XXXXXXXXXX
MEMBER NEW YORK STOCK EXCHANGE INC.
December 14, 2000
Xx. Xxxxxx X. Xxxx
President & CEO
VendingData Corporation
0000 Xxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Dear Xx. Xxxx:
This will confirm the understanding and agreement (the "Agreement")
between Josephthal & Company, Inc. ("Josephthal") and VendingData Corporation
(the "Company") as follows:
1) The Company hereby engages Josephthal as its exclusive agent in the
private placement of securities (the "Securities") of the Company to a
limited number of institutional accredited individual or strategic
investors (the "Investors" and the "Transaction") in connection with
the private placement of a minimum of $2 million up to $5.0 million of
its Senior Convertible Notes and Warrants (the "Equities"). The
Securities will be subject to these terms and conditions negotiated by
the Company and any such Investors. (See: Attachment A -- Preliminary
Term Sheet). Josephthal will provide the Company with a Stand-by Credit
Facility of $500,000 subject to the terms and conditions outlined in
Attachment B - Stand-by Credit Facility Term Sheet.
2) Xxxxxxxxxx hereby accepts the engagement and in that connection, if
requested by the Company, agrees to:
a) Prepare, in consultation with the Company, a Private Placement
Memorandum (the "Memorandum") describing the Company and the
Securities; which Memorandum shall not be made available to potential
Investors until such Memorandum and its use shall be approved by the
Company, which will also represent to Josephthal that the Memorandum
and any other materials provided to potential investors does not
contain any untrue statement or alleged untrue statement of a material
fact or omit to state a material fact required to be stated or
necessary to make any statement not misleading;
b) Review with the Company a list of prospective Investors (the "Investor
Contact List") to be contacted by Xxxxxxxxxx in connection with its
engagement herein;
Josephthal & Co. Inc.
000 Xxxx Xxxxxx Xxx Xxxx, XX 00000
Tel: 000.000.0000, 000.000.0000. Fax: 000.000.0000
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c) Prepare with the assistance and approval of the Company any other
communications to be used in placing the Securities, whether in the
form of letter, circular notice or otherwise; and
d) Assist in the negotiation of the sale of the Securities to the
Investors.
3) In connection with Xxxxxxxxxx's engagement, the Company will furnish
Josephthal with any Information concerning the Company that Josephthal
reasonably deems appropriate and will provide Josephthal with access to
the Company's officers, directors accountants, counsel and other
advisors. In addition, Xxxxxxxxxx shall be kept fully informed of any
events, known to the Company's management, that would have a material
effect on the financial condition of the Company. The Company
represents and warrants to Josephthal that all such information
concerning the Company will be true and accurate in all material
respects and will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the
statements therein not misleading in light of the circumstances under
which such statements are made. The Company acknowledges and agrees
that Josephthal will be using and relying upon such information
supplied by the Company and its officers, agents and others and any
other publicly available information concerning the Company without any
independent investigation or verification thereof or independent
appraisal by Josephthal of the Company or its business assets.
4) As compensation for the services to be rendered by Josephthal
hereunder, the Company shall pay Josephthal as follows:
a) At the signing of this agreement a non-refundable cash retainer of
$25,000; and
b) At the closing of the sale of Securities to Investors (the "Closing"),
(i) from the proceeds of the sale of the Securities, the Company shall
pay in cash to Josephthal by wire transfer a transaction fee (a
"Transaction Fee") of 10% of the Aggregate Consideration raised in the
private placement, less the amount of the cash retainer paid, except
for sales made to members of the Board of Directors, or stockholders of
five percent (5%) or more of the Company's Common Stock outstanding as
of the date of this agreement, for which the Company shall pay to
Josephthal a transaction fee of 5% of such Consideration; and (ii)
shall issue to Josephthal warrants (the "Warrants") to purchase such
number of shares of the common stock of the Company equal to 10% of the
aggregate number of fully diluted and/or converted shares of common
stock as are purchased by Investors on the same terms and conditions.
The Warrants shall be purchased for a nominal sum and shall be
exercisable for a period of five years from the date of Closing with an
exercise price per share equal to the effective per share price paid by
the Investors of the Securities. The terms of the Warrants shall be set
forth in one or more agreements (the "Warrant Agreements") in form and
substance reasonably satisfactory to Josephthal and the Company. The
Warrant Agreements shall contain customary terms substantially similar
to the current warrants outstanding including without limitation,
provisions for "cashless" exercise, change of control, and customary
one time demand and piggyback registration rights.
