SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT
(this “Agreement”) executed
this [___] day of August 2009 effective as of July 20, 2009, by and among New Media Lottery Services,
Inc., a Delaware corporation, with headquarters located at 0000
Xxxxxxxxxx Xxxxx, Xxxxxxxxxxxx, XX 00000 (the “Company”) and Trafalgar Capital Specialized
Investment Fund, FIS (the “Buyer”).
WHEREAS, the Company and the
Buyer are executing and delivering this Agreement in reliance upon an exemption
from securities registration pursuant to Section 4(2) and/or Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “1933 Act”);
and
WHEREAS, the parties hereto
desire that, upon the terms and subject to the conditions contained herein, the
Company shall issue and sell to the Buyer, and the Buyer shall purchase from the
Company, up to One Million United States Dollars (US$1,000,000) of secured
convertible redeemable debentures (the “Debentures”) from
time to time as provided herein, such Debentures to be in the form of Exhibit A attached hereto;
and
WHEREAS, in connection with
the sale of the Debentures, the Company has agreed to issue 2,000,000 shares of
its convertible preferred stock (the “Preferred Shares”) to
the Buyer in accordance with the terms set forth in that certain letter
agreement dated July 20, 2009 (the “Letter Agreement”)
entered into by and between the Company and the Buyer; and
WHEREAS, contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Security Agreement (the “Security Agreement”)
pursuant to which the Company has agreed to provide the Buyer with a security
interest in the Pledged Collateral (as defined in the Security Agreement) to
secure the Company’s obligations under this Agreement, the Debentures and any
other obligations of the Company to the Buyer; and
WHEREAS, this Agreement, the
Debentures, the Letter Agreement, the Settlement Escrow Agreement (once
executed) and each additional Security Instrument (as defined in Section 5(o)
herein below) and any other instrument executed in connection with the
transactions contemplated herein and therein are collectively referred to herein
as the “Transaction
Documents”).
NOW, THEREFORE, in
consideration of the mutual covenants and other agreements contained in this
Agreement, the Company and the Buyer hereby agree as follows:
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(i) On
the date hereof, the Company shall issue the Original Debentures in the
principal sum of Three Hundred Thousand United States Dollars
(US$300,000).
(ii) Subject
to the provisions of Section 6(c), within five (5) calendar days of Buyer
accepting a Draw Down Notice (each such date, a “Settlement Date”) the
Company shall, unless otherwise instructed by the Buyer, issue Debentures in the
principal sum of the applicable Investment Amount to be purchased by the Buyer
on such Settlement Date (the “Draw Down
Debentures”) and, upon receipt of such Draw Down Debentures, the Buyer
shall deliver the applicable Investment Amount representing the Draw Down
Debentures to be purchased on such Settlement Date by wire transfer of
immediately available funds to the Escrow Agent on or before the Settlement Date
for disbursement pursuant to the Escrow Agreement (each closing with respect to
Draw Down Debentures shall be referred to as, a “Settlement”). In
addition, on or prior to each such Settlement Date, each of the Company and the
Buyer shall deliver all documents, instruments and writings required to be
delivered by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein.
The Buyer
represents and warrants that:
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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, GENERALLY ACCEPTABLE
TO COMPANY’S COUNSEL, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.”
The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend within three (3) business days to the holder of
the security upon which it is stamped, if, unless otherwise required by state
securities laws: (i) in connection with a sale transaction, provided the
securities are registered under the 1933 Act or (ii) in connection with a sale
transaction, after such holder provides the Company with an opinion of counsel,
which opinion shall be in form, substance and scope reasonably acceptable to
counsel for the Company, to the effect that a public sale, assignment or
transfer of the securities may be made without registration under the 1933
Act.
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The
Company represents and warrants as of the date hereof, and as of the Closing
Date to the Buyer that:
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(ii) The
Company and its subsidiaries have good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens and encumbrances, other
than those in favor of the Buyer.
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(i) The
Company is subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act and has filed all required reports under Section 13 or 15(d) of the
Exchange Act during the 12 months prior to the date hereof (or for such shorter
period that the issuer was required to file such reports), other than Current
Reports on Form 8-K;
(ii) From
the date hereof until the Debentures or the Common Stock underlying the
Debentures have been sold by the Buyer, or may permanently be sold by the Buyer
without any restrictions pursuant to Rule 144 (the “Registration Period”)
the Company shall file with the SEC in a timely manner all required reports
under Section 13 or 15(d) of the Exchange Act and such reports shall conform to
the requirement of the Exchange Act and the SEC for filing
thereunder;
(iii) The
Company shall furnish to the Buyer so long as the Buyer owns the Debentures and
the Common Stock underlying the Debentures, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Buyer to
sell such securities pursuant to Rule 144 without registration; and
(iv) During
the Registration Period the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would otherwise permit such
termination.
