EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
27, 2007, among VendingData Corporation, a Nevada corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").
RECITALS
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule
144 under the Securities Act. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States.
"Closing" means the Closing of the purchase and sale of the Shares
pursuant to Section 2.1.
"Closing Date" means the Business Day when all of the Transaction
Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers' obligations to
pay the Subscription Amount and (ii) the Company's obligations to deliver
the applicable Shares have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.001
per share, and any other class of securities into which such securities may
hereafter be reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Disclosure Schedules" means the Disclosure Schedules of the Company
delivered in connection with the Closing.
"Effective Date" means the date that the initial Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GAAP" shall have the meaning ascribed to such term in Section 3.1(h).
"Intellectual Property Rights" shall have the meaning ascribed to such
term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction.
"Material Adverse Effect" shall have the meaning assigned to such term
in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers, in
the form of Exhibit A attached hereto.
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"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares.
"Required Approvals" shall have the meaning ascribed to such term in
Section 3.1(e).
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means the Shares, the Warrants and the Underlying Shares.
"SEC Reports" shall have the meaning ascribed to such term in Section
3.1(h).
"Shares" means the One Million, Six Hundred and Twenty Five Thousand
(1,625,000) shares of Common Stock issued or issuable to the Purchasers
pursuant to this Agreement.
"Short Sales" shall include all "short sales" as defined in Rule 200
of Regulation SHO under the Exchange Act (but shall not be deemed to
include the location and/or reservation of borrowable shares of Common
Stock).
"Subscription Amount" means, as to each Purchaser, the aggregate
amount to be paid for Shares and Warrants purchased hereunder as specified
below such Purchaser's name on the signature page of this Agreement and
next to the heading "Subscription Amount," in United States Dollars and in
immediately available funds.
"Subsidiary" means any subsidiary of the Company as set forth on
Schedule 3.1(a).
"Trading Market" means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the
American Stock Exchange, the New York Stock Exchange, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or the
OTC Bulletin Board.
"Transaction Documents" means this Agreement, the Warrants and the
Registration Rights Agreement executed in connection with the transactions
contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrant" and "Warrants" means a Common Stock purchase warrant, in the
form of Exhibit B, and all Warrants collectively.
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ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and each Purchaser agrees to purchase, severally and
not jointly, the number of Shares and Warrants set forth on each respective
Purchaser's signature page attached hereto, for the Subscription Amount set
forth thereon, which in the aggregate shall equal up to Four Million, Three
Hundred and Six Thousand and Two Hundred and Fifty Dollars ($4,306,250) of
Shares. On the Closing Date (the "Closing Date"), each Purchaser shall deliver
to the Company, via wire transfer or a certified check, immediately available
funds equal to their Subscription Amount, and the Company shall deliver to each
Purchaser their respective Shares and Warrants to be issued at the Closing (the
"Closing") at the Closing. Upon satisfaction of the conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of Xxxxxxxxx
Xxxxxxx, LLP, 000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxx Xxxx, Xxxxxxxxxx 00000,
or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) one or more stock certificates evidencing that number of
Shares purchased by each Purchaser hereunder, registered in the name
of such Purchaser;
(iii) an originally executed Warrant evidencing that number of
Warrants purchased by each Purchaser hereunder, registered in the name
of such Purchaser;
(iv) the Registration Rights Agreement duly executed by the
Company;
(v) an opinion of Xxxxxxxxx Traurig, LLP ("Company Counsel"),
dated as of the Closing Date, in substantially the form of Exhibit C
attached hereto;
(vi) a certificate evidencing the incorporation and good standing
of the Company and each of its U.S domiciled operating Subsidiaries in
such corporation's state of incorporation issued by the Secretary of
State of such state of incorporation as of a date within 10 days of
the Closing Date; and
(vii) a certificate, executed by the Secretary of the Company and
dated as of the Closing Date, as to (i) the resolutions consistent
with Section 3.1(c) as adopted by the Company's Board of Directors in
a form reasonably acceptable to such Purchaser, (ii) the Certificate
of Incorporation and (iii) the Bylaws, each as in effect at the
Closing, in the form attached hereto as Exhibit D.
