the
covenants hereinafter contained, the parties hereby agree as follows:
ARTICLE I
AUTHORIZATION, SALE AND TERMS OF SHARES AND WARRANTS
SECTION 1.1 THE PREFERRED SHARES. The Company, by all
requisite corporate action, has authorized the issuance and sale to the
Purchasers of the Preferred Shares and all additional shares of Preferred Stock
issuable in respect of dividends thereon (the "Additional Preferred Shares").
The relative powers, preferences and rights and qualifications, limitations and
restrictions of the Preferred Stock shall be set forth in the Certificate of
Designations thereof attached hereto as Exhibit A (the "Certificate of
Designation"). In reliance on the representations and warranties of the Company
contained herein and subject to the terms and conditions hereof, the Purchasers
agree to purchase the Preferred Shares from the Company, severally and in the
amounts set forth on Schedule 1, and the Company agrees to sell the Preferred
Shares to the Purchasers.
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SECTION 1.2 THE WARRANTS. The Company, by all requisite
corporate action, has authorized the issuance and sale to the Purchasers of the
Warrants, all additional warrants issuable in respect of dividends on the
Preferred Stock (the "Additional Warrants"), and all shares of common stock of
the Company issuable upon exercise of the Warrants and the Additional Warrants.
The Warrants and Additional Warrants shall (a) be exercisable for shares of
Class B Non-voting Common Stock of the Company on the terms set forth in the
form of Warrant attached as Exhibit B hereto and (b) not be transferable
separately from the Preferred Stock with which they were issued. In reliance on
the representations and warranties of the Company contained herein and subject
to the terms and conditions hereof, the Company agrees to issue the Warrants to
the Purchasers in the amounts set forth on Schedule 1.
ARTICLE II
CLOSING
SECTION 2.1 CLOSING DATE. The closing (the "Closing") of the
purchase and sale of the Purchased Securities contemplated hereby shall take
place as soon as practicable following such time as all of the conditions set
forth in Article V are satisfied or waived (the date of the Closing is
hereinafter referred to as the "Closing Date"). The Closing shall be held at the
offices of Weil, Gotshal & Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or at such other place as agreed to by the Company and the Purchasers.
Delivery of the Purchased Securities to be purchased by the
Purchasers pursuant to this Agreement shall be made at the Closing by the
Company delivering to each Purchaser, against payment of the purchase price
therefor, certificates representing the appropriate number of Preferred Shares
and Warrants (registered in the name of such Purchaser or such other person
which shall be an affiliate of such Purchaser or a nominee of such Purchaser or
such affiliate as such Purchaser may have designated in writing to the Company
prior to the date hereof). The purchase price for the Purchased Securities shall
be the amount set forth opposite each Purchaser's name on Schedule 1 and shall
be paid by wire transfer of immediately available funds to the account of the
Company specified in writing to the Purchasers prior to the date hereof.
SECTION 2.2 FURTHER ASSURANCES. From time to time following
the Closing, upon the request of any Purchaser, the Company shall execute and
deliver, or cause to be executed and delivered, to such Purchaser such other
instruments and take such other action as may be reasonably necessary to more
effectively vest in such Purchaser and put the Purchaser in possession of the
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Preferred Shares, the Warrants, the Additional Preferred Shares, the Additional
Warrants and all shares of common stock issuable upon exercise of the Warrants
and the Additional Warrants.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
represents and warrants to each of the Purchasers as follows:
SECTION 3.1 ORGANIZATION, STANDING AND POWER OF THE COMPANY
AND ITS SUBSIDIARIES; HOLDINGS OF THE COMPANY. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware; and each of the subsidiaries of the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and each subsidiary of the
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company and its subsidiaries are duly qualified to transact business and are in
good standing as foreign corporations in each jurisdiction where the character
of their activities requires such qualification, except where the failure of the
Company or its subsidiaries to be so qualified would not cause a material
adverse effect on the business, results of operations, condition (financial or
otherwise), properties, assets or prospects of the Company and its subsidiaries,
taken as a whole ("Material Adverse Change").
The Company owns, directly or indirectly, all of the issued
and outstanding shares of capital stock of each of its subsidiaries free and
clear of any liens, encumbrances, equities and claims (other than liens and
encumbrances pursuant to the Amended and Restated Credit Agreement, dated as of
October 15, 1997, among the Company, FATS, Inc., the lenders named therein, and
NationsBank, N.A., as agent; the "Credit Agreement"). All such shares were duly
authorized, validly issued and are non-assessable and were not issued or
transferred in violation of any preemptive or similar rights.
SECTION 3.2 AUTHORITY. The Company has all necessary corporate
power and corporate authority to enter into this Agreement and all documents and
instruments (including, without limitation, the Purchased Securities) to be
executed by the Company in furtherance of the transactions contemplated hereby
(collectively, the "Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby.
