Exhibit 10.56
PURCHASE AGREEMENT
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This PURCHASE AGREEMENT (this "Agreement"), dated as of August 2,
2001, by and among Mikohn Gaming Corporation, a Nevada corporation (the
"Company"), and each of the purchasers (individually, a "Purchaser" and,
collectively, the "Purchasers") listed on the Schedule of Purchasers attached as
Exhibit A hereto (the "Purchasers Schedule").
WHEREAS, the Company proposes to issue and sell to the Purchasers up
to an aggregate of 1,500,000 shares of its common stock, par value $.10 per
share (the "Common Stock" and, such shares, the "Common Shares"), subject to the
terms and conditions set forth in this Agreement;
WHEREAS, the Common Shares are being offered and sold to the
Purchasers in a private placement (the "Placement") without registration under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance on an
exemption from the registration requirements under the Securities Act, solely to
(i) persons in the United States whom the Company reasonably believes to be
"qualified institutional buyers," as defined in Rule 144A under the Securities
Act, as such rule may be amended from time to time, and (ii) a limited number of
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, that make certain representations and agreements
to the Company;
WHEREAS, ▇▇▇▇▇▇▇▇▇ & Company, Inc. (the "Agent") has been engaged by
the Company to act as exclusive placement agent to the Company in connection
with the Placement; and
WHEREAS, the Company has prepared a preliminary private placement
memorandum, dated July 17, 2001 (the "Preliminary Private Placement Memorandum")
and a final private placement memorandum, dated August 2, 2001 (together with
all amendments and supplements thereto, the "Private Placement Memorandum"),
describing the Placement and setting forth information regarding the Company and
the Common Shares.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, mutual covenants and agreements set forth herein,
the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF THE COMMON SHARES
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1.1 Agreement to Purchase and Sell. Upon the basis of the
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representations, warranties and covenants, and subject to the terms and
conditions set forth in this Agreement and in the Private Placement Memorandum,
at the Closing (as defined hereinafter), the Company agrees to sell to each
Purchaser, and each such Purchaser agrees, severally and not jointly, to
purchase from the Company, the number of Common Shares set forth opposite such
Purchaser's name in the Purchasers Schedule for an aggregate amount in cash
equal to the product (such product, the "Purchase Price") determined by
multiplying (a) the number of Common Shares purchased by such Purchaser by (b)
$5.50.
1.2 Registration Rights Agreement. At the Closing, the Company and
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the Purchasers shall execute and deliver a registration rights agreement with
respect to the Common
Shares, in substantially the form of Exhibit B hereto (the "Registration Rights
Agreement" and, together with this Agreement, the "Operative Agreements").
1.3 Closing. The closing of the transactions contemplated hereby
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(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇ Traurig, LLP, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on August 10, 2001, or at such other
place or time, or on such other date, as the Purchasers and the Company shall
mutually agree in writing. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.4 Delivery and Payment. At the Closing, (a) the Company shall
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deliver or cause to be delivered to each Purchaser (i) a stock certificate or
certificates evidencing the number of Common Shares to be purchased by such
Purchaser pursuant to this Agreement, such stock certificate(s) to be in the
denomination(s) and issued in the name(s) specified to the Company by such
Purchaser, (ii) a copy of the Registration Rights Agreement executed by the
Company and (iii) all other documents, instruments and writings required to be
delivered by the Company to such Purchaser pursuant to this Agreement or
otherwise required in connection herewith, and (b) each Purchaser shall deliver
or cause to be delivered to the Company (i) the Purchase Price, by wire transfer
of immediately available funds to the account designated by the Company, (ii) a
copy of the Registration Rights Agreement executed by such Purchaser and (iii)
all other documents, instruments and writings required to be delivered by such
Purchaser to the Company pursuant to this Agreement or otherwise required in
connection herewith.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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As of the date hereof, the Company hereby represents and warrants to
each Purchaser as follows:
2.1 Incorporation and Organization. The Company (a) is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Nevada; (b) has full corporate power and authority to conduct, operate
and carry on its business and operations as described in the Private Placement
Memorandum, and to manage, use, control, own, lease and operate its properties
and assets; and (c) is duly qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction in which such
qualification or licensing is required, except where the failure to be so
qualified or licensed and in good standing, individually or in the aggregate,
would not have a material adverse effect on the business, prospects, condition
(financial or otherwise), net worth or earnings of the Company and its
subsidiaries, taking the Company and its subsidiaries as a whole (a "Material
Adverse Effect").
2.2 Issuance and Delivery of Shares. The Common Shares have been
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duly authorized and, when issued by the Company and paid for by the Purchasers,
in compliance with the provisions of this Agreement, (a) shall be free and clear
of any and all liens, charges, security interests, options, claims, equitable
interests, pledges, proxies, voting trusts or agreements, encumbrances,
restrictions or adverse interests of any kind and of any nature whatsoever
(collectively, "Liens"), except for such restrictions on transfer or ownership
as set forth in this Agreement or in the Private Placement Memorandum or
otherwise imposed by applicable federal or state securities laws or applicable
gaming laws, (b) shall have been duly authorized and validly issued, (c) shall
be fully paid and nonassessable and (d) shall have been issued in compliance
with all applicable federal and state securities laws and all applicable gaming
laws.
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The issuance and delivery of the Common Shares are not subject to any
preemptive or similar rights.
2.3 Capital Structure. The authorized and outstanding capital stock
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of the Company as of the date hereof is, and as of the Closing Date will be, as
set forth in the Private Placement Memorandum under the caption
"Capitalization." All of the outstanding shares of the Company's capital stock
have been duly authorized and validly issued, are fully paid and nonassessable,
were issued in compliance with all applicable federal and state securities laws
and all applicable gaming laws and are not subject to, and were not issued in
violation of, any preemptive or similar rights. Except as set forth in the
Private Placement Memorandum, there are no outstanding securities, options,
warrants, calls, rights, contracts, commitments, agreements, arrangements,
understandings or undertakings of any kind to which the Company or any of its
subsidiaries is a party, or by which any of them is bound, obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, shares of capital stock or other securities of the
Company or any of its subsidiaries, or any securities convertible into or
exercisable or exchangeable for any shares of capital stock or other securities
of the Company or any of its subsidiaries, or obligating the Company or any of
its subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, contract, commitment, agreement, arrangement,
understanding or undertaking. Except as set forth on Schedule 2.3 of the
Schedule of Exceptions attached as Schedule A hereto (the "Schedule of
Exceptions"), there are no contracts, commitments, agreements, arrangements,
understandings or undertakings of any kind to which the Company or any of its
subsidiaries is a party, or by which any of them is bound, granting to any
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company or requiring
the Company to include such securities with Common Shares registered pursuant to
any registration statement.
2.4 Subsidiaries. Each of the subsidiaries of the Company (a) is
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duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization; (b) has full corporate power and authority to
conduct, operate and carry on its business and operations as described in the
Private Placement Memorandum, and to manage, use, control, own, lease and
operate its properties and assets; and (c) is duly qualified or licensed to do
business and is in good standing in every jurisdiction in which such
qualification or licensing is required, except where the failure to be so
qualified or licensed and in good standing, individually or in the aggregate,
would not have a Material Adverse Effect. All of the outstanding shares of
capital stock of, other securities of or other interests in each of the
Company's subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and are owned by the Company, directly or indirectly
through one or more of the Company's subsidiaries, free and clear of any and all
Liens.
2.5 Authorization; Validity of Agreement; Company Action. The
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Company has full corporate power and authority to execute and deliver each of
the Operative Agreements, to perform its obligations under each of the Operative
Agreements and to consummate the Placement and the other transactions
contemplated by each of the Operative Agreements. The execution and delivery by
the Company of each of the Operative Agreements and the consummation by the
Company of the transactions contemplated by each of the Operative Agreements
have been duly authorized by, and each of the Operative Agreements, the
Placement
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and each of the other transactions contemplated by each of the Operative
Agreements have been validly approved by, the requisite vote of the Company's
Board of Directors. No other corporate action or proceeding on the part of the
Company is necessary for the execution and delivery by the Company of the
Operative Agreements, the performance by the Company of its obligations under
the Operative Agreements or the consummation by the Company of the Placement and
the other transactions contemplated by the Operative Agreements. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due and valid authorization, execution and delivery of this Agreement by each of
the Purchasers, is a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
2.6 Consents and Approvals. Assuming the accuracy of the
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representation of each Purchaser set forth in Section 3.3 hereof, except as set
forth on Schedule 2.6 of the Schedule of Exceptions, no registration (including
any registration under the Securities Act) or filing with, or any notification
to, or any approval, permission, consent, ratification, waiver, authorization,
order, finding of suitability, permit, license, franchise, exemption,
certification or similar instrument or document (each, an "Authorization") of or
from, any court, arbitral tribunal, arbitrator, administrative or regulatory
agency or commission or other governmental or regulatory authority, agency or
governing body, domestic or foreign, including without limitation any Indian
tribe or gaming commission, authority or control board (each, a "Governmental
Entity"), or any other person, or under any statute, law, ordinance, rule,
regulation or agency requirement of any Governmental Entity, including without
limitation any gaming regulation or regulatory requirement (each, a "Law"), on
the part of the Company or any of its subsidiaries is required in connection
with the execution or delivery by the Company of the Operative Agreements, the
performance by the Company of its obligations under each of the Operative
Agreements or the consummation by the Company of the Placement and the other
transactions contemplated by the Operative Agreements.
2.7 No Violation
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(a) None of the Company or any of its subsidiaries is in
violation or breach of, or default under, nor has any event occurred that has
given or could give rise (either with or without due notice or the passage of
time or both or the happening or occurrence of any other event (including
through the action or inaction of any person)) to any right of termination,
amendment, cancellation or acceleration or any obligation to pay or repay with
respect to, or has resulted or could result in the loss of any benefit under,
any provision of the articles of incorporation, bylaws or similar organizational
documents or any of the Company or any of its subsidiaries, or (ii) any
indenture, loan agreement, mortgage, guarantee, other indebtedness, lease or
other agreement, contract, instrument, obligation, understanding, arrangement,
plan, proposal, restriction or other commitment to which the Company or any of
its subsidiaries is a party, or by which the Company or any of its subsidiaries
may be bound, or to which any of the respective properties or assets of the
Company or any of its subsidiaries may be subject, or to which any of the Common
Shares may be subject (each, a "Contract"), and which is material to the Company
and its subsidiaries, taking the Company and its subsidiaries as a whole (each
such Contract, a "Material Contract").