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Such fees shall be payable (i) with respect to any sale of securities
by the Company or any of its subsidiaries that occurs either during the
term of Xxxxxxxxxx's engagement hereunder regardless of whether the
Investor was identified by Xxxxxxxxxx, or at any time during a period
of one year following the effective date of termination of Xxxxxxxxxx's
engagement hereunder and the sale involves an Investor set forth on the
Investor Contact List (excluding members of the Board of Directors and
stockholders of five percent (5%) or more of the Company's Common Stock
as of the date of this Agreement); and (ii) if the Transaction has been
consummated and one or more additional transactions are consummated by
the Company (or by any Affiliate thereof) within one year from the date
of Closing of the Transaction with any party (or any Affiliate thereof)
whose name is on the Investor Contact List (including Investors in the
Transaction but excluding members of the Board of Directors and
stockholders of five percent (5%) or more of the Company's Common Stock
if they elect to participate in the Transaction).
c) If the Company executes a Letter of Intent to conduct a Control
Transaction prior to the earlier of the closing of the placement
contemplated by this letter and the termination date, then the Company
shall pay Josephthal a breakup fee of $200,000 upon the closing of such
Control Transaction. Notwithstanding any language in this Agreement to
the contrary, in no event shall .Josephthal be entitled to a breakup
fee and to the commissions discussed in this paragraph four.
5) For the purposes of this Agreement:
a) Aggregate Consideration shall be deemed to include total value of
Securities sold, directly or indirectly, by the Company in connection
with the Transaction, including proceeds received by the Company upon
exercise of options, warrants (excluding the Josephthal warrants)
and/or similar securities (collectively, the "Options"), any amounts
paid into escrow and any amounts payable in the future whether or not
subject to any contingency. Notwithstanding any language in this
Agreement to the contrary, consideration shall not be payable as a
result of the conversion or exercise of any derivative security issued
and outstanding as of the date of this Agreement.
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b) A "Control Transaction" shall mean any transaction or series or
combination of transactions, other than in the ordinary course of trade
or business, whereby, directly or indirectly, control of, or a material
interest in, the Company or any of its businesses, assets or
properties, is sold, leased or otherwise transferred, including,
without limitation, a sale or exchange of capital stock or assets, a
lease of assets with or without a purchase option, a merger or
consolidation, a tender or exchange offer, a leveraged buyout, a
restructuring, a re-capitalization, a repurchase of capital stock, an
extraordinary dividend or distribution (whether cash, property,
securities or a combination thereof) a liquidation, the formation of a
joint venture or partnership, a minority investment or any other
similar transaction. In the case of a tender or exchange offer or a
multi-step transaction which contemplates the acquisition of more than
50% of the Company's outstanding voting stock, a transaction shall be
deemed to have been consummated upon the acquisition of more than 50%
of the Company's outstanding voting power or the ability to elect a
majority of the Company's Board of Directors.
6) The Company shall reimburse Josephthal periodically for its reasonable
out-of-pocket and incidental expenses incurred during the term of its
engagement hereunder, including the fees and expenses of its legal
counsel and those of any advisor retained by Xxxxxxxxxx up to 3% of the
Aggregate Consideration raised and received by the Company in the
transaction described on Attachment A - Preliminary Term Sheet. Such
expenses will be fully documented and provided to the Company together
with any request for payment. Any expenditure in excess of $5,000 must
be approved in writing in advance by the Company.
7) Xxxxxxxxxx will be acting on behalf of the Company in connection with
this engagement, the Company agrees to indemnify the Agent as set forth
in a separate letter agreement dated the date hereof, between the Agent
and the Company (See: Annex A - Indemnification Provisions).
