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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of September 8, 1999 is entered
into by and between INTERNATIONAL LOTTERY AND TOTALIZATOR SYSTEMS, INC., a
California corporation (the "Company") and BERJAYA LOTTERY MANAGEMENT (H.K.)
LIMITED (the "Purchaser").
IN CONSIDERATION of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Sale of Shares.
Subject to the terms and conditions of this Agreement, at the Closing
(as defined in section 2 below) the Company will sell and issue to the
Purchaser, and the Purchaser will purchase, 6,933,817 shares of common stock, no
par value per share ("Common Stock"), of the Company for the purchase price of
$0.75 per share.
2. The Closing.
The closing ("Closing") of the sale and purchase of the Common Stock
under this Agreement shall take place at the offices of the Company, 0000
Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000-0000, X.X.X. The date of the Closing
is hereinafter referred to as the "Closing Date."
The Closing shall occur within thirty (30) days following execution of
this Agreement. At the Closing, the Company will deliver to the Purchaser one or
more certificates (in such denominations as Purchaser shall designate to the
Company in writing at least two business days prior to the Closing) for shares
of Common Stock being purchased, registered in the name of the Purchaser,
against payment to the order of the Company of the purchase price therefor, by
wire transfer, certified or bank cashier's check or other method acceptable to
the Company.
3. Representations and Warranties of the Company.
Subject to and except as disclosed by the Company in Exhibit "A"
hereto, the Company hereby represents and warrants to the Purchaser as follows:
3.1 Organization and Standing. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as presently conducted.
The Company has full corporate power and authority to enter into and perform
this Agreement and to carry out the transactions contemplated by this Agreement.
The Company and each of its subsidiaries is duly qualified as a foreign
corporation in good standing in each jurisdiction where the nature of its
business or of its owned or leased properties makes such qualification
necessary, except where the failure to so qualify will not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
3.2 Capitalization. The authorized capital stock of the Company
(immediately prior to the Closing) will consist of 50,000,000 shares of Common
Stock and 20,000,000 shares
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of Preferred Stock, of which 6,009,183 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding as of August 30, 1999 (the
"Outstanding Shares"). All of the Outstanding Shares have been duly authorized
and validly issued and are fully paid and nonassessable. Except as provided in
this Agreement or as set forth in the SEC Reports (as defined in section 3.11),
(i) no subscription, warrant, option, convertible security or other right to
purchase or acquire from the Company any shares of capital stock of the Company
is authorized or outstanding, (ii) there is no agreement binding on the Company
to issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidence of indebtedness or assets of the Company, and (iii) there is no
agreement binding on the Company to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. The Company has not agreed that
any person or entity be entitled to (i) any preemptive or similar right with
respect to the issuance of any capital stock of the Company, or (ii) any rights
with respect to the registration of any capital stock of the Company under the
Securities Act of 1933, as amended (the "Securities Act"). All of the
Outstanding Shares have been offered, issued and sold by the Company in
compliance with applicable federal and state securities laws.
3.3 Issuance of Shares of Common Stock; Binding Obligation; Securities
Laws. The issuance, sale and delivery of the shares of Common Stock in
accordance with this Agreement have been duly authorized, and such shares have
been reserved for issuance, by all necessary corporate action on the part of the
Company, and the shares of Common Stock when so issued, sold and delivered
against payment therefor in accordance with the provisions of this Agreement
will be duly and validly issued, fully paid and non-assessable. This Agreement
has been duly authorized by the Company and constitutes the legal, valid and
binding obligation of the Company and is enforceable against the Company in
accordance with its terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally or by equitable principles of general application (whether considered
in an action at law or in equity) and except as rights to indemnification may be
limited by applicable law. The offer and sale of the shares of Common Stock
hereby are and will be exempt from the registration and prospectus delivery
requirements of the Securities Act and are and will be exempt from the
registration or qualification requirements of all applicable U.S. state
securities laws.
3.4 Financial Statements. Company has provided to the Purchaser (i)
the Company's audited consolidated balance sheet as of December 31, 1998 and the
audited consolidated statements of operations, cash flows and shareholders'
equity for the twelve-month period then ended, together with the related opinion
of Xxxxxx Xxxxxxxx LLP, independent certified public accounts and (ii) an
unaudited consolidated balance sheet an of June 30, 1999 and unaudited
consolidated statements of operations, cash flows and shareholders' equity for
the six months then ended (collectively the "Financial Statements"). The
Financial Statements (a) are in accordance with the books and records of the
Company and its subsidiaries, (b) present fairly the financial condition of the
Company and its subsidiaries at the dates therein specified and the results of
their operations for the periods therein specified, and (c) have been prepared
in accordance with generally accepted accounting principles consistently
applied. Other than as set forth in the Financial Statements described in (ii)
above or as disclosed in the Company's Form 10-QSB for the quarter ended June
30, 1999, since December 31, 1998, there has been no
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material adverse change in the financial condition, business, results of
operation or prospects of the Company and its subsidiaries or any transaction
outside the ordinary course of business of the Company and its subsidiaries.