(b) None of the execution or delivery by the Company of the
Operative Agreements, the performance by the Company of its obligations under
the Operative
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Agreements, the consummation by the Company of the Placement or any of the other
transactions contemplated by each of the Operative Agreements or the compliance
by the Company with any of the terms of the Operative Agreements will (a)
conflict with, or result in or constitute any violation or breach of or default
under, or give rise (either with or without due notice or the passage of time or
both or the happening or occurrence of any other event (including through the
action or inaction of any person)) to any right of termination, amendment,
cancellation or acceleration or any obligation to pay or repay with respect to,
or result in the loss of any benefit under, any provision of the articles of
incorporation, bylaws or similar organizational documents of the Company or any
of its subsidiaries or any Material Contract; (b) conflict with, or result in or
constitute any violation of, any award, decision, judgment, decree, injunction,
writ, order, subpoena, ruling, verdict or arbitration award entered, issued,
made or rendered by any federal, state, local or foreign government or any other
Governmental Entity (each an "Order"), or any Law, applicable to the Company or
any of its subsidiaries, or to any of their respective properties or assets, or
to any Common Shares; (c) result in the creation or imposition of (or the
obligation to create or impose) any Lien on any of the properties or assets of
the Company or any of its subsidiaries, or on any Common Shares; or (d) conflict
with, or result in or constitute any violation of, or result in the termination,
suspension or revocation of, any Authorization applicable to the Company or any
of its subsidiaries, or to any of their respective properties or assets, or to
any Common Shares, or result in any other impairment of the rights of the holder
of any such Authorization.
2.8 SEC Documents; Financial Statements. The Company has filed in a
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timely manner all required reports, proxy statements, forms, and other documents
with the Securities and Exchange Commission (the "SEC") since January 1, 1996
(collectively, the "SEC Documents"). Each of the SEC Documents, as of its
respective date complied in all material respects with the requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and, except to the
extent that information contained in any SEC Document has been revised or
superseded by a later filed SEC Document filed and publicly available prior to
the date of this Agreement, none of the SEC Documents 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. The financial
statements of the Company and its consolidated subsidiaries included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring audit adjustments).
2.9 Intellectual Property. Except as set forth in the Private
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Placement Memorandum, the Company owns (and is the record owner of), or
possesses adequate licenses to use, sell and license, free and clear of all
Liens, the rights to any and all registered and unregistered service marks,
trademarks, trade names, corporate names, trade dress, Internet domain names,
identifying symbols, logos, emblems, signs or insignia, including all goodwill
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associated therewith, and all applications, registrations, and renewals in
connection therewith; all inventions (whether patentable or unpatentable and
whether or not reduced to practice), and all U.S. and foreign patents, patent
applications, and patent disclosures (and all rights related thereto, including
all reissues, divisions, continuations, continuations-in-part, substitutions,
extensions, or renewals of any of the foregoing); all copyrights, and all
applications, registrations, and renewals in connection therewith; and all
confidential information, technology, know-how, inventions, processes, formulae,
algorithms, models and methodologies; and any licenses to use any of the
foregoing (all of the foregoing, collectively, the "intellectual property"),
that are used in the business of the Company as presently conducted and as
described in the Private Placement Memorandum, except where the failure to own,
or be the record owner of, or possess such intellectual property, individually
or in the aggregate, would not have a Material Adverse Effect. Except as set
forth in the Private Placement Memorandum, neither the Company nor any of its
subsidiaries has received any notice of infringement or conflict with asserted
rights of others with respect to any of such intellectual property which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling, finding or other Order, would be likely to have a Material Adverse
Effect.
2.10 Litigation. Except as set forth in the Private Placement
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Memorandum, there are no investigations, claims, suits, actions, demands,
proceedings or arbitrations pending or, to the Company's knowledge, threatened
in any court or before or by any other Governmental Entity to which the Company
or any subsidiary of the Company is or could be a party or to which any of their
respective properties or assets are or could be subject, which, individually or
in the aggregate, could have a Material Adverse Effect, nor, to the knowledge of
the Company, is there any Law or Order outstanding against or affecting the
Company or any of its subsidiaries or any of their respective properties or
assets, which, individually or in the aggregate, could have a Material Adverse
Effect. To the knowledge of the Company, no action has been taken and no Law or
Order has been enacted, adopted or issued by any Governmental Entity which
prevents the execution, delivery or performance of this Agreement or the
Placement or the issuance of the Common Shares or suspends the Placement or the
offering, issuance or sale of the Common Shares in any jurisdiction in which the
Common Shares are proposed to be sold. No Order or relief of any nature by any
Governmental Entity has been issued with respect to the Company or any of its
subsidiaries which would suspend the Placement or the offering, issuance or sale
of the Common Shares in any jurisdiction in which the Common Shares are proposed
to be sold.
2.11 Compliance with Laws; Authorizations.
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(a) To the knowledge of the Company, none of the Company or any
of its subsidiaries has violated any foreign, federal, state or local Law or
Order relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, individually or in the aggregate, would not
have a Material Adverse Effect. To the knowledge of the Company, there are no
costs or liabilities associated with Environmental Laws (including any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization, any related
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constraints on operating activities and any potential liabilities to third
parties) or ERISA which, individually or in the aggregate, would be likely to
have a Material Adverse Effect.
(b) Each of the Company and its subsidiaries has such
Authorizations of, and has made all registrations and filings with and notices
to, all Governmental Entities, including under applicable Environmental Laws, as
are necessary to manage, use, control, own, lease and operate its properties and
assets and to conduct, operate and carry on its business and operations, except
where the failure to have any such Authorization or to make any such
registration, filing or notice, individually or in the aggregate, would not have
a Material Adverse Effect. (i) Each such Authorization is in full force and
effect, and each of the Company and its subsidiaries is in full compliance with
all the terms and conditions thereof and with the Laws and Orders of the
Governmental Entities having jurisdiction with respect thereto, (ii) no event
has occurred (including the receipt of notice from any Governmental Entities)
which allows, or after due notice or the passage of time or both would allow,
revocation, suspension or termination of any such Authorization or results, or
after due notice or the passage of time or both would result, in any other
impairment of the rights of the holder of any such Authorization; and (iii) such
Authorizations contain no restrictions that are burdensome to the Company or any
of its subsidiaries, except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the presence
of any such restriction, individually or in the aggregate, would not have a
Material Adverse Effect. To the knowledge of the Company, each of the Company
and its subsidiaries is in full compliance with all Laws and Orders applicable
to the Company or any of its subsidiaries, or to any of their respective
properties or assets, or to any Common Shares, except where the failure to be in
compliance, individually or in the aggregate, would not have a Material Adverse
Effect.
2.12 Related Party Transactions. Except as disclosed in the Private
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Placement Memorandum, no relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries, on the one hand, and the
directors, officers, stockholders, affiliates, customers or suppliers of the
Company or any of its subsidiaries, on the other hand, which would be required
by the Securities Act to be described in the Private Placement Memorandum if the
Private Placement Memorandum were a prospectus included in a registration
statement on Form S-1 filed with the SEC.
2.13 No Material Adverse Change. Except as disclosed in the Private
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Placement Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), subsequent to the date as of which
such information is given in such Private Placement Memorandum, (a) neither the
Company nor any of its subsidiaries has incurred any liability or obligation,
direct or contingent, or entered into any transaction, that is material to the
Company and its subsidiaries, taking the Company and its subsidiaries as a
whole, (b) there has not been any material change or any development involving
or which could reasonably be expected to involve a material change in the
capital stock of the Company or any of its subsidiaries, or material increase or
any development involving or which could reasonably be expected to involve a
material increase in the short-term or long-term debt of the Company or any of
its subsidiaries and (c) there has not been any material adverse change in the
business, prospects, condition (financial or otherwise), operations, net worth,
earnings, properties, assets, contracts, agreements or otherwise of the Company
and its subsidiaries, taking the Company and its subsidiaries as a whole (a
"Material Adverse Change"), or, to the knowledge of the Company,
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any development involving or which could reasonably be expected to involve a
Material Adverse Change.
2.14 Private Placement Memorandum.
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(a) The Private Placement Memorandum, as of the date hereof,
does not contain any untrue statement of a material fact or omit to state any
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. The historical financial statements, together with the related
notes, included in the Private Placement Memorandum have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved and fairly present the consolidated financial
position of the Company and its subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows and changes in financial
position for the periods then ended (subject, in the case of unaudited
statements, to normal recurring audit adjustments). The other financial and
statistical information and data with respect to the Company and its
subsidiaries set forth in the Private Placement Memorandum are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of the Company.
(b) The pro forma, or "as adjusted" (referred to herein as "pro
forma"), financial statements included in the Private Placement Memorandum have
been prepared on a basis consistent with the historical financial statements of
the Company and its subsidiaries, give effect to assumptions used in the
preparation thereof on a reasonable basis and in good faith and fairly present
the historical and proposed transactions contemplated by the Private Placement
Memorandum and comply as to form in all material respects with the requirements
applicable to pro forma financial statements included in registration statements
on Form S-1 under the Securities Act. The other pro forma financial and
statistical information and data with respect to the Company and its
subsidiaries set forth in the Private Placement Memorandum are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements.
2.15 Distribution of Offering Materials; Facilitation of Placement.
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Except as permitted by the Securities Act, the Company has not distributed and,
prior to the later to occur of the Closing Date and completion of the
distribution of the Common Shares, will not distribute any offering material in
connection with the Placement other than the Preliminary Private Placement
Memorandum and the Private Placement Memorandum. None of the Company or any
affiliate (as defined in Rule 501(b) of Regulation D ("Regulation D") under the
Securities Act) of the Company has directly, or through any agent (provided that
no representation is made as to the Agent or its affiliates or any person acting
on its behalf), (a) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of; any security (as defined in the Securities Act) which
is or will be integrated with the Placement in a manner that would require the
registration of the Common Shares under the Securities Act or; (b) engaged in or
used any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the Placement, including articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
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2.16 Investment Company Act. The Company is not and, after giving
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effect to the Placement and the application of the net proceeds therefrom as
described in the Private Placement Memorandum, will not be an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
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As of the date hereof, each Purchaser severally represents and
warrants to the Company as follows:
3.1 Authority. Such Purchaser has all requisite power and authority
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to execute and deliver each of the Operative Agreements, to perform its
obligations under each of the Operative Agreements and to consummate the
transactions contemplated by each of the Operative Agreements. Such Purchaser
has taken all requisite action to, and no other action or proceeding on the part
of such Purchaser is necessary for, the execution and delivery by such Purchaser
of the Operative Agreements, the performance by such Purchaser of its
obligations under the Operative Agreements or the consummation by such Purchaser
of the transactions contemplated by the Operative Agreements. This Agreement has
been duly and validly executed and delivered by such Purchaser and, assuming due
and valid authorization, execution and delivery of this Agreement by the
Company, is a valid and binding obligation of such Purchaser and is enforceable
by the Company against such Purchaser in accordance with its terms.
3.2 Consents and Approvals. No registration or filing with, or any
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notification to, or any Authorization of or from, any Governmental Entity or any
other person, on the part of the Purchaser is required in connection with the
execution or delivery by such Purchaser of the Operative Agreements, the
performance by such Purchaser of its obligations under the Operative Agreements
or consummation by such Purchaser of the transactions contemplated by the
Operative Agreements.
3.3 Investment Experience and Intent. Such Purchaser has read the
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information set forth under the caption "Notice to Investors" in the Private
Placement Memorandum and hereby makes in this Agreement each of the
acknowledgements, representations, warranties and agreements forth under the
caption "Notice to Investors" in the Private Placement Memorandum. Such
Purchaser acknowledges that the Company and others will rely upon the truth and
accuracy of such acknowledgments, representations, warranties and agreements and
hereby consents to such reliance. In addition, any sale by any Purchaser of the
Common Shares will be based on an independent investment decision by such
Purchaser reached at the time of such sale.