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(b) On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire transfer or
cashier's check to the account as specified by the Company in writing;
and
(iii) the Registration Rights Agreement duly executed by such
Purchaser.
2.3 Closing Conditions.
(a) The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the representations and warranties of the Purchasers shall be
true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date, which shall remain true and correct
as of such specific date);
(ii) all obligations, covenants and agreements of the Purchasers
required to be performed at or prior to the Closing Date shall have
been performed; and
(iii) the delivery by the Purchasers of the items set forth in
Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being
met:
(i) the representations and warranties of the Company and its
Subsidiaries shall be true and correct in all material respects
(except for those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the
Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, which shall remain
true and correct as of such specific date);
(ii) all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have
been performed;
(iii) the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
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(iv) the Common Stock (I) shall be listed on the Principal Market
and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC
or the Principal Market or (B) by falling below the minimum listing
maintenance requirements of the Principal Market; and
(v) the Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale
of the Shares and the Warrants.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries of the
Company are set forth on Schedule 3.1(a). The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe
for or purchase securities.
(b) Organization and Qualification. The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is
in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing,
as the case may be, could not have or reasonably be expected to result in
(i) a material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on the
business, properties, assets, operations, prospects, results of operations
or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
Effect") and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail
such power and authority or qualification.
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(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of
the Company and no further action is required by the Company, its board of
directors or its stockholders in connection therewith other than in
connection with the required approvals set forth on Schedule 3.1(c)
attached hereto (the "Required Approvals"). Each Transaction Document has
been (or upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company, the issuance and sale of the
Securities and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of
time or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents, other than (i) filings required pursuant to Section 4.4 of this
Agreement, (ii) the filing with the Commission of the Registration
Statement, (iii) application(s) to each applicable Trading Market for the
listing of the
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Shares and the Underlying Shares for trading thereon in the time and manner
required thereby, and (iv) the filing of Form D with the Commission and
such filings as are required to be made under applicable state securities
laws (collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than restrictions
on transfer provided for in the Transaction Documents. The Company has
reserved from its duly authorized capital stock the Shares and Underlying
Shares issuable pursuant to this Agreement.
(g) Capitalization. The capitalization of the Company is as set forth
on Schedule 3.1(g). No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities or as set forth on Schedule
3.1(g), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exercisable or
exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or
may become bound to issue additional shares of Common Stock or Common Stock
Equivalents. The issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder of
Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required
for the issuance and sale of the Securities. Except as set forth on
Schedule 3.1(g), there are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company's capital stock to
which the Company is a party or, to the knowledge of the Company, between
or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be
filed by it under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the period commencing on
January 1, 2006 through the date hereof (the foregoing materials, including
the exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the "SEC Reports") on a timely basis or
has received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, as applicable,
and none of the SEC Reports, when filed, contained any untrue
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statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Reports complied in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company and
its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included within
the SEC Reports, except as specifically disclosed in a subsequent SEC
Report, (i) there has been no event, occurrence or development that has had
or that could reasonably be expected by the Company to result in a Material
Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting,
(iv) the Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option
plans. The Company does not have pending before the Commission any request
for confidential treatment of information.
