FORM OF PLACEMENT AGENT AGREEMENT
Exhibit 1.1
FORM
OF
THIS
PLACEMENT AGENT AGREEMENT (the “Agreement”) is made and entered to be effective
this 31st day of January, 2005 by and between VENDINGDATA CORPORATION, a Nevada
corporation (the “Company”) and PHILADELPHIA BROKERAGE CORPORATION, a
Pennsylvania corporation (the “Agent”).
W I T N E
S S E T H:
WHEREAS,
the Company desires to issue and sell its 10% Senior Convertible Notes due
January 31, 2008 (the “Notes”), in a minimum aggregate principal amount of
$6,250,000 (the “Minimum Offering”) and a maximum aggregate principal amount of
$10,000,000 (the “Maximum Offering”), which notes shall be issued pursuant to
the terms and provisions of the Subscription Agreement (the “Subscription
Agreement”) to be executed and delivered by the Company and the purchasers of
the Notes (the “Investors”), and the Note Exchange Agreement related thereto
(collectively with the Subscription Agreement and the documents incorporated by
reference therein, the “Subscription Documents”); and
WHEREAS,
the Company desires that the Agent offer and sell strictly on a “best efforts”
basis to a limited number of purchasers (the “Investors”), as exclusive agent of
the Company, the Notes.
NOW,
THEREFORE, upon the terms, covenants, and conditions set forth below and for
good and valuable consideration, and intending to be legally bound, the parties
agree as follows:
1. Certain
Definitions. For the
purposes of this Agreement, the following terms have the meanings set forth
below:
1.1 Closing
Date.
“Closing Date” shall include the date of the Initial Closing and the date of any
Subsequent Closing. The “Initial Closing Date” shall refer only the date of the
Initial Closing.
1.2 Company.
“Company,” to the extent the context permits, includes any
Subsidiary.
1.3 Exchange
Act.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.
1.4 Initial
Closing. The
“Initial Closing” shall occur when the Minimum Offering has been attained. The
Initial Closing may, by mutual agreement of the parties, occur on any later date
to which the Offering has been extended.
1.5 Material
Adverse Effect.
“Material Adverse Effect” shall refer to any material adverse effect on the
condition (financial or otherwise), prospects, business, properties, net worth,
or results of operations of the Company on a consolidated basis.
1.6 Proprietary
Rights.
“Proprietary Rights” means patents, registered or common law trademarks, service
marks, trade names, registered or common law copyrights, licenses, and other
similar rights (including, without limitation, know-how, trade secrets, and
other confidential information) and applications for each of the
foregoing.
1.7 Subsequent
Closing.
“Subsequent Closing” shall mean any one or more closings following the Initial
Closing, which may occur by mutual agreement of the parties hereto, but not
later than February 15, 2005.
1.8 Subsidiary.
“Subsidiary” means any corporation or other entity of which shares of stock or
other indicia of ownership possessing a majority of the ordinary voting power in
electing the board of directors, or exercising corresponding control in the case
of a non-corporate entity, is, at the time as of which any determination is
being made, owned by the Company either directly or indirectly through one or
more Subsidiaries.
1.9 Withdrawal
Date.
“Withdrawal Date” shall mean the date on which the Company delivers to the Agent
a notice that the Company has elected to cancel and withdraw the Offering for
failure to attain the Minimum Offering or otherwise.
2. Agreement
to Engage the Agent.
2.1 Appointment
of the Agent. On the
terms and subject to all the conditions of this Agreement, the Company hereby
appoints the Agent on an exclusive basis for 180 days from the date hereof to
consult with and advise the Company and to solicit subscriptions for Notes on
behalf of the Company, in connection with the Offering. On the basis of the
representations, warranties, covenants and agreements set forth herein, the
Agent accepts such appointment and agrees to consult with and advise the Company
as to the matters regarding the Offering and to use its best efforts to solicit
subscriptions for Notes in accordance with this Agreement; provided,
however, that
the Agent shall have no obligation to solicit any minimum number of
subscriptions from Investors or to take any action not in accordance with all
applicable laws, regulations, decisions or orders. The appointment of the Agent
hereunder shall terminate upon (a) the attainment of the Maximum Offering, (b)
the Withdrawal Date, or (c) termination by the Agent or the Company in
accordance with Section 10 hereof; provided,
however, that
the termination of Agent’s appointment hereunder shall not affect the
obligations of the parties hereunder, or act to terminate this Agreement, except
and to the extent provided in Section 10 hereof. The Agent will receive all
orders for Notes and shall transmit orders to the Company and transfer
Investors’ funds received by it thereunder to Xxxxx Fargo Bank Nevada, N.A. for
deposit in the following account:
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|
Name: |
VendingData
Corporation |
|
Account
No.: |
3121447316 |
|
ABA
Routing No.: |
000000000 |
|
Bank: |
Xxxxx
Fargo Bank Nevada, N.A. |
|
Bank
Address:
|
0000
X. Xxxxxx Xxxxxxxx Xxxx Xxx Xxxxx, XX 00000 |
by
federal express or other courier service, or by wire transfer, on or before
12:00 p.m. (noon), eastern time, of the business day next following receipt of
such orders and funds by the Agent.
2.2 Responsibility
of Company. The
Company recognizes that compliance with applicable federal and state law in the
performance of its obligations described herein, including its obligations
concerning compliance with the requirements of applicable federal and state
securities laws pertaining to the offer and sale of the Notes, is in all
respects the responsibility of the Company, and the Company agrees to take such
precautions as may be necessary to ensure compliance therewith. Without in any
way limiting the generality of the foregoing, the parties contemplate that the
offer and sale of Notes will be made so as to comply with the registration
requirements of Section 5 of the Securities Act.
2.3 Subscription
Documents. The
Company shall at its own expense prepare and amend, if necessary, the
Subscription Documents and such other disclosure and offering documents as are
required to comply with the requirements of the applicable federal and state
securities laws for the Offering. The Agent may assist in the preparation of the
Subscription Documents on behalf of the Company but shall not be responsible for
any disclosures or omissions therein except for those matters directly related
to the Agent and its role in this Offering, including the determinations made in
Section 2.5 hereof. The representations made by the Subscription Documents are
exclusively the representations of the Company as relied upon by the Agent,
except for those matters directly related to the Agent and its role in the
Offering. The Company shall take all steps necessary to assess the legal and/or
regulatory sufficiency of the Subscription Documents or like documentation by
the retention of outside counsel engaged specifically to review such material
and the relevant issues thereunto pertaining. In any event, the Company warrants
that in authorizing the use of any documentation used in conjunction with the
activities anticipated to be conducted herein, it shall cause to be undertaken
sufficient review of such activity by competent counsel and/or advisors and no
provision contained herein shall result in any duty incumbent upon the Agent to
ascertain the legal and/or regulatory sufficiency of such documentation, except
for those matters directly related to the Agent and its role in the
Offering.