3.4 No Legal, Tax or Investment Advice. Such Purchaser understands
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that nothing in the Preliminary Private Placement Memorandum, the Private
Placement Memorandum, the Operative Agreements or any other materials presented
to such Purchaser in connection with the Placement or the purchase and sale of
the Common Shares constitutes legal, tax or investment advice. Such Purchaser
has consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed to be necessary or appropriate in connection with its
purchase of the Common Shares.
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SECTION 4. CONDITIONS
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4.1 Conditions to Closing of the Purchasers. Each Purchaser's
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obligation to purchase the Common Shares at the Closing is subject to the
satisfaction, or waiver by such Purchaser, of the following conditions:
(a) Representations and Warranties. The representations and
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warranties of the Company set forth in this Agreement shall be true and correct
in all material respects (except for those qualified as to materiality or a
Material Adverse Effect, which shall be true and correct) as of the date of this
Agreement and as of the Closing Date (except to the extent that such
representation or warranty speaks of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
(or if qualified as to materiality or a Material Adverse Effect, true and
correct) as of such date) as though made on and as of the Closing Date. Such
Purchaser shall have received a certificate signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of the Company to
such effect.
(b) Performance of Obligations of Company. The Company shall
-------------------------------------
have performed in all material respects all agreements and covenants required to
be performed by it under this Agreement prior to the Closing Date. Such
Purchaser shall have received a certificate signed on behalf of the Company by
the Chief Executive Officer and the Chief Financial Officer of the Company to
such effect.
(c) Opinion of Company and the Company's Counsel. Each
--------------------------------------------
Purchaser shall have received (i) an opinion dated the Closing Date from
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, counsel to the Company, in the form of Exhibit C hereto,
and (ii) an opinion dated the Closing Date from the General Counsel of the
Company, in the form of Exhibit D hereto.
(d) Registration Rights Agreement. The Company shall have
-----------------------------
executed and delivered to each of the Purchasers the Registration Rights
Agreement.
4.2 Conditions to Closing of the Company. The Company's obligation
------------------------------------
to issue and sell the Common Shares at the Closing is subject to the
satisfaction, or waiver by the Company, of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each Purchaser set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date (except to the extent that such representation or warranty speaks
of an earlier date, in which case such representation or warranty shall be true
and correct in all material respects as of such date) as though made on and as
of the Closing Date.
(b) Performance of Obligations of the Purchasers. Each of the
--------------------------------------------
Purchasers shall have performed in all material respects all agreements and
covenants required to be performed by it under this Agreement prior to the
Closing Date.
(c) Registration Rights Agreement. Each of the Purchasers shall
-----------------------------
have executed and delivered to the Company the Registration Rights Agreement.
10
SECTION 5. RESTRICTIONS ON TRANSFER OF SHARES
----------------------------------
5.1 Restrictions on Transferability. The Common Shares may not be
-------------------------------
offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities laws, or pursuant to an exemption therefrom, and in each case in
compliance with the terms of this Agreement and the restrictions set forth under
the caption "Notice to Investors" in the Private Placement Memorandum. The
Company shall be entitled to give stop transfer orders to its transfer agent
with respect to the Common Shares in order to enforce the foregoing
restrictions.
5.2 Restrictive Legend. Each certificate representing the Common
------------------
Shares will contain a legend substantially to the following effect (in addition
to any legends required under applicable securities laws).
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE EXPIRATION DATE
(THE "RESALE RESTRICTION TERMINATION DATE") OF THE PERIOD PROVIDED
UNDER RULE 144(k) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION THERETO) AS PERMITTING RESALES BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION (SUCH PERIOD TO BE MEASURED
FROM THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY)), EXCEPT (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER, (D) PURSUANT TO OFFERS AND SALES
TO FOREIGN PERSONS THAT OCCUR IN OFFSHORE TRANSACTIONS AND WITHOUT
DIRECTED SELLING EFFORTS WITHIN THE MEANINGS OF SUCH TERMS AS DEFINED
IN REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501 (a) (1), (2),
(3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO,
11
OR FOR OFFER OF SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT AND IN EACH CASE IN
ACCORDANCE WITH APPLICABLE SECURITIES LAWS OF ANY U.S. STATE OR ANY
OTHER APPLICABLE JURISDICTION. THE HOLDER OF THIS SECURITY AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
SECTION 6. MISCELLANEOUS
-------------
6.1 Survival of Representations and Warranties. All representations,
------------------------------------------
warranties, covenants and agreements (except covenants and agreements which are
expressly required to be performed and are performed in full on or before the
Closing Date) contained in this Agreement shall survive the Closing for three
years, except that (i) Section 2.11 shall survive until the end of the
applicable statutes of limitations, and (ii) Sections 2.2 and 2.3 and this
Section 6.1 shall survive indefinitely.
6.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed sufficiently given and served for all purposes
(a) when personally delivered or given by telex or machine-confirmed facsimile,
(b) one business day after a writing is delivered to a national overnight
courier service or (c) three business days after a writing is deposited in the
United States mail, first class postage or other charges prepaid and registered,
return receipt requested, in each case, addressed as follows (or at such other
address for a party as shall be specified by like notice): (i) in the case of
the Company, to Mikohn Gaming Corporation , Attention: President, ▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇ (Facsimile No.), and (ii) in the case
of any Purchaser, at the address for such Purchaser as set forth in the
Purchasers Schedule.
6.3 Amendments and Waivers. No modifications or amendments to, or
----------------------
waivers of, any provision of this Agreement may be made, except pursuant to a
document signed by the Company and the holders of a majority of the outstanding
Common Shares issued in the Placement.
6.4 Interpretation. When a reference is made in this Agreement to
--------------
Sections, paragraphs, clauses or Exhibits, such reference shall be to a Section,
paragraph, clause or Exhibit to this Agreement unless otherwise indicated. The
words "include," "includes," and "including"
12
when used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against any party. The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to August 2, 2001. The words
"hereof," "herein," "herewith," "hereby" and "hereunder" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement.
6.5 Expenses. Each party shall pay all costs and expenses incurred
--------
by it in connection with the execution and delivery of this Agreement and the
transactions contemplated hereby, including fees of legal counsel.
6.6 Further Assurances. Each party to this Agreement shall do and
------------------
perform or cause to be done and performed all such further acts and things and
shall execute and deliver all such agreements, certificates, instruments and
documents as the other party hereto may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
6.7 No Third-Party Beneficiaries. No person or entity not a party
----------------------------
to this Agreement shall be deemed to be a third-party beneficiary hereunder or
entitled to any rights hereunder. All representations, warranties or agreements
of any Purchaser contained in this Agreement shall inure to the benefit of the
Company.
6.8 Successors and Assigns. The provisions of this Agreement shall
----------------------
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto. Notwithstanding the foregoing, neither any Purchaser nor
the Company shall assign or delegate any of its rights or obligations under this
Agreement.
6.9 Entire Agreement. This Agreement and all other documents
----------------
required to be delivered pursuant hereto constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
documents, agreements and understandings, both written and verbal, among the
parties with respect to the subject matter hereof and the transactions
contemplated hereby.
6.10 Severability. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable under present or future laws, then, if
possible, such illegal, invalid or unenforceable provision will be modified to
such extent as is necessary to comply with such present or future laws and such
modification shall not affect any other provision hereof; provided that if such
provision may not be so modified such illegality, invalidity or unenforceability
will not affect any other provision, but this Agreement will be reformed,
construed and enforced as if such invalid, illegal or unenforceable provision
had never been contained herein.
6.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF
NEW YORK.
13
6.12 Gaming Laws. Each of the provisions of this Agreement is
-----------
subject to and shall be enforced in compliance with applicable gaming laws.
6.13 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each of the other parties, it being understood that
all parties need not sign the same counterpart.
(signature page follows)
14
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
MIKOHN GAMING CORPORATION
By:______________________
Name:
Title:
_________________________
as a PURCHASER
By:______________________
Name:
Title:
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
----------------------
Name and Address Number of
of Purchaser Common Shares
---------------------------------------------------------------------------------
EXHIBIT B
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as
of August 10, 2001, by and among Mikohn Gaming Corporation, a Nevada corporation
(the "Company"), and each of the purchasers (individually, a "Purchaser" and,
collectively, the "Purchasers") listed on the Schedule of Purchasers attached as
Exhibit A hereto.
WHEREAS, the Company has agreed to issue and sell to the
Purchasers pursuant to a Purchase Agreement, dated as August 2, 2001 (the
"Purchase Agreement"), by and among the Company and the Purchasers, up to an
aggregate of 1,500,000 shares of its common stock, par value $.10 per share (the
"Common Stock" and, such shares, the "Common Shares"), subject to the terms and
conditions set forth in the Purchase Agreement; and
WHEREAS, in order to induce the Purchasers to purchase the Common
Shares, the Company has agreed to provide the registration rights set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
Section 1. DEFINITIONS
-----------
Capitalized terms used but not defined herein shall have the
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized terms shall have the following respective
meanings:
"Business Day" means any day, excluding Saturday, Sunday and any
------------
day which is in the City of New York a legal holiday or a day upon which banking
institutions in the City of New York are required or authorized by law or other
governmental action to close.
"Effectiveness Deadline" has the meaning set forth in Section
----------------------
3(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
"Filing Deadline" has the meaning set forth in Section 3(a).
---------------
"Holder" has the meanings set forth in Section 2.
------
"Liquidated Damages" has the meaning set forth in Section 4.
------------------
"Prospectus" means the prospectus included in the Shelf
----------
Registration Statement at the time the Shelf Registration Statement is declared
effective, as amended or supplemented by
B-1
any prospectus supplement and all other amendments thereto, including post-
effective amendments, and all material incorporated by reference into such
Prospectus.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Shelf Registration Statement" has the meaning set forth in
----------------------------
Section 3(a).
"Transfer Restricted Shares" means Common Shares and any other
--------------------------
securities of the Company issued or issuable upon the exercise or conversion
thereof or in exchange therefor or upon any similar event with respect thereto,
whether by way of stock split or in connection with a combination of shares,
recapitalization, merger, consolidation, other reorganization or otherwise. As
to any particular Transfer Restricted Shares held by any particular person, once
issued such securities shall cease to be Transfer Restricted Shares when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) such securities
shall have been distributed by such person to a non-affiliate of such person
pursuant to Rule 144 under the Securities Act, (iii) such securities shall have
been otherwise transferred, new certificates for such securities not bearing a
legend restricting further transfer shall have been issued to such person and
subsequent disposition of such securities shall not require registration or
qualification of such securities under the Securities Act or any similar state
statute then in force, or (iv) such securities shall have ceased to be
outstanding.
Section 2. HOLDERS
-------
A person is deemed to be a holder of Transfer Restricted Shares
(each, a "Holder") whenever such person owns Transfer Restricted Shares.
