Exhibit 4.1
GLOBAL PAYMENT TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
MARCH __, 2004
TABLE OF CONTENTS
Page #
------
1. Agreement to Sell and Purchase...........................................................................1
2. Fees and Warrant. On the Closing Date:..................................................................1
3. Closing, Delivery and Payment............................................................................2
3.1 Closing.........................................................................................2
3.2 Delivery........................................................................................2
4. Representations and Warranties of the Company............................................................2
4.1 Organization, Good Standing and Qualification...................................................2
4.2 Subsidiaries....................................................................................3
4.3 Capitalization; Voting Rights...................................................................3
4.4 Authorization; Binding Obligations..............................................................4
4.5 Liabilities.....................................................................................4
4.6 Agreements; Action..............................................................................4
4.7 Obligations to Related Parties..................................................................5
4.8 Changes.........................................................................................5
4.9 Title to Properties and Assets; Liens, Etc......................................................6
4.10 Intellectual Property...........................................................................7
4.11 Compliance with Other Instruments...............................................................7
4.12 Litigation......................................................................................8
4.13 Tax Returns and Payments........................................................................8
4.14 Employees.......................................................................................8
4.15 Registration Rights and Voting Rights...........................................................9
4.16 Compliance with Laws; Permits...................................................................9
4.17 Environmental and Safety Laws...................................................................9
4.18 Valid Offering.................................................................................10
4.19 Full Disclosure................................................................................10
4.20 Insurance......................................................................................10
4.21 SEC Reports....................................................................................10
4.22 Listing........................................................................................10
4.23 No Integrated Offering.........................................................................10
4.24 Stop Transfer..................................................................................11
4.25 Dilution.......................................................................................11
4.26 Patriot Act....................................................................................11
5. Representations and Warranties of the Purchaser.........................................................11
5.1 No Shorting....................................................................................12
5.2 Requisite Power and Authority..................................................................12
5.3 Investment Representations.....................................................................12
5.4 Purchaser Bears Economic Risk..................................................................12
5.5 Acquisition for Own Account....................................................................12
5.6 Purchaser Can Protect Its Interest.............................................................13
5.7 Accredited Investor............................................................................13
5.8 Legends........................................................................................13
i
TABLE OF CONTENTS
(Cont'd)
6. Covenants of the Company................................................................................15
6.1 Stop-Orders....................................................................................15
6.2 Listing........................................................................................15
6.3 Market Regulations.............................................................................15
6.4 Reporting Requirements.........................................................................15
6.5 Use of Funds...................................................................................15
6.6 Access to Facilities...........................................................................16
6.7 Taxes..........................................................................................16
6.8 Insurance......................................................................................16
6.9 Intellectual Property..........................................................................17
6.10 Properties.....................................................................................17
6.11 Confidentiality................................................................................17
6.12 Required Approvals.............................................................................17
6.13 Reissuance of Securities.......................................................................19
7. Covenants of the Purchaser..............................................................................19
7.1 Confidentiality................................................................................19
7.2 Non-Public Information.........................................................................19
8. Covenants of the Company and Purchaser Regarding Indemnification.
8.1 Company Indemnification. .....................................................................19
8.2 Purchaser's Indemnification....................................................................20
8.3 Procedures.....................................................................................20
9. Conversion of Convertible Note..........................................................................20
9.1 Mechanics of Conversion........................................................................20
9.2 Maximum Conversion.............................................................................21
10. Registration Rights, Indemnification....................................................................22
10.1 Registration Rights Granted....................................................................22
10.2 Indemnification................................................................................22
10.3 Offering Restrictions..........................................................................24
11. Miscellaneous...........................................................................................24
11.1 Governing Law..................................................................................24
11.2 Survival.......................................................................................24
11.3 Successors.....................................................................................24
11.4 Entire Agreement...............................................................................25
11.5 Severability...................................................................................25
11.6 Amendment and Waiver...........................................................................25
11.7 Delays or Omissions............................................................................25
11.8 Notices........................................................................................25
11.9 Attorneys' Fees................................................................................26
11.10 Titles and Subtitles...........................................................................26
11.11 Facsimile Signatures; Counterparts.............................................................26
11.12 Broker's Fees..................................................................................27
ii
TABLE OF CONTENTS
(Cont'd)
11.13 Construction...................................................................................27
LIST OF EXHIBITS
Form of Convertible Term Note..................................... Exhibit A
Form of Warrant................................................... Exhibit B
Form of Opinion................................................... Exhibit C
Form of Escrow Agreement.......................................... Exhibit D
iii
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of March __, 2004, by and between GLOBAL PAYMENT TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), and Laurus Master Fund, Ltd., a Cayman
Islands company (the "Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale to the Purchaser of a
Convertible Term Note in the aggregate principal amount of One Million Five
Hundred Dollars ($1,500,000.00) (the "Note"), which Note is convertible into
shares of the Company's common stock, $0.01 par value per share (the "Common
Stock") at a fixed conversion price of $[ ] per share of Common Stock [105% of
the average closing bid price of the Common Stock for the ten (10) trading days
prior to Closing] ("Fixed Conversion Price");
WHEREAS, the Company wishes to issue a warrant to the Purchaser to purchase
up to 200,000 shares of the Company's Common Stock in connection with
Purchaser's purchase of the Note;
WHEREAS, Purchaser desires to purchase the Note and Warrant on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Sell and Purchase. Pursuant to the terms and conditions set
forth in this Agreement, on the Closing Date (as defined in Section 3), the
Company agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company a Note in the amount of $1,500,000 convertible in
accordance with the terms thereof into shares of the Company's Common Stock in
accordance with the terms of the Note and this Agreement. The Note purchased on
the Closing Date shall be known as the "Offering." A form of the Note is annexed
hereto as Exhibit A. The Note will have a Maturity Date (as defined in the Note)
thirty six (36) months from the date of issuance. Collectively, the Note and
Warrant (as defined in Section 2) and Common Stock issuable in payment of the
Note, upon conversion of the Note and upon exercise of the Warrant are referred
to as the "Securities."
2. Fees and Warrant. On the Closing Date:(a) The Company will issue and
deliver to the Purchaser a Warrant to purchase up to 200,000 shares of Common
Stock in connection with the Offering (the "Warrant") pursuant to Section 1
hereof. The Warrant must be delivered on the Closing Date. A form of Warrant is
annexed hereto as Exhibit B. All the representations,
covenants, warranties, undertakings, and indemnification, and other rights made
or granted to or for the benefit of the Purchaser by the Company are hereby also
made and granted in respect of the Warrant and shares of the Company's Common
Stock issuable upon exercise of the Warrant (the "Warrant Shares").