2.4 Full
and Fair Disclosure. It is
expressly understood and expected by both parties and expressly warranted by the
Company that the Subscription Documents and any other documentation provided by
the Company to the Agent in connection with the offering of the Notes pursuant
to this Agreement shall be reviewed by the Company or its appointees of
sufficient competence for any material deficiencies in such a manner as to
ensure accuracy and full and fair disclosure. The Company warrants that it shall
take all steps necessary to ensure that such documentation contains no material
misrepresentations or omissions and hereby acknowledges that the Agent is not
responsible for ensuring the accuracy or sufficiency of any documentation or
disclosures therein, except for those matters directly related to the Agent and
its role in the Offering.
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2.5 “Blue
Sky.” The
Agent, prior to making any offers in any state, shall promptly advise the
Company in writing of the requirements of the state securities laws of each such
state for making such offers and sales or qualification of the securities
offered in that state. The Company shall evaluate said requirements and advise
the Agent whether the Company desires to proceed with the offering in each
particular state. The Company shall file all documents and notices and pay such
fees as are required to make offers and sales in each state chosen by the
Company pursuant to the Offering. Nothing herein shall require the Company to
pay costs of the Agent’s registering as a broker/dealer in any
state.
2.6 Procedures. The
offer and sale of the Notes and the procedure for subscribing thereto shall
conform to the description thereof as set forth in the Subscription
Documents.
3. Best
Efforts Basis. The
Company hereby expressly acknowledges that the Agent is under no obligation to
purchase any number of Notes in a manner which may be construed as a firm
underwriting or commitment and that the entirety of the relationship created
hereby is strictly characterized by the term(s) “agent,” “finder,” and “best
efforts” as these terms are generally used by applicable rules, regulations,
interpretations and opinions issued by the SEC and the National Association of
Securities Dealers (“NASD”). There is no obligation on the part of the Agent to
purchase or raise the Minimum Offering.
4. [RESERVED.]
5. Covenants
of the Company.
5.1 Offering
Process. The
Company will offer the Notes in the states of Pennsylvania, New York, Alaska,
Nebraska and California, and such other states as may be agreed upon by the
parties. The Company will, to the extent required, use its commercially
reasonable efforts to have the Offering approved in those states, but, in no
event shall the Company be required to qualify to do business in such states
solely as a result of the Offering; and will notify the Agent (i) of the receipt
of any comments from the SEC or any other regulatory authority with respect to
the Offering or any other matter referred to in the Subscription Documents, (ii)
of any request by the SEC or any other regulatory authority for any amendment or
supplement to the Subscription Documents, the Blue Sky Materials (as hereinafter
defined) or for additional information, (iii) of the issuance by the SEC or any
other regulatory authority of any order or other action suspending the Offering
or the use of the Subscription Documents or any other filing of the Company
under applicable state law or the threat of any such action, and (iv) of the
issuance by the SEC or any regulatory authority of any stop order suspending the
use of the Subscription Documents or of the initiation or threat of initiation
of any proceedings for that purpose. The Company will make every reasonable
effort to prevent the issuance by the SEC or any regulatory authority of any
such order, and if any such order shall at any time be issued, to obtain the
lifting thereof at the earliest possible time. The Company shall file with the
state securities authorities of the states listed above (and any other states
subsequently added), to the extent necessary, appropriate registration materials
in order to comply with the laws of such states applicable to the sale of the
Notes (“Blue Sky Materials”).
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5.2 Amendment. The
Company will provide to the Agent notice of its intention to amend the
Subscription Documents and will not amend the Subscription Documents in a manner
to which the Agent shall reasonably object. If any event relating to or
affecting the Company shall occur, as a result of which it is necessary, in the
reasonable opinion of counsel for the Company, to amend or supplement the
Subscription Documents in order to make the Subscription Documents not
misleading in light of the circumstances existing at the time they are delivered
to an Investor, the Company will forthwith prepare and furnish to the Agent a
reasonable number of copies of an amendment or amendments of, or a supplement or
supplements to, the Subscription Documents (in form and substance satisfactory
to each of Company’s counsel and the Agent’s counsel) which will amend or
supplement the Subscription Documents so that, as amended or supplemented, they
will not contain any untrue statement of any material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time the Subscription Documents are delivered to a
prospective Investor or an Investor, not misleading. For the purpose of this
Section 5.2, the Company will furnish to the Agent such information with respect
to itself as the Agent may from time to time reasonably request; provided,
however, that
any information which is of a confidential or proprietary nature shall not be
delivered to any third party other than the Agent’s legal counsel or accountants
(who shall be instructed by Agent to maintain such information as confidential)
in connection with the Offering, or as otherwise required by law.
5.3 Provision
of Documents. The
Company has or will deliver to the Agent and to the Agent’s counsel at least one
(1) conformed copy of the Subscription Documents and the Blue Sky Materials, as
originally filed, and each amendment thereto or correspondence in connection
therewith. The Company will furnish to the Agent, from time to time, such number
of copies of the Subscription Documents (as amended or supplemented) as the
Agent may reasonably request for the purposes contemplated by the respective
applicable rules and regulations of the NASD.
5.4 Compliance
with Regulations. As of
the effective date of the Subscription Documents and continuing through each
Closing Date, the Company will comply, at its own expense, with all requirements
imposed upon it by the SEC, state securities regulators and by any other
applicable regulatory authority, so far as necessary to permit the continuance
of sales of Notes during such period in accordance with the provisions hereof
and the Subscription Documents, provided,
however, that
the Company may, in its sole discretion, withdraw from selling Notes in any
state listed in Section 5.1 above after prior written notice to and consultation
with the Agent.
5.5 Reports. The
Company will timely file such reports pursuant to the Exchange Act as are
necessary in order to make generally available to its security holders as soon
as practicable pursuant to Rule 158 of the Securities Act an earnings statement
for the purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the Securities Act. During the period of eighteen
(18) months from the latest Closing Date, the Company will furnish to the Agent
as soon as available, a copy of each report of the Company furnished generally
to stockholders of the Company or, to the extent required, filed with the SEC,
or any national securities exchange or system on which any class of securities
of the Company may be listed or quoted.
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5.6 Use of
Proceeds. The
Company will use the net proceeds from the sale of the Notes in the manner set
forth in the Subscription Documents under the caption, “Use of
Proceeds.”
5.7 No
Additional Offering Documents. Other
than the Subscription Documents or as permitted by applicable law, the Company
will not distribute any Subscription Documents, offering circular or other
offering material in connection with the offer and sale of the Notes and will
not publish any writing which constitutes an offer or Subscription
Documents.
5.8 Acceptance
of Offer. The
Company shall not be deemed to have accepted any subscription offer accompanied
by a check or comparable instrument until final payment has been made on such
check or instrument and the Company accepts the subscription.