Section 3. SHELF REGISTRATION
------------------
(a) Shelf Registration.
------------------
The Company shall cause to be filed, on or prior to 90
days after the Closing Date (the "Filing Deadline"), a shelf registration
statement pursuant to Rule 415 under the Securities Act (which may be an
amendment to any previously filed registration statement (the "Shelf
Registration Statement")), relating to all of the Transfer Restricted Shares,
and shall use its reasonable best efforts to cause such Shelf Registration
Statement to become effective on or prior to 60 days after the Filing Deadline
(such 60th day the "Effectiveness Deadline").
The Company shall use its reasonable best efforts to keep any Shelf
Registration Statement required by this Section 3(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Section 5(a) to the extent necessary to ensure that it is available for sales
of Transfer Restricted Shares and in conformity with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the SEC
as announced from time to time, for a period of at least two years (as extended
pursuant to Section 5(b)) following the Closing Date, or such shorter period as
will terminate when all Transfer Restricted Shares covered by the Shelf
Registration Statement have been sold pursuant thereto.
B-2
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement.
----------------------------
No Holder of Transfer Restricted Shares may include any of
its Transfer Restricted Shares in the Shelf Registration Statement unless and
until such Holder furnishes to the Company in writing, within 20 days after
receipt of a request therefor, the information specified in Item 507 or 508 of
Regulation S-K, as applicable, of the Securities Act for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Shares shall be entitled to
Liquidated Damages pursuant to Section 4 unless and until such Holder shall have
provided all such information. Each selling Holder agrees to promptly furnish
additional information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
Section 4. LIQUIDATED DAMAGES
------------------
If (a) the Shelf Registration Statement is not filed with the SEC
on or prior to the Filing Deadline, (b) the Shelf Registration Statement has not
been declared effective by the SEC on or prior to the Effectiveness Deadline, or
(c) the Shelf Registration Statement is filed and declared effective but
thereafter ceases to be effective or fails to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such Shelf
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (a) through (c), a
"Registration Default"), then, subject to Section 3(b), the Company hereby
agrees to pay to each Holder of Common Shares affected thereby liquidated
damages ("Liquidated Damages") in the amount of 0.05 share of Common Stock for
every Common Share purchased by such Holder pursuant to the Purchase Agreement
(rounded up to the nearest share, taking into account all Common Shares
purchased by such Holder pursuant to the Purchase Agreement). In addition, for
each month following the occurrence of a Registration Default that such
Registration Default continues, on or before the last day of such month, the
Company hereby agrees to pay to each Holder of Common Shares affected thereby
Liquidated Damages in the amount of 0.02 share of Common Stock for every Common
Share purchased by such Holder pursuant to the Purchase Agreement (rounded up to
the nearest share, taking into account all Common Shares purchased by such
Holder pursuant to the Purchase Agreement); provided, however, that the Company
-------- -------
shall in no event be required to pay Liquidated Damages for more than one
Registration Default at any given time.
All accrued Liquidated Damages shall be paid to the Holders
entitled thereto. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Share at
the time such security ceases to be a Transfer Restricted Share shall survive
until such time as all such obligations with respect to such security shall have
been satisfied in full.
Section 5. REGISTRATION PROCEDURES
-----------------------
(a) Shelf Registration Statement
----------------------------
In connection with the Shelf Registration Statement, the
Company shall:
B-3
(i) use its reasonable best efforts to effect such registration to
permit the sale of the Transfer Restricted Shares being sold in accordance with
the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 3(b)), and pursuant
thereto the Company will prepare and file with the SEC the Shelf Registration
Statement on any appropriate form under the Securities Act, which form shall be
available for the sale of the Transfer Restricted Shares in accordance with the
intended method or methods of distribution thereof within the time periods and
otherwise in accordance with the provisions of this Agreement;
(ii) use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective and provide all requisite financial statements
for the period specified in Section 3 of this Agreement; and upon the occurrence
of any event that would cause the Shelf Registration Statement or the Prospectus
contained therein (A) to contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statement therein not
misleading or (B) not to be effective and usable for resale of Transfer
Restricted Shares during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to the Shelf Registration Statement
curing such defect, and, if the SEC review is required, use its reasonable best
efforts to cause such amendment to be declared effective as soon as practicable;
(iii) prepare and file with the SEC such amendments and post-effective
amendments to the applicable Registration Statement as may be necessary to keep
the Shelf Registration Statement effective for the applicable period set forth
in Section 3, as the case may be; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and
462, as applicable, under the Securities Act in a timely manner; and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by the Shelf Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in the Shelf Registration Statement or supplement to
the Prospectus;
(iv) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Shelf Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the SEC for amendments to the
Shelf Registration Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the issuance by the SEC of
any stop order suspending the effectiveness of the Shelf Registration Statement
under the Securities Act or of the suspension by any state securities commission
of the qualification of the Transfer Restricted Shares for offering or sale in
any jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, and (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Shelf Registration
Statement, the Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of any
additions to or changes in the Shelf Registration Statement in order to make the
statements therein not misleading, or that requires the making of any additions
to or changes in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made,
B-4
not misleading (provided that the Company determines in its good faith judgment
--------
that the disclosure of such fact or happening or event at such time would have a
material adverse effect on the business, financial condition, operations or
prospects of the Company or the disclosure otherwise relates to a material
business transaction which has not yet been publicly disclosed); and if at any
time the SEC shall issue any stop order suspending the effectiveness of the
Shelf Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Shares under state
securities or blue sky laws, the Company shall use its reasonable best efforts
to obtain the withdrawal or lifting of such order at the earliest possible time;
(v) subject to Section 5(a)(ii), if any fact or event contemplated by
Section 5(a)(iv)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Shelf Registration Statement or related
Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of Transfer
Restricted Shares, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(vi) furnish to each Holder in connection with such sale, if any,
before filing with the SEC, copies of the Shelf Registration Statement or any
Prospectus included therein or any amendments or supplements to the Shelf
Registration Statement or Prospectus (including all documents incorporated by
reference after the initial filing of the Shelf Registration Statement), which
documents will be subject to the review and comment of such Holders in
connection with such sale, if any, for a period of at least five Business Days,
and the Company will not file the Shelf Registration Statement or Prospectus or
any amendment or supplement to the Shelf Registration Statement or Prospectus
(including all such documents incorporated by reference) to which such Holder
shall reasonably object within five Business Days after the receipt thereof; a
Holder shall be deemed to have reasonably objected to such filing if the Shelf
Registration Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
or fails to comply with the applicable requirements of the Securities Act;
(vii) promptly prior to the filing of any document that is to be
incorporated by reference into the Shelf Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such exchange
or sale, if any, make the Company's representatives available for discussion of
such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such Holder may
reasonably request;
(viii) make available at reasonable times for inspection by each Holder
and any attorney or accountant retained by such Holder, all financial and other
records, pertinent corporate documents of the Company and cause the Company's
officers, directors and employees to supply all information reasonably requested
by any such Holder, attorney or accountant in connection with the Shelf
Registration Statement or any post-effective amendment thereto subsequent to the
filing thereof and prior to its effectiveness; provided, however, that
-------- -------
B-5
such persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such persons, unless (A) disclosure of such information is
required by court or administrative order or is necessary to respond to inquires
of regulatory authorities, (B) disclosure of such information is required by law
(including any disclosure requirements pursuant to federal securities laws in
connection with the filing of the Shelf Registration Statement or the use of any
Prospectus), (C) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard such information
by such person or (D) such information becomes available to such person from a
source other than the Company and its subsidiaries and such source is not known,
after due inquiry, by such person to be bound by a confidentiality agreement;
provided further, that the foregoing investigation shall be coordinated on
-------- -------
behalf of such persons by one representative designated by and on behalf of such
persons and any such confidential information shall be available from such
representative to such persons so long as any person agrees to be bound by such
confidentiality agreement;
(ix) if requested by any Holder in connection with such exchange or
sale, promptly include in the Shelf Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holder may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Shares; and make all required filings
of such Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(x) furnish to each Holder in connection with such exchange or sale,
if any, without charge, at least one copy of the Shelf Registration Statement,
as first filed with the SEC, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference); (xi) deliver to each Holder, without charge,
as many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Holder reasonably may request; the
Company hereby consents to the use (in accordance with law) of the Prospectus
and any amendment or supplement thereto by each Holder in connection with the
offering and the sale of the Transfer Restricted Shares covered by the
Prospectus or any amendment or supplement thereto;
(xii) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and warranties
and take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Shares pursuant to the
Shelf Registration Statement as may be reasonably requested by such Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company shall:
(1) upon the request of any Holder, furnish (or in the case of
paragraphs (B) and (C) below, use its reasonable best efforts to cause to be
furnished) to such Holder, upon the effectiveness of the Shelf Registration
Statement:
B-6
(A) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a principal
financial or accounting officer of the Company, confirming, as of the date
thereof, the matters set forth in Sections 2.13 and 4.1(a) of the Purchase
Agreement and such other similar matters as such Holder may reasonably
request;
(B) an opinion, dated the date of effectiveness of the
Shelf Registration Statement, of independent counsel to the Company,
covering matters of the type customarily covered in opinions of issuer's
counsel requested in underwritten offerings, such as the effectiveness of
the Shelf Registration Statement and such other matters as may be
reasonably requested by such Holders; without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other financial data
included in the Shelf Registration Statement or the related Prospectus; and
(C) a customary comfort letter or letters, dated as of the
date of effectiveness of the Shelf Registration Statement, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to underwriters
in connection with underwritten offerings; and
(2) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with the
matters covered in clause (1) above and with any customary conditions contained
in any agreement entered into by the Company pursuant to this clause (xii);
(xiii) prior to any public offering of Transfer Restricted Shares,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Shares under the
securities or blue sky laws of such jurisdictions as the selling Holders may
request and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Transfer Restricted Shares covered
by the Shelf Registration Statement; provided, however, that the Company shall
-------- -------
not be required to register or qualify as a foreign corporation where the
Company is not now so qualified or to take any action that would subject the
Company to the service of process in suits or to taxation, other than as to
matters and transactions relating to the Shelf Registration Statement, in any
jurisdiction where the Company is not now so subject;
(xiv) in connection with any sale of Transfer Restricted Shares that
will result in such securities no longer being Transfer Restricted Shares,
cooperate with the Holders to facilitate the timely preparation and delivery of
certificates representing Transfer Restricted Shares to be sold and not bearing
any restrictive legends; and to register such Transfer Restricted Shares in such
denominations and such names as the selling Holders may request at least two
Business Days prior to such sale of Transfer Restricted Shares;
(xv) use its reasonable best efforts to cause the disposition of the
B-7
Transfer Restricted Shares covered by the Shelf Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to enable the seller or sellers thereof to consummate the
disposition of such Transfer Restricted Shares, subject to the proviso contained
in clause (xiii) above;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to its
security holders with regard to the Shelf Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) covering a twelve-month period beginning after
the effective date of the Shelf Registration Statement (as such term is defined
in paragraph (c) of Rule 158 under the Securities Act); and
(xvii) provide promptly to each Holder, upon request, each
document filed with the SEC pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(b) Restrictions on Holders.
