FORM OF
PLACEMENT AGENT
AGREEMENT
THIS PLACEMENT AGENT AGREEMENT (the
“Agreement”) is made and entered to be effective this
31st day of January, 2005 by and between VENDINGDATA CORPORATION, a
Nevada corporation (the “Company”) and PHILADELPHIA
BROKERAGE CORPORATION, a Pennsylvania corporation (the
“Agent”).
W I T N E S S E T H:
WHEREAS, the Company desires to issue and sell
its 10% Senior Convertible Notes due January 31, 2008 (the
“Notes”), in a minimum aggregate principal amount of
$6,250,000 (the “Minimum Offering”) and a maximum
aggregate principal amount of $10,000,000 (the “Maximum
Offering”), which notes shall be issued pursuant to the terms
and provisions of the Subscription Agreement (the
“Subscription Agreement”) to be executed and delivered
by the Company and the purchasers of the Notes (the
“Investors”), and the Note Exchange Agreement related
thereto (collectively with the Subscription Agreement and the
documents incorporated by reference therein, the
“Subscription Documents”); and
WHEREAS, the Company desires that the Agent
offer and sell strictly on a “best efforts” basis to a
limited number of purchasers (the “Investors”), as
exclusive agent of the Company, the Notes.
NOW, THEREFORE, upon the terms, covenants, and
conditions set forth below and for good and valuable consideration,
and intending to be legally bound, the parties agree as
follows:
1.
Certain Definitions
. For the purposes of this
Agreement, the following terms have the meanings set forth
below:
1.1
Closing Date
. “Closing Date” shall
include the date of the Initial Closing and the date of any
Subsequent Closing. The “Initial Closing Date” shall
refer only the date of the Initial Closing.
1.2
Company . “Company,” to the extent the
context permits, includes any Subsidiary.
1.3
Exchange Act
. “Exchange Act” means
the Securities Exchange Act of 1934, as amended, or any similar
federal law then in force.
1.4
Initial Closing
. The “Initial Closing”
shall occur when the Minimum Offering has been attained. The
Initial Closing may, by mutual agreement of the parties, occur on
any later date to which the Offering has been extended.
1.5
Material Adverse
Effect . “Material
Adverse Effect” shall refer to any material adverse effect on
the condition (financial or otherwise), prospects, business,
properties, net worth, or results of operations of the Company on a
consolidated basis.
1.6
Proprietary Rights
. “Proprietary Rights”
means patents, registered or common law trademarks, service marks,
trade names, registered or common law copyrights, licenses, and
other similar rights (including, without limitation, know-how,
trade secrets, and other confidential information) and applications
for each of the foregoing.
1.7
Subsequent Closing
. “Subsequent Closing”
shall mean any one or more closings following the Initial Closing,
which may occur by mutual agreement of the parties hereto, but not
later than February 15, 2005.
1.8
Subsidiary
. “Subsidiary” means any
corporation or other entity of which shares of stock or other
indicia of ownership possessing a majority of the ordinary voting
power in electing the board of directors, or exercising
corresponding control in the case of a non-corporate entity, is, at
the time as of which any determination is being made, owned by the
Company either directly or indirectly through one or more
Subsidiaries.
1.9
Withdrawal Date
. “Withdrawal Date”
shall mean the date on which the Company delivers to the Agent a
notice that the Company has elected to cancel and withdraw the
Offering for failure to attain the Minimum Offering or
otherwise.
2.
Agreement to Engage the
Agent .
2.1
Appointment of the
Agent . On the terms and
subject to all the conditions of this Agreement, the Company hereby
appoints the Agent on an exclusive basis for 180 days from the date
hereof to consult with and advise the Company and to solicit
subscriptions for Notes on behalf of the Company, in connection
with the Offering. On the basis of the representations, warranties,
covenants and agreements set forth herein, the Agent accepts such
appointment and agrees to consult with and advise the Company as to
the matters regarding the Offering and to use its best efforts to
solicit subscriptions for Notes in accordance with this Agreement;
provided, however , that the Agent shall have no
obligation to solicit any minimum number of subscriptions from
Investors or to take any action not in accordance with all
applicable laws, regulations, decisions or orders. The appointment
of the Agent hereunder shall terminate upon (a) the attainment of
the Maximum Offering, (b) the Withdrawal Date, or (c) termination
by the Agent or the Company in accordance with Section 10 hereof;
provided, however , that the termination of Agent’s
appointment hereunder shall not affect the obligations of the
parties hereunder, or act to terminate this Agreement, except and
to the extent provided in Section 10 hereof. The Agent will receive
all orders for Notes and shall transmit orders to the Company and
transfer Investors’ funds received by it thereunder to Wells
Fargo Bank Nevada, N.A. for deposit in the following
account:
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Name:
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VendingData
Corporation
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Account
No.:
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3121447316
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ABA Routing
No.:
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321270742
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Bank:
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Wells Fargo
Bank Nevada, N.A.