(j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which
materially adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect. None of the Company's or its Subsidiaries' employees is a
member of a union that relates to such employee's relationship with the
Company, and neither the Company or any of its Subsidiaries is a party to a
collective bargaining agreement, and the Company and its
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Subsidiaries believe that their relationships with their employees are
good. No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement
or non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any
liability with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and
foreign laws and regulations relating to employment and employment
practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business and all such laws that affect the environment, except in each case
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not have or reasonably be expected to
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries
and Liens for the payment of federal, state or other taxes, the payment of
which is neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by
them under valid, subsisting and enforceable leases with which the Company
and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service
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marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights necessary or material
for use in connection with their respective businesses as described in the
SEC Reports and which the failure to so have could have a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the
Company nor any Subsidiary has received a notice (written or otherwise)
that the Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and
there is no existing infringement by another Person of any of the
Intellectual Property Rights. The Company and its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged, including, but not
limited to, directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing
of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$60,000 other than (i) for payment of salary or consulting fees for
services rendered, (ii) reimbursement for expenses incurred on behalf of
the Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002
which are applicable to it as of the Closing Date. The Company maintains
disclosure controls and procedures (as such term is defined in Rule
13a-15(e) under the Exchange Act) that are effective in ensuring that
information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the rules and forms of
the SEC, including, without limitation, controls and procedures designed in
to ensure that information required to be disclosed by the Company in the
reports that it files or submits
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under the Exchange Act is accumulated and communicated to the Company's
management, including its principal executive officer or officers and its
principal financial officer or officers, as appropriate, to allow timely
decisions regarding required disclosure.
(s) Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the Transaction
Documents. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in connection
with the transactions contemplated by the Transaction Documents as a result
of any action taken by the Company or its Affiliates.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Trading Market.
(u) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.
(v) Registration Rights. Other than each of the Purchasers, no Person
has any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirements. The Company's Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to, or which to its knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. The
Company has not, in the 12 months preceding the date hereof, received
notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with
the listing or maintenance requirements of such Trading Market. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(x) Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation
(or similar charter documents) or the laws of its state of
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incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(y) Disclosure. All disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, with respect to the representations and warranties made
herein are true and correct with respect to such representations and
warranties and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, neither the
Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.
(aa) Tax Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of
a tax deficiency which has been asserted or threatened against the Company
or any Subsidiary.
(bb) No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the Securities
by any form of general solicitation or general advertising. The Company has
offered the Securities for sale only to the Purchasers and certain other
"accredited investors" within the meaning of Rule 501 under the Securities
Act.
(cc) Insolvency. The Company is not as of the date hereof, and after
giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this
Section 3.1(cc), "Insolvent" means, with respect to any Person , (i) the
present fair saleable value of such Person's assets is less than the amount
required to pay such Person's total indebtedness, (ii) such Person is
unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured, (iii)
such Person intends to incur or believes that it will incur debts that
would be beyond its ability to pay as such debts mature or (iv) such Person
has unreasonably small capital with which to conduct the business in which
it is engaged as such business is now conducted and is proposed to be
conducted.
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(dd) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its Exchange Act filings and is not so
disclosed or that otherwise would be reasonably likely to have a Material
Adverse Effect.
(ee) No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the transactions contemplated by this Agreement,
no event, liability, development or circumstance has occurred or exists
with respect to the Company or its business, properties, prospects,
operations or financial condition, that would be required to be disclosed
by the Company under applicable securities laws on a Current Report on Form
8-K filed with the SEC.
(ff) Environmental Laws. The Company is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply would be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect. The term "Environmental Laws"
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(gg) Manipulation of Price. The Company has not, and to its knowledge
no one acting on its behalf has taken, directly or indirectly, any action
designed to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
any of the Securities.
(hh) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor to the Company's knowledge, any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity;
(ii) made any direct or indirect unlawful payment to any foreign or
domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
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3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it
is a party has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the
valid and legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.
(b) Own Account. Such Purchaser understands that the Securities are
"restricted securities" and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the Securities
as principal for its own account and not with a view to or for distributing
or reselling such Securities or any part thereof in violation of the
Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities (this representation and
warranty not limiting such Purchaser's right to sell the Shares and
Underlying Shares pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws) in violation
of the Securities Act or any applicable state securities law. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of
its business.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and Warrants, it was, and at the date hereof it is, an "accredited
investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
under the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience of Such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
-15-
(e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(f) Short Sales and Confidentiality Prior To The Date Hereof. Other
than the transaction contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant
to any understanding with such Purchaser, engaged in any transaction,
including Short Sales, in the securities of the Company since the earlier
to occur of (i) the time that such Purchaser was first contacted by the
Company regarding an investment in the Company, or (ii) the 30th day prior
to the date of this Agreement (such earlier date, "Discussion Date").