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SECTION 3.3 NON-CONTRAVENTION. The execution, delivery, and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby by the Company do not and will not (a)
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to any agreement, instrument, franchise, license or
permit to which the Company or any of its subsidiaries is a party or by which
any of such corporations or their respective properties or assets may be bound
or (b) violate any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to the
Company or any of its subsidiaries or any of their respective properties or
assets, other than such breaches, defaults or violations that are not reasonably
expected to impair the ability of the Company to consummate the transactions
contemplated by the Transaction Documents. The execution, delivery and
performance of the Transaction Documents by the Company and the consummation of
the transactions contemplated thereby do not and will not violate or conflict
with any provision of the certificate of incorporation or by-laws of the Company
or any of its subsidiaries, as currently in effect. Except as set forth in
Section 3.3 of the Disclosure Letter dated the date hereof from the Company to
the Purchasers (the "Disclosure Letter"), no consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with any
court or any government agency or body or self regulatory organization
(including, without limitation, the NASD or the NASDAQ Stock Market) applicable
to the Company or any of its subsidiaries or any of their respective properties
or assets is required for the execution, delivery and performance of the
Transaction Documents or the consummation of the transactions contemplated
thereby, including the issuance, sale and delivery of the Purchased Securities
to be issued, sold and delivered by the Company hereunder and the issuance of
the Additional Preferred Shares, the Additional Warrants, and the issuance of
shares of the Company's common stock upon exercise of the Warrants and the
Additional Warrants.
SECTION 3.4 ENFORCEABILITY OF AGREEMENT. This Agreement has
been, and the other Transaction Documents to be executed and delivered by the
Company pursuant hereto have been duly and validly authorized by all requisite
corporate action on the part of, and executed and delivered by, the Company, and
this Agreement is, and such other Transaction Documents when so executed and
delivered will be, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, subject to applicable
bankruptcy, insolvency,
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reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). The Board of Directors of the Company has unanimously approved, and
resolved to take all actions described in, Section 6.4 of this Agreement.
SECTION 3.5 SEC REPORTS. The Company has filed all documents
required to be filed since January 1, 1996 with the Securities and Exchange
Commission (the "Commission") (the "SEC Reports"). As of their respective dates,
the SEC Reports complied in all material respects with the requirements of the
Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder, the "Securities Act"), and the Securities Exchange Act
of 1934, as amended (including the rules and regulations promulgated thereunder,
the "Exchange Act"), as the case may be, and none of the SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein, in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.6 ACCOUNTANTS. Xxxxxx Xxxxxxxx LLP, who have
expressed their opinion with respect to the financial statements and schedules
included in the SEC Reports, are independent accountants as required by the
Securities Act.
SECTION 3.7 FINANCIAL STATEMENTS. (a) The annual audited
financial statements of the Company included in the Company's Report on Form
10-K for its fiscal year ending March 31, 1998 (the "10-K") present fairly in
all material respects the financial position of the Company, as of the
respective date of such financial statements, and the results of operations and
changes in cash flows of the Company for the respective periods covered thereby.
Such statements and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, in each
case, as certified by the independent accountant named in Section 3.6.
(b) The unaudited interim financial statements of the Company
included in the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1998 (the "10-Q") present fairly in all material respects the financial
position of the Company, as of the respective dates of such financial
statements, and the results of operations and changes in cash flows of the
Company for the respective periods covered thereby. Such statements and related
notes have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis except for normal year-end adjustments
and the omission of certain footnote disclosure.
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SECTION 3.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Section 3.8 of the Disclosure Letter, (a) since the date of the latest balance
sheet presented in the 10-Q there has been no Material Adverse Change, whether
or not arising from transactions in the ordinary course of business, provided
that a decline in the trading price of the Company's common stock shall not be
deemed to be such a Material Adverse Change if such decline is not attributable
to a material adverse change in the business, properties, operations, prospects,
condition (financial or other) or results of operations of the Company and its
subsidiaries taken as a whole, (b) since the date of the latest balance sheet
presented in the 10-Q, neither the Company nor any of its subsidiaries has
incurred or undertaken any liabilities or obligations, direct or contingent,
except for (i) liabilities or obligations which are reflected in the 10-Q; (ii)
the transactions contemplated by this Agreement; (iii) contractual liabilities
incurred in the ordinary course of business; and (iv) other liabilities that
would not cause a Material Adverse Change.
SECTION 3.9 CAPITALIZATION. The Company's authorized and
outstanding capitalization is set forth in Section 3.9 of the Disclosure Letter.
All of the outstanding shares of the Company's capital stock are duly and
validly authorized and issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and were not issued and
are not now in violation of or subject to any preemptive rights. Except as
disclosed in the 10-Q, as of the date hereof neither the Company nor any
subsidiary has outstanding any warrants or options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into or exchangeable for, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, warrants, rights, convertible securities or obligations. There are
currently no shares of the Company's preferred stock outstanding.