5.9 Complete
Performance. The
Company covenants and agrees to use its commercially reasonable efforts to do
and perform all things required or necessary to be done and performed under this
Agreement by the Company and to satisfy all conditions precedent to the delivery
of the Notes.
6. Representations
and Warranties of the Company. Subject
to the information set forth in this Agreement and the Subscription Documents,
and other than as set forth on Schedule 6 hereto the Company represents,
warrants, covenants and agrees with the Agent as follows:
6.1 Organization
and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. The Company has all requisite corporate
power and authority and all material licenses, permits, and authorizations
necessary to own and operate its properties and to carry on its business as now
conducted and as presently proposed to be conducted, and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure to so register or qualify does not have a Material Adverse Effect. The
copies of the articles of incorporation and bylaws which have previously been
provided to the Agent reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
6.2 Subsidiaries. The
Subsidiaries are listed on Schedule
6.2. Each
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary is duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required, except those
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect.
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6.3 Capital
Stock and Related Matters. The
authorized, issued, and outstanding capital stock of the Company is as set forth
in the Subscription Documents. Except as set forth in the Subscription
Documents, the Company does not have outstanding any stock or securities
convertible or exchangeable for any shares of its capital stock, and it is not
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock. All of the outstanding shares
of the Company’s capital stock have been duly authorized and validly issued and
are fully paid and non-assessable. The Notes have been duly and validly
authorized for issuance and, when issued and delivered by the Company against
payment of the consideration therefor, the Notes will be duly and validly
issued, fully paid and non-assessable and will be free and clear of any security
interest, pledge, lien, encumbrance, claim or equity other than created by the
purchase or purchases thereof; neither the issuance of the Notes or of the
shares of the Company’s common stock, par value $.001 (“Common Stock”), upon the
conversion of the Notes will be in violation of any preemptive rights or other
rights to subscribe for or to purchase, or any restriction upon the voting or
transfer of, any shares of Common Stock pursuant to the Company’s articles of
incorporation, bylaws or other governing documents or any agreement or other
instrument to which the Company is a party or by which it is bound.
6.4 Authorizations;
No Breach. The
execution, delivery, and performance of this Agreement and all other agreements
and transactions contemplated hereby have been duly authorized by the Company.
This Agreement and all other agreements contemplated hereby each constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms subject, as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors’ rights, to general principles of equity and to the extent that rights
to indemnity hereunder may be limited under applicable laws. Except as set forth
on Schedule
6.4, the
consummation of the Offering and the transactions described in the Subscription
Documents, and the execution and delivery by the Company of this Agreement and
all other agreements contemplated hereby and the fulfillment of and compliance
with the respective terms hereof and thereof by the Company do not and will not
(i) conflict
with or result in a breach of the terms, conditions, or provisions of,
(ii)
constitute a default under, (iii) result
in the creation of any lien, security interest, charge, or encumbrance upon the
Company’s or any Subsidiary’s capital stock or assets pursuant to, (iv) give any
third party the right to accelerate any obligation under, (v) result
in a violation of, the articles of incorporation or bylaws of the Company, or
any law, statute, rule, regulation or order to which the Company is subject, or
any agreement, instrument, order, judgment, or decree to which the Company is
subject; or require any authorization, consent, approval, exemption, or other
action by or notice to, any court or administrative or governmental body
required to be filed as of the date of this representation.
6.5 Financial
Statements. The
Subscription Documents shall contain audited balance sheets of the Company as of
the last full completed fiscal year immediately prior to start of the Offering,
and the related audited statements of operations, stockholders’ equity, and cash
flows of the Company including the footnotes thereto, together with the opinion
of the independent certified public accountants with respect thereto. The
Subscription Documents may also contain unaudited financial statements and the
notes thereto (such unaudited financial statements, if any, together with the
latest audited financial statements, are referred to herein as the “Latest
Financial Statements”). The Latest Financial Statements shall have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods indicated.
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The
Company shall not have had, as of the date of the balance sheets contained in
the Latest Financial Statements, except as and to the extent reflected or
reserved against therein (including the notes thereto), any liabilities or
obligations (absolute or contingent) of a nature customarily reflected in a
balance sheet or the notes thereto prepared in accordance with generally
accepted accounting principles. The balance sheets of the Latest Financial
Statements shall present fairly, as of their dates, the financial condition of
the Company on such dates. The statements of operations of the Latest Financial
Statements shall present fairly the results of operations of the Company for the
periods indicated. The statements of stockholders’ equity and cash flows of the
Latest Financial Statements shall present fairly the information which should be
presented therein in accordance with generally accepted accounting principles.
The presentation of the unaudited portion of the Latest Financial Statements in
accordance with Regulation S-X promulgated by the SEC regarding the form and
content of and requirements for financial statements to be filed with the SEC
would not materially and adversely affect the reported amount of the Company’s
assets, stockholders’ equity, or results of operations as of any date or for any
period included therein.
6.6 Independent
Public Accountants. The
independent public accountants, whose report respecting the audited financial
statements of the Company is included in the Subscription Documents and who, as
expert, having reviewed certain other information of a financial nature
contained in the Subscription Documents, shall be independent certified public
accountants as required by the Securities Act.
6.7 No
Material Adverse Change. Except
as set forth in the Subscription Documents, since the date of the Latest
Financial Statements, there has been no material adverse change in the Company’s
financial condition, operating results, business prospects, employee relations,
customer relations, or otherwise, other than changes occurring in the ordinary
course of business which in the aggregate have not had a Material Adverse
Effect.
6.8 Absence
of Certain Developments.
6.8.1 Except as
expressly provided by this Agreement or except as disclosed in or contemplated
by the Subscription Documents, since the date of the Latest Financial Statements
the Company has not:
(a) issued
any equity stock, bonds, or other securities;
(b) borrowed
any amount or incurred or become subject to any liabilities, except current
liabilities incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of business;
(c) discharged
or satisfied any lien or encumbrance or paid any obligation or liability, other
than current liabilities paid in the ordinary course of business;
(d) declared
or made any payment or distribution of cash or other property to stockholders
with respect to its stock, or purchased or redeemed any shares of its capital
stock;
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(e) mortgaged
or pledged any of its properties or assets, or subjected them to any lien,
security interest, charge, or any other encumbrance, except liens for current
property taxes not yet due and payable;
(f) sold,
assigned, or transferred any of its tangible assets, except in the ordinary
course of business, or canceled any debts or claims;
(g) sold,
assigned, or transferred any patents, trademarks, trade names, copyrights, trade
secrets, or other intangible assets, or disclosed any proprietary confidential
information to any person, except for licenses or disclosures in the ordinary
course of the Company’s business;
(h) suffered
any extraordinary losses or intentionally waived any rights of material value or
compromised any material claims, whether or not in the ordinary course of
business of consistent with past practice;
(i) made
capital expenditures or commitments therefore that aggregate in excess of
$50,000;
(j) entered
into any other transaction other than in the ordinary course of business, or
entered into any other material transaction, whether or not in the ordinary
course of business;
(k) made
charitable contributions or pledges; or
(l) suffered
any damage, destruction, or casualty loss, whether or not covered by
insurance.
