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Exhibit 10.2
FORM OF
PROMISSORY NOTE
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THIS PROMISSORY NOTE AND THE UNDERLYING SHARES OF COMMON
STOCK HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW. THESE SECURITIES
MAY NOT BE SOLD, DISTRIBUTED, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS: (A) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAW COVERING ANY SUCH TRANSACTION INVOLVING THESE
SECURITIES; (B) THE COMPANY (DEFINED BELOW) RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES STATING THAT SUCH
TRANSACTION IS EXEMPT FROM REGISTRATION AND SUCH OPINION IS IN FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY; OR (C)
PURSUANT TO RULE 144 UNDER SUCH ACT. |
VENDINGDATA CORPORATION
10% SENIOR SECURED CONVERTIBLE NOTE DUE MARCH, 2008
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__________________________ |
March __, 2005
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FOR VALUE
RECEIVED, the undersigned VendingData Corporation, a Nevada
corporation (“Obligor” or the “Company”),
hereby promises to pay to the order of or (his/her/its)
registered assigns (“Holder”) on March __, 2008 (the
“Payment Date”), the principal sum of Dollars
($ ) and to pay interest on the unpaid principal balance
hereof from the date hereof at a rate of 10% per annum (the
“Interest Rate”), payable semi-annually, in arrears, on
August 1 and February 1 (commencing on August 1, 2005), until
this note (this “Note”) is paid off and satisfied in
full. Interest shall be calculated on the basis of a 365/366-day
year and actual days elapsed. Accrued but unpaid interest shall not
be compounded.
1.
Payment. The outstanding principal balance under this Note and all
accrued and unpaid interest shall be due and payable in a single
balloon payment on the Payment Date. At its discretion, Obligor
may, at any time, redeem the Note prior to the Payment Date
(“Pre-Payment”), where such Pre-Payment must be in an
amount no less than fifty percent (50%) of the then outstanding
principal amount under this Note. If a Pre-Payment occurs on or
prior to March __, 2006, the unpaid principal balance will be
multiplied by one hundred and five percent (105%). If a Pre-Payment
occurs after March __, 2006 and prior to March __, 2007, the unpaid
principal balance will be multiplied by one hundred and three
percent (103%). If a Pre-Payment occurs on or after March __, 2007,
or if the Pre-Payment occurs pursuant to the provisions of Section
4.2 of the Subscription Agreement dated as of the date hereof by
and between Obligor and Holder (the “Subscription
Agreement”), the unpaid principal shall remain at par. If
Obligor intends to exercise its right of Pre-Payment, Obligor shall
provide Holder with thirty (30) days prior written notice during
which time Holder may elect to convert this Note in accordance with
Section 4 of this Note. Time is of the essence with respect to all
of the terms and provisions of this Note.
2.
Description of Notes. This Note is issued as part of a
private placement of up to Two Million Dollars ($2,000,000) in
senior convertible notes (the “Private Placement”).
This Note shall be pari passu to all of the Notes issued as
part of the Private Placement and the 10% senior convertible notes
due February 15, 2008 (the “February Notes”), issued by
the Company in February of 2005 (the “February Private
Placement”). This Note is being issued in increments of Fifty
Thousand Dollars ($50,000).
3.
Security. This Note is secured pursuant to the terms of that
certain Amended and Restated Security Agreement of even date
herewith (the “Security Agreement”). Holder agrees that
all notices, demands, consents and other rights of Holder are to be
exercised pursuant to that certain Security Agreement of even date
herewith.
4.
Conversion. As long as the there remains principal outstanding
pursuant to this Note (the “Conversion Period”), Holder
may exercise a one-time right to convert up to fifty percent (50%)
of the then outstanding principal into shares of Obligor’s
common stock, $.001 par value (“Common Stock”) at a
rate of one share of Common Stock per each One and 65/10ths Dollars
($1.65) (the “Conversion Price”) of outstanding
principal, where the resulting shares of Common Stock shall be
referred to as the “Conversion
Shares.”
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4.1.
Covenants. Obligor hereby
covenants and agrees that: (1) all Conversion Shares shall,
upon issuance in accordance with the terms of this Note and subject
to clause (2) of this Section 4.1, be duly authorized, validly
issued, fully paid, and non-assessable; (2) Obligor will amend and
restate its articles of incorporation to provide for a sufficient
number of authorized shares to be reserved for the purpose of
issuance upon conversion of this Note, sufficient number of shares
of Common Stock to provide for the conversion of this Note; and (3)
the conversion rights of Holder shall be binding upon any entity
succeeding to Obligor by merger, consolidation, or acquisition of
all or substantially all of Obligor’s assets. |
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4.2.