(b) Subject to the terms of Section 2(d) below, the Company shall pay
to Laurus Capital Management, LLC, manager of Purchaser a closing payment in an
amount equal to three and one-half percent (3.50%) of the aggregate principal
amount of the Note. The foregoing fee is referred to herein as the "Closing
Payment."
(c) The Company shall reimburse the Purchaser for its reasonable legal
fees for services rendered to the Purchaser in preparation of this Agreement and
the Related Agreements (as hereinafter defined), and expenses in connection with
the Purchaser's due diligence review of the Company and relevant matters.
Amounts required to be paid hereunder will be paid at the Closing and shall be
$22,000 for legal fees and expenses and $8,750 for performing due diligence
inquiries on the Company.
(d) The Closing Payment, legal fees and due diligence fees (net of
deposits previously paid by the Company shall be paid at closing out of funds
held pursuant to a Funds Escrow Agreement of even date herewith among the
Company, Purchaser, and an Escrow Agent (the "Funds Escrow Agreement") and a
disbursement letter (the "Disbursement Letter").
3. Closing, Delivery and Payment.
------------------------------
3.1 Closing. Subject to the terms and conditions herein, the
closing of the transactions contemplated hereby (the "Closing"), shall take
place on the date hereof, at such time or place as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the "Closing Date").
3.2 Delivery. Pursuant to the Funds Escrow Agreement in the
form attached hereto as Exhibit C, at the Closing on the Closing Date, the
Company will deliver to the Purchaser, among other things, a Note in the form
attached as Exhibit A representing the principal amount of $1,500,000 and a
Warrant in the form attached as Exhibit B in the Purchaser's name representing
200,000 Warrant Shares and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Disbursement Letter by certified
funds or wire transfer.
4 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as of the date of this Agreement as set
forth below which disclosures are supplemented by, and subject to, the Company's
filings under the Securities Exchange Act of 1934 (collectively, the "Exchange
Act Filings"), copies of which have been provided or made available to the
Purchaser.
4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has the corporate power and authority to
own and operate its properties
2
and assets, to execute and deliver this Agreement, and the Note and the Warrant
to be issued in connection with this Agreement, the Security Agreement relating
to the Note dated as of March __, 2004 between the Company and the Purchaser,
the Registration Rights Agreement relating to the Securities dated as of March
__, 2004 between the Company and the Purchaser and all other agreements referred
to herein (collectively, the "Related Agreements"), to issue and sell the Note
and the shares of Common Stock issuable upon conversion of the Note (the "Note
Shares"), to issue and sell the Warrant and the Warrant Shares, and to carry out
the provisions of this Agreement and the Related Agreements and to carry on its
business as presently conducted. The Company is duly qualified and is authorized
to do business and is in good standing as a foreign corporation in all
jurisdictions in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.
4.2 Subsidiaries. Except as set forth on Schedule 4.2
attached hereto, the Company does not own or control any equity security or
other interest of other corporation, limited partnership or other business
entity.
4.3 Capitalization; Voting Rights.
------------------------------
(a) The authorized capital stock of the Company, as of the
date hereof consists of 20,000,000 shares, of which 20,000,000 are shares of
Common Stock, par value $0.01 per share, 5,851,877 shares of which are issued
and outstanding as of February 27, 2004. No shares of preferred stock are
authorized, issued or outstanding.
(b) Except as disclosed on Schedule 4.3 or as disclosed in
any Exchange Act Filings, other than: (i) the shares reserved for issuance under
the Company's stock option plans; and (ii) shares which may be granted pursuant
to this Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or agreements of any
kind for the purchase or acquisition from the Company of any of its securities.
Except as disclosed on Schedule 4.3, neither the offer, issuance or sale of any
of the Note or Warrant, or the issuance of any of the Note Shares or Warrant
Shares, nor the consummation of any transaction contemplated hereby will result
in a change in the price or number of any securities of the Company outstanding,
under anti-dilution or other similar provisions contained in or affecting any
such securities.
(c) All issued and outstanding shares of the Company's
Common Stock: (i) have been duly authorized and validly issued and are fully
paid and nonassessable; and (ii) were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
(d) The rights, preferences, privileges and restrictions of
the shares of the Common Stock are as stated in the Company's Certificate of
Incorporation (the "Charter"). The Note Shares and Warrant Shares have been duly
and validly reserved for issuance. When issued in compliance with the provisions
of this Agreement and the Company's Charter, the Securities will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Securities may be subject to
restrictions on transfer
3
under state and/or federal securities laws as set forth herein or as otherwise
required by such laws at the time a transfer is proposed.
4.4 Authorization; Binding Obligations. All corporate action
on the part of the Company, its officers and directors necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder at the Closing and, the authorization,
sale, issuance and delivery of the Note and Warrant has been taken or will be
taken prior to the Closing. The Agreement and the Related Agreements, when
executed and delivered and to the extent it is a party thereto, will be valid
and binding obligations of the Company enforceable in accordance with their
terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) general principles of equity that restrict the
availability of equitable or legal remedies.
The sale of the Note and the subsequent conversion of the Note into Note Shares
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. The issuance of the
Warrant and the subsequent exercise of the Warrant for Warrant Shares are not
and will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
4.5 Liabilities. As of December 31, 2003, the Company, to
the best of its knowledge, has no material contingent liabilities, except
current liabilities incurred in the ordinary course of business and liabilities
disclosed in any Exchange Act Filings.
4.6 Agreements; Action. Except as set forth on Schedule 4.6
or as disclosed in any Exchange Act Filings:
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve: (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business); or (ii) the transfer or license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off the shelf" or other standard
products); or (iii) provisions restricting the development, manufacture or
distribution of the Company's products or services; or (iv) indemnification by
the Company with respect to infringements of proprietary rights.
(b) Since December 31, 2003, the Company has not: (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock; (ii) incurred any
indebtedness for money borrowed or any other liabilities (other than ordinary
course obligations) individually in excess of $50,000 or, in the case of
indebtedness and/or liabilities individually less than $50,000, in excess of
$100,000 in the aggregate; (iii) made any loans or advances to any person not in
excess, individually or in the aggregate, of $100,000, other than ordinary
advances for travel expenses; or (iv) sold, exchanged
4
or otherwise disposed of any of its assets or rights, other than the sale of its
inventory in the ordinary course of business.