8) Right of First Refusal - During the term of this Agreement the Company
agrees that, if it shall pursue any of the type of Transaction whereby
it utilizes the service of an Investment Banker, it grants the right of
first refusal to Josephthal to act as its exclusive financial advisor
with respect to such Transaction. Xxxxxxxxxx shall not be obligated to
act as financial advisor with respect to such Transaction. Any decision
by Xxxxxxxxxx to act as financial advisor with dispositions, or lead
manager or placement agent with respect to financings or re-financings
would be contained in separate agreements, which agreements would
contain, among other matters, provisions for customary fees for
transactions of similar size and nature and indemnification of
Josephthal. The agreements with respect to financing or re-financing
would also include such conditions precedent as due diligence, current
conditions and approval by the requisite committees, as well as
customary representations and warranties. The Company grants to
Josephthal the right of first refusal to represent the Company in
investment banking activities as described in this paragraph 8 for a
period of one (1) year from the date of this agreement.
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9) The Company agrees that Xxxxxxxxxx has the right, subject to reasonable
advance review by the Company, to place advertisements in financial and
other newspapers and journals at its own expense describing its services
to the Company hereunder.
10) The provisions of paragraphs 4 through 7, 10 through 14 and the last two
sentences of paragraph 3 shall survive any termination of this Agreement.
The Company may terminate Xxxxxxxxxx's engagement hereunder if, within six
(6) months from the date of this Agreement, Xxxxxxxxxx has not raised up
to the $5 million described in paragraph 1 of this Agreement. If
Xxxxxxxxxx does raise such financing within said six (6) month period,
Xxxxxxxxxx shall remain as the Company's investment banker for twelve (12)
months after said six (6) month period. After the expiration of such a
twelve (12) month period, either party may terminate this Agreement by
giving the other party at least 10 days prior written notice.
11) The Memorandum to be provided to Investors and any information or advice
given to the Company by Josephthal under this Agreement shall not be
publicly disclosed or made available to third parties without Josephthal's
prior consent, unless otherwise required by law or regulation or as may be
compelled by subpoena or other judicial, administrative or regulatory
proceeding.
12) The Company represents and warrants to Josephthal that there are no
brokers, representatives or other persons that have an interest in
compensation due to Josephthal from any transaction contemplated herein.
13) The benefits of this Agreement shall inure to the benefit of respective
successors and assigns of the parties hereto and of the indemnified
parties hereunder and their successors and assigns and representatives,
and the obligations and liabilities assumed in this Agreement by the
parties hereto shall be binding upon their respective successors and
assigns.
14) This Agreement may not be amended or modified except in writing and shall
be governed and construed in accordance with the laws of the State of New
York, without regard to principles of conflicts of law.
Xxxxxxxxxx is delighted to accept this engagement and looks forward to
working with you on this assignment. Please confirm that the foregoing correctly
sets forth our agreement by signing the enclosed duplicate of this letter in the
space provided and returning it, whereupon this letter shall constitute a
binding agreement as of the date first above written.
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JOSEPHTHAL & CO. INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------
Xxxxx Xxxxxxx
Managing Director.
AGREED:
VENDINGDATA CORPORATION
By: /s/ Xxxxxx X. Xxxx
------------------------
Xxxxxx X. Xxxx
President & CEO
Date: 12/19/2000
----------------------
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ATTACHMENT A
PRELIMINARY TERM SHEET
Offering Size: $2 million to $5.0 million
Securities Offered: Senior Convertible Notes with Warrants
Note:
Interest Rates: 9.5% per annum; payable quarterly.
Term: 18 months from issuance
Conversion: Notes are convertible at the option of the
holders into shares of common stock, subject
to anti-dilution protection and at any time
prior to the 18 month term of the Notes, at
$4.00 per share
Prepayment: Company has the right to prepay Notes
provided that investors are given a (30 day)
notice, during which period the investors
will have the right to convert their Notes
and the Company agrees to file a
registration statement with the SEC and
applicable state securities agencies with
respect to the underlying shares prior to
conversion/ prepayment.
Warrants:
Warrants Coverage: 100% coverage, based on the face value of
the Notes
Warrant Exercise Price: Warrant exercise price per share will be
$4.00
Warrant Term: Five years
Additional Warrants: 133,500 warrants up to 333,750 warrants (a
26.7% coverage ratio applied to the number
of share underlying the Notes) at a nominal
exercise price ($01 per share) with a five
year term
Registration: Customary one time Demand and Piggyback
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THE FOLLOWING ARE REVISIONS TO THE AGREEMENT LETTER
DATED 12/14/2000 BETWEEN VENDINGDATA
CORPORATION AND JOSEPHTHAL & CO. INC.