Adjustment Provisions. During the
Conversion Period, the Conversion Price and the number of
Conversion Shares shall be subject to adjustment from time to time
as provided in this Section 4.2. If Obligor shall, prior to
the payment of the Note in full, (1) declare a dividend or
make a distribution of Common Stock payable in shares of Common
Stock, (2) subdivide its outstanding shares of Common Stock,
into a greater number of shares of Common Stock, (3) combine
its outstanding shares of Common Stock into a smaller number of
shares of Common Stock, or (4) issue any shares of capital
stock of Obligor by reclassification or capital reorganization of
its shares of Common Stock, then the number of Conversion Shares
and the Conversion Price in effect immediately prior to such action
shall be adjusted so that Holder shall be entitled to receive the
number and kind of shares of Common Stock or other capital stock
which Holder would have owned or have been entitled to receive
immediately after such action had Holder converted this Note
immediately prior to the record date in the case of (1), or the
effective date in the case of (2), (3) or (4). In the event that
any adjustment of the Conversion Price as required herein results
in a fraction of a cent, such Conversion Price shall be rounded up
to the nearest cent. |
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4.3.
Weighted Average Conversion Price
Adjustment Provisions. Until the conversion of this Note pursuant
to this Section 4, in the event that the Company issues Common
Stock in consideration for cash, cash equivalents, promissory notes
or other consideration (other than pursuant to stock options issued
pursuant to the Company’s stock option plans) at a price per
share or issues debt or equity securities or reprices outstanding
debt or equity securities with an exercise and/or conversion price
(in either case, the “New Price”) less than the
Conversion Price, as adjusted in accordance with Section 4.2
hereof, the Company shall agree to calculate the adjusted
Conversion Price (the “Adjusted Conversion Price”)
based upon a weighted average of the Conversion Shares issuable
based on the Conversion Price and the New Price pursuant to the
following formula: |
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Adjusted
Conversion
Price |
= |
Conversion Price |
x |
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( |
Shares Outstanding |
+ |
Conversion Shares Based |
) |
|
| Prior to Issuance |
on Conversion Price |
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( |
Shares Outstanding |
+ |
Conversion Shares Based |
) |
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| Prior to Issuance |
on New Price |
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where, based on the 17,199,558 shares outstanding as of
December 31, 2004 and the maximum conversion of the Notes, if the
Company were to issue shares of Common Stock at $1.00 per share,
the Adjusted Conversion Price would be calculated as
follows: |
–2–
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Adjusted
Conversion
Price
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=
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$1.65
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x
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(
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17,199,558
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+
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606,061
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)
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=
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$1.61
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(
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17,199,558
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+
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1,000,000
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)
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4.4.
Manner of Conversion. Subject to the
provisions hereof, the relevant portion of this Note may be
converted by the Holder by the surrender of this Note, together
with a conversion agreement in the form attached hereto (the
“Conversion Agreement”), duly completed and executed by
Holder, to Obligor during normal business hours on any business day
at Obligor’s principal executive offices (or such other
location as Obligor may designate by notice to Holder). |
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4.5.
Issuance of Conversion Shares.
Subject to the amendment and restatement of the Obligor’s
articles of incorporation as contemplated by Section 4.1(2), the
Conversion Shares shall be deemed to be issued to Holder, as the
record owner of such Conversion Shares, as of the close of business
on the date on which this Note shall have been surrendered and the
completed Conversion Agreement shall have been delivered.
Certificates for the Conversion Shares, representing the aggregate
number of shares specified in the Conversion Agreement, shall be
delivered to Holder as soon as reasonably practicable, not
exceeding three (3) business days after the relevant portion of
this Note shall has been so converted. The certificates so
delivered shall be in such denominations as may be reasonably
requested by Holder and shall be registered in the name of Holder.
Obligor shall, at its expense, at the time of delivery of such
certificates, deliver to Holder a new promissory note substantially
identical to this Note other than with respect to this conversion
herewith representing the balance of the outstanding principal
under this Note that had not been converted. |
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4.6.