(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
4.7 Obligations to Related Parties. Except as set forth on
Schedule 4.7 or as disclosed in any Exchange Act Filings, there are no
obligations of the Company to officers, directors, stockholders or employees of
the Company other than:
(a) for payment of salary for services rendered and for
bonus payments;
(b) reimbursement for reasonable expenses incurred on behalf
of the Company;
(c) for other standard employee benefits made generally
available to all employees (including stock option agreements outstanding under
any stock option plan approved by the Board of Directors of the Company); and
(d) obligations listed in the Company's financial statements
or disclosed in any of its Exchange Act Filings.
Except as described above or set forth on Schedule 4.7 or as disclosed in any
Exchange Act Filings, none of the officers, directors or, to the best of the
Company's knowledge, key employees or stockholders of the Company or any members
of their immediate families, are indebted to the Company, individually or in the
aggregate, in excess of $60,000 or have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may
compete with the Company. Except as described above, no officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company and no
agreements, understandings or proposed transactions are contemplated between the
Company and any such person. Except as set forth on Schedule 4.7, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
4.8 Changes. Since December 31, 2003, except as disclosed in
any Exchange Act Filing or in Schedule 4.8 to this Agreement or in any schedule
attached to the Related Agreements, there has not been:
(a) Any change in the assets, liabilities, financial
condition, prospects or operations of the Company, other than changes in the
ordinary course of business, none of which individually or in the aggregate has
had or is reasonably expected to have a material adverse effect on such assets,
liabilities, financial condition, prospects or operations of the Company;
5
(b) Any resignation or termination of any officer, key
employee or group of employees of the Company;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect material loans made by the
Company to any stockholder, employee, officer or director of the Company, other
than advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity related to the Company;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the
Company is a party or by which it is bound which may materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of the Company;
(m) Any other event or condition of any character that,
either individually or cumulatively, has or may materially and adversely affect
the business, assets, liabilities, financial condition, prospects or operations
of the Company; or
(n) Any arrangement or commitment by the Company to do any
of the acts described in subsection (a) through (m) above.
4.9 Title to Properties and Assets; Liens, Etc. Except as
set forth on Schedule 4.9 or as disclosed in any Exchange Act Filings, the
Company has good and marketable title to its properties and assets, and good
title to its leasehold estates, in each case subject to no mortgage, pledge,
lien, lease, encumbrance or charge, other than:
6
(a) those resulting from taxes which have not yet become
delinquent;
(b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company; and
(c) those that have otherwise arisen in the ordinary course
of business.
All facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used. Except as set forth on Schedule 4.9 or as disclosed in any Exchange Act
Filings, the Company is in compliance with all material terms of each lease to
which it is a party or is otherwise bound.
4.10 Intellectual Property.
(a) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted and to the Company's knowledge as presently
proposed to be conducted (the "Intellectual Property"), without any known
infringement of the rights of others. There are no outstanding options, licenses
or agreements of any kind relating to the foregoing proprietary rights, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging
that the Company has violated any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other proprietary rights of any
other person or entity, nor is the Company aware of any basis therefor.
(c) The Company does not believe it is or will be necessary
to utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been rightfully
assigned to the Company.
4.11.....Compliance with Other Instruments. Except as set forth
on Schedule 4.11 or as disclosed in any Exchange Act Filings, the Company is not
in violation or default of any term of its Charter or Bylaws, or of any material
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order or writ. The execution, delivery and performance of and compliance
with this Agreement and the Related Agreements to which it is a party, and the
issuance and sale of the Note by the Company and the other Securities by the
Company each pursuant hereto, will not, with or without the passage of time or
giving of notice, result in any such material violation, or be in conflict with
or constitute a default under any such term or provision, or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company or the suspension, revocation, impairment,
forfeiture or nonrenewal of
7
any permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
4.12 Litigation. Except as set forth on Schedule 4.12 hereto
or as disclosed in any Exchange Act Filings, there is no action, suit,
proceeding or investigation pending or, to the Company's knowledge, currently
threatened against the Company that prevents the Company to enter into this
Agreement or the Related Agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs
or prospects of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, nor is the Company aware that there is
any basis for any of the foregoing. The Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
4.13 Tax Returns and Payments. The Company has timely filed
all tax returns (federal, state and local) required to be filed by it. All taxes
shown to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 4.13 or as disclosed in any Exchange
Act Filings, the Company has not been advised:
(a) that any of its returns, federal, state or other, have
been or are being audited as of the date hereof; or
(b) of any deficiency in assessment or proposed judgment to
its federal, state or other taxes.
The Company has no knowledge of any liability of any tax to be imposed upon its
properties or assets as of the date of this Agreement that is not adequately
provided for.
4.14 Employees. Except as set forth on Schedule 4.14, the
Company has no collective bargaining agreements with any of its employees. There
is no labor union organizing activity pending or, to the Company's knowledge,
threatened with respect to the Company. Except as disclosed in the Exchange Act
Filings or on Schedule 4.14, the Company is not a party to or bound by any
currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Company's knowledge, no employee
of the Company, nor any consultant with whom the Company has contracted, is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual to
be employed by, or to contract with, the Company because of the nature of the
business to be conducted by the Company; and to the Company's knowledge the
continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would
8
interfere with their duties to the Company. The Company has not received any
notice alleging that any such violation has occurred. Except for employees who
have a current effective employment agreement with the Company, no employee of
the Company has been granted the right to continued employment by the Company or
to any material compensation following termination of employment with the
Company. Except as set forth on Schedule 4.14, the Company is not aware that any
officer, key employee or group of employees intends to terminate his, her or
their employment with the Company, nor does the Company have a present intention
to terminate the employment of any officer, key employee or group of employees.
4.15 Registration Rights and Voting Rights. Except as set
forth on Schedule 4.15 and except as disclosed in Exchange Act Filings, the
Company is presently not under any obligation, and has not granted any rights,
to register any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued. Except as set forth on Schedule 4.15
and except as disclosed in Exchange Act Filings, to the Company's knowledge, no
stockholder of the Company has entered into any agreement with respect to the
voting of equity securities of the Company.
4.16 Compliance with Laws; Permits. Except as set forth on
Schedule 4.16 or as disclosed in any Exchange Act Filings, to its knowledge, the
Company is not in violation in any material respect of any applicable statute,
rule, regulation, order or restriction of any domestic or foreign government or
any instrumentality or agency thereof in respect of the conduct of its business
or the ownership of its properties which violation would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. No governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of any of the
Securities, except such as has been duly and validly obtained or filed, or with
respect to any filings that must be made after the Closing, as will be filed in
a timely manner. The Company has all material franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects or financial condition of the Company.
