8% SENIOR SECURED NOTE PURCHASE AGREEMENT
Exhibit
10.1
This
8%
Senior Secured Note Purchase Agreement (this “Agreement”)
is
dated as of May 1, 2006, by and among VendingData Corporation, a Nevada
corporation (the “Company”),
and
Bricoleur Partners, L.P., Bricoleur Enhanced, L.P., BRIC 6, L.P. and Bricoleur
Offshore Ltd. (each, including its successors and assigns, a “Lender”
and
collectively the “Lenders”).
RECITALS
A. WHEREAS,
the Company and the Lenders are parties to that certain 7% Senior Secured
Note
Purchase Agreement, dated as of March 29, 2006 (the “Original Agreement”),
pursuant to which the Lenders agreed to purchase, and the Company agreed
to
sell, certain securities of the Company, and the parties intend for this
Agreement to supersede and replace the Original Agreement in its entirety
B. WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”)
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to
each
Lender, and each Lender, severally and not jointly, desires to purchase from
the
Company, an 8% Senior Secured Note (“Note”)
in the
form of Exhibit
A
and
Common Stock Purchase Warrants (“Warrants”)
in the
form of Exhibit
B
attached
hereto entitling the Lenders to purchase up to 3,200,000 shares of Common
Stock.
C. WHEREAS,
concurrent with close of the purchase and sale of the Notes and Warrants
under
this Agreement, the Company will acquire a put option from the Lenders to
sell,
from time to time, up to $5 million of the Company’s Common Stock to the Lenders
pursuant to that certain Securities Put Agreement (“Securities
Put Agreement”)
of the
same date herewith between the Company and Lenders.
AGREEMENT
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of
which
are hereby acknowledged, the Company and each Lender agree as
follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms have the meanings indicated in this
Section 1.1:
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as
such
terms are used in and construed under Rule 144 under the Securities Act.
With
respect to a Lender, any investment fund or managed account that is managed
on a
discretionary basis by the same investment manager as such Lender will be
deemed
to be an Affiliate of such Lender.
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“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States.
“Closing”
means
the Closing of the purchase and sale of the Notes and Warrants pursuant to
Section 2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed
and
delivered by the applicable parties thereto, and all conditions precedent
to (i)
the Lenders’ obligations to pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Notes and Warrants have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of the Company, par value $0.001 per share, and any other
class
of securities into which such securities may hereafter be reclassified or
changed into.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the
holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that
is at
any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Company
Counsel”
means
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP.
“Disclosure
Schedules”
means
the Disclosure Schedules of the Company delivered in connection with the
Closing.
“Effective
Date”
means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Intellectual
Property Rights”
shall
have the meaning ascribed to such term in Section 3.1(o).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b).
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“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
“Notes”
shall
mean the 8% Senior Secured Notes in the form of Exhibit
A
attached
hereto.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among the Company
and
the Lenders in the form of Exhibit
C
attached
hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by each Lender of the Warrant Shares.
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as
such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect
as such
Rule.
“SEC
Reports”
shall
have the meaning ascribed to such term in Section 3.1(h).
“Senior
Notes”
shall
mean the Company’s outstanding 10% senior secured convertible notes due February
2008 and outstanding 10% senior secured convertible notes due March
2008.
“Shareholder
Approval”
means
such approval as may be required by the applicable rules and regulations
of the
American Stock Exchange (or any successor entity) from the shareholders of
the
Company in accordance with Section 14 of the Exchange Act with respect to
the
Company’s issuance of shares of its Common Stock pursuant to the Securities Put
Agreement.
“Short
Sales”
shall
include all “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
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“Subscription
Amount”
means,
as to each Lender, the aggregate amount to be paid for a Notes and Warrants
purchased hereunder as specified below such Lender’s name on the signature page
of this Agreement and next to the heading “Subscription Amount”, in United
States Dollars and in immediately available funds.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a).
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or
quoted
for trading on the date in question: the Nasdaq Capital Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
the
OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, and the Notes, Warrants, Security Agreement and Registration
Rights Agreement and any other documents or agreements executed in connection
with the transactions contemplated hereunder.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing.