The Purchased Securities, the Additional Preferred Shares, the
Additional Warrants and all shares of common stock issuable upon exercise of the
Warrants and Additional Warrants have been duly and validly authorized by the
Company. When issued, sold and delivered in accordance with this Agreement, the
Warrants and the Additional Warrants, the Preferred Shares, the Additional
Preferred Shares, and all shares of the Company's common stock issuable upon
exercise of the Warrants and Additional Warrants, will be duly and validly
issued, fully paid and nonassessable. All of the currently authorized but
unissued shares of
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Class B Non-voting Common Stock of the Company have been, and, upon compliance
by the Company with its covenants set forth in Section 6.4 hereof, a sufficient
number of shares of Class B Non-voting Common Stock will have been, reserved for
issuance upon exercise of all Warrants and Additional Warrants; a sufficient
number of shares of Class A Common Stock of the Company has been reserved for
issuance upon conversion (pursuant to the Company's certificate of
incorporation) of all shares of Class B Non-voting Common Stock issuable upon
exercise of the Warrants and Additional Warrants; and, except as contemplated by
Section 6.4, no further approval or authority of the stockholders or the Board
of Directors of the Company under the Delaware General Corporation Law, the
Exchange Act or the rules of the NASDAQ Stock Market will be required for any
such issuance. No preemptive rights or other rights to subscribe for or purchase
securities exist with respect to the issuance and sale of the Purchased
Securities by the Company pursuant to this Agreement or the issuance of common
stock upon exercise of all Warrants and Additional Warrants.
Except as set forth in Section 3.9 of the Disclosure Letter,
no security holder of the Company has any right which has not been satisfied or
waived to require the Company to register the sale of any securities owned by
such security holder under the Securities Act.
SECTION 3.10 ACTIONS. Except as described in Section 3.10 of
the Disclosure Letter, there is no litigation or governmental proceeding to
which the Company or any of its subsidiaries is a party or to which any property
of the Company or any of its subsidiaries is subject or which is pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries which could reasonably be expected to cause a Material Adverse
Change.
SECTION 3.11 INVESTMENT COMPANY ACT. Neither the Company nor
any of its subsidiaries is (i) an "investment company" or a company "controlled"
by an investment company within the meaning of the Investment Company Act of
1940, as amended, (ii) a "holding company" or a "subsidiary company" of a
holding company or an "affiliate" thereof within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to regulation
under the Federal Power Act, the Interstate Commerce Act or any federal or state
statute or regulation limiting its ability to consummate the transactions
contemplated hereby.
SECTION 3.12 REPORTING. The Company is subject to Section 13
of the Exchange Act and is in compliance in all material respects with the
provisions of such section.
SECTION 3.13 REGISTRATION AND QUALIFICATION. Assuming the
accuracy of the representations and warranties made by each of the Purchasers
set forth in Article IV hereof, it is not
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necessary in connection with the offer, sale and delivery of the Purchased
Securities to the Purchasers in the manner contemplated by this Agreement to
register under the Securities Act the Purchased Securities, the Additional
Preferred Shares, the Additional Warrants or the shares of common stock issuable
upon exercise of the Warrants and the Additional Warrants.
SECTION 3.14 NO LIABILITIES. Neither the Company nor its
subsidiaries has any liabilities or obligations (direct or indirect, contingent
or absolute, known or unknown, matured or unmatured) of any nature whatsoever,
whether arising out of contract, tort, statute or otherwise, except (i) as
reflected or reserved against in the latest balance sheet of the Company
presented in the 10-Q and not heretofore discharged, (ii) as set forth in
Section 3.14 of the Disclosure Letter, (iii) liabilities incurred in the
ordinary course of business since the date of the latest balance sheet presented
in the 10-Q, (iv) contractual liabilities incurred in the ordinary course of
business, or (v) other liabilities that would not cause a Material Adverse
Change.
SECTION 3.15 NO DEFAULTS. Except as disclosed in Section 3.15
of the Disclosure Letter, neither the Company nor any of its subsidiaries is in
violation or default under any provision of its certificate of incorporation,
bylaws or other organizational documents, or is in breach of or default with
respect to any provision of any agreement, judgment, decree, order, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties are bound; and
there does not exist an event of default (as defined in such documents) on the
part of the Company or any such subsidiary or any other event or circumstance
which, with notice or lapse of time or both, would constitute a default, which
such violation or default, in either such case, would cause a Material Adverse
Change.