-----------------------
Each Holder agrees by acquisition of a Transfer Restricted
Share that, upon receipt of the notice referred to in Section 5(a)(iv)(C)
or any notice from the Company of the existence of any fact of the kind
described in Section 5(a)(iv)(D) (in each case, a "Suspension Notice"),
such Holder will forthwith discontinue disposition of Transfer Restricted
Shares pursuant to the Shelf Registration Statement until (i) such Holder
has received copies of the supplemented or amended Prospectus contemplated
by Section 5(a)(v), or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (in each case, the "Recommencement Date");
provided, however, that any Suspension Period occurring as a result of
-------- -------
notice from the Company of the existence of any fact of the kind described
in Section 5(a)(iv)(D) shall not exceed, for so long as this Agreement is
in effect, the shorter of (x) the period ending on the date the information
responsible for the Suspension Period is disclosed to the public and (y) 60
days (provided that no two Suspension Periods shall occur during any period
--------
of 135 consecutive days). Each Holder receiving a Suspension Notice hereby
agrees that it will either (i) destroy any Prospectuses, other than
permanent file copies, then in such Holder's possession which have been
replaced by the Company with more recently dated Prospectuses or (ii)
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Shares that was current at the time of
receipt of the Suspension Notice. The time period regarding the
effectiveness of the Shelf Registration Statement set forth in Section 3,
shall be extended by a number of days equal to the number of days in the
period from and including the date of delivery of the Suspension Notice to
the Recommencement Date.
Section 6.Registration Expenses
---------------------
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether the Shelf Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state blue sky or securities
laws; (iii) all expenses of printing,
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messenger and delivery services and telephone; (iv) all reasonable fees and
disbursements of counsel for the Company and the Holders; (v) all application
and filing fees; and (vi) all reasonable fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), the expenses of any
annual audit and the fees and expenses of any person, including special
experts, retained by the Company.
(b) In connection with the Shelf Registration Statement the Company
will reimburse the Holders of Transfer Restricted Shares who are selling or
reselling Common Shares pursuant to the "Plan of Distribution" contained in the
Shelf Registration Statement for the reasonable fees and disbursements of not
more than one counsel for all of the Holders. Each Holder, and not the Company,
shall be exclusively responsible for such Holder's pro rata share of
underwriter's fees incurred by the Holders in connection with the Shelf
Registration Statement.
Section 7. Indemnification
---------------
(a) The Company agrees to indemnify and hold harmless each Holder,
its directors, officers and each person, if any, who controls such Holder
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) from and against any and all losses, claims, damages,
liabilities and judgments (including without limitation the legal fees and other
expenses incurred in connection with investigating or defending any matter,
including any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Shelf Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto),
provided by the Company to the Holders or to any prospective purchaser of Common
Shares, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or judgments are caused by any untrue statement or omission or
alleged untrue statement or omission that is based upon information relating to
any of the Holders furnished in writing to the Company by such Holders. This
indemnity shall not limit any other rights the Holders may have against the
Company with respect to any such losses, claims, damages, liabilities or
judgments.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, officers, attorneys, accountants,
agents and representatives, and each person, if any, who controls (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act)
the Company, to the same extent as the foregoing indemnity from the Company set
forth in Section 7(a) above, but only with reference to information relating to
such Holder furnished in writing to the Company by such Holder expressly for use
in the Shelf Registration Statement or any amendment or supplement thereto. In
no event shall any Holder, its directors, officers, or any person who controls
such Holder be liable or responsible under this Section 7 for any amount in
excess of the amount by which the total amount received by such Holder with
respect to its sale of Transfer Restricted Shares pursuant to the Shelf
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Shares, plus (ii) the amount of any damages that such
Holder, its directors, officers, or any person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. This indemnity shall not limit any
other rights the Company may have against the Holders with respect to any such
losses, claims,
B-9
damages, liabilities or judgments.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b),
such person (the "Indemnified person") shall promptly notify the person against
whom such indemnity may be sought (the "Indemnifying person") in writing, and
the Indemnifying person shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the Indemnified person and
shall pay all fees and expenses of such counsel as incurred (except that in the
case of any action in respect of which indemnity may be sought pursuant to both
Sections 7(a) and 7(b), a Holder shall not be required to assume the defense of
such action pursuant to this Section 7(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of such Holder). Any
Indemnified person shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified person unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the Indemnifying person, (ii) the Indemnifying person shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the Indemnified person or (iii) the named parties in any such action (including
any impleaded parties) include both the Indemnifying person and the Indemnified
person, and the Indemnified person shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying person (in which case the
Indemnifying person shall not have the right to assume the defense of such
action on behalf of the Indemnified person). It is understood that the
Indemnifying person shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all Indemnified persons, and that all such fees and expenses shall
be reimbursed as they are incurred. Any such separate firm for the indemnified
Holders shall be designated in writing by a majority of the indemnified Holders,
in the case of parties indemnified pursuant to Section 7(a), and any such
separate firm for the Company, its directors, its officers and such control
persons shall be designated in writing by the Company, in the case of parties
indemnified pursuant to Section 7(b). The Indemnifying person shall indemnify
and hold harmless the Indemnified person from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty Business Days
after the Indemnifying person shall have received a request from the Indemnified
person for reimbursement for the fees and expenses of counsel (in any case where
such fees and expenses are at the expense of the Indemnifying person) and, prior
to the date of such settlement, the Indemnifying person shall have failed to
comply with such reimbursement request. No Indemnifying person shall, without
the prior written consent of the Indemnified person, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the Indemnified person is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the Indemnified person, unless such settlement, compromise or
judgment (i) includes an unconditional release of the Indemnified person from
all liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the Indemnified person.
(d) To the extent that the indemnification provided for in this
Section 7 is unavailable to an Indemnified person in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
Indemnifying person, in lieu of indemnifying such Indemnified person hereunder,
shall contribute to the amount paid or payable by such Indemnified person as a
result of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, on
B-10
the one hand, and the indemnified Holder, on the other hand, from their sale of
Transfer Restricted Shares or (ii) if the allocation provided by clause 7(d)(i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 7(d)(i) above
but also the relative fault of the Company, on the one hand, and the indemnified
Holder, on the other hand, in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative fault of the Company,
on the one hand, and the indemnified Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, on the one hand,
or by the indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 7(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for
such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified person as
a result of the losses, claims, damages, liabilities or judgments referred
to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified person in connection with
investigating or defending any matter including any action that could have
given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 7, in no event shall a
Holder, its directors, officers, or any person who controls such Holder, be
required to contribute, in the aggregate, pursuant to this Section 7 any
amount in excess of the amount by which the total received by such Holder
with respect to the sale of Transfer Restricted Shares pursuant to the
Shelf Registration Statement exceeds the sum of (i) the amount paid by such
Holder for such Transfer Restricted Shares, plus (ii) the amount of any
damages that such Holder, its directors, officers, or any person who
controls such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Holders' obligations to contribute pursuant to this Section 7(d) are
several in proportion to the respective principal amount of the Transfer
Restricted Shares held by each Holder hereunder and not joint. This Section
7(d) shall not limit any other rights the Company may have against the
Holders, or that the Holders may have against the Company, with respect to
any such losses, claims, damages, liabilities or judgments.
Section 8. Rule 144 and Other Information
------------------------------
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Shares remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Shares, adequate
current public information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 under the Securities Act in order to
B-11
permit sales of such Transfer Restricted Shares pursuant to Rule 144 under the
Securities Act and (ii) is subject to Section 13 or 15(d) of the Exchange Act,
to make all filings required thereby in a timely manner in order to permit sales
of such Transfer Restricted Shares without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144 under the
Securities Act.
Section 9. Miscellaneous
-------------
(a) Remedies.
--------
The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Section 3 may result in material
irreparable injury to the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, any Holder may obtain such relief as may
be required to specifically enforce the Company's obligations under Section 3.
The Company further agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements.
--------------------------
The Company will not, on or after the date of this Agreement,
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions. The Company has not previously entered into any agreement
granting any registration rights with respect to its securities to any person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any agreement in effect on the date.
(c) Notices.
-------
All notices and other communications hereunder shall be in
writing and shall be deemed sufficiently given and served for all purposes (i)
when personally delivered or given by machine-confirmed facsimile, (ii) one
business day after a writing is delivered to a national overnight courier
service or (iii) three business days after a writing is deposited in the United
States mail, first class postage or other charges prepaid and registered, return
receipt requested, in each case, addressed as follows (or at such other address
for a party as shall be specified by like notice): (A) in the case of the
Company, to Mikohn Gaming Corporation, Attention: President, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇, (▇▇▇) ▇▇▇-▇▇▇▇ (Facsimile No.), and (B) in the case of any
Holder, at the address set forth on the stock records of the Company.
(d) Amendments and Waivers.
----------------------
No modifications or amendments to, or waivers of, any provision
of this Agreement may be made, except pursuant to a document signed by the
Company and Holders of a majority of the outstanding Transfer Restricted Shares.
(e) Interpretation.
--------------
B-12
When a reference is made in this Agreement to Sections,
paragraphs, clauses or Exhibits, such reference shall be to a Section,
paragraph, clause or Exhibit to this Agreement unless otherwise indicated. The
words "include," "includes," and "including" when used herein shall be deemed in
each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. This Agreement has been negotiated by the respective parties hereto
and their attorneys and the language hereof will not be construed for or against
either party. The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to August 10, 2001. The words "hereof," "herein," "herewith," "hereby"
and "hereunder" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(f) No Third-Party Beneficiaries.
----------------------------
No person or entity not a party to this Agreement shall be deemed
to be a third-party beneficiary hereunder or entitled to any rights hereunder.
(g) Successors and Assigns.
----------------------
Other than with respect to transferees as to which the Common
Shares held by such transferee have ceased to be Transfer Restricted Shares,
this Agreement shall inure to the benefit of and be binding upon the successors
and assigns of each of the parties, including without limitation and without the
need for an express assignment, subsequent Holders; provided, however, that
-------- -------
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Transfer Restricted Shares in violation of the terms or of the
Purchase Agreement. If any transferee of any Holder shall acquire Transfer
Restricted Shares in any manner, whether by operation of law or otherwise, such
Transfer Restricted Shares shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Shares such person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and, if applicable, the Purchase Agreement, and such
person shall be entitled to receive the benefits.
(h) Entire Agreement.
----------------
This Agreement is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted with respect to the Transfer Restricted Shares.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(i) Severability.
------------
If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future laws, then, if possible, such illegal,
invalid or
B-13
unenforceable provision will be modified to such extent as is necessary to
comply with such present or future laws and such modification shall not affect
any other provision hereof; provided that if such provision may not be so
--------
modified such illegality, invalidity or unenforceability will not affect any
other provision, but this Agreement will be reformed, construed and enforced as
if such invalid, illegal or unenforceable provision had never been contained
herein.
(j) GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
(k) Gaming Laws.
-----------
Each of the provisions of this Agreement is subject to and shall
be enforced in compliance with applicable gaming laws.
(l) Counterparts.
------------
This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to each of the other parties, it being understood that all parties
need not sign the same counterpart.