Upon the terms and subject to the conditions set forth herein, the Company
agrees to sell, and each Lender agrees to purchase, severally and not jointly,
a
Note and Warrant for the Subscription Amount set forth on each respective
Lender’s signature page attached hereto, which in the aggregate shall equal
$13,000,000. On the Closing Date (the “Closing Date”), each Lender shall
deliver to the Company, via wire transfer or a certified check, immediately
available funds equal to its respective Subscription Amount, and the Company
shall deliver to such Lender a duly executed Note. Upon satisfaction of the
conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at
the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On
or
prior to the Closing Date, the Company shall deliver or cause to be delivered
to
Lenders the following:
(i) this
Agreement duly executed by the Company;
(ii) the
Notes
and Warrants duly executed by the Company;
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(iii) a
legal
opinion of Company Counsel in the form acceptable to the Lenders in their
reasonable discretion;
(iv) the
Registration Rights Agreement duly executed by the Company;
(v) a
Security Agreement (“Security
Agreement”)
in the
form of Exhibit
D
attached
hereto duly executed by the Company;
(vi) the
delivery of the written agreements of the holders of the Senior Notes to
convert
all indebtedness outstanding under the Senior Notes not to be paid off at
the
Closing to shares of Common Stock in the form acceptable to the Lenders in
their
reasonable discretion;
(vii) a
pay-off
statement from ▇▇▇▇▇ ▇▇▇▇▇▇ & Co. stating the full amount due and payable as
of the Closing Date under that certain Credit Agreement dated October 1,
2005
between the Company, ▇▇▇▇▇ and Triage Capital Management, L.P.; and
(viii) the
Securities Put Agreement duly executed by the Company.
(b) On
or
prior to the Closing Date, each Lender shall deliver or cause to be delivered
to
the Company the following:
(i) this
Agreement duly executed by such Lender;
(ii) such
Lender’s Subscription Amount by wire transfer or cashier’s check to the account
designated by the Company;
(iii) the
Registration Rights Agreement duly executed by such Lender; and
(iv) the
Security Agreement duly executed by such Lender.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy when made and on the Closing Date of the representations and warranties
of Lenders contained herein;
(ii) all
obligations, covenants and agreements of Lenders required to be performed
at or
prior to the Closing Date shall have been performed;
and
(iii) the
delivery by the Lenders of the items set forth in Section 2.2(b) of this
Agreement.
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(b) The
obligations of each Lender hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy when made and on the Closing Date of the representations and warranties
of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date shall have been performed; and
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except
as
set forth under the corresponding section of the disclosure schedules delivered
to the Lenders concurrently herewith (the “Disclosure Schedules”) which
Disclosure Schedules shall be deemed a part hereof, the Company hereby makes
the
representations and warranties set forth below to each Lender:
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3.1(a).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all the issued
and
outstanding shares of capital stock of each Subsidiary are validly issued
and
are fully paid, non-assessable and free of preemptive and similar rights
to
subscribe for or purchase securities.
(b) Organization
and Qualification.
The
Company and each of the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational
or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted
or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could
not
have or reasonably be expected to result in (i) a material adverse effect
on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the Company and the Subsidiaries, taken as a whole,
or (iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
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(c) Authorization;
Enforcement.
Subject
to Shareholder Approval as to the Securities Put Agreement, the Company has
the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to
carry out its obligations hereunder and thereunder. The execution and delivery
of each of the Transaction Documents by the Company and the consummation
by it
of the transactions contemplated hereby and thereby have been duly authorized
by
all necessary action on the part of the Company and no further action is
required by the Company, its board of directors or its stockholders in
connection therewith other than in connection with the Required Approvals.
Each
Transaction Document has been (or upon delivery will have been) duly executed
by
the Company and, when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be
limited by applicable law.
(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the issuance and sale of the Notes and Warrants and the consummation by the
Company of the other transactions contemplated hereby and thereby do not
and
will not (i) conflict with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute
a
default (or an event that with notice or lapse of time or both would become
a
default) under, result in the creation of any Lien upon any of the properties
or
assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which
any
property or asset of the Company or any Subsidiary is bound or affected,
or
(iii) subject to the Required Approvals, conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected.