No Rights or Liabilities as a
Stockholder. This Note shall not entitle Holder to any voting
rights or other rights as a stockholder of Obligor. No provision of
this Note, in the absence of affirmative action by Holder to
convert any relevant portion of this Note, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise
to any liability of such Holder for the Conversion Price or as a
stockholder of Obligor, whether such liability is asserted by
Obligor or by creditors of Obligor. |
5.
Demand Registration Rights. As soon as practicable after the
issuance of this Note, Obligor shall prepare and file a
registration statement (the “Registration Statement”)
on Form S-3 or any similar short-form registration statement, with
respect to the registration under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder
(collectively, the “Securities Act”) of all Conversion
Shares for resale, which Registration Statement shall also cover
such shares convertible under the February Notes, which
Registration Statement shall also cover such indeterminate number
of additional shares of Common Stock as may become issuable upon
conversion of the Notes as a result of adjustments from stock
splits, stock dividends or similar transactions.
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5.1.
Registration Process. Obligor shall
file the Registration Statement as soon as practicable, but in any
event within thirty (30) days after the issuance of this Note, and
shall use commercially reasonable efforts to have such Registration
Statement promptly declared effective by the Securities and
Exchange Commission (“SEC”) whether or not all
Conversion Shares requested to be registered can be included;
provided, however, that if Obligor shall furnish to such
Holder a certificate signed by the President of Obligor stating
that in the good-faith judgment of the Obligor’s board of
directors it would be seriously detrimental to Obligor and its
stockholders for such Registration Statement to be filed within
such thirty-day (30-day) period and it is therefore essential to
defer the filing of such Registration Statement, Obligor shall have
an additional period of not more than ninety (90) days after the
expiration of the initial thirty-day (30-day) period within which
to file such Registration Statement; provided, that during
such time Obligor may not file a Registration Statement for
securities to be issued and sold for its own account. |
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5.2.
Registration Default. In the event
that: (a) the Registration Statement is not filed by the Company
within thirty (30) days after the issuance of this Note, or
declared effective by the SEC within one hundred twenty (120) days
after the date of the issuance of this Note, on the 120th day after
the issuance of this Note, or (b) the Common Stock is no longer
listed on the American Stock Exchange or another national
securities exchange or quotation medium (including the Nasdaq
National Market and the Nasdaq SmallCap Market) or has been
suspended from trading thereon for three (3) consecutive business
days, the Interest Rate shall increase by one-half percent (0.5%)
per annum for each 30-day period for which Obligor remains in
default pursuant to this Section 5.2, where the Interest Rate shall
not increase to more than fourteen percent (14%) per annum;
provided, however, with respect to a registration default under
subsection (b), Obligor shall have one hundred twenty (120) days to
cure such registration default during which time the Interest Rate
shall not increase, where the failure of Obligor to cure during
said 120-day period shall cause the retroactive application of the
one-half percent (0.5%) per annum increase to the date of the
registration default. Once the Registration Statement has been
declared effective by the SEC, if the Registration Statement is no
longer effective, other than as provided in Section 5.3(f), for a
period of thirty (30) days in the aggregate (which days need not be
consecutive), on the day after such thirtieth (30th) day the then
applicable Interest Rate shall increase by one-half percent (0.5%)
per annum and shall be subject to additional increases of one-half
percent (0.5%) per annum for every such subsequent aggregate 30-day
period that the Registration Statement is no longer effective. Upon
the re-listing of the Common Stock or when the Registration
Statement regains its effectiveness, the Interest Rate shall return
to ten percent (10%) per annum. |
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5.3.
Obligations of the Company. In
connection with the registration of the Conversion Shares, the
Company shall have the following obligations: |
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a.
The Company shall keep such Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier
of (i) the date on which all of the Conversion Shares have been
sold and (ii) the date on which all of the Conversion Shares may be
immediately sold to the public without registration or restriction
pursuant to Rule 144(k) under the Securities Act or any successor
provision (the “Registration Period”), which
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein and all documents
incorporated by reference therein) (i) shall comply in all material
respects with the requirements of the Securities Act and the rules
and regulations of the SEC promulgated thereunder and (ii) shall
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary
to make the statements therein not misleading. The financial
statements of the Company included in the Registration Statement or
incorporated by reference therein will comply as to form in all
material respects with the applicable accounting requirements and
the published rules and regulations of the SEC applicable with
respect thereto. Such financial statements will be prepared in
accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the
notes thereto, or (ii) in the case of unaudited interim statements,
to the extent they may not include footnotes or may be condensed on
summary statements and fairly present in all material respects
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