SECTION 3.16 VIOLATIONS OF LAW. The Company and its
subsidiaries are in compliance, and have complied at all times during the past
three years, and all transactions pursuant to the Transaction Documents shall
comply with, all applicable federal, state and local statutes, codes,
ordinances, rules and regulations of the United States and all other countries
and all subdivisions thereof (the "Laws") to the extent applicable, other than
violations which would not cause a Material Adverse Change. Neither the Company
nor any of its Subsidiaries has received notice within the past three years of
any violations of any Laws, which violations would be material to the Company
and its subsidiaries taken as a whole.
SECTION 3.17 PROPERTIES. The Company holds its leased
properties under valid and binding leases, with such exceptions as are not
materially significant in relation to the business of
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the Company. Except as disclosed in Section 3.17 of the Disclosure Letter, the
Company owns or leases all such properties as are necessary to its operations as
now conducted.
SECTION 3.18 INTELLECTUAL PROPERTY. Except as disclosed in
Section 3.18 of the Disclosure Letter, the Company and its subsidiaries have
sufficient trademarks, trade names,patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct their businesses
substantially as now conducted; and the Company has no knowledge of any
infringement by it or its subsidiaries of any trademark, trade name, patent,
copyright, licenses, trade secret or other similar rights of others, and there
is no claim being made against the Company or its subsidiaries regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement, in any such case which could reasonably be expected to cause a
Material Adverse Change.
SECTION 3.19 TAXES. The Company and its subsidiaries have
filed all necessary federal, state and foreign income and franchise tax returns.
and have paid all taxes shown as due thereon; and the Company has no knowledge
of any tax deficiency which has been asserted or threatened against the Company
or its subsidiaries which could cause a Material Adverse Change.
SECTION 3.20 INSURANCE. The Company and its subsidiaries
maintain insurance of the types and in the amounts generally deemed adequate for
its business and that of its subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
SECTION 3.21 CERTAIN PAYMENTS. To the knowledge of the
Company, neither the Company nor any of its subsidiaries has at any time (i)
made any unlawful contribution to any candidate for foreign office, or failed to
disclose fully any contribution in violation of law or (ii) made any payment to
any federal or state governmental officer or official, or other person charged
with similar public or quasi-public duties, other than payments required or
permitted by the laws of the United States or any jurisdiction thereof.
SECTION 3.22 DELAWARE GENERAL CORPORATION LAW SECTION 203.
Section 203 of the Delaware General Corporation Law will not apply to this
Agreement or the other Transaction Documents or the transactions contemplated
hereby and thereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
As an inducement to the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, each of the Purchasers
hereby represents and warrants to the Company as follows:
SECTION 4.1 INVESTMENT. Purchaser is acquiring the Purchased
Securities for investment for its own account, and not with a view to any
distribution thereof in contravention of applicable securities laws. Purchaser
understands that the Purchased Securities and the shares of common stock
issuable upon exercise of the Warrants have not been registered under the
Securities Act by reason of specific exemptions therefrom which depend upon,
among other things, the bona fide nature of the investment intent and the
accuracy of Purchaser's representations as expressed herein.
Purchaser's financial condition and investments are such that
it is in a position to hold the Purchased Securities and the shares of common
stock issuable upon exercise of the Warrants for an indefinite period, bear the
economic risks of the investment and to withstand the complete loss of the
investment. Purchaser has extensive knowledge and experience in financial and
business matters and has the capability to evaluate the merits and risks of any
Purchased Securities and the shares of common stock issuable upon exercise of
the Warrants. Purchaser qualifies as an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act.
SECTION 4.2 RULE 144. Purchaser acknowledges that the
Purchased Securities and the shares of common stock issuable upon exercise of
the Warrants must be held indefinitely unless subsequently registered under the
Securities Act or any applicable state securities laws or unless exemptions from
such registrations are available. Purchaser is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions.
SECTION 4.3 ORGANIZATION OF PURCHASER. Purchaser is duly
organized and validly existing under the laws of the jurisdiction of its
organization.
SECTION 4.4 AUTHORITY OF PURCHASER. Purchaser has the power
and authority (corporate or similar) to execute and deliver this Agreement, to
consummate the transactions contemplated hereby and to comply with the terms,
conditions and provisions hereof.
The execution, delivery and performance of this Agreement by
Purchaser has been duly authorized and approved by Purchaser and does not
require any further authorization or
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consent of Purchaser or its beneficial owners. This Agreement is the legal,
valid and binding agreement of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
SECTION 4.5 NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by Purchaser and the consummation of any of the
transactions contemplated hereby by Purchaser will not (a) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of Purchaser pursuant to
any agreement, instrument, franchise, license or permit to which Purchaser is a
party or by which any of its properties or assets may be bound or (b) violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body applicable to
Purchaser or any of its properties or assets, other than such breaches, defaults
or violations that are not reasonably expected to impair the ability of
Purchaser to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby by Purchaser do not and
will not violate or conflict with any provision of the organizational documents
of Purchaser, as currently in effect.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
OBLIGATIONS OF THE PURCHASERS
SECTION 5.1 GENERAL CONDITIONS TO OBLIGATIONS OF THE
PURCHASERS. The obligation of each of the Purchasers to consummate the
transactions contemplated herein is subject to the accuracy of the
representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date, and to the performance in all material
respects by the Company of its obligations hereunder (including the covenants
contained in Article VI of this Agreement).