(e) Filings,
Consents and Approvals.
Except
as set forth on Schedule 3.1(e), the
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of
the
Transaction Documents, other than (i) filings required pursuant to Section
4.4
of this Agreement, (ii) the filing with the Commission of the Registration
Statement, (iii) application(s) to each applicable Trading Market for the
listing of the Warrant Shares for trading thereon in the time and manner
required thereby, (iv) the filing of Form D with the Commission and such
filings
as are required to be made under applicable state securities laws; (v) the
filing of a UCC-1 Financing Statement with the Nevada Secretary of State;
and
(vi) Shareholder Approval of the Securities Put Agreement (collectively,
the
“Required
Approvals”).
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(f) Issuance
of Securities.
The
Notes and Warrants are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens imposed
by the
Company other than restrictions on transfer provided for in the Transaction
Documents. The Warrant Shares, when issued in accordance with the terms of
the
Transaction Documents, will be validly issued, fully paid and non-assessable,
free and clear of all Liens imposed by the Company other than restrictions
on
transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the Warrant Shares issuable pursuant
to
this Agreement.
(g) Capitalization.
The
capitalization of the Company is as set forth on Schedule
3.1(g).
No
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as set forth on Schedule
3.1(g),
there
are no outstanding options, warrants, script rights to subscribe to, calls
or
commitments of any character whatsoever relating to, or securities, rights
or
obligations convertible into or exercisable or exchangeable for, or giving
any
Person any right to subscribe for or acquire, any shares of Common Stock,
or
contracts, commitments, understandings or arrangements by which the Company
or
any Subsidiary is or may become bound to issue additional shares of Common
Stock
or Common Stock Equivalents. The issuance and sale of the Notes and Warrants
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Lenders) and will not result in
a right
of any holder of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding shares
of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
and
none of such outstanding shares was issued in violation of any preemptive
rights
or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors of the Company
or
others is required for the issuance and sale of the Notes and Warrants. Except
as set forth on Schedule
3.1(g),
there
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company’s
stockholders.
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(h) SEC
Reports; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the period commencing
January 1, 2005 through the date hereof (the foregoing materials, including
the
exhibits thereto and documents incorporated by reference therein, being
collectively referred to herein as the “SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and
has
filed any such SEC Reports prior to the expiration of any such extension.
Except
as set forth on Schedule
3.1(h),
as of
their respective dates, the SEC Reports complied in all material respects
with
the requirements of the Securities Act and the Exchange Act and the rules
and
regulations of the Commission promulgated thereunder, as applicable, and
none of
the SEC Reports, when filed, contained any untrue statement of a material
fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under
which they were made, not misleading. Except as set forth on Schedule
3.1(h),
the
financial statements of the Company included in the SEC Reports complied
in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of
filing. Except as set forth on Schedule
3.1(h),
such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the
notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of
and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in a subsequent SEC Report or as
set
forth on Schedule
3.1(i),
(i)
there has been no event, occurrence or development that has had or that could
reasonably be expected by the Company to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made
any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares
of
its capital stock and (v) the Company has not issued any equity securities
to
any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
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(j) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
materially adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Notes and Warrants.
There is no Action that has not been disclosed in the SEC Reports. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company which could reasonably
be
expected to result in a Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates to such employee’s
relationship with the Company, and neither the Company or any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that their relationships with their employees
are
good. No executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any of its Subsidiaries to any liability with respect
to
any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all U.S. federal, state, local and foreign laws and regulations relating
to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(l) Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of
(and
no event has occurred that has not been waived that, with notice or lapse
of
time or both, would result in a default by the Company or any Subsidiary
under),
nor has the Company or any Subsidiary received notice of a claim that it
is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of
any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
and all such laws that affect the environment.
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(m) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the
SEC Reports, except where the failure to possess such permits could not have
or
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) Title
to Assets.
Except
as set forth on Schedule
3.1(n),
the
Company and the Subsidiaries have good and marketable title in fee simple
to all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes,
the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases with which the
Company and the Subsidiaries are in compliance. The security interest granted
by
the Company to the Lenders pursuant to the Security Agreement will be senior
to
any other Liens of the Company.