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(i) With
the exception of the Ten Thousand United States Dollars (US$10,000) legal
document review allowance paid by the Company pursuant to the Letter Agreement,
each of the Company and the Buyer shall pay all costs and expenses incurred by
such party in connection with the negotiation, investigation, preparation,
execution and delivery of this Agreement, the Transaction Documents and any
other documents relating to this transaction;
(ii) The
Company shall issue to the Buyer the Preferred Shares pursuant to the terms set
forth in the Letter Agreement; and
(iii) The
Sixty-Thousand United States Dollars (US$60,000) deducted from the Company’s
gross proceeds arising from the sale of the Original Debentures previously paid
by the Buyer with the consent of the Company.
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(k)
Restriction on “Short”
Position. Neither the Buyer nor any of its affiliates have an
open short position in the Common Stock of the Company, and the Buyer agrees
that it shall not, and that it will cause its affiliates not to, engage in any
short sales with respect to the Common Stock as long as any Debentures shall
remain outstanding.
(l)
Restriction on Incurring
Additional Secured Debt. The Company shall not incur any
additional debt or permit any subsidiary of the Company to incur any additional
debt other than in the ordinary course of business without the Buyer’s prior
written consent.
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(i) The
representations and warranties of the Buyer shall be true and correct in all
material respects as of the date when made and as of the applicable Settlement
Date as though made at each such time (except for representations and warranties
specifically made as of a particular date which shall be true and correct in all
material respects as of the date when made).
(ii) The
Buyer shall have performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Buyer at or prior to such
Settlement.
(iii) The
Buyer shall have executed this Agreement and the other Transaction Documents and
delivered the same to the Company.
(iv) The
Buyer shall have delivered to the Escrow Agent the applicable Investment Amount
for the Draw Down Debentures to be purchased at the Settlement in accordance
with the terms herein and in the Escrow Agreement.
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(i) The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the applicable date of
delivery of the Draw Down Notice as though made at such time (except for
representations and warranties specifically made as of a particular date which
shall be true and correct in all material respects as of the date when
made).
(ii) The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to such date.
(iii) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby that prohibits or directly and
adversely affects any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement.
(iv) Since
the Closing Date, no event that had or is reasonably likely to have a material
adverse effect shall have occurred.
(v) The
Company shall not be in default of a material term, covenant, warranty or
undertaking of the Company contained in the Transaction Documents.
(vi) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the shares of Common Stock issuable upon the conversion of the Draw Down
Debentures shall be approved for listing (if applicable) or trading on the
Primary Market.
(vii) The
Buyer shall have executed such other documents as are reasonably required by the
Company.
(i) The
Company shall have executed this Agreement, the Transaction Documents and any
other documents relating to this transaction and delivered the same to the
Buyer.
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(ii) The
representations and warranties of the Company in this Agreement, the Debentures
and the Transaction Documents shall be true and correct in all material respects
(except to the extent that any of such representations and warranties is already
qualified as to materiality in Section 4 above, in which case, such
representations and warranties shall be true and correct without further
qualification) as of the date when made and as of the applicable Settlement
Date, as though made at that time (except for representations and warranties
that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Settlement
Date. With respect to the purchase of Draw Down Debentures, the Buyer
shall have received a certificate, executed by the President of the Company,
dated as of the applicable Settlement Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer.
(iii) The
Company shall have executed and delivered to the Buyer the Debentures required
to be delivered pursuant to Section 2(e) hereof.
(iv) The
Company shall have provided to the Buyer a certificate of good standing from the
secretary of state from the State of Delaware.
(v) There
shall not have been any change or disruption or any development involving a
prospective change or disruption in the financial or capital markets the effect
of which is, in the Buyer’s sole judgment, so material and adverse as to make it
impractical or inadvisable to proceed with the purchase of the
Debentures.
(vi) There
shall have been no change which the Buyer, in its sole and absolute discretion,
deems to be materially adverse in respect of the business, results of
operations, condition (financial or otherwise), value, prospects, liabilities or
assets of the Company.
(vii) The
Company’s management incentive and employment agreements shall be acceptable to
the Buyer and its counsel.
(viii) The
Company shall be insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts in all material respects as
are customary in the businesses in which they are engaged or propose to engage
after giving effect to the transactions contemplated hereby. All policies of
insurance and fidelity or surety bonds insuring the Company or any of its
subsidiaries or the Company’s or its subsidiaries’ respective businesses,
assets, employees, officers and directors shall be in full force and effect
except where the failure of such insurance policies and fidelity or surety bonds
to be in full force and effect would not in the Buyer’s sole judgment be so
material and adverse as to make it impractical or inadvisable to proceed with
the purchase of the Debentures.
(ix) The
completion of satisfactory legal, accounting and financial due
diligence.
(x) The
Company has received all approvals (governmental and otherwise) and third party
consents of all requisite parties necessary in order for the Company to
consummate the transactions contemplated by the Transaction
Documents.
(xi) The
Company has demonstrated to the Buyer’s satisfaction that there are no material
environmental issues with respect to the Company’s business.
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(xii) The
Company has not defaulted in any material contracts, which defaults have not
been remedied, and there is no material litigation, as determined by the Buyer
as of the applicable Settlement.