6.8.2 The Company
has not at any time made any political contributions (except those permitted
under state and federal law) or any bribes, kickback payments, or other illegal
payments.
6.9 Assets.
6.9.1 Except as set
forth in the Subscription Documents or the Latest Financial Statements, the
Company has good and marketable title to, or a valid leasehold interest in, the
material properties and assets shown on the Latest Financial Statements or in
the Subscription Documents or acquired thereafter, free and clear of all
material liens, security interests, charges and encumbrances, other than liens
for current property taxes not yet due and payable and as disclosed in the
Subscription Documents or the Latest Financial Statements.
6.9.2 Except as set
forth in the Subscription Documents, the Company’s buildings, equipment, and
other tangible assets are in good condition in all material respects and are
usable in the ordinary course of business.
6.9.3 Except as set
forth in the Subscription Documents, the Company owns, or has a valid leasehold
interest in, all assets necessary for the conduct of its business as presently
conducted.
6.10 Material
Contracts. Except
as set forth in the Subscription Documents or the Subscription Documents, the
Company is not a party to any material lease or contract (meaning thereby a
lease or contract materially affecting its business or properties). No default
of any material significance exists in the due performance and observance by the
Company of any term, covenant, or condition of any such lease or contract; all
such leases or contracts are in full force and effect and are binding on the
parties thereto in accordance with their terms; and to the knowledge of the
Company, no other party to any such material lease or contract has threatened or
instituted any action or proceeding wherein the Company is alleged to be in
default thereunder.
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6.11 Tax
Returns. Except
as set forth in the Subscription Documents, the Company has filed all federal,
state and local tax returns which are
required to be filed and has paid all taxes shown on such returns and all
assessments received by it to the extent such taxes have become due. All taxes
with respect to which the Company is obligated have been paid or provided for by
adequate reserves.
6.12 Proprietary
Rights. Except
as set forth in the Subscription Documents, the Company possesses all material
proprietary rights necessary to the conduct of its business. Except as set forth
in the Subscription Documents, (i) the
Company to the best of its knowledge, owns or licenses all such proprietary
rights, (ii) there
have been no claims made against the Company for the assertion of the
invalidity, abuse, misuse, or unenforceability of any of such rights, and to the
best of the Company’s knowledge, there are no grounds for the same, (iii) the
Company has not received a notice of conflict with the asserted rights of
others, and (iv) to the
best of the Company’s knowledge, the conduct of the Company’s business has not
infringed any proprietary rights of others.
6.13 Litigation,
Etc. Except
as set forth in the Subscription Documents, (i) there
are no actions, suits, proceedings, orders, investigations, or claims pending
or, to the Company’s knowledge, threatened against or affecting the Company at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency, or, instrumentality, excluding non-material claims in the
ordinary course of business; (ii) there
are no arbitration proceedings pending under collective bargaining agreements or
otherwise; (iii) there are
no governmental inquiries (including inquiries as to the qualification of the
Company to hold or receive any license or permit); and (iv) to the
best of the Company’s knowledge there is no basis for any of the foregoing.
6.14 Brokerage. Except
as set forth in the Subscription Documents or this Agreement, there are no
claims for brokerage commissions, finders’ fees, or similar compensation in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement binding upon the Company. The Company will pay, and
hold the Agent harmless against, any liability, loss, damage, or expense
(including, without limitation, attorneys’ fees and travel and out-of-pocket
expenses) arising in connection with any such claim.
6.15 Governmental
Consent, Etc. No
permit, consent, approval, or authorization of, or declaration to or filing
with, any governmental authority is required in connection with the execution,
delivery, and performance of this Agreement by the Company or the consummation
by the Company of the Offering or any other transactions contemplated hereby,
except as have been obtained or accomplished and except as expressly
contemplated herein or in the exhibits hereto.
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6.16 Compliance with
Laws. As of
the date of the Subscription Documents and each Closing Date, the Company is not
in violation of any material law, rule, regulation or order (including laws,
rules, regulations and orders pertaining to the offer and sale of securities),
or in violation of its articles of incorporation or bylaws, or in default in the
performance or observance of any material obligation, agreement, covenant, or
condition contained in any material contract, lease, loan agreement, indenture
or other instrument to which it is a party or by which it or any of its
properties may be bound, except where such violation or default does not have a
Material Adverse Effect or is caused by the Agent’s gross negligence or willful
misconduct.
6.17 Disclosure. Neither
this Agreement, its exhibits or schedules, nor any of the attachments, written
statements, documents, certificates, or other items prepared or supplied by the
Company with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading. The Subscription
Documents (i) describe
accurately in all material respects the business, condition (financial and
otherwise), prospects and operations of the Company; and (ii) contain
no untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements, in the light of the circumstances in
which made, not misleading. The Company acknowledges and agrees that all
responsibility for the accuracy and adequacy of information contained in the
Subscription Documents (other than information relating to the Agent made in
reliance on and in conformity with information furnished to the Company in
writing by or on behalf of the Agent expressly for use therein) shall be the
sole responsibility of the Company and shall not be the responsibility of the
Agent; and the Company shall promptly take such steps as are or may become
necessary to ensure the accuracy and adequacy thereof. Notwithstanding the
foregoing, with respect to projections and other forward-looking information, if
any, contained in the Subscription Documents, the Company represents only that
such projections and other forward-looking information were prepared in good
faith, that the Company believes it has a reasonable basis for the projections
and other forward looking information and the assumptions on which they are
based, that the projections represent management’s estimate of possible results
of operations, that the Company is not aware of any change in its circumstances
or other fact that has occurred that would cause it to believe that it will be
unable to meet the forecasts set forth in the Subscription Documents.
6.18 Environmental
Matters. The
Company is in compliance with all federal, state, local, and regional statutes,
ordinances, orders, judgments, rulings, and regulations relating to any
environmental matter of pollution or of environmental regulation or control to
the extent that any failure to comply therewith or violation thereof have
resulted or are reasonably likely to result in material actual or potential
fines, penalties, or liabilities, and there are and have been no material
releases or threatened releases of “hazardous substances” into the environment,
as that term is defined in section 101(14) of the Comprehensive Environmental
Response Compensation and Liability Act, as amended. The Company has no notice
of any actual or claimed failure to comply with such statutes, ordinances,
orders, judgments, rulings, or regulations with respect to environmental
matters.