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser's assets, the
representation set forth above shall only apply with respect to the portion
of assets managed by the portfolio manager that made the investment
decision to purchase the Securities covered by this Agreement. Other than
to other Persons party to this Agreement, such Purchaser has maintained the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
(g) Access to Information. Such Purchaser acknowledges that it has
received and had the opportunity to review (i) copies of the SEC Reports,
and (ii) all exhibits thereto. Such Purchaser further acknowledges that it
or its representatives have been afforded (iii) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities, the merits and risks of investing in the
Securities, (iv) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment
in the Securities; and (v) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy and completeness
of the information contained in the SEC Reports.
(h) Restrictions on Securities. Such Purchaser understands that the
Securities have not been registered under the Securities Act and may not be
offered, resold, pledged or otherwise transferred except (a) pursuant to an
exemption from registration under the Securities Act or pursuant to an
effective registration statement in compliance with Section 5 under the
Securities Act and (b) in accordance with all applicable securities laws of
the states of the United States and other jurisdictions.
-16-
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, the
Company may require the transferor thereof to provide to the Company an
opinion of counsel to the Company, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under
the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE
"RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE
SECURITIES ACT. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
REASONABLE SATISFACTION OF COUNSEL TO THE ISSUER.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Shares and Underlying Shares under Rule
144. The Company further covenants that it will take such further action as any
holder of Shares and Underlying Shares may reasonably request, to the extent
required from time to time to enable such Person to sell such Shares and
Underlying Shares without registration under the Securities Act within the
requirements of the exemption provided by Rule 144.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
-17-
4.4 Securities Laws Disclosure; Publicity. The Company shall, within one
Business Day of the Closing Date, issue a press release disclosing the material
terms of the transactions contemplated hereby, and shall file a Current Report
on Form 8-K (the "Closing 8-K") which shall attach the Transaction Documents
thereto by the first Business Day following the Closing Date. The press release
and the Closing 8-K shall be acceptable to the Purchasers in their reasonable
discretion. No Purchaser shall issue any such press release or otherwise make
any such public statement without the prior consent of the Company. The Company
shall not publicly disclose the name of any Purchaser, or include the name of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except (i)
as required by federal securities law in connection with (A) any registration
statement contemplated by the Registration Rights Agreement and (B) the filing
of final Transaction Documents (including signature pages thereto) with the
Commission and (ii) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under this subclause (ii).
4.5 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Shares hereunder as set forth on Schedule 4.5 of the Disclosure Schedule.
4.6 Listing of Common Stock. The Company hereby agrees to use best efforts
to maintain the listing of the Common Stock on a Trading Market, and as soon as
reasonably practicable following the Closing to list all of the Shares and
Underlying Shares on such Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it
will include in such application all of the Shares and Underlying Shares, and
will take such other action as is necessary to cause all of the Shares and
Underlying Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
4.7 Short Sales and Confidentiality After The Date Hereof. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will engage in any transactions, including any Short Sales, in the securities of
the Company during the period commencing at the Discussion Time and ending at
the time that the transactions contemplated by this Agreement are first publicly
announced as described in Section 4.4. Each Purchaser, severally and not jointly
with the other Purchasers, covenants that neither it nor any Affiliate acting on
its behalf or pursuant to any understanding with it will engage in any Short
Sales in the securities of the Company during the period commencing at the
Discussion Time and ending on the date the Closing 8-K is filed with the SEC
("Black-out Termination Date"). Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company as
described in Section 4.4, such Purchaser will maintain the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). Each Purchaser understands and
-18-
acknowledges, severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short sales of shares
of the Common Stock "against the box" prior to the Effective Date of the
Registration Statement with respect to the Shares is a violation of Section 5 of
the Securities Act, as set forth in Item 65, Section A, of the Manual of
Publicly Available Telephone Interpretations, dated July 1997, compiled by the
Office of Chief Counsel, Division of Corporation Finance. Notwithstanding the
foregoing, no Purchaser makes any representation, warranty or covenant hereby
that it will not engage in Short Sales in the securities of the Company after
the Black-out Termination Date. Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser's assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.
