CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
TIDEL TECHNOLOGIES, INC.
and
THE INVESTOR SIGNATORY HERETO
Dated as of September 29, 2000
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated as
of September 29, 2000, among Tidel Technologies, Inc., a Delaware corporation
(the "Company"), and the investor signatory hereto ("Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase from the Company, an aggregate principal amount of
$3,000,000 of the Company's 6% Convertible Debentures, due September 8, 2004,
which shall be in the form of Exhibit A (the "Debentures"), and which are
convertible into shares of the Company's common stock, $ .01 par value per share
(the "Common Stock").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchaser agree
as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing
(a) The Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchaser and
the Purchaser shall purchase from the Company the Debentures for an aggregate
purchase price of $3,000,000. The closing of the purchase and sale of the
Debentures (the "Closing") shall take place at the offices of Xxxxxx Xxxxxxxx
Frome Xxxxxxxxxx & Wolosky LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000
("OGFR&W"), immediately following the execution hereof or such later date as the
parties shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver to the
Purchaser: (1) Debentures registered in the name of the Purchaser in the
aggregate principal amount indicated below the Purchaser's name on the signature
page to this Agreement, (2) a Common Stock purchase warrant, in the form of
Exhibit D, registered in the name of the Purchaser, pursuant to which the
Purchaser shall have the right to acquire shares of Common Stock, upon the terms
and conditions set forth therein (collectively, the "Warrants"), (3) the legal
opinion of OGFR&W, outside counsel to the Company, in the form of Exhibit C, (4)
an executed Registration Rights Agreement, dated the date hereof, among the
Company and the Purchaser, in the form of Exhibit B (the "Registration Rights
Agreement"), and (5) Transfer Agent Instructions, in the form of Exhibit E,
delivered to and acknowledged by the Company's transfer agent (the "Transfer
Agent Instructions"), and (B) the Purchaser will deliver to the Company: (1) the
purchase price indicated below the Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose,
and (2) an executed Registration Rights Agreement.
1.2 Certain Defined Terms. For purposes of this Agreement, "Conversion
Price," "Original Issue Date" and "Trading Day" shall have the meanings set
forth in the Debentures; "Business Day" shall mean any day except Saturday,
Sunday and any day which shall be a federal legal holiday in the United States
or a day on which banking institutions in the State of New York or Texas are
authorized or required by law or other governmental action to close; "Person"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchaser:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively the "Subsidiaries"). Except as set forth in
Schedule 2.1 (a), each of the Subsidiaries is an entity, duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent Instructions, the Debentures or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect on the
results of operations, assets, or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under any
of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been duly executed by the Company and, when
delivered in accordance with the terms hereof,
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will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule 2.1(c), the Company owns all of the Capital Stock of
each Subsidiary. No shares of Common Stock are entitled to preemptive or similar
rights, nor is any holder of the securities of the Company entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of any of the Transaction Documents. Except as a result of
the purchase and sale of the Debentures and the Warrants and except as disclosed
in Schedule 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Shares, Warrants or Underlying Shares
(as hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other securities to any Person other than the Purchaser and will not
result in a right of any holder of Company securities to adjust the exercise or
conversion or reset price under such securities.
(d) Issuance of the Debentures and the Warrants. The Company
will have (and will, at all times while Debentures and the Warrants are
outstanding, maintain) an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the holders of such Debentures and Warrants, to
enable it to perform its conversion, exercise and other obligations under this
Agreement. Such number of reserved and available shares of Common Stock shall
not be less than the sum of 175% of the number of shares of Common Stock which
would be issuable upon (I) conversion in full of the Debentures assuming such
conversion occurred on the Original Issue Date, the Debentures remain
outstanding for four years and all interest is paid in shares of Common Stock
and (ii) exercise in full of the Warrants (such number of shares of Common
Stock, the "Initial Minimum"). All such authorized shares of Common Stock shall
be duly reserved for issuance to the holders of the Debentures and the Warrants.
The shares of Common Stock issuable upon conversion of the Debentures and upon
exercise of the Warrants are collectively referred to herein as the "Underlying
Shares." The Debentures, the Warrants and the Underlying Shares are collectively
referred to herein as, the "Securities". When issued in accordance with the
Debentures and the Warrants, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively, "Liens").