6.19 Material
Transactions or Affiliations. Every
contract, agreement, or arrangement between the Company and any predecessor and
any person who is or has ever been an officer or director of the Company or
person owning of record, or known by the Company to own beneficially, more than
5% of the issued and outstanding Common Stock and which is to be performed in
whole or in part after the date hereof or was entered into within three years
before the date hereof was for a bona fide business purpose of the Company, and
the amount paid or received, whether in cash, in services, or in kind, is, has
been during the full term thereof, and is required to be during the unexpired
portion of the term thereof, no less favorable to the Company than terms
available from otherwise unrelated parties in arm’s-length transactions. Each of
the foregoing is accurately and completely described in the Subscription
Documents.
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6.20 Books and
Records. The
books, records and accounts of the Company and its subsidiaries accurately and
fairly reflect, in all material respects and in reasonable detail, the
transactions and dispositions of their respective assets. The system of internal
accounting controls maintained by the Company and its subsidiaries is sufficient
to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or specific
authorization; (ii)
transactions are recorded as necessary (A) to permit preparation of financial
statements and (B) to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
6.21 Trading
Activity. The
Company has not taken and shall not take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the Common Stock to facilitate the sale of the Notes.
6.22 No
Registration Rights. Except
as described in Schedule
6.22 hereto,
there are no persons with registration rights or similar rights to have any
securities registered pursuant to the Subscription Documents or otherwise
registered by the Company under the Securities Act, and all of such rights have
been waived with respect to the Offering.
7. Covenants
of the Agent.
7.1 Best
Efforts. The
Agent covenants and agrees to use its best efforts as the exclusive agent of the
Company, to offer and sell the Notes; but this covenant shall not constitute an
obligation or guarantee to purchase or sell any or all of the Notes. The
right to offer and sell is subject to and limited by the conditions in the
Subscription Documents and this Agreement.
7.2 Compliance
with Securities Laws. The
Agent further covenants and agrees that:
7.2.1 The Agent
will offer the Notes only in
those states in which the Offering of the Notes has been
qualified for sale, or is exempt from registration, under the applicable state
statutes and regulations.
7.2.2 The
Agent, in connection with the offer and sale of the Notes and in
the performance of its duties and obligations under this Agreement, will comply
with all applicable federal laws and regulations, the laws and regulations of
the states or other jurisdictions in which the Notes are
offered and sold and the rules and regulations of the NASD, and will not, in
connection with its efforts hereunder to sell the Notes, make
any representation or give any information other than as contained in the
Subscription Documents.
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7.2.3 The Agent
will
maintain, and deliver a copy to the Company, a record of names and addresses of
persons to whom it delivered a copy of the Subscription Documents.
7.2.4 The Agent
shall not
make any factual statement or representation, whether written or oral,
concerning the Company, this Offering, or the Notes that is
inconsistent with the representations contained in the Subscription
Documents.
8. Representations
and Warranties of the Agent. The
Agent represents and warrants that:
8.1 Organization and
Corporate Power. It is a
corporation duly organized, validly existing and subsisting under the laws of
the Commonwealth of Pennsylvania, and has full corporate power and authority to
execute this Agreement and complete the transactions contemplated hereby.
8.2 Registration. It is
in good standing and duly registered as a broker-dealer so that it may undertake
the acts and obligations contemplated by this Agreement, in accordance with the
rules and regulations of the SEC, and the securities laws and regulations of the
Commonwealth of Pennsylvania and any other state in which it is contemplated
that the Agent may offer and sell the Notes.
8.3 NASD
Licensing. It is a
member in good standing of the NASD and will be able to offer and sell the
Notes in
compliance with registration provisions under which the Offering is to be
conducted under the Securities Act and the relevant qualifications in each state
in which the Notes will be
offered or sold, will have such licenses, approvals, and authorizations in any
states in which offers or sales of the Notes are made
at such time that any such offers or sales are made, and is subject to no
statutory disqualification provisions including, but not limited to those
contained in NASD Regulation Section 230.262.
8.4 Authorizations. The
execution, delivery, and performance of this Agreement has been duly authorized
by all requisite corporate action on behalf of the Agent, and this Agreement has
been duly executed and delivered and constitutes the valid and binding
obligation of the Agent enforceable in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting creditors’ rights, to
general principles of equity and to the extent that rights to indemnity
thereunder may be limited under applicable laws.
8.5 No
Breach. The
execution and delivery by the Agent of this Agreement, the performance by the
Agent of this Agreement and the completion of the transactions herein
contemplated will not conflict with or result in a breach of the terms of, or
constitute a default under or violation of, any law or regulation of any
governmental authority, domestic or foreign, or the articles of incorporation or
bylaws of the Agent or any material agreement or instrument to which the Agent
is a party or by which it is bound or to which it is subject, nor will it give
to others any interests or rights, including rights of termination,
acceleration, or cancellation, in of with respect to any of the properties,
assets, agreements, contracts, or business of the Agent.
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8.6 Governmental
Consent, Etc. No
permit, consent, approval, or authorization of, or declaration to, or filing
with, any governmental authority is required in connection with the execution,
delivery, and performance of this Agreement by the Agent or the consummation by
the Agent of any other transactions contemplated hereby, except as have been
obtained or accomplished and except as expressly acknowledged herein or in the
exhibits hereto.
8.7 Litigation. There
is no pending litigation, regulatory proceeding or order, disciplinary
proceeding or claim of violation, or, to the best knowledge of the Agent, any
threatened litigation, regulatory proceeding or order, disciplinary proceeding
or claim of violation, that could materially affect the ability of the Agent to
carry out its functions as the Agent contemplated by this Agreement.
9. Conditions
to Obligations of the Agent. The
obligations of the Agent under this Agreement are, at the option of the Agent,
subject to the satisfaction at or prior to the Initial Closing and through each
Subsequent Closing, of each of the following conditions:
9.1 All
representations and warranties and other statements of the Company herein are,
as applicable, at and as of the commencement of the Offering or as of the
applicable Closing Date, true and correct in all material respects, and the
Company shall have performed in all material respects all its obligations
hereunder to be performed on or before such dates.
9.2 No stop
order or similar prohibition suspending the use of the Subscription Documents
shall have been issued under any applicable law or proceedings thereof initiated
or threatened by any regulatory authority, and no order or other action
suspending the consummation of the transactions described in the Subscription
Documents shall have been issued or proceeding therefor initiated or threatened
by the SEC or any other regulatory authority.
9.3 At the
Initial Closing Date the Agent shall have received:
9.3.1 The
opinion addressed to the Agent as of the Initial Closing Date of Xxxxxx Xxxxxxxx
Xxxxxx & Xxxxxxx, counsel for the Company, in form and substance
satisfactory to the Agent’s counsel, substantially to the effect
that:
9.3.1.1 The
Company has been duly incorporated and is validly existing and in good standing
under the laws of the State of Nevada.