4.8 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof, promptly upon request of any Purchaser. The Company shall take
such action as the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers at the Closing under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.
4.9 Closing Documents. On or prior to fourteen (14) calendar days after the
Closing Date, the Company agrees to deliver, or cause to be delivered, to each
Purchaser and Xxxxxxx Xxxx & Xxxxx LLP executed copies of the Transaction
Documents, Securities and any other document required to be delivered to any
party pursuant to Section 2.2 hereof.
4.10 Additional Issuances of Securities.
(a) For purposes of this Section 4.10, the following definitions shall
apply.
(i) "Approved Stock Plan" means any employee benefit plan which
has been approved by the Board of Directors of the Company, pursuant to which
the Company's securities may be issued to any employee, officer or director for
services provided to the Company.
(ii) "Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
(iii) "Convertible Securities" means any stock or securities
(other than Options) convertible into or exercisable or exchangeable for shares
of Common Stock.
(iv) "Excluded Securities" means (i) any Common Stock or Options
issued or issuable in connection with any Approved Stock Plan; (ii) any Common
Stock issuable upon the exercise of the Warrants; (iii) any Common Stock
issuable upon conversion, exercise or exchange of any Options or Convertible
Securities which are outstanding on the day immediately preceding the date
hereof, provided that the terms of any such Options or Convertible Securities
-19-
are not amended, modified or changed on or after the date hereof; or (iv) any
Common Stock or Common Stock Equivalents issued (whether in exchange for Options
or Convertible Securities or otherwise) in any Change of Control Transaction (as
defined below).
(v) "Options" means any rights, warrants or options to subscribe
for or purchase shares of Common Stock or Convertible Securities.
(vi) "Ownership Interest" means, with respect to any Purchaser at
any given time, the quotient of (x) the Purchaser Securities Amount of such
Purchaser and (y) the sum of (I) the Common Stock Deemed Outstanding (as defined
in the Warrants) as of such time and (II) the Warrant Shares issuable upon
exercise of the Warrants held by, or issuable to, such Purchaser pursuant to the
Transaction Documents as of such time, without regard for any limitations on
exercise in the Warrants held by such Purchaser.
(vii) "Purchaser Securities Amount" means, with respect to any
Purchaser at any given time, the number of Shares and Common Stock issuable upon
exercise of the Warrants held by, or issuable to, such Purchaser pursuant to the
Transaction Documents as of such time, without regard for any limitations on
exercise in the Warrants held by such Purchaser.
(viii) "Subsequent Placement" means any offer or sale by or on
behalf of the Company of the Company's equity or equity equivalent securities,
including without limitation any debt, preferred stock or other instrument or
security that is, at any time during its life and under any circumstances,
convertible into or exchangeable or exercisable for shares of Common Stock or
Common Stock Equivalents, for direct or indirect consideration of cash or cash
equivalents, pursuant to either (a) a transaction exempt from Section 5 of the
Securities Act; (b) a bona fide underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the Company of less
than $10,000,000; (c) a bona fide underwritten public offering with a nationally
recognized underwriter which generates gross proceeds to the Company of at least
$10,000,000 in an "at-the-market offering" as defined in Rule 415(a)(4) under
the 1933 Act or containing any "equity lines"; or (d) an offering pursuant to a
registration statement filed under Section 5 of the Securities Act other than a
bona fide underwritten public offering with a nationally recognized underwriter
which generates gross proceeds to the Company of at least $10,000,000.