REVISED ATTACHMENT A
PRELIMINARY TERM SHEET
Offering Size: $2 million to $5.0 million
Securities Offered: Senior Convertible Notes with Warrants
Note:
Interest Rates: 9.5% per annum; payable quarterly.
Term: 18 months from issuance
Conversion: Notes are convertible at the option of the
holders into shares of common stock, subject
to anti-dilution protection and at any time
prior to the 18 month term of the Notes, at
$3.00 per share
Prepayment: Company has the right to prepay Notes
provided that investors are given a (30 day)
notice, during which period the investors
will have the right to convert their Notes
and the Company agrees to file a
registration statement with the SEC and
applicable state securities agencies with
respect to the underlying shares prior to
conversion/ prepayment.
Warrants:
Warrants Coverage: 100% coverage, based on the face value of
the Notes
Warrant Exercise Price: Warrant exercise price per share will be
$3.00
Warrant Term: Five years
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ATTACHMENT B
STAND-BY CREDIT FACILITY TERM SHEET.
Offering size: $500,000
Securities Offered: Senior Note with warrants
Note:
Interest Rates: 10% per annum for amount drawn down
Term: 12 months or on termination becomes a 30 day
demand note
Drawdown: Company may draw down, in $50,000
increments, up to $500,000, provided that
Josephthal is given 10 business days notice
Prepayment: The company has the right to prepay any or
all of the outstanding balance
Repayment: The entire amount of the draw down,
including accrued interest, must be repaid
upon the closing of at least $2 million of
financing contemplated by the Senior
Convertible Note Offering, at which time the
Stand-by Credit Facility will be terminated.
Warrants:
Warrant Coverage: 100% coverage based on the face value of the
amount of the drawdown
Standby Warrant Coverage: 50,000 warrants exercisable at $2.50 per
share
Warrant Exercise Price: Warrant Exercise price per share will be
$2.50
Warrant Term: Five years
Other Terms: Same as those contemplated in the Senior
Convertible Note and Warrant Offering
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ATTACHMENT C
ADDITION TO THE 12/14/2000 AGREEMENT BETWEEN VENDINGDATA
CORPORATION AND JOSEPHTHAL & CO. INC.
In connection with the 12/14/2000 Agreement between VendingData Corporation and
Josephthal & Co. Inc., the Company agrees to compensate Josephthal Investment
Corporation, a wholly owned corporation of Josephthal Holdings, Inc., for its
role as advisor with respect to the acquisition of certain assets of Spintek
Corporation and other matters arising in connection with its business. The
Company shall issue to Josephthal Investment Corporation:
Warrants: 200,000 warrants at a nominal exercise price
($.01 per share) with a five year term
Registration: Customary one time Demand and Piggyback
JOSEPHTHAL INVESTMENT CORPORATION
By: /s/ Xxxxx Xxxxxxx
-----------------------
Xxxxx Xxxxxxx
Managing Director
AGREED:
VENDINGDATA CORPORTION
By: /s/ Xxxxxx X. Xxxx
--------------------------
Xxxxxx X. Xxxx
President & CEO
DATE: 3/19/2001
---------------
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ANNEX A
Indemnification Provisions
--------------------------------------------------------------------------------
In connection with the engagement of Josephthal Investment Corporation
(`Josephthal") by VendingData Corporation (the "Company") pursuant to a letter
agreement dated December 15, 2000 between the Company and Josephthal as it may
be amended from time to time (the "Letter Agreement"), the Company, hereby
agrees as follows:
1. In connection with or arising out of or relating to the engagement of
Josephthal under the Letter Agreement, or any actions taken or omitted,
services performed or matters contemplated by or in connection with the
Letter Agreement, the Company agrees to reimburse Josephthal, its
affiliates and their respective directors, officers, employees, agents and
controlling persons (each an "Indemnified Party") promptly upon demand for
actual, out-of-pocket expenses (including reasonable fees and expenses for
legal counsel) as they are incurred in connection with the investigation
of, preparation for or defense of any pending or threatened claim, or any
litigation, proceeding or other action in respect (hereof (collectively, a
"Claim"). The Company also agrees (in connection with the foregoing) to
indemnify and hold harmless each Indemnified Party from and against any and
all out-of-pocket losses, claims, damages and liabilities, join or several,
to which any Indemnified Party may become subject, including any amount
paid in settlement of any litigation or other action (commenced or
threatened) to which the Company shall have consented in writing (such
consent not to be reasonably withheld), whether or not any Indemnified
Party is a party and whether or not liability resulted; provided, however,
that the Company shall not be liable pursuant to this sentence in respect
of any loss, claim, damage or liability to the extent that a court or other
agency having competent jurisdiction shall have determined by final
judgement (not subject to further appeal) that such loss, claim, damage or
liability was incurred solely as a direct result of the willful misconduct
or gross negligence of such Indemnified Party.