(signature page follows)
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
MIKOHN GAMING CORPORATION
By:__________________________________
Name:
Title:
______________________________________
as a PURCHASER
By:___________________________________
Name:
Title:
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EXHIBIT A
---------
SCHEDULE OF PURCHASERS
----------------------
Name and Address Number of
of Purchaser Common Shares
-------------------- -----------------
B-A-1
EXHIBIT C
---------
FORM OF OPINION OF ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
August _____, 2001
The Purchasers Listed on the Schedule of Purchasers
----------------------
to the Common Stock Purchase Agreement
Ladies and Gentlemen:
We have acted as special counsel to Mikohn Gaming Corporation, a Nevada
corporation (the "Company"), in connection with the negotiation, execution and
delivery of, and the transactions contemplated by (i) the Purchase Agreement,
dated as of August 2, 2001 (the "Purchase Agreement"), by and among the Company
and the Purchasers listed on the Schedule of Purchasers attached thereto (the
"Purchasers") (the Company and the Purchasers referred to herein collectively,
as "parties," and individually, as a "party"), pursuant to which Purchase
Agreement the Company is issuing and selling an aggregate of up to 1,500,000
shares of the Company's Common Stock (the "Common Shares"), and (ii) the
agreements attached as exhibits thereto or contemplated thereby (the Purchase
Agreement and the Registration Rights Agreement are hereby referred to
collectively as the "Agreements"). This opinion letter (this "Letter") is being
delivered to you pursuant to Section 4.1(c) of the Purchase Agreement. All
capitalized terms not otherwise defined herein shall have the respective
meanings assigned to such terms in the Purchase Agreement.
Subject to the limitations set forth herein, in connection with the
preparation of this Letter and for purposes of the opinions set forth below, we
have examined (i) an Opinion Certificate, a copy of which is attached hereto as
Exhibit A (the "Opinion Certificate"); and (ii) originals or photostatic or
certified copies of certain of the records and documents of the Company
including a certified copy of the Company's Amended and Restated Articles of
Incorporation (the "Articles"), and a copy (certified by an officer) of the
Company's Amended and Restated Code of Bylaws (the "Bylaws"), and those
instruments and documents listed on the Mikohn Gaming Corporation Schedule of
Due Diligence Documents, dated as of July 31, 2001 (collectively, the
"Applicable Documents"), a copy of which list is attached to the Opinion
Certificate as Exhibit D thereto.
Based upon such review and inquiries, and subject to the assumptions
and limitations herein set forth, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Nevada, is duly
licensed or qualified to transact business and is in good standing in each
jurisdiction in which the failure to be so qualified, licensed or in good
standing would have, individually or in the aggregate, a Material Adverse
Effect. The Company has the corporate power and authority to own, lease and
operate its properties, to carry on its business as currently conducted, to
execute and deliver each of the Agreements and to perform its obligations under
each of the Agreements.
C-1
2. Each of the domestic subsidiaries of the Company is validly
existing and in good standing under the laws of its state of incorporation and
is duly licensed or qualified to transact business and is in good standing in
each jurisdiction in which the failure to be so qualified, licensed or in good
standing would have, individually or in the aggregate, a Material Adverse
Effect.
3. The execution, delivery and performance by the Company of the
Agreements have been duly authorized by all requisite corporate action of the
Company. Each of the Agreements has been duly executed and delivered by the
Company and, except as otherwise stated in this Letter, constitutes the legal,
valid and binding obligations of the Company, enforceable in accordance with its
terms.
4. The execution, delivery and performance of the Agreements and the
issuance, sale and delivery of the Common Shares will not conflict with,
violate, constitute a breach of or a default under, require the consent of any
Person (other than consents already obtained), or result in the imposition of a
lien on any properties of the Company or an acceleration of indebtedness
pursuant to, (i) the Articles or Bylaws of the Company (collectively, the
"Charter Documents"), (ii) any Applicable Document; (iii) to our knowledge, any
Order; or (iv) any Law, which, in our experience, is normally applicable to
transactions of the type contemplated by the Agreements.
5. The Company has an authorized capitalization as set forth in
Private Placement Memorandum and the authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the Private
Placement Memorandum. The statements in the Private Placement Memorandum under
the caption "Description of Capital Stock" insofar as such statements purport to
summarize certain provisions of the documents referred to therein, fairly
summarize such provisions in all material respects.
6. The Common Shares have been duly authorized and, when issued
pursuant to the Purchase Agreement, will be validly issued, fully paid and
nonassessable, and entitled to the rights, preferences and privileges relative
to shares of the Company's common stock as set forth in the Articles. To our
knowledge, none of the issuance, sale and delivery of the Common Shares is
subject to any preemptive rights of stockholders of the Company or to any right
of first refusal or other similar right in favor of any person.
C-2
7. Except for such matters as may be described or set forth in the
Private Placement Memorandum, we have not been engaged to give substantive
attention to, or represent the Company or its officers, directors or employees
in connection with, nor to our knowledge is there, any litigation, governmental
proceeding, investigation or arbitration pending or threatened against or
directly involving the Company or its officers, directors or employees, or to
which any property or assets of the Company are subject, that questions the
legality or validity of the Purchase Agreement or any actions taken or to be
taken pursuant to or in connection with the Purchase Agreement or that, if
determined adversely to the Company (including with respect to such property or
assets) or any such person, would have, individually or in the aggregate, a
Material Adverse Effect.
8. No authorizations, approval, consent, license or order of, or
filing, registration or qualification with, any Governmental Authority is
required in connection with, or as a condition to, the execution, delivery or
performance of the Agreements or for the consummation of the transactions
contemplated thereby (including, without limitation, the offer, issuance, sale
and delivery of the Common Shares); it being understood that the foregoing
opinion does not cover applicable securities laws.
9. Subject to the accuracy of the Purchasers' representations in
Section 3 of the Purchase Agreement, the offer, sale and issuance of the Common
Shares in conformity with the terms of the Purchase Agreement constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
10. To our knowledge, the Company is not in violation of or in default
under its Charter Documents.
11. The Company is not and, after giving effect to the Placement and
the application of the net proceeds therefrom as described in the Private
Placement Memorandum, will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
12. The statements made in the Private Placement Memorandum under the
heading "Plan of Distribution" and "Notice to Investors," insofar as such
statements purport to constitute statements of law or legal conclusions, are
accurate in all material respects.
13. To our knowledge, except for: (i) the Registration Rights
Agreement; (ii) certain registrations that may be required under warrants
described in the Private Placement Memorandum under the Section "Description of
Capital Stock - Warrants"; and (iii) certain registrations to be entered into in
connection with the Company's intention to refinance its remaining senior
indebtedness by issuing $100.0 million of senior notes pursuant to Rule 144A
under the Securities Act as set forth in the Private Placement Memorandum, there
are no contracts, commitments, agreements, arrangements, understandings or
undertakings of any kind to which the Company is a party, or by which it is
bound, granting to any person the right to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company or to require the Company to include such securities with Common
Shares registered pursuant to any registration statement.
C-3
14. To our knowledge, except as set forth in the Private Placement
Memorandum, there are no outstanding securities, options, warrants, calls,
rights, contracts, commitments, agreements, arrangements, understandings or
undertakings of any kind to which the Company is a party, or by which it is
bound, obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, shares of capital stock or other securities of the Company,
or any securities convertible into or exercisable or exchangeable for any shares
of capital stock or other securities of the Company, or obligating the Company
to issue, grant, extend or enter into any such security, option, warrant, call,
right, contract, commitment, agreement, arrangement, understanding or
undertaking.
15. To our knowledge, as of the date of the Private Placement
Memorandum and as of the Closing Date, the Private Placement Memorandum (except
for the financial statements and other financial data included therein, as to
which we do not express any opinion), does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
The opinions herein expressed are subject to the following further
qualifications and exceptions:
A. As to matters of fact bearing upon the opinions set forth in this
Letter, we have, with your consent, relied primarily upon, and have not
independently verified the accuracy of, the representations, warranties and
other statements of all parties contained in the Agreements and matters of fact
set forth in certificates of government officials, corporate officers and other
representatives of persons referred to herein. In rendering such opinions, we
have further relied upon the following assumptions, which we have not
necessarily independently verified:
i. Each signature is genuine; each document submitted to us as an
original is authentic; and each document submitted to us as a copy conforms to
the original;
ii. Each party, other than the Company, has the power, authority and
legal right to execute and deliver, and to perform its obligations under, the
Agreements;
iii. The execution, delivery and performance of the Agreements and any
other certificates, instruments or documents in connection with the Agreements,
by each party other than the Company, have been duly authorized;
iv. The Agreements constitute legal, valid and binding obligations of
each party thereto other than the Company;
v. The parties to the Agreements have received the consideration to
be delivered to them at the Closing pursuant to the Agreements; and
vi. The factual representations and warranties in the Agreements of
each of the parties thereto, other than those of the Company, are true and the
facts and circumstances contemplated pursuant to the Agreements (excluding those
set forth in the representations and
C-4
warranties of the Company) are as contemplated therein.
B. No opinion is expressed as to the enforceability of the
obligations of the Company under the Agreements or any documents contemplated or
referenced thereby to the extent that enforceability of the rights, obligations
and agreements is subject to, affected or limited by: (a) rights of the United
States of America under the Federal Tax Lien Act of 1966; (b) applicable
liquidation, conservatorship, bankruptcy, insolvency, moratorium, reorganization
or other laws relating to debtor relief or the enforcement of creditors' rights
from time to time in effect under state and/or Federal law; (c) general
principles of equity (whether considered in a proceeding in equity or at law);
(d) the exercise of the discretionary powers of any court or other authority
before which may be brought in any proceeding seeking equitable remedies,
including, without limitation, specific performance and injunctive relief; (e)
any provision of the Agreements that provides for an absolute and unconditional
obligation to perform thereunder even though such agreement is invalid,
terminated or such performance would be illegal; (f) other applicable laws and
court decisions that may limit or render unenforceable certain rights and
remedies of any Purchaser provided in the Agreements, but that do not in our
judgment, make any such agreement invalid as a whole or inadequate for the
ultimate practical realization of the benefits intended to be provided thereby,
though they may result in delays (and we express no opinion as to the economic
consequences, if any, of any such delays); (g) applicable fraudulent conveyance
laws or fraudulent transfer laws from time to time in effect; or (h) the
limitations on indemnification arising under Federal or state securities laws.
C. As used in the opinions expressed herein, the phrase "to our
knowledge" refers only to the actual current knowledge of those attorneys within
our firm who have given substantive attention to the Company and does not (i)
include constructive notice of matters or information, or (ii) except for our
conversations with the officers of the Company responsible for such matters and
information and our review of the Agreements and the Applicable Documents and as
otherwise set forth in this Letter, imply that we have undertaken any
independent investigation (a) with any persons outside of our firm, or (b) as to
the accuracy or completeness of any factual representation or other information
made or furnished in connection with the transactions contemplated by the
Agreements. Furthermore, the phrase "actual current knowledge" expressed herein
also means that we do not know of any fact or circumstance which would give us
any basis to question the accuracy of those statements made to us or furnished
to us and relied upon by us in rendering the opinions in this Letter.