(b) From the date hereof until the date that is sixty (60) Trading
Days following the Effective Date (the "Trigger Date"), the Company will
not, directly or indirectly, (x) file any registration statement with the
SEC prior to the filing of the Registration Statement (as defined in the
Registration Rights Agreement) or (y) cause any registration statement
filed on or after the date hereof to become effective under the 1933 Act
prior to the Effective Date (as defined in the Registration Rights
Agreement); provided, that, the Company shall not be required to comply
with clause (y) above if the Company has acted in good faith with respect
to its agreements and obligations set forth in the Registration Rights
Agreement and used its reasonable best efforts to have the Registration
Statement declared effective under the 1933 Act prior to the Effective
Date.
(c) From the Trigger Date until the earlier to occur of (x) the second
anniversary of the Closing Date and (y) such date after which the Company
has, directly or
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indirectly, in one or more related transactions (collectively, the "Change
of Control Transaction"): (I) allowed another Person to make a purchase,
tender or exchange offer that is accepted by the holders of more than 50%
of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the Person or Persons making or party to, or
associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer) or (II) consummated a stock purchase
agreement or other business combination (including, without limitation, a
merger or consolidation, reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person, after
giving effect to such Change of Control Transaction, is the beneficial
owner of 50% or more of the outstanding shares of Common Stock, the Company
will not, directly or indirectly, effect any Subsequent Placement unless
the Company shall have first complied with this Section 4.10(c).
(i) The Company shall deliver to each Purchaser an irrevocable
written notice (the "Offer Notice") of any proposed or intended
issuance or sale (the "Offer") of the securities being offered (the
"Offered Securities") in a Subsequent Placement, which Offer Notice
shall (w) identify and describe the Offered Securities, (x) describe
the price and other terms upon which they are to be issued or sold,
and the number or amount of the Offered Securities to be issued or
sold, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued or sold and (z)
offer to issue and sell to such Purchasers such percentage of the
Offered Securities that would permit the Purchasers to maintain their
aggregate Ownership Interest in the Company as in effect immediately
prior to the consummation of such Subsequent Placement, allocated
among such Purchasers (a) based on such Purchaser's pro rata portion
of the aggregate Purchaser Securities Amount of all the Purchasers at
such time (the "Basic Amount"), and (b) with respect to each Purchaser
that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other
Purchasers as such Purchaser shall indicate it will purchase or
acquire should the other Purchasers subscribe for less than their
Basic Amounts (the "Undersubscription Amount"), which process shall be
repeated until the Purchasers shall have an opportunity to subscribe
for any remaining Undersubscription Amount.
(ii) To accept an Offer, in whole or in part, such Purchaser must
deliver a written notice to the Company prior to the end of the fifth
(5th) Business Day after such Purchaser's receipt of the Offer Notice
(the "Offer Period"), setting forth the portion of such Purchaser's
Basic Amount that such Purchaser elects to purchase and, if such
Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to
purchase (in either case, the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubscription Amount in its Notice of Acceptance shall be entitled
to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however,
that if the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"),
each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Undersubscription Amount as the Basic Amount of such
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Purchaser bears to the total Basic Amounts of all Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the
Company to the extent its deems reasonably necessary. Notwithstanding
the foregoing, if the Company desires to modify or amend the terms and
conditions of the Offer prior to the expiration of the Offer Period,
the Company may deliver to the Purchasers a new Offer Notice and the
Offer Period shall expire on the third (3rd) Business Day after such
Purchaser's receipt of such new Offer Notice.
(iii) The Company shall have twenty (20) Business Days from the
expiration of the Offer Period above to offer, issue or sell all or
any part of such Offered Securities as to which a Notice of Acceptance
has not been given by the Purchasers (the "Refused Securities")
pursuant to a definitive agreement(s) (the "Subsequent Placement
Agreement"), but only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more
favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice.
(iv) In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4.10(c)(iii) above), then each Purchaser
may, at its sole option and in its sole discretion, reduce the number
or amount of the Offered Securities specified in its Notice of
Acceptance to an amount that shall be not less than the number or
amount of the Offered Securities that such Purchaser elected to
purchase pursuant to Section 4.10(c)(ii) above multiplied by a
fraction, (a) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue or sell
(including Offered Securities to be issued or sold to Purchasers
pursuant to Section 4.10(c)(iii) above prior to such reduction) and
(b) the denominator of which shall be the original amount of the
Offered Securities. In the event that any Purchaser so elects to
reduce the number or amount of Offered Securities specified in its
Notice of Acceptance, the Company may not issue or sell more than the
reduced number or amount of the Offered Securities unless and until
such securities have again been offered to the Purchasers in
accordance with Section 4.10(c)(i) above.