3.5 No Breach of Other Instruments and Laws. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby shall not conflict with or result in any violation of, default under,
creation of any lien or right of termination under or material change in the
economic terms of any provision of the Articles of Incorporation or By-Laws of
the Company or any of its subsidiaries or of any mortgage, indenture. lease,
agreement or other instrument, permit, concession, grant, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company, any of its subsidiaries or any of their properties.
3.6 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority or any
third party is required in connection with the valid execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby.
3.7 Absence of Undisclosed Liabilities. Except as may arise under
this Agreement, the Company has no material obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise), except (a) to the
extent set forth on or reserved against in its balance sheet as of June 30, 1999
and (b) current liabilities incurred, and obligations under agreements entered
into, in the usual and ordinary course of business since June 30, 1999 that
(individually and in the aggregate) do not materially and adversely affect the
business, properties, financial condition or prospects of the Company.
3.8 Tax Returns and Audits. All required United States federal state
and local tax returns and reports and all foreign tax returns and reports of the
Company and its subsidiaries, including consolidated federal income tax returns
in which the Company or its subsidiaries are included, have been accurately
prepared and duly and timely filed, and all federal, state and local taxes
required to be paid with respect to the periods covered by such returns and
reports have been paid. Neither the Company nor any of its subsidiaries has been
delinquent in the payment of any tax, assessment or governmental charge. Neither
the Company nor any of its subsidiaries has ever had any tax deficiency proposed
or assessed against it and to the best of the Company's knowledge there is no
pending tax deficiency threatened against the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has executed any
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. None of the federal income tax returns nor any state
income or franchise tax returns of the Company or any of its subsidiaries is
being audited by governmental authorities.
3.9 Employee Retirement Income Security Act of 1974 and Other
Employment Matters.
(a) Except as described in the Company's annual report on Form
10-K for the year ended December 31, 1998 or its quarterly report on Form 10-QSB
for the quarter ended June 30, 1999 and except for consulting agreements entered
into in the ordinary course of
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business, neither the Company nor any affiliate of the Company (other than
Purchaser) (together, the "Company Group") maintains or contributes to or has
any obligation to contribute to, or has any liability (including, without
limitation, a liability arising out of an indemnification, guarantee, hold
harmless or similar agreement) with respect to any plan, program arrangement,
agreement or commitment which is an employment, consulting or deferred
compensation agreement, or an executive compensation, incentive bonus or other
bonus, employee pension, profit-sharing, savings, retirement, stock option,
stock purchase, severance pay, life, health, disability or accident insurance
plan, or vacation, or other employee benefit plan, program, arrangement,
agreement or commitment, including, without limitation, "employee benefit plans"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") (individually, a "Plan," and collectively, the
"Plans").
(b) With respect to each Plan, the members of the Company Group
have complied with, and each such Plan conforms in form and operation to, all
applicable laws and regulations, including, but not limited to, the applicable
provisions of ERISA and the Code, in all material respects.
(c) The transactions contemplated by this Agreement will not
result in the acceleration of the exercisability of any stock option issued to
any employee or payment or series of payments by any member of the Company Group
to any person of a parachute payment within the meaning of Section 280G of the
Code.
(d) None of the members of the Company Group are parties to any
collective bargaining agreements and there are no labor unions or other
organizations representing, purporting to represent, or attempting to represent
any employee of the Company or any of the members of the Company Group.
3.10 Litigation. Except as described in the Company's annual report on
Form l0-K for the year ended December 31, 1998 or its quarterly report on Form
10-QSB for the quarter ended June 30, 1999, there is no legal action, suit,
arbitration or other legal, administrative or other governmental investigation,
inquiry, or proceeding (whether federal state, local or foreign) pending or, to
the best knowledge of the Company, threatened against or affecting the Company
or any of its subsidiaries or their properties, assets or business, except for
any action, suit or proceeding that would not have a material adverse effect on
the Company. The Company and its subsidiaries are not in default with respect to
any order, writ, judgment, injunction, decree, determination or award of any
court or of any governmental agency or instrumentality (whether federal, state,
local or foreign).