SECTION 5.2 REGISTRATION RIGHTS AGREEMENT. The obligation of
each of the Purchasers to consummate the transactions contemplated herein is
subject to the (i)
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Registration Rights Agreement dated as of July 31, 1996 among the Company,
certain of the Purchasers and affiliates thereof (the "Registration Rights
Agreement") continuing to be in full force and effect and (ii) the Purchasers'
receipt of the Company's agreement, in form and substance satisfactory to the
Purchasers, that all shares of common stock issuable upon exercise of the
Warrants and the Additional Warrants, and all shares of the Company's Class A
Common Stock issued upon conversion of such shares (and all securities issuable
in respect thereof upon a split, combination or reclassification of such
securities or pursuant to a merger of the Company with another entity),
constitute "Registrable Securities" under and for purposes of the Registration
Rights Agreement.
SECTION 5.3 OFFICERS' CERTIFICATES. The obligation of each of
the Purchasers to consummate the transactions contemplated herein is subject to
each of the Purchasers at the Closing Date receiving a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company, dated the Closing
Date, to the effect that (i) as of the date hereof and as of the Closing Date,
the representations and warranties of the Company set forth in Article III
hereof are accurate and (ii) as of the Closing Date, the obligations of the
Company to be performed hereunder on or prior to the Closing Date have been duly
performed in all material respects.
SECTION 5.4 OPINION. The obligation of each of the Purchasers
to consummate the transactions contemplated herein is subject to the Purchasers'
receiving at the Closing Date the opinion of Sidley & Austin, counsel to the
Company, to the effect of the matters set forth in Exhibit C attached hereto.
SECTION 5.5 CERTIFICATE OF DESIGNATION. The obligation of each
of the Purchasers to consummate the transactions contemplated herein is subject
to the Certificate of Designation attached hereto as Exhibit A having been duly
adopted by the Company and filed with the Secretary of State of the State of
Delaware in accordance with the General Corporation Law of that State.
SECTION 5.6 MATERIAL ADVERSE CHANGE. The obligation of each of
the Purchasers to consummate the transactions contemplated herein is subject to
there being since the date of the last balance sheet presented in the 10-Q no
fact or condition which would cause, or insofar as reasonably can be foreseen
could cause a Material Adverse Change; provided, that a decline in the trading
price of the Company's common stock shall not be deemed to be such a Material
Adverse Change if such decline is not attributable to a Material Adverse Change
in the business, properties, prospects, operations, condition (financial or
other) or results of operations of the Company and its subsidiaries taken as
a whole.
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SECTION 5.7 NATIONSBANK CONSENT. The obligation of each of the
Purchasers to consummate the transactions contemplated herein is subject to the
execution and delivery by the Company and the required lenders of a waiver and
amendment to the Credit Agreement reflecting the terms set forth in the term
sheet with respect thereto previously delivered to the Purchasers.
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OBLIGATIONS OF THE COMPANY
SECTION 5.8 GENERAL CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY. The obligation of the Company to issue the Purchased Securities to each
of the Purchasers shall be subject to the accuracy of the representations and
warranties of each of the Purchasers herein contained except to the extent any
inaccuracies do not materially impair the ability of the Purchasers to
consummate the transaction contemplated by the Agreement, as of the date hereof
and as of the Closing Date, and to the performance in all material respects by
each of the Purchasers of its obligations hereunder.
OBLIGATIONS OF EACH OF THE COMPANY AND THE PURCHASERS
SECTION 5.9 NO INJUNCTION. The obligations of each of the
Company and the Purchasers to consummate the transactions contemplated herein
are subject to the condition that no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction prohibiting or preventing consummation of the transactions
contemplated herein shall be in effect.
ARTICLE VI
COVENANTS OF THE COMPANY
As an inducement to the Purchasers to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
hereby covenants with each of the Purchasers as follows:
SECTION 6.1 REPORTING. The Company shall, so long as the
Preferred Shares, the Additional Preferred Shares or the shares of common stock
issuable upon exercise of the Warrants and the Additional Warrants are
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, file reports and other information with the Commission
under Section 13 or 15 (d) of the Exchange Act.