In
consideration of the Buyer’s execution and delivery of this Agreement and the
other Transaction Documents and for acquiring the Debentures and the Common
Stock underlying the Debentures upon conversion hereunder, and in addition to
all of the Company’s other obligations under this Agreement and the other
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Debentures, and all of their
officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Buyer Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Buyer Indemnitee is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and all costs and disbursements (the “Indemnified
Liabilities”), incurred by the Buyer Indemnitees or any of them as a
result of, or arising out of, or relating to (A) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement, the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (B) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the Transaction Documents
or any other certificate, instrument or document contemplated hereby or thereby
or (C) any cause of action, suit or claim brought or made against such Buyer
Indemnitee by a third party and arising out of or resulting from a material
misrepresentations by the Company under this Agreement or due to a material
breach by the Company of its obligations under the Transaction Documents and the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the Buyer
Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Debentures or
the status of the Buyer or holder of the Debentures, as a purchaser of the
Debentures and the Common Stock underlying the Debentures of the
Company. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
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(a) Governing
Law. This Agreement shall be deemed to be made under and shall
be construed in accordance with the laws of the State of Delaware without giving
effect to the principals of conflict of laws thereof. Each of the
parties consents to the jurisdiction of the U.S. District Court sitting in
the Southern District of the State of Florida or the state courts of the State
of Florida sitting in Dade County, Florida in connection with any dispute
arising under this Agreement and the other Transaction Documents and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens to the
bringing of any such proceeding in such jurisdictions.
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If
to the Company, to:
|
New
Media Lottery Services, Inc.
0000
Xxxxxxxxxx Xxxxx
Xxxxxxxxxxxx,
XX 00000
Attention: Xxxx
Xxxxxx, President and CEO
Facsimile: (000)
000-0000
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With
a copy to:
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Xxxxxxx
X. Xxxxx, Esq.
000
Xxxx 00xx
Xxxxxx
Xxx
Xxxx, XX 00000
Telephone: (000)
000-0000
Facsimile: 0-000-XXX-XXXX
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.
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||
If
to the Buyer:
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Trafalgar
Capital Specialized Investment Fund
The
Xxxxxxx, Xxxx Street
00
Xxxxxxxxxxx Xxxxxx
Xxxxxx
XX0X 0XX
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Attention:
Xxxxxx Xxxxx, Chairman of the Board of Trafalgar
Capital
Sarl, General Partner
Facsimile: 011-44-207-405-0161
and
001-786-323-1651
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||
With
Copy to:
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K&L
Gates LLP
000
Xxxxx Xxxxxxxx Xxxx., Xxxxx 0000
Xxxxx,
Xxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile: (000)
000-0000
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Each
party shall provide five (5) days’ prior written notice to the other party of
any change in address or facsimile number.
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Buyer and the Company
have caused this Securities Purchase Agreement to be duly executed as of the
date first written above.
COMPANY:
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NEW
MEDIA LOTTERY SERVICES, INC.
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By:
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Name:
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|
Title:
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BUYER:
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TRAFALGAR
CAPITAL SPECIALIZED
|
INVESTMENT
FUND, FIS
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By: Trafalgar
Capital Sarl
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Its: General
Partner
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By:
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Name:
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Title:
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EXHIBIT
A
[FORM
OF DEBENTURE]
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EXHIBIT
B
[FORM
OF ESROW AGREEMENT]
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SCHEDULE
4(a)
COMPANY
SUBSIDIARIES
[TO
BE ATTACHED]
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SCHEDULE
4(c)
CAPITALIZATION
DISCLOSURES
Debentures
issued in the name of the Buyer
The
Preferred Shares to be issued pursuant to the terms of the Letter
Agreement
New Media
Lottery Services has 150,000,000 authorized shares of Common Stock at par value
$0.0001 per share.
31,247,843
shares of common stock have been issued.
Date
of
|
Expiration
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#
of
|
Exercise
|
|||||||||
Name
|
Grant
|
Date
|
Shares
|
Price
|
||||||||
OPTIONS:
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||||||||||||
Various
employees
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5/29/09
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5/28/19
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3,475,000 | $ | 0.10 | |||||||
WARRANTS:
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|
|||||||||||
Xxxxxx
Xxxxxxx
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7/23/09
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7/22/12
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750,000 | $ | 0.05 | |||||||
Xxxxxx
Xxxxxxx
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7/23/09
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7/22/12
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750,000 | $ | 0.05 | |||||||
Lilliput
Holdings, LTD
|
5/6/05
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5/5/15
|
200,000 | $ | 0.25 |
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SCHEDULE
4(x)
SEC
Delinquent Filings
10KSB for
the period ended April 30, 2008 was filed on August 14, 2008
10Q for
the period ended January 31, 2009 was filed on April 3, 2009
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SCHEDULE
4(y)
Notices
from Exchange
On March
24, 2009, New Media Lottery Services, Inc was notified by FINRA that it had been
delinquent with the filing of its 10-KSB for the period ended April 30, 2008 and
its 10-Q for the period ended January 31, 2009. A third delinquent
filing within a 24 month period would result in the ineligibility for quotation
on the OTCBB for a period of one year.
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