9.3.1.2 The
Company has the corporate power and authority to conduct its business and to
own, lease and operate its properties as described in the Subscription Documents
and as otherwise contemplated.
9.3.1.3 All
shares of Common Stock issuable upon conversion of the Notes pursuant to the
terms thereof have been duly and validly authorized for issuance, and when
issued and delivered by the Company pursuant to the terms of the Notes upon
conversion will be duly and validly issued and fully paid and
nonassessable.
9.3.1.4 This
Agreement has been duly authorized, executed and delivered by the Company and is
the legal, valid and binding agreement of the Company enforceable in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating to
or affecting creditors’ rights, to general principles of equity and to the
extent that rights to indemnity thereunder may be limited under applicable
laws.
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9.3.1.5 No stop
order or other prohibition suspending the use of the Subscription Documents has
been issued or, to the best of such counsel’s knowledge after reasonable
inquiry, proceedings therefor initiated or threatened by any regulatory
authority respecting the issuance of the Notes.
9.3.1.6 No
further approval, registration, authorization, consent or other order of any
public board or body is required in connection with the execution and delivery
of this Agreement, the issuance of the Notes (except
for approvals of state securities agencies, if any, as to which such counsel
need not express any opinion) and the consummation of the transactions described
in the Subscription Documents.
In
rendering the foregoing opinions, counsel may rely, as to factual matters, on
certificates of officers of the Company and on certificates of appropriate
public officials, and, as to certain legal matters, may rely on the opinions of
other legal counsel. In addition, such counsel’s opinion may be limited to laws
of the United States of America and the State of Nevada.
The
opinion letter shall also contain a paragraph substantially to the effect that
in the course of the preparation of the Subscription Documents and the
Subscription Documents, such counsel participated in conferences with officers
and representatives of the Company, and with the Company’s independent public
accountants, at which conferences the content of the Subscription Documents and
the Subscription Documents were discussed and at which conferences such counsel
made inquiries of such officers, representatives and accountants, and, on the
basis of the foregoing, nothing has come to such counsel’s attention that would
lead such counsel to believe that either the Subscription Documents or any
amendment thereto, as of the date the Subscription Documents or such amendment
is or was declared effective, and as of the Initial Closing Date, or the
Subscription Documents as of the date thereof and as of the Initial Closing
Date, contained or contains any untrue statement of a material fact or omitted
or omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel does not express any
belief with respect to the financial statements, and the notes and schedules
related thereto and other financial information or statistical data included in
the Subscription Documents, any amendment thereto, or the Subscription
Documents), or otherwise failed or fails to conform to the requirements of the
Securities Act. Without limiting the generality of the foregoing, such counsel
assumes no responsibility for the accuracy, completeness or fairness of any
statements contained in the Subscription Documents or Subscription Documents,
other than statements insofar as they relate to legal matters under the captions
“Risk Factors” and “Business.”
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9.3.2 At each
Closing Date, the Agent shall receive a joint certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company, dated as of such Closing
Date, to the effect that, except to the extent set forth in any amendment to the
Subscription Documents (i) since the respective dates as of when information was
given in the Subscription Documents, there has been no change in the financial
condition or in the earnings or business of the Company which has caused, or
would be reasonably expected to cause, a Material Adverse Effect, whether or not
arising in the ordinary course of business, (ii) the representations and
warranties in Section 6 are true and correct with the same force and effect as
though expressly made at and as of the Initial Closing Date, (iii) the Company
has complied with all agreements and satisfied all conditions relating to the
Offering and this Agreement on its part to be performed or satisfied at or prior
to the applicable Closing Date, (iv) no stop order suspending the use of the
Subscription Documents has been issued and no proceedings for that purpose have
been initiated or threatened and (v) no order suspending the Offering or the
authorization for final use of the Subscription Documents has been issued and no
proceedings for that purpose have been initiated or threatened.
9.3.3 At each
Closing Date after the Initial Closing Date, the Agent shall receive the written
opinions of Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxxx, dated as of such Closing Date,
to the effect set forth in Section 9.3.1; provided,
however, that in
lieu of such opinions, such counsel may furnish the Agent with a letter to the
effect that the Agent may rely on the opinion referred to in Section 9.3.1 to
the same extent as if it were dated such Closing Date.
9.3.4 At each
Closing Date, the Agent’s counsel shall have been furnished with such documents
and opinions as they may reasonably require for the purpose of enabling them to
pass upon the sale of the Notes as
herein contemplated and related proceedings or in order to evidence the accuracy
or completeness of any of the representations or warranties, or the fulfillment
of any of the conditions herein contained; and all proceedings taken by the
Company in connection with the Offering, this Agreement and the sale of the
Notes as
herein contemplated shall be reasonably satisfactory in form and substance to
the Agent and the Agent’s counsel.
9.3.5 The
Company shall not have sustained, since the date of the Latest Financial
Statements included in the Subscription Documents, any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Subscription Documents, and since the respective dates as of
which information is given in the Subscription Documents, there shall not have
been any change or any development involving a prospective change in, or
affecting the general affairs, business prospects, management, financial
position, stockholders’ equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Subscription Documents, the
effect of which, in any such case described above, is in the Agent’s reasonable
judgment so material and adverse as to make it impracticable or inadvisable to
proceed with the Offering or the delivery of the Notes on the
terms and in the manner contemplated in the Subscription Documents.
9.3.6 There
shall not exist as of the relevant date any of the following: (i) a suspension
or material limitation in trading in securities generally on the New York or
American Stock Exchanges or the Nasdaq National Market; or (ii) a general
moratorium on commercial bank activities or a general moratorium on the
withdrawal of deposits from federal stock savings banks insured by the
FDIC.
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9.4 Direction
to Escrow Agent. The
Company shall have directed the Escrow Agent to pay directly to the Agent at the
Closing any amounts due the Agent as of such Closing pursuant to this Agreement,
upon request of the Agent.
9.5 Further
Certificates. The
Company shall furnish or cause to have furnished to the Agent at such Closing
such further certification(s) and/or documents as the Agent shall have
reasonably requested, and the Agent shall furnish or cause to have furnished to
the Company at such Closing such further certification(s) and/or documents as
the Company shall have reasonably requested.
10. Termination.
10.1 Upon the
occurrence of any of the following events, the Agent, at its election, may
terminate this Agreement and neither party to this Agreement shall thereafter
have any obligation to the other hereunder, except for obligations of the
Company to the Agent as set forth in Sections 11, 12, 13 and 14 hereof, if: (i)
at any time, the Agent in its sole discretion determines that a Material Adverse
Effect has occurred in the financial condition or operations of the Company
since October 21, 2004; (ii) prior to the commencement of the Offering, the
Agent, in its sole discretion, determines that the Subscription Documents and/or
related disclosure documents do not accurately and satisfactorily disclose all
relevant information of and concerning the Company and that the sale of the
Notes based on
such information is not advisable; (iii) the Agent, in its sole discretion,
determines that due to the market conditions prevailing at the time the Offering
is to be commenced it is inadvisable to proceed with the Offering; or (iv) the
Initial Closing shall not have occurred by February 4, 2005.