3.11 SEC Reports. The Company has provided the Purchaser with correct
and complete copies of its annual reports on Form 10-K for the years ended
December 31, 1996, 1997 and 1998, its quarterly reports on Form 10-QSB for the
quarters ended March 31, 1999 and June 30, 1999 and its proxy statement for the
1999 Annual Meeting of Shareholders (the "SEC Reports"). None of the SEC
Reports, at the time it was filed with the Securities and Exchange Commission,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading. The SEC Reports include all forms, reports, or other documents
required to be filed by the Company with the Securities and Exchange Commission
since December 31, 1998.
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3.12 No Brokers or Finders. No person or entity has, or as a result
of the transactions contemplated herein will have, any right or valid claim
against the Company for any commission, fee or other compensation as a finder or
broker, or in any similar capacity.
3.13 Disclosure. Neither this Agreement nor any written document,
statement, or other instrument referred to herein or delivered by or on behalf
of the Company in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein and therein not misleading, insofar as
the same shall relate to the Company and its subsidiaries.
3.14 Compliance with Law. The Company and its subsidiaries are in
compliance with all laws and regulations of the United States of America and all
foreign countries having jurisdiction, and of any state or municipality or other
governmental unit, and of any governmental division or agency of any
governmental unit, that are applicable to the conduct of business and the
ownership of property by the Company or its subsidiaries, where failure to so
comply would have a material adverse effect, and the Company and its
subsidiaries have all material local, state, federal and other governmental
licenses and permits necessary to conduct their business as now conducted.
3.15 Proprietary Rights. The Company's business does not infringe or
violate any patent, copyright or other intellectual property right or
proprietary right of any other person or entity.
4. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
4.1 Investment. The Purchaser is the sole and true party in interest
and is acquiring the shares of Common Stock for its own account for investment
and not with a view to or for the resale or distribution, thereof, nor with any
present intention of distributing, subdividing or selling the same; and the
Purchaser has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the disposition thereof.
Notwithstanding the foregoing, the Purchaser may pledge the shares of Common
Stock acquired hereby in a transaction that complies with the Securities Act of
1933, as amended.
4.2 Authority. The Purchaser has full power and authority to enter
into and to perform this Agreement. The execution of and performance of this
Agreement and compliance with its provisions by such Purchaser will not conflict
with or result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, any agreement or other instrument to which the
Purchaser is a party or by which such Purchaser is bound or any decree, judgment
or order applicable to such Purchaser.
4.3 Experience. The Purchaser has carefully reviewed the Financial
Statements, SEC Reports and other documents and information provided to it by
the Company in connection with this Agreement; the Purchaser has had such
opportunity as it deems adequate to obtain from representatives of the Company
all such information as is necessary for it to fully evaluate the merits and
risks of this investment; the officers of the Company have made available to the
Purchaser all information which it has requested and have answered to the
Purchaser's
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satisfaction all inquiries made by the Purchaser; the Purchaser has such
knowledge and experience in financial, business and investment matters that it
is capable of evaluating the merits and risks of this investment, of making an
informed investment decision and of protecting its own interests in connection
with this investment; there has been no representation, guarantee or warranty
made, expressly or by implication, of the percentage of profit and/or amount or
type of consideration profit or loss, to be realized, if any, as a result of the
Purchaser's investment; the offering of shares of Common Stock has not been
registered under the Securities Act and has not been registered or qualified
under the Blue Sky laws of any state; any disposition of the shares of Common
Stock will be subject to restrictions imposed by federal and state law; the
Purchaser cannot dispose of the shares of Common Stock absent registration and
qualification, or an available exemption from registration and qualification;
the availability of an exemption in the future will depend in part on
circumstances outside the Purchaser's control; except as provided in Section 17,
no promise or undertaking has been made with regard to registering or qualifying
the shares of Common Stock in the future; and the Purchaser understands that all
certificates evidencing the shares of Common Stock will bear on their face a
legend condition as provided in section 5(b). The representations made by the
Purchaser in this section 4.3 shall not effect or diminish in any way the
representations and warranties made by the Company to the Purchaser pursuant to
section 3 hereof and the Purchaser's rights with respect thereto.
4.4 Accredited Investor. The Purchaser is an "accredited investor"
within the definition set forth in Rule 501(a) under the Securities Act; and all
information supplied by the Purchaser to the Company with respect to its
purchase of shares of Common Stock is true, complete and accurate.