4.17 Environmental and Safety Laws. The Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. Except as set forth on Schedule 4.17, no Hazardous
Materials (as defined below) are used or have been used, stored, or disposed of
by the Company or, to the Company's knowledge, by any other person or entity on
any property owned, leased or used by the Company. For the purposes of the
preceding sentence, "Hazardous Materials" shall mean:
(a) materials which are listed or otherwise defined as
"hazardous" or "toxic" under any applicable local, state, federal and/or foreign
laws and regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials; or
9
(b) any petroleum products or nuclear materials.
4.18 Valid Offering. Assuming the accuracy of the
representations and warranties of the Purchaser contained in this Agreement, the
offer, sale and issuance of the Securities will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and, if required, will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
4.19 Full Disclosure. The Company has provided the Purchaser
with all information requested by the Purchaser in connection with its decision
to purchase the Note and Warrant, including all information the Company believes
is reasonably necessary to make such investment decision. Neither this
Agreement, the exhibits and schedules hereto, the Related Agreements nor any
other document delivered by the Company to Purchaser or its attorneys or agents
in connection herewith or therewith or with the transactions contemplated hereby
or thereby, contain any untrue statement of a material fact nor omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances in which they are made, not misleading.
Any financial projections and other estimates provided to the Purchaser by the
Company were based on the Company's experience in the industry and on
assumptions of fact and opinion as to future events which the Company, at the
date of the issuance of such projections or estimates, believed to be
reasonable.
4.20 Insurance. The Company has general commercial, product
liability, fire and casualty insurance policies with coverages which the Company
believes are customary for companies similarly situated to the Company in the
same or similar business.
4.21 SEC Reports. Except as set forth on Schedule 4.21, the
Company has filed all proxy statements, reports and other documents required to
be filed by it under the Exchange Act. The Company has furnished or made
available to the Purchaser copies of: (i) its Annual Report on Form 10-K for the
fiscal year ended September 30, 2003; and (ii) its Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2003, and the Form 8-K filings which
it has made during 2004 to date (collectively, the "SEC Reports"). Except as set
forth on Schedule 4.21, each SEC Report was, at the time of its filing, in
substantial compliance with the requirements of its respective form and none of
the SEC Reports, nor the financial statements (and the notes thereto) included
in the SEC Reports, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22 Listing. The Company's Common Stock is listed for
trading on the NASDAQ National Market ("NASDAQ") and satisfies all requirements
for the continuation of such listing. The Company has not received any notice
that its Common Stock will be delisted from NASDAQ or that its Common Stock does
not meet all requirements for listing. No Integrated Offering. 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
the offering of the Securities pursuant to this Agreement to be integrated with
prior offerings by the Company for purposes of
10
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its affiliates or subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.
4.24 Stop Transfer. The Securities are restricted securities
as of the date of this Agreement. The Company will not issue any stop transfer
order or other order impeding the sale and delivery of any of the Securities at
such time as the Securities are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the Note and
exercise of the Warrant is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
shareholders of the Company.
4.26 Patriot Act. If the Company is a corporation, trust,
partnership, limited liability Purchaser or other organization, the Company
certifies that, to the best of Company's knowledge, the Company has not been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Company hereby acknowledges that the
Purchaser seeks to comply with all applicable laws concerning money laundering
and related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that the
Company will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Company to the Purchaser,
to the extent that they are within the Company's control shall cause the
Purchaser to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Company shall promptly notify the Purchaser if any of these
representations ceases to be true and accurate regarding the Company. The
Company agrees to provide the Purchaser any additional information regarding the
Company that the Purchaser deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Company understands and agrees that if at any time it is discovered that any of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Purchaser may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Company's investment in the Purchaser. The Company further understands that
the Purchaser may release confidential information about the Company and, if
applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests
of the Purchaser in light of relevant rules and regulations under the laws set
forth in subsection (ii) above.
5. Representations and Warranties of the Purchaser. The Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement).
11
5.1 No Shorting. The Purchaser or any of its affiliates and
investment partners has not, will not and will not cause any person or entity,
directly or indirectly, to engage in "short sales" of the Company's Common Stock
or any other hedging strategies as long as the Note shall be outstanding.
5.2 Requisite Power and Authority. Purchaser has all
necessary power and authority under all applicable provisions of law to execute
and deliver this Agreement and the Related Agreements and to carry out their
provisions. All corporate action on Purchaser's part required for the lawful
execution and delivery of this Agreement and the Related Agreements have been or
will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement and the Related Agreements will be valid and binding
obligations of Purchaser, enforceable in accordance with their terms, except:
(a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; and
(b) as limited by general principles of equity that restrict
the availability of equitable and legal remedies.
5.3 Investment Representations. Purchaser understands that
the Securities are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement, including, without limitation, that
the Purchaser is an "accredited investor" within the meaning of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"). The
Purchaser confirms that it has received or has had full access to all the
information it considers necessary or appropriate to make an informed investment
decision with respect to the Note and the Warrant to be purchased by it under
this Agreement and the Note Shares and the Warrant Shares acquired by it upon
the conversion of the Note and the exercise of the Warrant, respectively. The
Purchaser further confirms that it has had an opportunity to ask questions and
receive answers from the Company regarding the Company's business, management
and financial affairs and the terms and conditions of the Offering, the Note,
the Warrant and the Securities and to obtain additional information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
the Purchaser or to which the Purchaser had access.
5.4 Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to: (i) an effective
registration statement under the Securities Act; or (ii) an exemption from
registration is available with respect to such sale.
5.5 Acquisition for Own Account. Purchaser is acquiring the
Note and Warrant and the Note Shares and the Warrant Shares for Purchaser's own
account for investment only, and not as a nominee or agent and not with a view
towards or for resale in connection with their distribution.
12
5.6 Purchaser Can Protect Its Interest. Purchaser represents
that by reason of its, or of its management's, business and financial
experience, Purchaser has the capacity to evaluate the merits and risks of its
investment in the Note, the Warrant and the Securities and to protect its own
interests in connection with the transactions contemplated in this Agreement,
and the Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement
or the Related Agreements.