D. Our opinions expressed in paragraph 5 of this Letter are based
solely upon our review of the minute books and other corporate records of the
Company and the Opinion Certificate, and for purposes of our opinion expressed
in these respective paragraphs, we have assumed the Company's receipt of
adequate consideration for its shares of outstanding capital stock (other than
the Common Shares sold pursuant to the Purchase Agreement) in accordance with
the authorizing resolutions relating thereto. Furthermore, we have assumed that
the transfer ledger, minute books and other corporate records of the Company
pertaining to our opinions expressed in paragraph 5 of this Letter are complete,
accurate, up to date, and that there have been no amendments, revisions or other
documents which supersede such records.
E. No opinion is expressed as to consents, approvals, authorizations
or orders
C-5
required under state securities or "blue sky" laws in connection with the
acquisition of the Common Shares by the Purchasers.
F. Although we have acted as special counsel to the Company in
connection with the Purchase Agreement, our engagement is limited to those
matters about which we have been consulted. Consequently, there may exist
matters of a legal nature involving the Company in connection with which we have
not been consulted and have not represented the Company. To our knowledge,
however, there are no such matters which would affect this Letter.
G. This Letter is limited to the matters stated herein and no
opinions may be implied or inferred beyond the matters expressly stated therein.
H. The opinions expressed herein are as of the date hereof, and we
assume no obligation to update or supplement such opinions to reflect any facts
or circumstances that may hereafter come to our attention or any changes in law
that may hereafter occur.
I. The opinions set forth herein are based in part upon Federal and
state authorities as they are currently compiled and reported on by customary
reporting services. It is possible that legislation affecting the opinions
expressed herein might have been enacted into law that are not reflected in such
reporting services. We are not currently aware of the passage of any such
legislation. However, it is not possible for us to know with certainty as of the
date of this Letter whether any such legislation may have been passed into law.
J. The opinions contained herein do not include any opinion as to any
licenses, permits or approvals necessary for building, zoning, environmental,
land use, fire or other development laws, ordinances, regulations or
requirements or the compliance by the Company with such requirements.
K. This Letter has been issued solely for the benefit of the
Purchasers and no other party or entity shall be entitled to rely hereon without
the express written consent of a shareholder of this firm ("Our Prior Written
Consent"). Without Our Prior Written Consent, this Letter may not be quoted in
whole or in part or otherwise referred to in any document or report. Copies of
this Letter may, however, be furnished by the Purchasers to third parties in
your discretion, except that no such recipient may rely upon this Letter without
Our Prior Written Consent.
L. We are licensed to practice law only in New York, and do not hold
ourselves to be experts on the laws of any jurisdiction other than the State of
New York and the United States of America. Accordingly, the opinions expressed
herein are specifically limited to the laws of the State of New York and the
Federal law of the United States of America in effect on the date hereof, to the
extent such laws are involved in the opinions set forth herein, and we express
no opinion on any matter governed by the law of any other jurisdiction.
Notwithstanding the foregoing, we express no opinion on matters governed by the
laws and regulations of any jurisdiction pertaining to the gaming industry.
M. Notwithstanding that the opinions expressed herein may refer to
any party
C-6
other than the Company, we are not representing, and do not purport to
represent, such party in connection with the transaction described herein.
N. We do not express any opinion as to any provisions in the
Agreements purporting to: (i) apply the laws of a particular jurisdiction, other
than the laws of the State of New York, (ii) waive or establish jurisdiction or
venue or (iii) indemnify any person against, or relieve any person of liability
for, its own negligent or wrongful act or in any other circumstance in which
enforcement of such provision would be against public policy or limited or
prohibited by applicable law.
O. Notwithstanding any provision in any of the Agreements to the
effect that such provision reflects the entire understanding of the parties with
respect to the matters described therein, the courts of the State of New York
may consider extrinsic evidence of the circumstances surrounding the entering
into of an Agreement to ascertain the intent of the parties in using the
language employed in such Agreement, regardless of whether or not the meaning of
the language used in such Agreement is plain and unambiguous on its face, and
may determine that additional or supplementary terms should be incorporated into
such Agreement.
P. In giving the opinion that the Company is validly existing under
the laws of the State of Nevada, we have relied solely upon a certificate to
that effect issued by the Secretary of State of the State of Nevada. Further, in
rendering the opinions set forth in paragraphs 1 and 2 above, (a) in order to
determine the states in which qualification is appropriate, we have assumed that
qualification may be required only in those states in which the Company or such
domestic subsidiaries, respectively, own or lease real property, maintain
offices or have employees, and we have relied on the Company's listing of those
states in the Opinion Certificate, and (b) as to the qualification and good
standing of the Company and such domestic subsidiaries in the states so
identified in such Opinion Certificate, we have relied exclusively on
certificates of public officials, although we have not obtained tax good
standing certificates in states other than Nevada, and no opinion is provided
with respect to tax good standing.
Very truly yours,
__________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
C-7
EXHIBIT D
---------
FORM OF OPINION OF COMPANY COUNSEL
August _____, 2001
The Purchasers Listed on the Schedule of Purchasers
----------------------
to the Common Stock Purchase Agreement
Ladies and Gentlemen:
I am general counsel to Mikohn Gaming Corporation, a Nevada
corporation (the "Company"), in connection with the negotiation, execution and
delivery of, and the transactions contemplated by (i) the Purchase Agreement,
dated as of August 2, 2001 (the "Purchase Agreement"), by and among the Company
and the Purchasers listed on the Schedule of Purchasers attached thereto (the
"Purchasers") (the Company and the Purchasers referred to herein collectively,
as "parties," and individually, as a "party"), pursuant to which Purchase
Agreement the Company is issuing and selling an aggregate of up to 1,500,000
shares of the Company's Common Stock (the "Common Shares"), and (ii) the
agreements attached as exhibits thereto or contemplated thereby (the Purchase
Agreement, the Registration Rights Agreement and the Private Placement
Memorandum are hereby referred to collectively as the "Agreements"). This
opinion letter (this "Letter") is being delivered to you pursuant to Section
4.1(c) of the Purchase Agreement. All capitalized terms not otherwise defined
herein shall have the respective meanings assigned to such terms in the Purchase
Agreement.
In connection with the opinions expressed herein, I have reviewed the
following:
(i) the Agreements;
(ii) a copy of the Company's Amended and Restated Articles of
Incorporation and a copy of the Company's Amended and Restated Code of Bylaws;
(iii) those instruments and documents listed on the Mikohn
Gaming Corporation Schedule of Due Diligence Documents, dated as of August ___,
2001 (collectively, the "Applicable Documents"), a copy of which list is
attached hereto as Exhibit "A"; and
(iv) originals or copies of such other corporate documents or
records of the Company and such other documents as I have deemed necessary or
appropriate as a basis for the opinions hereinafter expressed.
This Letter relates solely to the laws of the State of Nevada, and I
express no opinion with respect to the effect or applicability of the federal
laws or laws of other jurisdictions. I invite your attention to the fact that
the Purchase Agreement and the Registration Rights Agreement are governed by the
laws of the State of New York. I have made no investigation of New York law nor
consulted with counsel admitted to practice law in the State of New York. I
have not examined the question of, and express no opinion as to, what law would
govern the interpretation or enforcement of the Agreements, and my opinion with
regard to such matters is based upon the assumption that the internal law of the
State of Nevada would govern the provisions thereof.
D-1
Based upon such review and inquiries, and subject to the assumptions
and limitations herein set forth, I am of the opinion that:
1. Each of the subsidiaries of the Company has full corporate power and
authority to conduct, operate and carry on its business and operations as
described in the Private Placement Memorandum, and to manage, use, control, own,
lease and operate its properties and assets.
2. Each of the subsidiaries of the Company has been duly organized. Each
of the subsidiaries of the Company is validly existing and in good standing
under the laws of its jurisdiction of organization and is duly qualified or
licensed to do business and is in good standing in every jurisdiction in which
such qualification or licensing is required, except where the failure to be so
qualified or licensed and in good standing, individually or in the aggregate,
would not have a Material Adverse Effect.
3. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued, are fully paid and
nonassessable, were issued in compliance with all applicable federal and state
securities laws and all applicable gaming laws and are not subject to, and were
not issued in violation of, any preemptive or similar rights.
4. All of the outstanding shares of capital stock of, other securities
of or other interests in each of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and, with the
exception of Mikohn South America, S.A. ("MSA"), are owned by the Company,
directly or indirectly through one or more of the Company's subsidiaries, free
and clear of any and all Liens. With respect to MSA, the Company owns 99.7% of
the issued and outstanding shares.
5. Except as set forth in the Private Placement Memorandum, there are no
outstanding securities, options, warrants, calls, rights, contracts,
commitments, agreements, arrangements, understandings or undertakings of any
kind to which the Company or any of its subsidiaries is a party, or by which any
of them is bound, obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, shares of capital
stock or other securities of the Company or any of its subsidiaries, or any
securities convertible into or exercisable or exchangeable for any shares of
capital stock or other securities of the Company or any of its subsidiaries, or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, contract,
commitment, agreement, arrangement, understanding or undertaking.
6. Except for: (i) the Registration Rights Agreement; (ii) certain
registrations that may be required under warrants described in the Private
Placement Memorandum under the Section "Description of Capital Stock -Warrants";
and (iii) certain registrations to be entered into in connection with the
Company's intention to refinance its remaining senior indebtedness by issuing
$100.0 million of senior notes pursuant to Rule 144A under the Securities Act as
set forth in the Private Placement Memorandum, there are no contracts,
commitments, agreements, arrangements, understandings or undertakings of any
kind to which the Company is a party, or by which it is bound, granting to any
person the right to require the Company to file a registration statement under
the Securities Act with respect to any securities of the Company or
D-2
to require the Company to include such securities with Common Shares registered
pursuant to any registration statement.
7. None of the Company and its subsidiaries is in violation or breach
of, or default under, nor has any event occurred that has given or could give
rise (either with or without due notice or the passage of time or both or the
happening or occurrence of any other event (including through the action or
inaction of any person)) to any right of termination, amendment, cancellation or
acceleration or any obligation to pay or repay with respect to, or has resulted
or could result in the loss of any benefit under, any provision of the articles
of incorporation, bylaws or similar organizational documents or any of the
Company or any of its subsidiaries, or any Material Contract.
8. After due inquiry, other than as described in the Private Placement
Memorandum, I do not know of any investigations, claims, suits, actions,
demands, proceedings or arbitrations pending or threatened in any court or
before or by any other Governmental Entity to which the Company or any
subsidiary of the Company is or could be a party or to which any of their
respective properties or assets are or could be subject, which, individually or
in the aggregate, could have a Material Adverse Effect, or of any applicable Law
or applicable Order outstanding against or affecting the Company or any of its
subsidiaries or any of their respective properties or assets, which,
individually or in the aggregate, could have a Material Adverse Effect.