(o) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
trade secrets, inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or material for use in connection with
their
respective businesses as described in the SEC Reports (collectively, the
“Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or
otherwise) that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and
there
is no existing infringement by another Person of any of the Intellectual
Property Rights. The Company and its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries
are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the Subscription Amount. Neither the Company nor
any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.
11
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company and (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company.
(r) ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
of 2002 which are applicable to it as of the Closing Date.
(s) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. Lenders shall have no obligation
with
respect to any fees or with respect to any claims made by or on behalf of
other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction Documents
as a
result of any action taken by the Company or its Affiliates.
(t) Private
Placement.
Assuming the accuracy of the Lenders representations and warranties set forth
in
Section 3.2, no registration under the Securities Act is required for the
offer
and sale of the Notes and Warrants by the Company to the Lenders as contemplated
hereby.
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after the Closing,
will not be or be an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended. The Company shall conduct
its
business in a manner so that it will not become subject to the Investment
Company Act.
(v) Registration
Rights.
Other
than each of the Lenders, no Person has any right to cause the Company to
effect
the registration under the Securities Act of any securities of the
Company.
12
(w) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to
its
knowledge is likely to have the effect of, terminating the registration of
the
Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration.
The Company has not, in the 12 months preceding the date hereof, received
notice
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing
or
maintenance requirements of such Trading Market. The Company is, and has
no
reason to believe that it will not in the foreseeable future continue to
be, in
compliance with all such listing and maintenance requirements.
(x) Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to any Lender as a result
of
such Lender and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents.
(y) Disclosure.
All
disclosure furnished by or on behalf of the Company to Lenders regarding
the
Company, its business and the transactions contemplated hereby, including
the
Disclosure Schedules to this Agreement, with respect to the representations
and
warranties made herein are true and correct with respect to such representations
and warranties and do not contain any untrue statement of a material fact
or
omit to state any material fact necessary in order to make the statements
made
therein, in light of the circumstances under which they were made, not
misleading.
(z) No
Integrated Offering.
Assuming
the accuracy of each Lender’s representations and warranties set forth in
Section 3.2, neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made any offers
or
sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Notes and Warrants to
be
integrated with prior offerings by the Company for purposes of the Securities
Act or any applicable shareholder approval provisions of any Trading Market
on
which any of the securities of the Company are listed or designated.
(aa) Tax
Status.
Except
as set forth on Schedule
3.1(aa),
and for
matters that would not, individually or in the aggregate, have or reasonably
be
expected to result in a Material Adverse Effect, the Company and each Subsidiary
has filed all necessary federal, state and foreign income and franchise tax
returns and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
13
(bb) Acknowledgement
Regarding Each Lender’s Purchase.
The
Company acknowledges and agrees that each Lender is acting solely in the
capacity of an arm’s length lender with respect to the Transaction Documents and
the transactions contemplated thereby. The Company further acknowledges that
each Lender is not acting as a financial advisor or fiduciary of the Company
(or
in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated thereby and any advice given by such Lender or
any of
their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental
to each
Lender’s purchase of its respective Note and Warrant. The Company further
represents to each Lender that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
3.2 Representations
and Warranties of Lenders. Each Lender, for itself and for no other Lender,
hereby represents and warrants as of the date hereof and as of the Closing
Date
to the Company as follows:
(a) Organization;
Authority.
Such
Lender is an entity duly organized, validly existing and in good standing
under
the laws of the jurisdiction of its organization with full right, corporate
or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance
by
such Lender of the transactions contemplated by this Agreement have been
duly
authorized by all necessary corporate or similar action on the part of such
Lender. Each Transaction Document to which it is a party has been duly executed
by such Lender, and when delivered by such Lender in accordance with the
terms
hereof, will constitute the valid and legally binding obligation of such
Lender,
enforceable against it in accordance with its terms, except (i) as limited
by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be
limited by applicable law.
(b) Own
Account.