(v) Upon the closing of the issuance or sale of all or less than
all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or
amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4.10(c)(iv) above if the Purchasers
have so elected, upon the terms and conditions specified in the Offer.
The purchase by the Purchasers of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company
and the Purchasers of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the
Purchasers and their respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 4.10(c)(iii) above may not be
issued or sold until they are again offered to the Purchasers under
the procedures specified in this Agreement.
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(vii) The Company and the Purchasers agree that if any Purchaser
elects to participate in the Offer, (x) neither the Subsequent
Placement Agreement with respect to such Offer nor any other
transaction documents related thereto (collectively, the "Subsequent
Placement Documents") shall include any term or provisions whereby any
Purchaser shall be required to agree to any restrictions in trading as
to any securities of the Company owned by such Purchaser prior to such
Subsequent Placement, and (y) such Purchaser shall be entitled to
registration rights, if any, no less favorable than such registration
rights, if any, provided to any other Persons acquiring securities in
such Subsequent Placement.
(viii) Notwithstanding anything to the contrary in this Section
4.10 and unless otherwise agreed to by the Purchasers, the Company
shall either confirm in writing to the Purchasers that the transaction
with respect to the Subsequent Placement has been abandoned or shall
publicly disclose its intention to issue the Offered Securities, in
either case in such a manner such that the Purchasers will not be in
possession of material non-public information, by the twentieth (20th)
Business Day following the expiration of the Offer Period (the "Offer
Information Deadline"). If by the Offer Information Deadline no public
disclosure regarding a transaction with respect to the Offered
Securities has been made, and no notice regarding the abandonment of
such transaction has been received by the Purchasers, such transaction
shall be deemed to have been abandoned and the Purchasers shall not be
deemed to be in possession of any material, non-public information
with respect to the Company. Should the Company decide to pursue such
transaction with respect to the Offered Securities, the Company shall
provide each Purchaser with another Offer Notice and each Purchaser
will again have the right of participation set forth in this Section
4.10(c). After any Offer Information Deadline, the Company shall not
be permitted to deliver an additional Offer Notice to the Purchasers
prior to the fifth (5th) Business Day after such Offer Information
Deadline.
(ix) The restrictions contained in subsections (b) and (c) of
this Section 4.10 shall not apply in connection with the issuance of
any Excluded Securities.
4.11 Fair Market Value. The Company hereby covenants and agrees that the
fair market value of the Securities for purposes of Article IX of the Charter or
any repurchase of any of the Securities in accordance with applicable law by the
Company shall be the Subscription Amount of such Securities.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, or the Company by
written notice to the other parties, if the Closing has not been consummated on
or before April 15, 2007, provided, however, that no such termination will
affect the right of any party to xxx for any breach by the other party (or
parties).
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5.2 Fees and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.
5.3 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 3:30 p.m. (Las Vegas
time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 3:30 p.m. (Las Vegas time) on any Business
Day, (c) the 2nd Business Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto, and a copy of any notices to any Purchaser (for informational purposes
only) shall also be delivered to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchasers holding not less than 51% of the Shares or, in
the case of a waiver, by the party against whom enforcement of any such waived
provision is sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.