5.7 Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
5.8 Patriot Act. If the Purchaser is a corporation, trust,
partnership, limited liability company or other organization, the Purchaser
certifies that, to the best of Purchaser's knowledge, the Purchaser has not been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Purchaser hereby acknowledges that the
Company seeks to comply with all applicable laws concerning money laundering and
related activities. In furtherance of those efforts, the Purchaser hereby
represents, warrants and agrees that: (i) none of the cash or property that the
Purchaser will pay or will contribute to the Company has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Purchaser to the Company,
to the extent that they are within the Purchaser's control shall cause the
Company to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Purchaser shall promptly notify the Company if any of these
representations ceases to be true and accurate regarding the Purchaser. The
Purchaser agrees to provide the Company any additional information regarding the
Purchaser that the Company deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Purchaser understands and agrees that if at any time it is discovered that any
of the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Company may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Purchaser's investment in the Company. The Purchaser further understands
that the Company may release confidential information about the Purchaser and,
if applicable, any underlying beneficial owners, to proper authorities if the
Company, in its sole discretion, determines that it is in the best interests of
the Company in light of relevant rules and regulations under the laws set forth
in subsection (ii) above.
5.9 Reoffers and Resales. Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of the
Securities unless registered under the Securities Act or pursuant to an
exemption from registration under the Securities Act.
5.10 No Advertisement, Etc. Purchaser is not subscribing for
the Securities as a result of, or pursuant to, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or presented at any seminar or
meeting. Purchaser understands that no United States federal or state agency, or
13
similar agency of any other country, has passed upon or made any recommendation
or endorsement of the Company, this transaction or the purchase of the
Securities.
5.11 Company Reliance. Purchaser understands that the
Securities are being offered and sold to the Purchaser by the Company in
reliance upon the truth and accuracy of, and the Purchaser's compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of the Purchaser set forth herein and in the documents contemplated in
connection herewith in order to determine the eligibility of the Purchaser to
acquire or receive an offer to acquire the Securities; and the information with
respect to the Purchaser provided to the Company by the Purchaser is accurate
and complete in all material respects.
5.12 Legends.
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS. THIS NOTE
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR
SUCH SHARES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO GLOBAL
PAYMENT TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED."
(b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined) in connection with a resale, shall bear a legend
which shall be in substantially the following form until such shares are covered
by an effective registration statement filed with the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO GLOBAL PAYMENT TECHNOLOGIES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED."
(c) The Warrant shall bear substantially the following legend:
"THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED
14
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO GLOBAL PAYMENT TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED."
6. Covenants of the Company. The Company covenants and agrees with the
Purchaser as follows:
6.1 Stop-Orders. The Company will advise the Purchaser, promptly
after it receives notice of issuance by the Securities and Exchange Commission
(the "SEC"), any state securities commission or any other regulatory authority
of any stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
6.2 Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon conversion of the Note and upon the
exercise of the Warrant on NASDAQ (the "Principal Market") upon which shares of
Common Stock are listed (subject to official notice of issuance) and shall
maintain such listing so long as any other shares of Common Stock shall be so
listed. The Company will maintain the listing of its Common Stock on the
Principal Market, and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the
National Association of Securities Dealers ("NASD") and such exchanges, as
applicable.
6.3 Market Regulations. The Company shall notify the SEC, NASD
and applicable state authorities, in accordance with their requirements, of the
transactions contemplated by this Agreement, and shall take all other necessary
action and proceedings as may be required and permitted by applicable law, rule
and regulation, for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.
6.4 Reporting Requirements. The Company will timely file with the
SEC all reports required to be filed pursuant to the Exchange Act and refrain
from terminating its status as an issuer required by the Exchange Act to file
reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
6.5 Use of Funds. The Company agrees that it will use the
proceeds of the sale of the Note and Warrant to repay existing indebtedness (as
consented to by Laurus) and for general working capital purposes only.
15
6.6 Access to Facilities. The Company will permit any
representatives designated by the Purchaser (or any successor of the Purchaser),
upon reasonable notice and during normal business hours, at such person's
expense and accompanied by a representative of the Company, to:
(a) visit and inspect any of the properties of the Company;
(b) examine the corporate and financial records of the Company
(unless such examination is not permitted by federal, state or local law or by
contract) and make copies thereof or extracts therefrom; and
(c) discuss the affairs, finances and accounts of the Company
with the directors, officers and independent accountants of the Company.
Notwithstanding the foregoing, the Company will not provide any material,
non-public information to the Purchaser unless the Purchaser signs a
confidentiality agreement and otherwise complies with Regulation FD, under the
federal securities laws.
6.7 Taxes. The Company will promptly pay and discharge, or cause
to be paid and discharged, when due and payable, all lawful taxes, assessments
and governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor.
6.8 Insurance. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in similar business similarly situated as the Company; and the Company
will maintain, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner which the Company reasonably believes is customary for companies
in similar business similarly situated as the Company and to the extent
available on commercially reasonable terms. The Company will bear the full risk
of loss from any loss of any nature whatsoever with respect to the assets
pledged to the Purchaser as security for its obligations hereunder and under the
Related Agreements. At the Company's own cost and expense in amounts and with
carriers reasonably acceptable to Purchaser, the Company shall (i) keep all its
insurable properties and properties in which it has an interest insured against
the hazards of fire, flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts, as is customary
in the case of companies engaged in businesses similar to the Company's
including business interruption insurance; (ii) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (iii) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which the Company is engaged in business; and (iv) furnish Purchaser with (x)
copies of all policies and evidence of the maintenance of such policies
16
at least thirty (30) days before any expiration date, (y) excepting the
Company's workers' compensation policy, endorsements to such policies naming
Purchaser as "co-insured" or "additional insured" and appropriate loss payable
endorsements in form and substance satisfactory to Purchaser, naming Purchaser
as loss payee, and (z) evidence that as to Purchaser the insurance coverage
shall not be impaired or invalidated by any act or neglect of the Company and
the insurer will provide Purchaser with at least thirty (30) days notice prior
to cancellation. The Company shall instruct the insurance carriers that in the
event of any loss thereunder, the carriers shall make payment for such loss to
the Company and Purchaser jointly. In the event that as of the date of receipt
of each loss recovery upon any such insurance, the Purchaser has not declared an
event of default with respect to this Agreement or any of the Related
Agreements, then the Company shall be permitted to direct the application of
such loss recovery proceeds toward investment in property, plant and equipment
that would comprise "Collateral" secured by Purchaser's security interest
pursuant to its security agreement, with any surplus funds to be applied toward
payment of the obligations of the Company to Purchaser. In the event that
Purchaser has properly declared an event of default with respect to this
Agreement or any of the Related Agreements, then all loss recoveries received by
Purchaser upon any such insurance thereafter may be applied to the obligations
of the Company hereunder and under the Related Agreements, in such order as the
Purchaser may determine. Any surplus (following satisfaction of all Company
obligations to Purchaser) shall be paid by Purchaser to the Company or applied
as may be otherwise required by law. Any deficiency thereon shall be paid by the
Company, as applicable, to Purchaser, on demand.