Each
Lender understands that the Note, Warrant and Warrant Shares are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law and is acquiring the Note, Warrant and Warrant
Shares as principal for its own account and not with a view to or for
distributing or reselling such securities or any part thereof in violation
of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such securities (this representation and warranty not
limiting each Lender’s right to sell the Warrant Shares pursuant to the
Registration Statement or otherwise in compliance with applicable federal
and
state securities laws) in violation of the Securities Act or any applicable
state securities law. Each Lender is acquiring the Note and Warrant hereunder
in
the ordinary course of its business.
14
(c) Lender
Status.
At the
time such Lender was offered the Note and Warrant, it was, and at the date
hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act. Such Lender is not required
to be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience
of Lenders.
Each
Lender, 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
Note and Warrant, and has so evaluated the merits and risks of such investment.
Each Lender is able to bear the economic risk of an investment in the Note
and
Warrant and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Each
Lender is not purchasing the Note and Warrant as a result of any advertisement,
article, notice or other communication regarding the Note and Warrant published
in any newspaper, magazine or similar media or broadcast over television
or
radio or presented at any seminar or any other general solicitation or general
advertisement.
(f) Short
Sales and Confidentiality Prior To The Date Hereof.
Other
than the transactions contemplated hereunder or under the Securities Put
Agreement and except as separately disclosed by the Lenders to the Company
in
writing, each Lender has not directly or indirectly, nor has any Person acting
on behalf of or pursuant to any understanding with such Lender, engaged in
any
transaction, including Short Sales, in the securities of the Company since
March 15, 2006 (“Discussion
Date”).
Such
Lender has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction).
(g) Access
to Information.
Each
Lender acknowledges that it has received and had the opportunity to review
(i)
copies of the SEC Reports, and (ii) the terms of the Securities Put Agreement,
and all exhibits thereto. Each Lender further acknowledges that it or its
representatives have been afforded (iii) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives
of
the Company concerning the terms and conditions of the offering of the Notes
and
Warrants, the merits and risks of investing in the Notes and Warrants, and
the
terms of the Securities Put Agreement; (iv) access to information about the
Company and the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate
its
investment in the Notes and Warrants; and (v) the opportunity to obtain such
additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy and
completeness of the information contained in the SEC Reports.
(h) Restrictions
on Notes and Warrants.
Each
Lender understands that the Notes and Warrants have not been registered under
the Securities Act and may not be offered, resold, pledged or otherwise
transferred except (a) pursuant to an exemption from registration under the
Securities Act or pursuant to an effective registration statement in compliance
with Section 5 under the Securities Act, (b) in accordance with all applicable
securities laws of the states of the United States and other jurisdictions
and
(c) the lock-up provisions of Section 4.1(b) below.
15
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Notes, Warrants and Warrant Shares may only be disposed of in compliance
with
state and federal securities laws. In connection with any transfer of the
Notes,
Warrants and Warrant Shares other than pursuant to an effective registration
statement or Rule 144, the Company may require the transferor thereof to
provide
to the Company an opinion of counsel to the Company, the form and substance
of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred securities
under the Securities Act.
(b) In
addition to transfer restrictions under the Securities Act, the Lenders agree
that any Warrant Shares issued upon exercise of the Warrants shall be subject
to
a lock-up for a period of six months from the date of Closing and during
such
period shall not be sold, assigned or otherwise disposed of by such Lender
except to a Permitted Transferee (as defined below) in accordance with subpart
(d) below.
(c) Each
Lender agrees to the imprinting, so long as is required by this Section 4.1,
of
a legend on any of the Notes, Warrants and Warrant Shares in the following
form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED SECURITIES” AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE SECURITIES ACT. SUCH SECURITIES
MAY
NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
THEREUNDER, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF COUNSEL TO THE ISSUER. [IN ADDITION, THESE SECURITIES ARE
SUBJECT TO A CONTRACTUAL LOCK-UP THE TERMS OF WHICH ARE SET FORTH IN A NOTE
PURCHASE AGREEMENT DATED MAY 1, 2006 A COPY OF WHICH IS ON FILE WITH THE
COMPANY.]