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(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (I) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or govern-mental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate, have or
result in a Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could
not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other govern-mental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (I) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission")of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Underlying
Shares by the Purchaser (the "Underlying Shares Registration Statement"), (iii)
the application(s) to the Nasdaq National Market (the "NASDAQ") for the listing
of the underlying shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed) in the
time and manner required thereby, (iv) applicable Blue Sky filings, and (v) in
all other cases where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or registration could not
have or result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (I)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or
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has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission any
request for confidential treatment of information and the Company has no
knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement). There has
not been, and to the best of the Company's knowledge there is not pending or
contemplated, any investigation by the Commission involving the Company or any
current or former director or officer of the Company.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (I) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is in violation of any statute, rule or
regulation of any governmental authority, in each case of clauses (i), (ii) or
(iii) above, except as could not individually or in the aggregate, have or
result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchaser set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchaser as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC Documents; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including, without limitation, all filings required
pursuant to Sections 13(a) and 15(d) thereof, for the two years preceding the
date hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein as
the "SEC Documents" and, together with the Schedules to this Agreement, the
"Disclosure Materials") on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Documents prior to the expiration
of any such extension. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents as
required under the Exchange Act. The financial statements of the Company
included in the SEC Documents comply in all material respects with
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applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. Since June 30, 2000, except as specifically
disclosed in the SEC Documents, (a) there has been no event, occurrence or
development that has or that could result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable by the
Company to Value Investing Partners, no fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchaser shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchaser, its employees, officers,
trustees, agents, and partners, and its Affiliates, from and against all claims,
losses, damages, costs (including the costs of preparation and attorney's fees)
and expenses suffered in respect of any such claimed or existing fees, as such
fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) Form S-3 Eligibility. The Company is eligible to register
securities for resale under Form S-3 promulgated under the Securities Act.
(o) Exclusivity. The Company shall not issue and sell the
Debentures to any Person other than the Purchaser without the specific prior
written consent of the Purchaser.
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(p) Seniority. Except as set forth in Schedule 2.1(p), no
indebtedness of the Company is senior to the Debentures in right of payment,
whether with respect to interest or upon liquidation or dissolution, or
otherwise.
(q) Listing and Maintenance Requirements Compliance. Except as
set forth in the SEC Documents, the Company has not, in the two years preceding
the date hereof, received notice (written or oral) from the NASDAQ or any stock
exchange, market or trading facility on which the Common Stock is or has been
listed (or on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange, market
or trading facility. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance with all such
listing and maintenance requirements.
(r) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective businesses as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon the rights of any Person. To the best
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.
(s) Registration Rights; Rights of Participation. Except as
set forth on Schedule 6(b) to the Registration Rights Agreement, the Company has
not granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied.
Except as set forth on Schedule 6(b) to the Registration Rights Agreement, no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents.
(t) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(u) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries, except for
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such defects which would not result in a Material Adverse Effect. Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and its Subsidiaries are in material compliance and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its Subsidiaries.
(v) Labor Relations. No material labor problem exists or, to
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(w) Disclosure. The Company confirms that neither it nor any
other Person acting on its behalf has provided the Purchaser or its agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchaser
shall be relying on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchaser regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
2.2 Representations and Warranties of the Purchaser. The Purchaser
hereby for itself represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a Massachusetts
business trust duly organized, validly existing and in good standing under the
laws the state of Massachusetts with the requisite power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
the Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of the Purchaser. Each of this Agreement and the
Registration Rights Agreement has been duly executed by the Purchaser, and when
delivered by the Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of the Purchaser, enforceable against
it in accordance with its terms.
(b) Investment Intent. The Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement, the Registration Rights Agreement, the Debentures
and the Warrant, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by the Purchaser to hold the
Securities for any period of time. The Purchaser is acquiring the Securities
hereunder in the ordinary course of its
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business. The Purchaser does not have any agreement or understanding, directly
or indirectly, with any Person to distribute the Securities.