6.9 Intellectual Property. The Company shall maintain in full
force and effect its corporate existence, rights and franchises and all licenses
and other rights to use Intellectual Property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.6.10
Properties. The Company will keep its properties in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company will at all times comply with each provision of all
leases to which it is a party or under which it occupies property if the breach
of such provision could reasonably be expected to have a material adverse
effect.
6.11 Confidentiality. The Company agrees that it will not
disclose, and will not include in any public announcement, the name of the
Purchaser, unless expressly agreed to by the Purchaser or unless and until such
disclosure is required by law or applicable regulation, and then only to the
extent of such requirement. The Company may disclose Purchaser's identity and
the terms of this Agreement to its current and prospective debt and equity
financing sources.
6.12 Required Approvals. For so long as twenty-five percent (25%)
of the principal amount of the Note is outstanding, the Company, without the
prior written consent of the Purchaser, shall not:
(a) directly or indirectly declare or pay any dividends, other
than dividends with respect to its preferred stock;
(b) liquidate, dissolve or effect a material reorganization if
such material reorganization would result in a change to a majority of the
current composition of the
17
Company's Board of Directors or could reasonably be expected to have a material
adverse effect (i) on the ability of the Company to fully perform its
Obligations (as defined in the Security Agreement between the Company and the
Purchaser of even date herewith (the "Security Agreement"), or (ii) on the
practicable ability of the Purchaser to realize any of the rights and remedies
granted to it hereunder or under the Note with respect to the Collateral (as
defined in the Security Agreement) or the priority of the Purchaser's liens with
respect thereto;
(c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict the Company's right to perform the
provisions of this Agreement or any of the agreements contemplated thereby;
(d) materially alter or change the scope of the business of the
Company.
(e) (i) create, incur, assume or suffer to exist any indebtedness
(exclusive of trade debt and debt incurred to finance the purchase of equipment
(not in excess of five percent (5%) per annum of the Company's assets) whether
secured or unsecured other than the Company's indebtedness to Laurus and as set
forth on Exhibit 6.12(e) attached hereto and made a part hereof or any
refinancings or replacements thereof or any debt incurred in connection with the
purchase of assets or in connection with operating lines of credit as necessary
to operate such assets, or any refinancings or replacements thereof; (ii) cancel
any debt owing to it in excess of $200,000 in the aggregate during any 12 month
period; (iii) assume, guarantee, endorse or otherwise become directly or
contingently liable in connection with any obligations of any other Person,
except the endorsement of negotiable instruments by a Company for deposit or
collection or similar transactions in the ordinary course of business or
guarantees provided to any of the lenders set forth in subparagraph (i)
immediately above.
(f) make investments in, make any loans or advances to, or
transfer assets to, and of its subsidiaries, other than (in each case) in the
ordinary course of business.
6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.7 above at such time as:
(a) the holder thereof is permitted to dispose of such Securities
pursuant to Rule 144(k) under the Securities Act; or
(b) upon resale subject to an effective registration statement
after such Securities are registered under the Securities Act.
The Company agrees to cooperate with the Purchaser in connection with all
resales pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions
necessary to allow such resales provided the Company and its counsel receive
reasonably requested representations from the selling Purchaser and broker, if
any.
18
6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion acceptable to the Purchaser from the Company's legal
counsel. The Company will provide, at the Company's expense, such other legal
opinions in the future as are reasonably necessary for the conversion of the
Note and exercise of the Warrant.
7. Covenants of the Purchaser. The Purchaser covenants and agrees with the
Company as follows:
7.1 Confidentiality. The Purchaser agrees that it will not disclose,
and will not include in any public announcement, the name of the Company, unless
expressly agreed to by the Company or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
7.2 Non-Public Information. The Purchaser agrees not to effect any
sales in the shares of the Company's Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
8. Conditions precedent. The obligations hereunder of the Company and the
Purchaser to enter into this Agreement and sell and purchase the Securities is
subject to their satisfaction or waiver, at or before the Closing, of each of
the conditions set forth below. These conditions are for the Company's and the
Purchaser's sole benefit respectively, and they may waive their own rights at
any time in their sole discretion.
(a) The parties shall have executed and delivered this Agreement and
the Related Agreements.
(b) The Purchaser shall have delivered to the Escrow Agent the
purchase price for the Securities and the Company shall have delivered the Note
and the Warrant to the Escrow Agent.
(c) Each of the representations and warranties of the Company and the
Purchaser shall be true and correct in all material respects as of the Closing
Date, except for representations and warranties that speak as of a particular
date, which shall be true and correct in all material respects as of such date.
(d) The Company shall have performed, satisfied and complied in all
respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.
(e) At the Closing, the Purchaser shall have received an opinion of
counsel to the Company, dated the date of such Closing, in the form of Exhibit C
hereto.
9. Covenants of the Company and Purchaser Regarding Indemnification.
9.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend Purchaser, each of Purchaser's officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or
19
imposed upon the Purchaser which results, arises out of or is based upon: (i)
any misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Company of any
covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
9.2 Purchaser's Indemnification. Purchaser agrees to indemnify, hold
harmless, reimburse and defend the Company and each of the Company's officers,
directors, agents, affiliates, control persons and principal shareholders, at
all times against any claim, cost, expense, liability, obligation, loss or
damage (including reasonable legal fees) of any nature, incurred by or imposed
upon the Company which results, arises out of or is based upon: (i) any
misrepresentation by Purchaser or breach of any warranty by Purchaser in this
Agreement or in any exhibits or schedules attached hereto or any Related
Agreement; or (ii) any breach or default in performance by Purchaser of any
covenant or undertaking to be performed by Purchaser hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
9.3 Procedures. The procedures and limitations set forth in Section
11.2(c) and (d) shall apply to the indemnifications set forth in Sections 9.1
and 9.2 above.