9. After due inquiry, I do not know of any action that has been taken
and or any Law or Order that has been enacted, adopted or issued by any
Governmental Entity which prevents the execution, delivery or performance of
this Agreement or the Placement or the issuance of the Common Shares or suspends
the Placement or the offering, issuance or sale of the Common Shares in any
jurisdiction in which the Common Shares are proposed to be sold. After due
inquiry, I do not know of any Order or relief of any nature by any Governmental
Entity that has been issued with respect to the Company or any of its
subsidiaries which would suspend the Placement or the offering, issuance or sale
of the Common Shares in any jurisdiction in which the Common Shares are proposed
to be sold.
10. The Company owns (and is the record owner of), or possesses adequate
licenses to use, sell and license, free and clear of all Liens all intellectual
property that are used in the business of the Company as presently conducted and
as described in the Private Placement Memorandum, except where the failure to
own, or be the record owner of, or possess such intellectual property,
individually or in the aggregate, would not have a Material Adverse Effect. To
the best of my knowledge, after due inquiry, neither the Company nor any of its
subsidiaries has received any notice of infringement or conflict with asserted
rights of others with respect to any of such intellectual property which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling, finding or other Order, would be likely to have a Material Adverse
Effect.
11. None of the Company or any of its subsidiaries has violated any
Environmental Laws, any provisions of ERISA, or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, individually or in the aggregate, would not
have a Material Adverse Effect.
D-3
12. Each of the Company and its subsidiaries has such Authorizations of,
and has made all registrations and filings with and notices to, all Governmental
Entities, including under applicable Environmental Laws, as are necessary to
manage, use, control, own, lease and operate its properties and assets and to
conduct, operate and carry on its business and operations, except where the
failure to have any such Authorization or to make any such registration, filing
or notice, individually or in the aggregate, would not have a Material Adverse
Effect. (i) Each such Authorization is in full force and effect, and each of the
Company and its subsidiaries is in full compliance with all the terms and
conditions thereof and with the Laws and Orders of the Governmental Entities
having jurisdiction with respect thereto, (ii) no event has occurred (including
the receipt of notice from any Governmental Entities) which allows, or after due
notice or the passage of time or both would allow, revocation, suspension or
termination of any such Authorization or results, or after due notice or the
passage of time or both would result, in an other impairment of the rights of
the holder of any such Authorization; and (iii) such Authorizations contain no
restrictions that are burdensome to the Company or any of its subsidiaries,
except where such failure to be valid and in full force and effect or to be in
compliance, the occurrence of any such event or the presence of any such
restriction, individually or in the aggregate, would not have a Material Adverse
Effect. Each of the Company and its subsidiaries is in full compliance with all
Laws and Orders applicable to the Company or any of its subsidiaries, or to any
of their respective properties or assets, or to any Common Shares, except where
the failure to be in compliance, individually or in the aggregate, would not
have a Material Adverse Effect.
13. After due inquiry, except as disclosed in the Private Placement
Memorandum, I do not know of any relationship, direct or indirect, existing
between or among the Company or any of its subsidiaries, on the one hand, and
the directors, officers, stockholders, affiliates, customers or suppliers of the
Company or any of its subsidiaries, on the other hand, which would be required
by the Securities Act to be described in the Private Placement Memorandum if the
Private Placement Memorandum were a prospectus included in a registration
statement on Form S-1 filed with the SEC.
14. I have no reason to believe that, as of the date of the Private
Placement Memorandum or as of the Closing Date, the Private Placement
Memorandum, as amended or supplemented, if applicable (except for the financial
statements and other financial data included therein, as to which I do not
express any opinion) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinions herein expressed are subject to the following further
qualifications and exceptions:
A. In connection with the opinions expressed herein, I have made such
examination of matters of law and of fact as I considered appropriate or
advisable for purposes hereof. As to matters of fact bearing upon the opinions
set forth in this Letter, I have, with your consent, relied primarily upon, and
have not independently verified the accuracy of, the representations, warranties
and other statements of all parties contained in the Agreements and matters of
fact set forth in certificates of government officials, corporate officers and
other representatives of persons referred to herein. In rendering such
opinions, I have further relied upon the following assumptions, which I have not
necessarily independently verified:
D-4
i. Each signature is genuine; each document submitted to me as an
original is authentic; and each document submitted to me as a copy conforms to
the original;
ii. Each party, other than the Company, has the power, authority and
legal right to execute and deliver, and to perform its obligations under, the
Agreements;
iii. The execution, delivery and performance of the Agreements and any
other certificates, instruments or documents in connection with the Agreements,
by each party, other than the Company, have been duly authorized;
iv. The Agreements constitute legal, valid and binding obligations of
each party thereto, other than the Company;
v. The parties to the Agreements have received the consideration to be
delivered to them at the Closing pursuant to the Agreements; and
vi. The factual representations and warranties in the Agreements of each
of the parties thereto, other than those of the Company, are true and the facts
and circumstances contemplated pursuant to the Agreements (excluding those set
forth in the representations and warranties of the Company) are as contemplated
therein.
B. No opinion is expressed as to the enforceability of the obligations
of the Company under the Agreements or any documents contemplated or referenced
thereby to the extent that enforceability of the rights, obligations and
agreements is subject to, affected or limited by: (a) rights of the United
States of America under the Federal Tax Lien Act of 1966; (b) applicable
liquidation, conservatorship, bankruptcy, insolvency, moratorium, reorganization
or other laws relating to debtor relief or the enforcement of creditors' rights
from time to time in effect under state and/or Federal law; (c) general
principles of equity (whether considered in a proceeding in equity or at law);
(d) the exercise of the discretionary powers of any court or other authority
before which may be brought in any proceeding seeking equitable remedies,
including, without limitation, specific performance and injunctive relief; (e)
any provision of the Agreements that provides for an absolute and unconditional
obligation to perform thereunder even though such agreement is invalid,
terminated or such performance would be illegal; (f) other applicable laws and
court decisions that may limit or render unenforceable certain rights and
remedies of any Purchaser provided in the Agreements, but that do not in my
judgment, make any such agreement invalid as a whole or inadequate for the
ultimate practical realization of the benefits intended to be provided thereby,
though they may result in delays (and I express no opinion as to the economic
consequences, if any, of any such delays); (g) applicable fraudulent conveyance
laws or fraudulent transfer laws from time to time in effect; or (h) the
limitations on indemnification arising under Federal or state securities laws.
C. As used in the opinions expressed herein, the term "knowledge" and
the phrase "to my knowledge" refer only to my actual current knowledge and do
not (i) include constructive notice of matters or information, or (ii) except
for my conversations with the officers of the Company responsible for such
matters and information and my review of the
D-5
Agreements and the Applicable Documents and as otherwise set forth in this
Letter, imply that I have undertaken any independent investigation (a) with any
persons outside of the Company, or (b) as to the accuracy or completeness of any
factual representation or other information made or furnished in connection with
the transactions contemplated by the Agreements. Furthermore, the phrase "actual
current knowledge" expressed herein also means that I do not know of any fact or
circumstance which would give me any basis to question the accuracy of those
statements made to me or furnished to me and relied upon by me in rendering the
opinions in this Letter.
D. My opinions expressed in paragraph 4 of this Letter are based solely
upon my review of the minute books and other corporate records of the Company,
and for purposes of my opinion expressed in these respective paragraphs, I have
assumed (and have no knowledge to the contrary that) the Company's receipt of
adequate consideration for its shares of outstanding capital stock (other than
the Common Shares sold pursuant to the Purchase Agreement that) in accordance
with the authorizing resolutions relating thereto. Furthermore, I have assumed
(and have no knowledge to the contrary) that the transfer ledger, minute books
and other corporate records of the Company pertaining to my opinions expressed
in paragraph 4 of this Letter are complete, accurate, up to date, and that there
have been no amendments, revisions or other documents which supersede such
records.
E. No opinion is expressed as to consents, approvals, authorizations or
orders required under state securities or "blue sky" laws in connection with the
acquisition of the Common Shares by the Purchasers other than the laws of the
State of Nevada.
F. This Letter is limited to the matters stated herein and no opinions
may be implied or inferred beyond the matters expressly stated therein.
G. The opinions expressed herein are as of the date hereof, and I assume
no obligation to update or supplement such opinions to reflect any facts or
circumstances that may hereafter come to my attention or any changes in law that
may hereafter occur.
H. The opinions set forth herein are based in part upon Federal and
state authorities as they are currently compiled and reported on by customary
reporting services. It is possible that legislation affecting the opinions
expressed herein might have been enacted into law that are not reflected in such
reporting services. I am not currently aware of the passage of any such
legislation. However, it is not possible for me to know with certainty as of
the date of this Letter whether any such legislation may have been passed into
law.
I. The opinions contained herein do not include any opinion as to any
licenses, permits or approvals necessary for building, zoning, environmental,
land use, fire or other development laws, ordinances, regulations or
requirements or the compliance by the Company with such requirements.
J. This Letter has been issued solely for the benefit of the Purchasers,
and no other party or entity shall be entitled to rely hereon without my express
written consent ("My Prior Written Consent"). Without My Prior Written Consent,
this Letter may not be quoted in whole or in part or otherwise referred to in
any document or report. Copies of this Letter may,
D-6
however, be furnished by the Purchasers to third parties in your discretion,
except that no such recipient may rely upon this Letter without My Prior Written
Consent.
K. I am licensed to practice law only in Nevada, and do not hold myself
to be an expert on the laws of any jurisdiction other than the State of Nevada.
Accordingly, the opinions expressed herein are specifically limited to the laws
of the State of Nevada in effect on the date hereof, to the extent such laws are
involved in the opinions set forth herein, and I express no opinion on any
matter governed by the law of any other jurisdiction.
L. Notwithstanding that the opinions expressed herein may refer to any
party other than the Company, I am not representing, and do not purport to
represent, such party in connection with the transaction described herein.
M. I do not express any opinion as to any provisions in the Agreements
purporting to: (i) apply the laws of a particular jurisdiction, other than the
laws of the State of Nevada, (ii) waive or establish jurisdiction or venue or
(iii) indemnify any person against, or relieve any person of liability for, its
own negligent or wrongful act or in any other circumstance in which enforcement
of such provision would be against public policy or limited or prohibited by
applicable law.
N. Notwithstanding any provision in any of the Agreements to the effect
that such provision reflects the entire understanding of the parties with
respect to the matters described therein, the courts of the State of Nevada may
consider extrinsic evidence of the circumstances surrounding the entering into
of an Agreement to ascertain the intent of the parties in using the language
employed in such Agreement, regardless of whether or not the meaning of the
language used in such Agreement is plain and unambiguous on its face, and may
determine that additional or supplementary terms should be incorporated into
such Agreement.
O. In rendering the opinions set forth in paragraphs 1 and 2 above, (a)
in order to determine the states in which qualification is appropriate, I have
assumed that qualification may be required only in those states in which the
subsidiaries of the Company, respectively, own or lease real property, maintain
offices or have employees, and (b) as to those states, I have relied exclusively
on certificates of public officials, although I have not obtained tax good
standing certificates in states other than Nevada, and no opinion is provided
with respect to tax good standing.
Very truly yours,
__________________________
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General Counsel
D-7