(c) Purchaser Status. At the time the Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of the Purchaser. The Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the pre-sent time, is able to afford a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (I) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, proper-ties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of the Purchaser or its representatives or counsel shall modify, amend or
affect the Purchaser's right to rely on the truth, accuracy and completeness of
the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. The Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. The Purchaser understands and acknowledges that
(I) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and
truth-fulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
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The Company acknowledges and agrees that the Purchaser does
not make and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) The Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act or
pursuant to an available exemption from or in a transaction not subject to the
registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of the Purchaser under this Agreement and the Registration
Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The Underlying Shares shall not contain the legend set forth
above nor any other legend if the conversion of Debentures or the exercise of
the Warrants, as the case may be, occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or the holder is
relying on Rule 144 promulgated under the Securities Act ("Rule 144") in
connection with the resale of such Underlying Shares, or in the event there is
not an effective Underlying Shares Registration Statement, and Rule 144 is not
then available for resale of the Underlying Shares, at such time as such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The
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Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the date that an
Underlying Shares Registration Statement is declared effective by the Commission
(such date, the "Effective Date"). The Company agrees that following the
Effective Date, it will, no later than three Trading Days following the delivery
by the Purchaser to the Company of a certificate or certificates representing
Underlying Shares issued with a restrictive legend, deliver to the Purchaser
certificates representing such Underlying Shares which shall be free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which enlarge
the restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon the conversion of the Debentures and the
exercise of the Warrants will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligation to issue Underlying Shares
upon conversion of the Debenture and the exercise of the Warrants is
unconditional and absolute, subject to the limitations set forth in the
Debentures or the Warrants, as the case may be, regardless of the effect of any
such dilution.
3.3 Furnishing of Information. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchaser owns Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchaser and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchaser to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including causing its attorneys to render and deliver any legal opinion required
in order to permit a Purchaser to receive Underlying Shares free of all
restrictive legends and to subsequently sell Underlying Shares under Rule 144
upon receipt of a notice of an intention to sell or other form of notice having
a similar effect. Upon the request of any such Person, the Company shall deliver
to such Person a written certification of a duly authorized officer as to
whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchaser.
3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from
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issuing (a) 175% of the number of Underlying Shares as would then be issuable
upon a conversion in full of the Debentures and (b) the number of Underlying
Shares issuable upon exercise in full of the Warrants (the "Current Required
Minimum"), in either case, due to the unavailability of a sufficient number of
authorized but unissued or reserved shares of Common Stock, then the Board of
Directors of the Company shall promptly prepare and mail to the stockholders of
the Company proxy materials requesting authorization to amend the Company's
certificate or articles of incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue to at least such number of
shares as reasonably requested by the Purchaser in order to provide for such
number of authorized and unissued shares of Common Stock to enable the Company
to comply with its issuance, conversion exercise and reservation of shares
obligations as set forth in this Agreement, the Debentures and the Warrants (the
sum of (x) the number of shares of Common Stock then outstanding plus all shares
of Common Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments, and (y) the Current Required Minimum, shall be a
reasonable number). In connection therewith, the Board of Directors shall (a)
adopt proper resolutions authorizing such increase, (b) recommend to and
otherwise use its best efforts to promptly and duly obtain stockholder approval
to carry out such resolutions (and hold a special meeting of the stockholders no
later than the earlier to occur of the sixtieth (60th) day after delivery of the
proxy materials relating to such meeting and the ninetieth (90th) day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five (5) Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(I) in the time and manner required by any national securities exchange, market,
trading or quotation facility on which the Common Stock is then traded, prepare
and file with such national securities exchange, market, trading or quotation
facility on which the Common Stock is then traded an additional shares listing
application covering a number of shares of Common Stock which is not less than
the Initial Minimum, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on any such national securities
exchange, market or trading or quotation facility on which the Common Stock is
then listed as soon as possible thereafter, and (iii) provide to the Purchaser
evidence of such listing, and the Company shall maintain the listing of its
Common Stock thereon. If the number of Underlying Shares issuable upon (x)
conversion in full of the then outstanding Debentures and (y) exercise in full
of the then unexercised portion of the Warrants, exceeds eighty-five percent
(85%) of the number of Underlying Shares previously listed on account thereof
with any such required exchanges, then the Company shall take the necessary
actions to immediately list a number of Underlying Shares as equals no less than
the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon conversion of the Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, in such amount as may
be required to fulfill its obligations in full under the Transaction Documents,
which reserve shall equal no less than the then Current Required Minimum.
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3.7 Conversion and Exercise Procedures. The Transfer Agent
Instructions, the Conversion Notice (as defined in the Debentures) and the Form
of Election to Purchase (as defined in the Warrants) sets forth the totality of
the procedures with respect to the conversion of the Debentures and the exercise
of the Warrants, including the form of legal opinion, if necessary, that shall
be rendered to the Company's transfer agent and such other information and
instructions as may be reasonably necessary to enable the Purchaser to convert
their Debentures and their Warrants, as the case may be.
3.8 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures.