10.2 In the
event the Company fails to meet the conditions specified in Section 9 hereof on
the applicable Closing Date, at the election of the Agent by notifying the
Company of such election in writing, this Agreement shall terminate and neither
party to this Agreement shall thereafter have any obligation to the other
hereunder, except for obligations of the Company to the Agent as set forth in
Sections 11, 12, 13 and 14 hereof.
10.3 This
Agreement may be terminated by the Agent, with respect to the Agent’s
obligations hereunder, by notifying the Company in writing of the same, and
neither party to this Agreement shall thereafter have any obligation to the
other hereunder, except for obligations of the Company to the Agent as set forth
in Sections 11, 12, 13 and 14 hereof.
10.4 This
Agreement may be terminated by the Company, at any time, by notifying the Agent
in writing of the same, and neither party to this Agreement shall thereafter
have any obligation to the other hereunder, except for obligations of the
Company to the Agent as set forth in Sections 11, 12, 13 and 14
hereof.
11. Compensation
to the Agent; Expenses of Offering.
11.1 Payment
of Fees and Commissions. Subject
to the terms, conditions, and covenants of this Agreement, the Company shall pay
to the Agent the following compensation for its services:
11.1.1 Subject
to the attainment of the Minimum Offering, fees and commissions from the sale of
the Notes of 4% of
the gross cash proceeds received from the Investors, payable in cash at or
before the Closing Date with respect to such Notes;
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11.1.2 In the
event that the Minimum Offering is not attained, or Agent’s appointment or this
Agreement is terminated pursuant to Sections 10.1, 10.2 or 10.4 hereof, the
Company will reimburse Agent for its reasonable out-of-pocket expenses in
connection with the Offering, including, but not limited to legal fees, in an
aggregate amount not to exceed $10,000, payable on the Withdrawal Date or the
effective date of such termination, as applicable.
11.2 Company
Offering Expenses. The
Company will pay all expenses incident to the Offering and the performance of
its obligations under this Agreement, including (a) the preparation and filing
of the Subscription Documents, including any filing fees, (b) the fees and
disbursements of counsel, accountants and consultants related to the preparation
of the Subscription Documents, (c) the fees of the Escrow Agent and other escrow
fees; (d) the qualification of the Notes for the offer and sale thereof under
the securities laws of the states the Company may reasonably designate,
including filing fees and the fees and disbursements of counsel in connection
therewith, and (d) the printing and delivery to the Agent of such quantities of
the Subscription Documents as the Agent may reasonably request and all
amendments or supplements thereto. Such costs and expenses shall be paid whether
the Offering is consummated or not, and the Company’s responsibility to pay such
expenses shall survive the termination of this Agreement. Except as otherwise
provided in Section 11.1.2 hereof, the Agent shall be solely responsible for its
out-of-pocket expenses, including counsel fees, incurred in connection with its
performance of its obligations hereunder.
12. Indemnification.
12.1 The
Company agrees to indemnify and hold harmless the Agent and its officers,
directors, agents, employees and each person, if any, who controls the Agent
within the meaning of Section 15 of the Securities Act, against all losses,
claims, damages or liabilities, joint or several, to which the Agent or any of
them may become subject under all applicable federal and state laws or
otherwise, and to reimburse the Agent and such persons for any expenses
(including reasonable fees and disbursements of counsel) incurred by the Agent
or any of them in connection with investigating, preparing or defending any
actions, to the extent such losses, claims, damages, liabilities or actions (i)
arise out of or are based upon any untrue statement or alleged untrue statement
contained in the Subscription Documents (or any amendment or supplement
thereto), or any Blue Sky Materials or other instrument executed by the Company
or based upon written information supplied by the Company filed in any state or
jurisdiction to qualify any or all of the Notes under the securities laws
thereof, or (ii) arise out of or are based upon the omission or alleged omission
to state in any of the foregoing documents a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or (iii) arise from or
are based upon any Subscription Documents distributed in connection with the
Offering and this Agreement; provided,
however, that
the Company shall not be liable in any such case to the extent such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact in, or material
omission or alleged material omission from, the Subscription Documents (or any
amendment or supplement thereto) made in reliance upon and in conformity with
information furnished in writing to the Company by the Agent regarding the Agent
expressly for use in the Subscription Documents or if the Agent fails to deliver
a Subscription Documents that corrects a deficient disclosure if such corrected
Subscription Documents was made available to the Agent on a timely basis. The
Company agrees that as of the date hereof the Agent has furnished no information
for use in the Subscription Documents.
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12.2 The Agent
agrees to indemnify and hold harmless the Company, its directors, officers,
employees, agents and each person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act against all losses, claims, damages
or liabilities, joint or several, to which they, or any or them, may become
subject under all applicable federal and state laws or otherwise, and to
reimburse the Company and such persons for any expenses (including reasonable
fees and disbursements of counsel) incurred by them, in connection with
investigating, preparing or defending any actions, to the extent such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Subscription Documents (or any amendment or supplement thereto), or based upon
the omission or alleged omission to state in the Subscription Documents a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that
the Agent’s obligations under this Section 12.2 shall exist only if and only to
the extent that such untrue statement or alleged omitted material fact was
contained in the Subscription Documents (or any amendment or supplement thereto)
in reliance upon and in conformity with information furnished in writing to the
Company by the Agent regarding the Agent expressly for use in the Subscription
Documents.
12.3 Promptly
after receipt by an indemnified party under this Section 12 of notice of any
claim or the commencement of any action, the indemnified party shall, if a claim
in respect thereof is to be made against the indemnifying party under this
Section 12, notify the indemnifying party in writing of the claim or the
commencement of that action; provided,
however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party. No indemnification provided
for in this Section 12 shall be available to any party who shall fail to give
notice as provided in this Section 12.3 if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related and
was materially prejudiced by the failure to give such notice, but the failure to
give such notice shall not relieve the indemnifying party or parties from any
liability which it or they may have to the indemnified party for (i)
contribution or (ii) otherwise than on account of the provisions of this Section
12. If any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 12 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that
any indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying party in
writing, (ii) such indemnified party shall have been advised by such counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the
reasonable judgment of such counsel it is advisable for such indemnified party
to employ separate counsel or (iii) the indemnifying party has failed to assume,
within a reasonable period of time, the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 12.1 and 12.2, shall use its best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall be liable for any settlement of any
such action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
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12.4 The
agreements contained in this Section 12 and in Section 13 hereof and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Agent or its officers, directors or
controlling persons, or by or on behalf of the Company or any officers,
directors or controlling persons of the Company, (ii) delivery of and payment
for the Notes, or (iii) any termination of this Agreement.