SECTION 6.2 PAYMENT OF EXPENSES. Whether or not the
transactions contemplated in this Agreement are consummated or this Agreement is
terminated, the Company hereby agrees to pay (i) all costs and expenses incident
to the performance of the obligations of the Company hereunder, including those
in connection with (a) the issuance, transfer and delivery of the Preferred
Shares, the Additional Preferred Shares, the Warrants, the Additional Warrants,
and all shares of common stock issuable upon exercise of the Warrants and the
Additional Warrants, including any transfer or similar taxes payable therein,
(b) the qualification of the Preferred Shares, the Additional Preferred
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Shares and the shares of common stock issuable upon exercise of the Warrants and
the Additional Warrants under state or foreign securities or Blue Sky laws, (c)
the cost of printing certificates for the Preferred Shares, the Additional
Preferred Shares and the shares of common stock issuable upon exercise of the
Warrants and the Additional Warrants and (d) the cost and charges of any
transfer agent, registrar, trustee or fiscal paying agent; and (ii) all
documented out-of-pocket costs and expenses, including attorneys', accountants'
and consultants' fees, incurred by each of the Purchasers in connection with the
negotiation and of this Agreement and consummation of the transactions
contemplated hereby.
SECTION 6.3 INSPECTION. Prior to and following the Closing,
the Company will permit each of the Purchasers and their representatives to
visit and inspect any of the Company's properties, to examine its books and
records and to make copies and to take extracts therefrom, and to discuss its
business affairs and finances with its officers and key employees, all at such
reasonable times as the Purchasers may request.
SECTION 6.4 AVAILABILITY OF COMMON STOCK. The Company hereby
covenants and agrees to use its best efforts to take all action necessary,
desirable or appropriate to have, reserve and keep available at all times out of
the Company's authorized but unissued shares of capital stock the full number of
shares of Class B Non-voting Common Stock issuable upon exercise of the Warrants
and the Additional Warrants, and the full number of shares of Class A Common
Stock into which such shares are convertible pursuant to the Company's
certificate of incorporation, for issuance for the purpose of effecting the
exercise of the Warrants and the Additional Warrants and such conversions.
Without limiting the generality of the foregoing, the Company
shall, in compliance with the provisions of the General Corporation Law of the
State of Delaware, the Exchange Act and the rules of the NASD and the NASDAQ
Stock Market (and any other market upon which the common stock may be listed)
applicable thereto:
(a) submit any necessary increase in the Company's authorized
common stock capitalization for approval by the Company's stockholders
at the earliest to occur of (i) the next special or annual meeting, or
consent solicitation, of the Company's stockholders, (ii) a meeting of
the Company's stockholders that the Purchasers, in connection with any
pending Change of Control (as defined in the Credit Agreement) of the
Company, requested that the Company call and convene, and (iii) August
31, 1999;
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(b) the Company shall duly call, give notice of and convene
(x) any stockholders' meeting requested by the Purchasers described in
clause (a)(ii) above within 25 days of receipt of such request and (y)
its next annual meeting of stockholders prior to the date set forth in
clause (a)(iii) above;
(c) timely prepare and distribute an appropriate proxy
statement and form of proxy for the purpose of obtaining such
stockholder approvals;
(d) recommend that all stockholders vote in favor of such
increase in the Company's authorized capitalization; and
(e) take all other actions as may be necessary or appropriate
from time to time to effectuate the intent of this Section 6.4.
SECTION 6.5 NO GENERAL SOLICITATION. None of the Company, its
affiliates (as defined in Rule 501(b) of the Securities Act) or any person
acting on their behalf will solicit any offer to buy or offer or sell the
Purchased Securities, Additional Preferred Shares or any shares of common stock
issuable upon exercise of the Warrants or the Additional Warrants by means of
any form or general solicitation or general advertising (as those terms are used
in Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act that would
require the registration of such securities under the Securities Act.
SECTION 6.6 EXCHANGE OF STOCK CERTIFICATES. Upon surrender of
any certificate representing the Purchased Securities, the Additional Preferred
Shares, the Additional Warrants, or the common stock issuable upon exercise of
such Warrants for exchange at the office of the Company, the Company at its
expense will cause to be issued in exchange therefor new certificates in such
denomination or denominations as may be requested for the same aggregate number
of securities represented by the certificate so surrendered and registered as
such holder may request.
SECTION 6.7 LOST CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of any certificate evidencing any of the Purchased Securities, the
Additional Preferred Shares, the Additional Warrants, or the common stock
issuable upon exercise of the Warrants and Additional Warrants, and (in case of
loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable
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expenses incidental thereto, and upon surrender and cancellation of such
certificate, if mutilated, the Company will make and deliver in lieu of such
certificate a new certificate of like tenor and for the number of shares
evidenced by such certificate which remain outstanding. A Purchaser's agreement
of indemnity shall constitute indemnity satisfactory to the Company for the
purposes of this Section 6.7.