16
(d) Notwithstanding
the foregoing, any holder of a Note, Warrant or Warrant Shares may transfer
such
securities to any Permitted Transferee of such holder who consents in a writing
delivered to the Company to be bound by the terms of this Agreement applicable
to such securities, subject to the Company’s reasonable determination that such
transfer does not require registration of such transferred securities under
the
Securities Act. With respect to any such holder, a “Permitted Transferee” means
the spouse or lineal descendants of such holder, any trust for the benefit
of
such holder or the benefit of the spouse or lineal descendants of such holder,
any corporation or partnership in which such holder, the spouse and the lineal
descendants of such holder are the direct and beneficial owners of substantially
all of the equity interests (provided such holder, spouse and lineal descendants
agree in writing to remain the direct and beneficial owners of all such equity
interests), the personal representative of such holder upon such holder’s death
for purposes of administration of such holder’s estate or upon such holder’s
incompetency for purposes of the protection and management of the assets
of such
holder; or for any holder that is a partnership, limited liability company,
corporation or other entity to (i) a partner or former partner of such
partnership, a member or former member of such limited liability company
or a
shareholder of such corporation, (ii) the estate of any such partner, member
or
shareholder, or (iii) any other Affiliate of such holder; or for any Lender,
to
another Lender or an Affiliate of a Lender.
4.2 Furnishing
of Information. As long as any Lender owns the Warrant or any Warrant
Shares, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required
to be
filed by the Company after the date hereof pursuant to the Exchange Act.
As long
as any Lender owns the Warrant or any Warrant Shares, if the Company is not
required to file reports pursuant to the Exchange Act, it will prepare and
furnish to such Lender and make publicly available in accordance with Rule
144(c) such information as is required for such Lender to sell the Warrant
Shares under Rule 144. The Company further covenants that it will take such
further action as each Lender may reasonably request, to the extent required
from time to time to enable such Lender to sell Warrant Shares without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Notes, Warrants
or
Warrant Shares in a manner that would require the registration under the
Securities Act of the sale of the Notes, Warrants and Warrant Shares to any
Lender or that would be integrated with the offer or sale of the Notes, Warrants
and Warrant Shares for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the closing
of
such other transaction unless shareholder approval is obtained before the
closing of such subsequent transaction.
17
4.4 Securities
Laws Disclosure; Publicity. The Company shall, within one Trading Day of the
Closing Date, issue a press release disclosing the material terms of the
transactions contemplated hereby, and shall file a Current Report on Form
8-K
which shall attach the Transaction Documents thereto by the fourth Business
Day
following the Closing Date. The press release and Form 8-K shall be acceptable
to the Lenders in their reasonable discretion. The Lenders shall not issue
any
such press release or otherwise make any such public statement without the
prior
consent of the Company. The Company shall not publicly disclose the name
of the
Lenders, or include the name of any Lender in any filing with the Commission
or
any regulatory agency or Trading Market, without the prior written consent
of
such Lender, except (i) as required by federal securities law in connection
with
(A) any registration statement contemplated by the Registration Rights Agreement
and (B) the filing of final Transaction Documents (including signature pages
thereto) with the Commission and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
such Lender with prior notice of such disclosure permitted under this subclause
(ii).
4.5 Use
of
Proceeds. The Company shall use the net proceeds from the sale of the Notes
and Warrants hereunder as set forth on Schedule 4.5 of the Disclosure Schedule.
4.6 Listing
of Common Stock.
The
Company hereby agrees to use best efforts to maintain the listing of the
Common
Stock on a Trading Market, and as soon as reasonably practicable following
the
Closing to list all of the Warrant Shares on such Trading Market. The Company
further agrees, if the Company applies to have the Common Stock traded on
any
other Trading Market, it will include in such application all of the Warrant
Shares, and will take such other action as is necessary to cause all of the
Warrant Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue
the
listing and trading of its Common Stock on a Trading Market and will comply
in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
4.7 Short
Sales and Confidentiality After The Date Hereof. Each Lender
covenants that neither it nor any Affiliate acting on its behalf or pursuant
to
any understanding with it will engage in any transactions, including any
Short
Sales, in the securities of the Company during the period commencing at the
Discussion Time and ending at the time that the transactions contemplated
by
this Agreement are first publicly announced as described
in
Section 4.4.