13. Contribution. In
order to provide for just and equitable contribution in circumstances in which
the indemnification provided for in Section 12 is due in accordance with its
terms but is for any reason held by a court to be unavailable from the Company,
the Company and the Agent shall contribute to the aggregate losses, claims,
damages and liabilities (including any investigation, legal and other expenses)
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, (but deducting from such aggregate
amount any contribution received by the Company from persons other than the
Agent, who may also be liable for contribution) to which the Company may be
subject in such proportion so that the Agent is responsible for that portion
represented by the percentage that the compensation paid to the Agent pursuant
to Section 11 of this Agreement (not including expenses) bears to the gross
proceeds received by the Company from the sale of the Notes in the Offering, and
the Company shall be responsible for the balance. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as appropriate to reflect
not only such relative benefits but also the relative fault of the Company on
the one hand and the Agent on the other hand in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Agent on the other hand shall be deemed to be in the same proportion
as total
net proceeds from the sale of Notes (before deducting expenses) received by the
Company bear to the total compensation (not including expenses) received by the
Agent. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to written
information supplied by the Company on the one hand or the Agent on the other
hand and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
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The
Company and the Agent agree that it would not be just and equitable if
contribution pursuant to this Section 13 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
considerations referred to above in this Section 13. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section 13
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim and permitted by the provisions of Section 12. Notwithstanding
the provisions of this Section 13, the Agent shall not be required to contribute
any amount in excess of the amount by which the aggregate price of Notes sold in
the Offering exceeds the amount of any damages which the Agent would have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of any fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Company and the Agent under
this Section 13 and under Section 12 shall be in addition to any liability which
the Company and the Agent may otherwise have. For purposes of this Section 13,
each of the Agent’s officers and directors and each person, if any, who controls
the Agent within the meaning of the Securities Act shall have the same rights to
contribution as the Agent and each person, if any, who controls the Company
within the meaning of the Securities Act, and each officer and director of the
Company shall have the same rights to contribution as the Company. Any party
entitled to contribution, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in respect to which a claim
for contribution may be made against another party under this Section 13, will
notify such party from whom contribution may be sought, but the omission to so
notify such party shall not relieve the party from whom contribution may be
sought from any other obligation it may have hereunder or otherwise than under
this Section 13.
14. Miscellaneous.
14.1 Expenses.
14.1.1 The
Company will pay, and hold the Agent harmless against liability for the payment
of (i)
reasonable fees and expenses (excluding such expenses for which the Agent is
responsible under Section 11.2 hereof) incurred with respect to any amendments
or waivers requested by the Company (whether or not the same become effective)
under or in respect of this Agreement, the Notes, or the other agreements
contemplated hereby; (ii) stamp
and other taxes which may be payable in respect to the execution and delivery of
this Agreement or the issuance, delivery, or sales of the Notes; and
(iii) should
the Agent be the prevailing party in litigation brought for such purpose,
reasonable fees and expenses incurred, as against the Company, in respect of the
enforcement of the rights granted under this Agreement, the Notes, or the other
agreements contemplated hereby.
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14.1.2 In any
litigation arising out of this Agreement, the prevailing party shall be entitled
to recover its legal fees in an amount determined reasonable by a court of
competent jurisdiction.
14.2 Notice. All
notices hereunder by any party to the other shall be in writing. All notices,
demands and requests shall be deemed given three days after the date when
mailed, postage prepaid, registered or certified mail, return receipt requested,
or immediately upon confirmation of receipt, if delivered by facsimile
transmission, or one day after delivery to a recognized overnight courier
service, to:
To the
Company:
VendingData
Corporation
0000
Xxxxxxx Xxxxxx
Xxx
Xxxxx, Xxxxxx 00000
Attention:
Xxxxxx X. Xxxx
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
with a
copy to:
Xxxxxx
Xxxxxxxx Xxxxxx & Xxxxxxx
0000
Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx
Xxxxx
Xxx
Xxxxx, Xxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
To the
Agent:
Philadelphia
Brokerage Corporation
000 Xxx
Xxxxx Xxxxxx Xxxx
Xxxxx
000
Xxxxx,
Xxxxxxxxxxxx 00000
Attention:
Xxxxxx Xxxx
Telephone:
(000) 000-0000
Telecopy:
(000) 000-0000
or to
such other address or to such other person as may be designated by notice given
from time to time during the term of this Agreement by one party to the
other.
14.3 Remedies. The
Agent and the Company will have all rights and remedies set forth in this
Agreement. Any person having any rights under any provision of this Agreement
will be entitled to enforce these rights specifically, to recover damages by
reason of any breach of any provision of this Agreement, and to exercise all
other rights granted by law.
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14.4 Consent to
Amendments and Waivers. Except
as otherwise expressly provided herein, the provisions of this Agreement may be
amended, and the Company or the Agent, as the case may be, may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if it has obtained the written consent of the other. No course of
dealing between the Company and the Agent or any delay in exercising any rights
hereunder will operate as a waiver of any rights of the Agent or the Company.
14.5 Survival of
Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith will survive the execution and delivery of this Agreement
regardless of any investigation made by the Agent, the Company, or on their
respective behalves.
14.6 Successors and
Assigns. Except
as otherwise expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. Neither party hereto shall have the right to
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the prior written consent of the other
party.
14.7 Entire
Agreement; Amendments. This
Agreement, and any exhibits or schedules referred to herein, and the documents
delivered pursuant hereto contain the entire understanding of the parties hereto
with regard to the subject matter contained herein or therein, and supercedes
all prior agreements, understandings or letters of intent between of among any
of the parties hereto. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by an authorized
representative of each of the parties hereto.
14.8 Severability.
Whenever possible, each provision of this Agreement will be interpreted in a
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
that provision will be ineffective only to the extent of the prohibition or
invalidity, without invalidating the remainder of this Agreement.
14.9 Counterparts. This
Agreement may be executed in two or more counterparts, any one of which need not
contain the signatures of more than one party, but all counterparts taken
together will constitute one and the same Agreement.
14.10 Descriptive
Heading. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
14.11 Governing
Law. The
construction, validity, and interpretation of this Agreement will be governed by
the laws of the Commonwealth of Pennsylvania notwithstanding any
conflict-of-laws doctrines of such state or any other jurisdiction to the
contrary, and without the aid of any canon, custom or rule of law requiring
construction against the draftsman.
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective
on the date first written above.
VENDINGDATA
CORPORATION
By:
Name:
Title:
PHILADELPHIA
BROKERAGE CORPORATION
By:
Name:
Title:
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