3.9 Certain Securities Laws Disclosures; Publicity. The Company shall:
(I) on the Closing Date, issue a press release reasonably acceptable to the
Purchaser disclosing the transactions contemplated hereby, (ii) file with the
Commission a Report on Form 8-K disclosing the transactions contemplated hereby
within ten Business Days after the Closing Date, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act. The Company shall, no
less than two Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchaser for its
review. The Company and the Purchaser shall consult with each other in issuing
any other press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, except that if such disclosure is required by law or stock
market regulation, in which such case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Purchaser, or include the name of the
Purchaser in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchaser,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law or stock market regulations, in
which case the Company shall provide the Purchaser with prior notice of such
disclosure.
3.10 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchaser.
3.11 Use of Proceeds. Except as set forth in Schedule 3.11 hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for
working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the
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ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.
3.12 Reimbursement. If the Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse the Purchaser for
its reasonable legal and other expenses (including, but not limited to, the cost
of any investigation, preparation or travel) incurred in connection therewith,
as such expenses are incurred. The reimbursement obligations of the Company
under this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of the Purchaser who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Purchaser and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Purchaser and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchaser nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.
3.13 Certain Trading Restrictions. The Purchaser agrees that during the
five Trading Days preceding each Put Date (as defined in the Debentures) it
shall not enter into any Short Sales (as defined herein). For purposes of this
Section 3.13, a "Short Sale" by the Purchaser shall mean a sale of Common Stock
by the Purchaser that is marked as a short sale and that is made at a time when
there is no equivalent offsetting long position in Common Stock held by the
Purchaser. For purposes of determining whether there is an equivalent offsetting
long position in Common Stock held by the Purchaser, Underlying Shares that are
issuable on exercise of the Warrants or conversion of the Debentures on a
Trading Day shall be deemed to be held long by the Purchaser on such Trading
Day.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall reimburse the
Purchaser for its legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxx, Xxxx
& Xxxxx LLC $3,000.00 for the negotiation of the Transaction Documents. The
amount contemplated by the immediately preceding sentence shall be retained by
the Purchaser and shall not be delivered to the Company at the Closing. Other
than the amount contemplated herein, and except as otherwise set forth in the
Registration Rights Agreement, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Securities.
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4.2 Entire Agreement; Amendments. The Transaction Documents, together
with the Exhibits and Schedules thereto and Transfer Agent Instructions, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (I) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:00 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Tidel Technologies, Inc.
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxx
If to the Purchaser: To the address set forth under the Purchaser's
name on the signature page hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and the Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
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4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser. Except as set forth in
Section 3.1(a), the Purchaser may not assign this Agreement or any of the rights
or obligations hereunder without the consent of the Company. This provision
shall not limit the Purchaser's right to transfer securities or transfer or
assign rights under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and
conversion of the Warrants or the Debentures, as the case may be.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. The parties hereto agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of
its obligations described in the foregoing sentence and hereby agrees to waive
in any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
4.13 Independent Nature of Purchaser's Obligations and Rights. Nothing
contained herein or in any Transaction Document, and no action taken by the
Purchaser pursuant thereto, shall be deemed to constitute the Purchaser as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchaser is in any way acting in concert with
respect to such obligations or the transactions contemplated by the Transaction
Document. The Purchaser shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for the Purchaser to be joined as an additional party in any
proceeding for such purpose.
4.14 Non-Liability of Trustees and Shareholders. A copy of the
Declaration of Trust of the Purchaser is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this agreement is
executed on behalf of the Purchaser by officers of the Purchaser as officers and
not individually. All obligations of the Purchaser hereunder shall be binding
only upon the assets of the Purchaser (or the appropriate series thereof) and
shall not be binding upon any trustee, officer, employee, agent or shareholder
of the Purchaser. Neither the authorization of any action by the Trustees of the
Purchaser nor the execution of this agreement on behalf of the Purchaser shall
impose any liability upon any trustee, officer or shareholder of the Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
TIDEL TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------------
Name: Xxxxx X. Xxxx
Title: President and Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
ACORN INVESTMENT TRUST
on behalf of its series Acorn Fund
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Assistant Treasurer
Purchase Price: $3,000,000
Address for Notice:
Acorn Investment Trust
on behalf of its series Acorn Fund
000 X. Xxxxxx Xx., #0000
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Treasurer
With copies to: Xxxx, Xxxx & Xxxxx LLC
Three First Xxxxxxxx Xxxxx, #0000
Xxxxxxx, XX 00000
Facsimile: 000-000-0000
Attn: Xxxxx X. Xxxxx