10. Conversion of Convertible Note.
10.1 Mechanics of Conversion.
(a) Provided the Purchaser has notified the Company of the Purchaser's
intention to sell the Note Shares and the Note Shares are included in an
effective registration statement or are otherwise exempt from registration when
sold: (i) Upon the conversion of the Note or part thereof, the Company shall, at
its own cost and expense, take all necessary action (including the issuance of
an opinion of counsel) to assure that the Company's transfer agent shall issue
shares of the Company's Common Stock in the name of the Purchaser (or its
nominee) or such other persons as designated by the Purchaser in accordance with
Section 10.1(b) hereof and in such denominations to be specified representing
the number of Note Shares issuable upon such conversion; and (ii) The Company
warrants that no instructions other than these instructions have been or will be
given to the transfer agent of the Company's Common Stock and that after the
Effectiveness Date (as defined in the Registration Rights Agreement) the Note
Shares issued will be freely transferable subject to the prospectus delivery
requirements of the Securities Act and the provisions of this Agreement, and
will not contain a legend restricting the resale or transferability of the Note
Shares.
(b) Purchaser will give notice of its decision to exercise its right
to convert the Note or part thereof by telecopying or otherwise delivering an
executed and completed notice of the number of shares to be converted to the
Company (the "Notice of Conversion"). The Purchaser will not be required to
surrender the Note until the Purchaser receives a credit to the account of the
Purchaser's prime broker through the DWAC system (as defined below),
representing the Note Shares or until the Note has been fully satisfied. Each
date on which a Notice of Conversion is telecopied or delivered to the Company
in accordance with the provisions hereof shall be deemed a "Conversion Date."
Pursuant to the terms of the Notice of Conversion, the Borrower will issue
instructions to the transfer agent accompanied by an opinion
20
of counsel within one (1) business day of the date of the delivery to Borrower
of the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing thethe Conversion Shares to the Holder by crediting
the account of the Purchaser's prime broker with the Depository Trust Company
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Company of the Notice of Conversion
(the "Delivery Date") so long as such Common Stock is being issued in connection
with a resale by the Purchaer.
(c) The Company understands that a delay in the delivery of the Note
Shares in the form required pursuant to Section 10 hereof beyond the Delivery
Date could result in economic loss to the Purchaser. In the event that the
Company fails to direct its transfer agent to deliver the Note Shares to the
Purchaser via the DWAC system within the time frame set forth in Section 10.1(b)
above and the Note Shares are not delivered to the Purchaser by the Delivery
Date, as compensation to the Purchaser for such loss, the Company agrees to pay
late payments to the Purchaser for late issuance of the Note Shares in the form
required pursuant to Section 10 hereof upon conversion of the Note in the amount
equal to the greater of: (i) $500 per business day after the Delivery Date; or
(ii) the Purchaser's actual damages from such delayed delivery. Notwithstanding
the foregoing, the Company will not owe the Purchaser any late payments if the
delay in the delivery of the Note Shares beyond the Delivery Date is solely out
of the control of the Company and the Company is actively trying to cure the
cause of the delay. The Company shall pay any payments incurred under this
Section in immediately available funds upon demand and, in the case of actual
damages, accompanied by reasonable documentation of the amount of such damages.
Such documentation shall show the number of shares of Common Stock the Purchaser
is forced to purchase (in an open market transaction) which the Purchaser
anticipated receiving upon such conversion, and shall be calculated as the
amount by which (A) the Purchaser's total purchase price (including customary
brokerage commissions, if any) for the shares of Common Stock so purchased
exceeds (B) the aggregate principal and/or interest amount of the Note, for
which such Conversion Notice was not timely honored.
Nothing contained herein or in any document referred to herein or delivered
in connection herewith shall be deemed to establish or require the payment of a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required to
be paid or other charges hereunder exceed the maximum amount permitted by such
law, any payments in excess of such maximum shall be credited against amounts
owed by the Company to a Purchaser and thus refunded to the Company.
10.2 Maximum Conversion. The Purchaser shall not be entitled to
convert on a Conversion Date, that amount of a Note that would be convertible
into that number of shares of Common Stock which would be (a) in excess of the
sum of: (i) the number of shares of Common Stock beneficially owned by the
Purchaser on a Conversion Date; and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this proviso is being made on a Conversion Date, which would result in
beneficial ownership by the Purchaser of more than 4.99% of the outstanding
shares of Common Stock of the Company on such Conversion Date or (b) (ii) exceed
twenty five percent (25%) of the aggregate dollar trading volume of the Common
Stock for the ten (10) day trading period immediately preceding delivery of a
Notice of Conversion to the Company. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance
21
with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Purchaser may waive the conversion limitation described in this Section 10.2
upon (a) seventy-five (75) days prior written notice to the Company or (b)
without any notice requirement upon an Event of Default (as defined in the
Note); and upon such waiver, this conversion limitation shall become null and
void.
11. Registration Rights, Indemnification.
11.1 Registration Rights Granted. The Company hereby grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.
11.2 Indemnification. (a) In the event of a registration of any
Registrable Securities under the Securities Act pursuant to the Registration
Rights Agreement, the Company will indemnify and hold harmless the Purchaser,
and its officers, directors and each other person, if any, who controls the
Purchaser within the meaning of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which the Purchaser, or such
persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act pursuant to the
Registration Rights Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Purchaser, and each such person for any
reasonable legal or other expenses incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by or on
behalf of the Purchaser or any such person in writing specifically for use in
any such document.
(b) In the event of a registration of the Registrable Securities under
the Securities Act pursuant to the Registration Rights Agreement, the Purchaser
will indemnify and hold harmless the Company, and its officers, directors and
each other person, if any, who controls the Company within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the Securities Act pursuant to the Registration Rights
Agreement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such person for any reasonable legal or
other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action, provided, however, that the
Purchaser
22
will be liable in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 11.2(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.2(c) if and to the extent the indemnifying party is prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 11.2(c) for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof; if the
indemnified party retains its own counsel, then the indemnified party shall pay
all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to it which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution in the
event of joint liability under the Securities Act in any case in which either:
(i) the Purchaser, or any controlling person of the Purchaser, makes a claim for
indemnification pursuant to this Section 11.2 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 10.2 provides for indemnification in such case; or (ii)
contribution under the Securities Act may be required on the part of the
Purchaser or controlling person of the Purchaser in circumstances for which
indemnification is provided under this Section 11.2; then, and in each such
case, the Company and the Purchaser will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Purchaser is responsible only for
the portion represented by the percentage that the public offering price of its
securities offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, provided,
however, that, in any such case, (A) the Purchaser will not be required to
contribute any amount in excess of the public offering price of all such
securities offered by it pursuant to such registration statement; and (B) no
person or entity guilty of fraudulent misrepresentation (within the meaning of
Section 10 of
23
the Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.