5.6 Indemnification.
(a) In consideration of each Purchaser's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in
addition to all of the
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Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless each Purchaser and all
of their stockholders, partners, members, officers, directors, employees
and direct or indirect investors and any of the foregoing Persons' agents
or other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective
of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "Indemnified Liabilities"), incurred by any
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument
or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (iii) any cause of action, suit or claim
brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (x) the execution, delivery, performance
or enforcement of the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby or (y) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, in each
case, solely to the extent arising with respect to any willful misconduct,
gross negligence or fraud of the Company or any of its Subsidiaries, or any
of their directors, officers, employees, agents, or representatives,
respectively. To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) Promptly after receipt by an Indemnitee under this Section 5.6 of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim for indemnification in respect thereof is to
be made against any indemnifying party under this Section 5.6, deliver to
the indemnifying party a written notice of the commencement thereof, and
the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnitee; provided, however, that an Indemnitee shall have the right
to retain its own counsel with the fees and expenses of not more than one
counsel for such Indemnitee to be paid by the indemnifying party, if, in
the reasonable opinion of the Indemnitee, the representation by such
counsel of the Indemnitee and the indemnifying party would be inappropriate
due to actual or potential conflicts of interests between such Indemnitee
and any other party represented by such counsel in such proceeding. Legal
counsel referred to in the immediately preceding sentence shall be selected
by the Investors holding at least a majority of the Shares. The Indemnitee
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or Indemnified Liabilities by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnitee that relates to such
action or Indemnified Liabilities. The indemnifying party shall keep the
Indemnitee fully apprised at all times as to the status of the defense or
any settlement negotiations with respect
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thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall,
without the prior written consent of the Indemnitee, consent to entry of
any judgment or enter into any settlement or other compromise which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee of a release from all liability in respect to
such Indemnified Liabilities or litigation. Following indemnification as
provided for hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnitee with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnitee under
this Section 5.6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.
(c) The indemnification required by this Section 5.6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills become due or Indemnified
Liabilities become due.
(d) The indemnity agreements contained herein shall be in addition to
(x) any cause of action or similar right of the Indemnitee against the
indemnifying party or others, and (y) any liabilities the indemnifying
party may be subject to pursuant to the law.
5.7 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.8 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Required Holders, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Warrants). No
Purchaser may assign any of its rights hereunder without the consent of the
Company.
5.9 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.10 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
State of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the State of New York,
for the adjudication of any dispute hereunder or in connection herewith or with
any
-26-
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
5.11 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares.
5.12 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or ".pdf" signature page were an original thereof.
5.13 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
5.14 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights.
5.15 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu
-27-
of and substitution therefor, a new certificate or instrument, but only upon
receipt of evidence reasonably satisfactory to the Company of such loss, theft
or destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.16 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.
(Signature Pages Follow)
-28-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
VENDINGDATA CORPORATION Address for Notice:
By: /s/ Xxxx X. Xxxxxxx 1120 Town Center
--------------------------------- Xxxxx 000
Xxxx X. Xxxxxxx, Xxx Xxxxx, XX 00000
President and Chief Executive Fax: 000.000.0000
Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
GLG NORTH AMERICAN OPPORTUNITY FUND Address for Notice:
By: /s/ Xxx Xxxxxxxx Xxxxxx House
--------------------------------- 00 Xxxx Xxxxxx
Name: Xxx Xxxxxxxx Xxxxxx Town
Title: Xxxxx Xxxxxxx, XXX Xxxxxxxx XX Xxxxx Xxxxxx X00-0000
Cayman Islands
Subscription Amount: $4,306,250
with a copy to:
Shares: 1,625,000
c/o GLG Partners, LP
Warrants: 1,625,000 0 Xxxxxx Xxxxxx
Xxxxxx XXX 0XX
Facsimile: x00 00 0000 0000
Telephone: x00 00 0000 0000
Attention: Xxxxxxx Xxxxxxxxx
E-mail:
xxxxxxx.xxxxxxxxx@xxxxxxxxxxx.xxx
Address for Delivery of Shares and
Warrants for Purchaser:
c/o GLG Partners, LP
0 Xxxxxx Xxxxxx
Xxxxxx XXX 0XX
Facsimile: x00 00 0000 0000
Telephone: x00 00 0000 0000
Attention: Xxxxxxx Xxxxxxxxx
E-mail:
xxxxxxx.xxxxxxxxx@xxxxxxxxxxx.xxx