ARTICLE VII
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES
SECTION 7.1 RESTRICTIVE LEGEND. Each certificate representing
(a) the Preferred Shares, (b) the Warrants, (c) the Additional Preferred Shares,
(d) the Additional Warrants, (e) the shares of the common stock issuable upon
exercise of the Warrants and Additional Warrants, and (f) any other securities
issued in respect of such shares upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall be stamped or
otherwise imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR EXEMPTIONS THEREFROM UNDER SAID ACT AND LAWS.
The Company will promptly, upon request, remove any such legend when no longer
required by the terms of this Agreement or by applicable law.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION. The Company hereby agrees to
indemnify, defend and hold harmless each Purchaser and its partners,
stockholders, directors, officers and affiliates from and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities,
costs and expenses (collectively, "Claims"), including without limitation,
interest, penalties and attorneys' fees and expenses, asserted against,
resulting to, or imposed upon or incurred by such Purchaser directly or
indirectly, in connection with the transactions contemplated hereby.
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SECTION 8.2 TERMS OF INDEMNIFICATION. The obligations and
liabilities of the Company with respect to Claims by third parties will be
subject to the following terms and
conditions:
a. a Purchaser will give the Company prompt notice of any
Claims asserted against, resulting to, imposed upon or incurred by a
Purchaser, directly or indirectly, and the Company will undertake the
defense thereof by representatives of their own choosing which are
reasonably satisfactory to such Purchaser; provided that the failure of
any Purchaser to give notice as provided in this Section 8.2 shall not
relieve the Company of its obligations under this Article VIII, except
to the extent that such failure has materially and adversely affected
the rights of the Company;
b. if within a reasonable time after notice of any Claim, the
Company fails to defend, such Purchaser will have the right to
undertake the defense, compromise or settlement of such Claims on
behalf of and for the account and at the risk of the Company, subject
to the right of the Company to assume the defense of such Claim at any
time prior to settlement, compromise or final determination thereof;
c. the Company on one hand and the Purchasers on the other
will not, without the prior written consent of the other, settle or
compromise any Claim or consent to entry of any judgment relating to
any such Claim;
d. with respect to any Claims asserted against a Purchaser,
such Purchaser will have the right to employ one counsel of its choice
in each applicable jurisdiction (if more than one jurisdiction is
involved) to represent such Purchaser if, in such Purchaser's
reasonable judgment, a conflict of interest between such Purchaser and
the indemnifying party exists in respect of such Claims, and in that
event the reasonable fees and expenses of such separate counsel shall
be paid by such indemnifying party; and
e. the Company will provide each Purchaser reasonable access
to all records and documents of the Company relating to any Claim.
ARTICLE IX
ADDITIONAL AGREEMENT OF THE PARTIES
(a) The Purchasers acknowledge that the Class B Non-voting Common Stock
issuable upon exercise of the Warrants and the Additional Warrants has no voting
rights, but in other respects is entitled to the same rights as the Class A
Common Stock of the Company, and pursuant to the Fourth Article of the
Certificate of Incorporation of the Company, a holder of Class B Non-voting
Common Stock is entitled to convert at the holder's election and
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at any time any or all of such holder's Class B Non-voting Common Stock into
shares of Class A Common Stock at the rate of one share of Class B Non-voting
Common Stock for one share of Class A Common Stock.
(b) Notwithstanding the provisions of the Certificate of Incorporation
of the Company establishing conversion rights with respect to the Class B
Non-voting Common Stock, the Company and the Purchasers each severally agree as
follows: (i) the Purchasers will not exercise, and hereby waive irrevocably, any
right to elect to convert shares of Class B Non-voting Common Stock issuable
upon exercise of the Warrants and the Additional Warrants to shares of Class A
Common Stock if, as a result of such conversion, Centre Partners Management LLC,
Centre Partners II, L.P. and the Purchasers (individually, a "Centre Entity" and
collectively, the "Centre Entities") would hold, collectively, of record or
beneficially with power to vote, more than 50% of the shares of Class A Common
Stock outstanding immediately following such conversion, unless concurrently
with such conversion the shares of Class A Common Stock are transferred to an
unaffiliated person or entity; (ii) the Company shall be entitled to refuse to
honor and carry out an election to convert shares of Class B Non-voting Common
Stock in violation of clause (i) above; and (iii) the limitations on the
conversion of the Class B Non-voting Common Stock issuable upon exercise of the
Warrants and the Additional Warrants shall apply only so long as the shares of
Class B Non-voting Common Stock are owned by any of the Centre Entities and do
not apply to a conversion exercised in connection with a sale or transfer of
shares of Class B Non-voting Common Stock by a Centre Entity to a person or
entity that is not an affiliate of the Centre Entities.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAWS RULES THEREOF.
SECTION 10.2 SURVIVAL. All representations and warranties,
covenants and agreements of the Company and any Purchaser contained in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Purchaser or any representative or
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof; and such
representations and warranties shall survive for a
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period of one year from the Closing Date and such covenants and agreements shall
survive indefinitely.