Each
Lender
covenants that neither it nor any Affiliate acting on its behalf or pursuant
to
any understanding with it will engage in any Short Sales in the securities
of
the Company during the period commencing at the Discussion Time and ending
on
the Effective Date (“Black-out Termination Date”).
Each
Lender
covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company as described in Section 4.4,
such Lender will maintain the confidentiality of all disclosures made to
it in
connection with this transaction (including the existence and terms of this
transaction). Each Lender understands and acknowledges that the Commission
currently takes the position that coverage of short sales of shares of the
Common Stock “against the box” prior to the Effective Date of the Registration
Statement with the Warrant Shares is a violation of Section 5 of the Securities
Act, as set forth in Item 65, Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Notwithstanding
the foregoing, each Lender makes no representation, warranty or covenant
hereby
that it will not engage in Short Sales in the securities of the Company after
the Black-out Termination Date.
18
4.8 Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect
to the Notes and Warrants as required under Regulation D and to provide a
copy
thereof, promptly upon request of the Lenders. The Company shall take such
action as the Company shall reasonably determine is necessary in order to
obtain
an exemption for, or to qualify the Notes and Warrants for, sale to Lenders
at
the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Lender.
4.9 Dividends
and Redemptions. The Company shall not declare or pay any dividend or make
any distribution on its capital stock or purchase, redeem (by direct payment,
sinking fund or otherwise) or otherwise acquire or retire for value any of
its
capital stock, except that this restriction shall not apply to the repurchase
of
shares of Common Stock from any employee of the Company upon the cessation
of
his or her employment if such purchase is at the Company’s option and is at a
price no greater than the price originally paid for these shares by the
employee. Notwithstanding the foregoing, nothing in this Agreement shall
prohibit the Company from conducting any dividend, asset distribution, spin-off
or share repurchase under any arrangement with Dolphin Products Pty
Ltd.
4.10 Indebtedness.
The Company will not create, incur, issue, assume, guarantee or otherwise
become
liable for, any indebtedness that is senior to or pari passu with the
Notes.
4.11 Debt
Service. The Company agrees that as long as any principal balance remains
outstanding under the Notes, 50% of the net proceeds from all of the following
will be used to reduce the principal balance of the Notes: (i) sales of the
Company’s assets (other than sales of inventory in the ordinary course of
business); (ii) amounts received by the Company pursuant to settlement
agreements or similar arrangements relating to litigation (excluding amounts
awarded to reimburse the Company for costs); and (iii) sales of equity
securities of the Company for cash consideration after the Closing Date
(excluding proceeds received from (x) the sale of the first 1,000,000 shares
of
Common Stock or Common Stock Equivalents, calculated in the aggregate, issued
after the Closing Date in a private placement transaction or series of
transactions, (y) the exercise of warrants and options outstanding on the
Closing Date, and (z) the exercise of options issued after the Closing Date
to
the Company’s employees and directors). Payments made pursuant to this Section
4.11 shall be applied dollar for dollar against scheduled principal payments
on
the Notes. Notwithstanding the foregoing, the Company shall not be required
to
apply such amounts to the Notes unless the net proceeds received by the Company
with respect to the transaction in question equals or exceeds $50,000.
4.12 Reduction
in Number of Warrants. If at any time prior to the first anniversary of the
Closing Date, the aggregate outstanding principal balance of the Notes is
reduced to $7,000,000 or less, the parties agree that 800,000 Warrants, in
the
aggregate, will be cancelled. If the principal balance under the Notes is
reduced to $7,000,000 or less by the second anniversary of the Closing Date,
400,000 Warrants will be cancelled; and if the principal balance of the Notes
is
reduced to $7,000,000 or less by the third anniversary of the Closing Date,
200,000 Warrants will be cancelled. The cancellation of Warrants pursuant
to
this Section 4.12 shall be effected (i) pro rata among all Lenders based
on the
number of Warrants issued to the Lenders at the Closing, and (ii) automatically
and immediately upon the Company’s delivery of payment or other effective
reduction of principal amount of the Notes without need of any other notice
by
or action on the part of any party.