5. Sale or Transfer of Shares; Legend.
(a) The shares of Common Stock sold and issued hereby constitute
"Restricted Stock" and may not be sold or transferred unless either (i) they
first shall have been registered under the Securities Act, or (ii) such sale or
transfer is exempt from registration under the Securities Act and all applicable
Blue Sky laws, and the Company first shall have been furnished with an opinion
or memorandum of legal counsel reasonably satisfactory to the Company, to the
effect that such sale or transfer is exempt from the registration requirements
of the Securities Act and all applicable Blue Sky laws.
(b) Each certificate representing Restricted Stock shall bear a
legend substantially in the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended and may not be offered, sold,
transferred, assigned, pledged, hypothecated or otherwise disposed of in
the absence of registration under said Act and all the rules and
regulations thereunder and all applicable state securities or "blue sky"
laws or an exemption therefrom.
6. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, executors and administrators of the parties hereto. Nothing in this
Agreement, express or implied, is intended to or shall
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confer upon any other person any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement
7. Survival of Representation and Warranties. All representations and
warranties contained herein or in any certificate delivered hereunder shall
survive the Closing and shall expire on the second anniversary of the Closing
(except that Section 3.8 shall expire on the expiration of all applicable
statutes of limitation).
8. All notices, requests, consents, and other communications under this
Agreement shall be in writing and shall be delivered by hand, by facsimile
transmission or mailed by first class certified or registered mail, return
receipt requested, postage prepaid:
If to the Company, at 0000 Xxxxxxx Xxxxxx, Xxxxxxxx Xxxxxxxxxx,
00000-0000, Attention: President, or at such other address as may be furnished
in writing by the Company to the Purchasers, with a copy to Xxxxxx & Xxxxxxx;
000 "X" Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X.
Xxxx, Esq.; and
If to the Purchaser, at Xxxxx 00, Xxxxxx Xxxxxxx Insas, 00 Xxxxx
Xxxxxx Xxxxxx, 00000 Xxxxx Xxxxxx, Xxxxxxxx or at such other address as may be
designated to the Company in writing by the Purchaser.
Notices provided in accordance with this section 8 shall be deemed
delivered upon personal delivery, confirmation of facsimile transmission or
deposit in the mail.
9. Brokers. The Company and the Purchaser (a) represents and warrants to
the other that it has retained no finder or broker in connection with the
transaction contemplated by this Agreement, and (b) will indemnify and save the
other parties harmless from and against any and all claims, liabilities or
obligations with respect to brokerage or finders fees or commissions or
consulting fees in connection with the transactions contemplated by this
Agreement asserted by any person on the basis of any statement or representation
alleged to have been made by such indemnifying party.
10. Entire Agreement, Amendments and Warranties. This Agreement embodies
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and thereof and supersedes all prior agreements and
understandings relating to such subject matter. This Agreement may be amended
only by a writing signed by both parties hereto.
11. Attorneys Fees. In the event of any legal action or other proceeding
arising out of or by reason of this Agreement, the prevailing party shall be
entitled to recover, in addition to other damages, its reasonable attorney's
fees and costs.
12. Expenses. The Company and the Purchaser shall each be responsible for
its own fees and expenses incurred in connection with this Agreement.
13. Headings. The headings of the sections, subsections and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
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14. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision.
15. Governing Law and Place of Performance. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California. The place of performance of this Agreement shall be at Carlsbad,
California, or at any subsequent principal place of business of the Company.
16. Counterparts. 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.
17. Registration Rights. The shares of Common Stock sold to Purchaser
under this Agreement shall be "Registrable Securities" under the Registration
Rights Agreement dated as of June 16, 1993 between the Company and Purchaser,
and the Purchaser shall be entitled to the registration rights set forth therein
with respect to the shares of Common Stock purchased hereunder.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the
day and year first above written.
INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.
By: /s/ M. XXXX XXXXXXXX
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M. Xxxx Xxxxxxxx
President
By: /s/ XXXXXXXX X. XXXXX
---------------------------------
Xxxxxxxx X. Xxxxx
Secretary
PURCHASER:
BERJAYA LOTTERY MANAGEMENT (H.K) LIMITED
By: /s/ TAN SRI DATO XXXXXXX XXX CHEE YIOUN
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TAN SRI DATO XXXXXXX XXX CHEE YIOUN
Group Chief Executive Officer
This signature page is for the Stock Purchase Agreement dated as of September 8,
1999 between International Lottery & Totalizator Systems, Inc. and Berjaya
Management (H.K) Limited.
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