SECTION 10.3 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. No
assignment of this Agreement may be made by the Company at any time, whether or
not by operation of law, without the Purchasers' prior written consent. Each
Purchaser may assign any of its rights hereunder to an affiliate of such
Purchaser without the Company's consent provided that such affiliate expressly
assumes in writing all of the Purchaser's obligations hereunder, and provided
that such assignment shall not relieve the assigning Purchaser of its
obligations hereunder. From and after the Closing Date, all rights of the
Purchasers hereunder shall inure to subsequent holders of the Purchased
Securities, the Additional Preferred Shares, the Additional Warrants, and the
shares of common stock issuable upon the exercise of the Warrants and the
Additional Warrants.
SECTION 10.4 ENTIRE AGREEMENT: AMENDMENT. This Agreement, the
Transaction Documents and the Registration Rights Agreement constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof. Except as expressly provided herein, neither this Agreement nor
any term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
SECTION 10.5 NOTICES, ETC. All notices and other
communications provided for or permitted hereunder shall be made in writing by
hand delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopier or courier guaranteeing overnight delivery,
addressed (a) if to the Purchasers to Centre Partners Management LLC, 00
Xxxxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxx
Xxxxxxxxx, Facsimile No.: (000) 000-0000 or at such other addresses as shall
have been furnished to the Company, with a copy (which shall not constitute
notice) to: Weil, Gotshal & Xxxxxx LLP; 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attn: Xxxxxx X. Xxxxxxx, Esq., Facsimile No.: (000) 000-0000 and (b) if
to the Company, at 0000 XxXxxxxx Xxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000, Attention:
Chief Financial Officer, or at such other address as the Company shall have
furnished to the Purchasers in writing, with a copy to: Sidley & Austin, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxx X. Xxxxxx, Esq., Facsimile
No.: (000) 000-0000. All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in
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the mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next business day, if timely
delivered to a courier guaranteeing overnight delivery.
SECTION 10.6 DELAYS OR OMISSIONS. Except as expressly
provided herein, no delay or omission to exercise any right, power or remedy
accruing to the Company or any of the Purchasers upon any breach or default of
any party under this Agreement, shall impair any such right, power or remedy of
the Company or any of the Purchasers nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein. or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of the Company or any of the Purchasers of any breach or
default under this Agreement, or any waiver on the part of any such party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to the
Company or any of the Purchasers, shall be cumulative and not alternative.
SECTION 10.7 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which may be executed by only one of the
parties hereto, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
SECTION 10.8 SEVERABILITY. In the event that any provision of
this Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provisions; provided that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to any
party.
SECTION 10.9 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
SECTION 10.10 NO PUBLIC ANNOUNCEMENT. Neither the Company nor
any of the Purchasers shall make any press release or other public announcement
concerning the transactions contemplated by this Agreement except as and to the
extent that any such party shall be obligated to make any such disclosure by law
or by the rules of NASDAQ and then only after consultation
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with the other regarding the basis of such obligation and the content of such
press release or other public announcement or as the parties shall mutually
agree.
SECTION 10.11 DISTRIBUTIONS AND ADJUSTMENTS. If from June 30,
1998 through the Closing Date the Company shall have taken any action which
would entitle the holders of Preferred Stock to a distribution or adjustment in
accordance with the Certificate of Designation if the Preferred Stock were then
outstanding, then the consideration to be received by the Purchasers hereunder
shall be appropriately adjusted.
SECTION 10.12 SPECIFIC ENFORCEMENT. Purchasers, on the one
hand, and the Company, on the other, acknowledge and agree that irreparable
damage would occur in the event that any of the covenants contained in this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, and that money damages are an inadequate remedy for breach
thereof because of the difficulty of ascertaining and quantifying the amount of
damage that will be suffered by the parties hereto in the event that such
covenants are not performed in accordance with their terms or are otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of the covenants referred to in
the immediately preceding sentence and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other rights and remedies to which
they may be entitled at law or equity.
SECTION 10.13 TIME OF THE ESSENCE. Time is of the essence for
purposes of the Company's covenants and agreements contained herein.
[signature page follows]
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IN WITNESS WHEREOF, each of the undersigned has caused the
foregoing Agreement to be executed by one of its duly authorized officers as of
the date first above written.
FIREARMS TRAINING SYSTEMS, INC.
By /s/ Xxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxx X. Xxxxx
Title: CFO, Treasurer and Secretary
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.,
as General Partner
By: Centre Partners Management LLC,
as Attorney-in-fact
By: /s/ Xxxxxxxx Xxxxx
-----------------------------------------
Managing Director
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC,
as General Partner
By: Xxxxxxxx Xxxxx
Managing Director
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