2. An Indemnified Party shall have the right to retain separate legal counsel
of its own choice to conduct the defense and all related matters in
connection with any Claim. The Company shall pay the reasonable fees and
expenses of such legal counsel, and such counsel shall to the fullest
extent, consistent with its professional responsibilities, cooperate with
the Company and any legal counsel designated by the Company.
3. The Company will not, without the prior written consent of each Indemnified
Party settle; compromise or consent to the entry of any judgement in any
pending or threatened Claim in respect of which indemnification may be
reasonably sought hereunder (whether or not any Indemnified Person is an
actual or potential party to such Claim), unless such settlement,
compromise or consent includes an unconditional, irrevocable release of
each Indemnified Person against whom such Claim may be brought hereunder
from any and all liability arising out of such Claim.
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4. In the event the indemnity provided for in paragraphs 1 and 2 hereof is
unavailable or insufficient to hold any Indemnified Party harmless, then
the Company shall contribute to amounts paid or payable by an Indemnified
Party in respect of such Indemnified Party's losses, claims, damages and
liabilities as to which the indemnity provided for in paragraphs I and 2
hereof is unavailable or insufficient (i) in such portion as appropriately
reflects the relative benefits received by the Company, on the one hand,
and the Indemnified Party, on the other hand, in connection with the
matters as to which losses, claims, damages or liabilities relate, or (ii)
if the allocation provided by (i) above is not permitted by applicable law,
in such proportion as appropriately reflects not only the relative benefits
referred to in clause (i) but also the relative fault of the Company, on
the one hand, and the Indemnified Parties, on the other hand, as well as
any other equitable considerations. The amounts paid or payable by a party
in respect of losses, claims, damages and liabilities referred to above
shall be deemed to include any reasonable legal or other out-of-pocket fees
and expenses incurred in defending any litigation, proceeding or other
action or claim. Notwithstanding the provisions hereof, Xxxxxxxxxx's share
of the liability hereunder shall not be in excess of the amount of fees
actually received by Xxxxxxxxxx under the Letter Agreement (excluding any
amounts received as reimbursement of expenses by Xxxxxxxxxx).
5. It is understood and agreed that, in connection with Xxxxxxxxxx's
engagement by the Company under the Letter Agreement, Xxxxxxxxxx may also
be engaged to act for the Company in one or more additional capacities, and
that the terms of any such additional engagement may be embodied in one or
more separate written agreements. These Indemnification Provisions shall
apply to the engagement under the Letter Agreement and to any such
additional engagement and any modification of such additional engagement;
provided, however, that in the event that the Company engages Josephthal to
act as a dealer manager in an exchange or tender offer or as an underwriter
in connection with the issuance of securities by the Company or to furnish
an opinion letter, such further engagement may be subject to separate
indemnification and contribution provisions as may be mutually agreed upon.
6. These Indemnification Provisions shall remain in full force and effect in
connection with the transaction contemplated by the Letter Agreement
whether or not consummated, and shall survive the expiration or termination
of the Letter Agreement, and shall be in addition to any liability that the
Company might otherwise have to any Indemnified Party under the Letter
Agreement or otherwise.
7. Each party hereto consents to personal jurisdiction and service of process
and venue in any court in the State of New York in which any claim for
indemnity is brought by any Indemnified Person.
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JOSEPHTHAL INVESTMENT CORPORATION
BY: /s/ Xxxxx Xxxxxxx
-----------------------------
NAME: Xxxxx Xxxxxxx
TITLE: Managing Director
VENDINGDATA CORPORATION
BY: /s/ Xxxxxx X. Xxxx
-----------------------------
NAME: Xxxxxx X. Xxxx
TITLE: President/CEO
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