11.3 Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company; or shares of preferred stock issued to
pay dividends in respect of the Company's preferred stock; or equity or debt
issued in connection with an acquisition of a business or assets by the Company;
or the issuance by the Company of stock in connection with the establishment of
a joint venture partnership or licensing arrangement (these exceptions
hereinafter referred to as the "Excepted Issuances"), the Company will not issue
any securities with a continuously variable/floating conversion feature which
are or could be (by conversion or registration) free-trading securities (i.e.
common stock subject to a registration statement) prior to the full repayment or
conversion of the Note (the "Exclusion Period").
12. Miscellaneous.
12.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS. ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE
OTHER CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT
AND OTHER AGREEMENTS ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. IN THE EVENT THAT ANY
PROVISION OF THIS AGREEMENT OR ANY OTHER AGREEMENT DELIVERED IN CONNECTION
HEREWITH IS INVALID OR UNENFORCEABLE UNDER ANY APPLICABLE STATUTE OR RULE OF
LAW, THEN SUCH PROVISION SHALL BE DEEMED INOPERATIVE TO THE EXTENT THAT IT MAY
CONFLICT THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR
RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR UNENFORCEABLE UNDER
ANY LAW SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION
OF ANY AGREEMENT.
12.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.
12.3 Successors. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of the Securities from time to time, other than the holders of
24
Common Stock which has been sold by the Purchaser pursuant to Rule 144 or an
effective registration statement. Purchaser may not assign its rights hereunder
to a competitor of the Company. Notwithstanding the foregoing, any assignee
shall be bound by the terms and provisions of this Agreement.
12.4 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
12.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
12.6 Amendment and Waiver.
(a) This Agreement may be amended or modified only upon the written
consent of the Company and the Purchaser.
(b) The obligations of the Company and the rights of the Purchaser
under this Agreement may be waived only with the written consent of the
Purchaser.
(c) The obligations of the Purchaser and the rights of the Company
under this Agreement may be waived only with the written consent of the Company.
12.7 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Note or the
Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
12.8 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given:
(a) upon personal delivery to the party to be notified;
(b) when sent by confirmed facsimile if sent during normal business
hours of the recipient, if not, then on the next business day;
(c) three (3) business days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or
(d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
25
All communications shall be sent as follows:
If to the Purchaser, to: Global Payment Technologies, Inc.
000-X Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
with a copy to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
If to the Company, to: Laurus Master Fund, Ltd.
c/o Ironshore Corporate Services ltd.
X.X. Xxx 0000 G.T.
Queensgate House, South Church Street
Grand Cayman, Cayman Islands
Facsimile: 000-000-0000
with a copy to:
Xxxx X. Xxxxxx , Esq.
000 Xxxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
or at such other address as the Company or the Purchaser may designate by
written notice to the other parties hereto given in accordance herewith.
12.9 Attorneys' Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
12.10 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
12.11 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
26
12.12 Broker's Fees. Except as set forth on Schedule 12.12 hereof,
Each party hereto represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of such party
hereto is or will be entitled to any broker's or finder's fee or any other
commission directly or indirectly in connection with the transactions
contemplated herein. Each party hereto further agrees to indemnify each other
party for any claims, losses or expenses incurred by such other party as a
result of the representation in this Section 12.12 being untrue.
12.13 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
27
IN WITNESS WHEREOF, the parties hereto have executed the SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
GLOBAL PAYMENT TECHNOLOGIES, INC. LAURUS MASTER FUND, LTD.
By: By:
------------------------------------------ -----------------------------------------------
------------------------------------------ -----------------------------------------------
Name: Name:
------------------------------------------ -----------------------------------------------
------------------------------------------ -----------------------------------------------
Title: Title:
------------------------------------------ -----------------------------------------------
28
EXHIBIT A
FORM OF CONVERTIBLE NOTE
A-1
EXHIBIT B
FORM OF WARRANT
B-1
EXHIBIT C
FORM OF OPINION
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted.
2. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement and Related
Agreements. All corporate action on the part of the Company and its officers,
directors and stockholders necessary has been taken for: (i) the authorization
of the Agreement and Related Agreements and the performance of all obligations
of the Company thereunder at the Closing; and (ii) the authorization, sale,
issuance and delivery of the Securities pursuant to the Agreement and the
Related Agreements. The Note Shares and the Warrant Shares, when issued pursuant
to and in accordance with the terms of the Agreement and the Related Documents
and upon delivery shall be validly issued and outstanding, fully paid and non
assessable.
3. The execution, delivery and performance of the Agreement, the Note
or the Related Agreements by the Company and the consummation of the
transactions on its part contemplated by any thereof, will not, with or without
the giving of notice or the passage of time or both:
(a) Violate the provisions of the Charter or bylaws of the Company; or
(b) To the best of such counsel's knowledge, violate any judgment,
decree, order or award of any court binding upon the Company.
4. The Agreement and Related Agreements will constitute, valid and
legally binding obligations of the Company, and are enforceable against the
Company in accordance with their respective terms, except:
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and
(b) general principles of equity that restrict the availability of
equitable or legal remedies.
5. To such counsel's knowledge, the sale of the Note and the subsequent
conversion of the Note into Note Shares are not subject to any preemptive rights
or rights of first refusal that have not been properly waived or complied with.
To such counsel's knowledge, the sale of the Warrant and the subsequent exercise
of the Warrant for Warrant Shares are not subject to any preemptive rights or,
to such counsel's knowledge, rights of first refusal that have not been properly
waived or complied with.
6. Assuming the accuracy of the representations and warranties of the
Purchaser contained in the Agreement, the offer, sale and issuance of the
Securities on the Closing Date
C-1
will be exempt from the registration requirements of the Securities Act. To such
counsel's knowledge, 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 and security under
circumstances that would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes of
the Securities Act which would prevent the Company from selling the Securities
pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions.
7. There is no action, suit, proceeding or investigation pending or, to
such counsel's knowledge, currently threatened against the Company that prevents
the right of the Company to enter into this Agreement or any of the Related
Agreements, or to consummate the transactions contemplated thereby. To such
counsel's knowledge, the Company is not a party or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality; nor is there any action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
initiate.
8. The UCC-1 Financing Statement naming the Company as debtor and
Laurus as secured party is in proper form for filing and assuming that such
UCC-1 Financing Statement has been filed with the Secretary of State of
Delaware, the security interest created under the Security Agreement will
constitute a perfected security interest under the Uniform Commercial Code in
favor of Laurus.
C-2
EXHIBIT D
FORM OF ESCROW AGREEMENT
D-3