19
ARTICLE
V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Lender, as to such Lender’s obligations
hereunder only and without any effect whatsoever on the obligations between
the
Company and the other Lenders, or the Company by written notice to the other
parties, if the Closing has not been consummated on or before __________,
2006,
provided, however, that no such termination will affect the right
of any party to ▇▇▇ for any breach by the other party (or parties).
5.2 Fees
and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery
and
performance of this Agreement; provided that the Company shall, following
the
Closing, reimburse the reasonable legal fees and expenses of counsel for
the
Lenders, which shall not exceed for all transactions contemplated by this
Agreement $25,000. The Company shall pay all transfer agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of the
Notes,
Warrants or Warrant Shares to the Lenders.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede and replace in their entirety
all
prior agreements and understandings, oral or written, with respect to such
matters, including specifically the Original Agreement, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice
or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto prior to 5:30 p.m. (New York City time)
on a
Trading Day, (b) the next Trading Day after the date of transmission, if
such
notice or communication is delivered via facsimile at the facsimile number
set
forth on the signature pages attached hereto on a day that is not a Trading
Day
or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
2nd
Trading
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as follows:
|
If
to the Company:
|
VendingData
Corporation
|
|
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
|
|
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
|
|
|
Chief
Executive Officer
|
20
|
If
to the Lenders:
|
c/o
Bricoleur Capital Management, LLC
|
|
▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
|
|
|
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇
|
or
such
other address as either party may provide to the other in writing.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived or amended except in
a
written instrument signed by the party against whom enforcement of any such
waived provision is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to
be a
continuing waiver in the future or a waiver of any subsequent default or
a
waiver of any other provision, condition or requirement hereof, nor shall
any
delay or omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.6 Headings.
The headings herein are for convenience only, do not constitute a part of
this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit
of the parties and their successors and permitted assigns. Neither the Company
nor the Lenders may assign this Agreement or any rights or obligations hereunder
without the prior written consent of each the other party (other than by
merger), except that any Lender may assign its rights and obligations hereunder,
including any Notes, Warrants or Warrant Shares, to a Permitted Transferee
without the Company’s prior written consent.
5.8 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and
is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.
5.9 Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof. Each party
agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall
be
commenced exclusively in the state and federal courts sitting in the San
Diego,
California. The parties hereby waive all rights to a trial by jury. If either
party shall commence an action or proceeding to enforce any provisions of
the
Transaction Documents, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
21
5.10 Survival.
The representations and warranties contained herein shall survive the Closing
and the delivery of the Notes and Warrants.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which
when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered
to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on
whose
behalf such signature is executed) with the same force and effect as if such
facsimile or “.pdf” signature page were an original thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement is held
by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the
same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that
may be
hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, whenever any Lender exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its
related
obligations within the periods therein provided, then such Lender may rescind
or
withdraw, in its sole discretion from time to time upon written notice to
the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
5.14 Replacement
of Securities. If any certificate or instrument evidencing the Notes,
Warrants or Warrant Shares is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction.
The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement security.
5.15 Construction.
The parties agree that each of them and/or their respective counsel has reviewed
and had an opportunity to revise the Transaction Documents and, therefore,
the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto.
22
IN
WITNESS WHEREOF, the parties hereto have caused this 8% Senior Secured Note
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
VENDINGDATA
CORPORATION
By: /s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇
▇.
▇▇▇▇▇▇▇,
President
and Chief Executive Officer
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR LENDERS FOLLOWS]
23
BRICOLEUR
PARTNERS, L.P.
By:
Bricoleur Capital Management, LLC,
Its
General Partner
By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, Member of
Management
Board
Subscription
Amount: $0
BRICOLEUR
ENHANCED, L.P.
By:
Bricoleur Capital Management, LLC,
Its
General Partner
By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, Member of
Management
Board
Subscription
Amount: $6,000,000
BRIC
6, L.P.
By:
Bricoleur Capital Management, LLC,
Its
General Partner
By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, Member of
Management
Board
Subscription
Amount: $0
BRICOLEUR
OFFSHORE LTD.
By:
Bricoleur Capital Management, LLC,
Its
Investment Adviser
By: /s/
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇, Member of
Management
Board
Subscription
Amount: $7,000,000
24