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Bank
Address:
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4425 W. Spring
Mountain Road
Las Vegas, NV 89102
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by federal
express or other courier service, or by wire transfer, on or before
12:00 p.m. (noon), eastern time, of the business day next following
receipt of such orders and funds by the Agent.
2.2
Responsibility of
Company . The Company
recognizes that compliance with applicable federal and state law in
the performance of its obligations described herein, including its
obligations concerning compliance with the requirements of
applicable federal and state securities laws pertaining to the
offer and sale of the Notes, is in all respects the responsibility
of the Company, and the Company agrees to take such precautions as
may be necessary to ensure compliance therewith. Without in any way
limiting the generality of the foregoing, the parties contemplate
that the offer and sale of Notes will be made so as to comply with
the registration requirements of Section 5 of the Securities
Act.
2.3
Subscription Documents
. The Company shall at its own
expense prepare and amend, if necessary, the Subscription Documents
and such other disclosure and offering documents as are required to
comply with the requirements of the applicable federal and state
securities laws for the Offering. The Agent may assist in the
preparation of the Subscription Documents on behalf of the Company
but shall not be responsible for any disclosures or omissions
therein except for those matters directly related to the Agent and
its role in this Offering, including the determinations made in
Section 2.5 hereof. The representations made by the Subscription
Documents are exclusively the representations of the Company as
relied upon by the Agent, except for those matters directly related
to the Agent and its role in the Offering. The Company shall take
all steps necessary to assess the legal and/or regulatory
sufficiency of the Subscription Documents or like documentation by
the retention of outside counsel engaged specifically to review
such material and the relevant issues thereunto pertaining. In any
event, the Company warrants that in authorizing the use of any
documentation used in conjunction with the activities anticipated
to be conducted herein, it shall cause to be undertaken sufficient
review of such activity by competent counsel and/or advisors and no
provision contained herein shall result in any duty incumbent upon
the Agent to ascertain the legal and/or regulatory sufficiency of
such documentation, except for those matters directly related to
the Agent and its role in the Offering.
2.4
Full and Fair
Disclosure . It is
expressly understood and expected by both parties and expressly
warranted by the Company that the Subscription Documents and any
other documentation provided by the Company to the Agent in
connection with the offering of the Notes pursuant to this
Agreement shall be reviewed by the Company or its appointees of
sufficient competence for any material deficiencies in such a
manner as to ensure accuracy and full and fair disclosure. The
Company warrants that it shall take all steps necessary to ensure
that such documentation contains no material misrepresentations or
omissions and hereby acknowledges that the Agent is not responsible
for ensuring the accuracy or sufficiency of any documentation or
disclosures therein, except for those matters directly related to
the Agent and its role in the Offering.
2.5
“ Blue Sky .” The
Agent, prior to making any offers in any state, shall promptly
advise the Company in writing of the requirements of the state
securities laws of each such state for making such offers and sales
or qualification of the securities offered in that state. The
Company shall evaluate said requirements and advise the Agent
whether the Company desires to proceed with the offering in each
particular state. The Company shall file all documents and notices
and pay such fees as are required to make offers and sales in each
state chosen by the Company pursuant to the Offering. Nothing
herein shall require the Company to pay costs of the Agent’s
registering as a broker/dealer in any state.
2.6
Procedures
. The offer and sale of the Notes
and the procedure for subscribing thereto shall conform to the
description thereof as set forth in the Subscription
Documents.
3.
Best Efforts Basis
. The Company hereby expressly
acknowledges that the Agent is under no obligation to purchase any
number of Notes in a manner which may be construed as a firm
underwriting or commitment and that the entirety of the
relationship created hereby is strictly characterized by the
term(s) “agent,” “finder,” and “best
efforts” as these terms are generally used by applicable
rules, regulations, interpretations and opinions issued by the SEC
and the National Association of Securities Dealers
(“NASD”). There is no obligation on the part of the
Agent to purchase or raise the Minimum Offering.
5.
Covenants of the
Company .
5.1
Offering Process
. The Company will offer the Notes
in the states of Pennsylvania, New York, Alaska, Nebraska and
California, and such other states as may be agreed upon by the
parties. The Company will, to the extent required, use its
commercially reasonable efforts to have the Offering approved in
those states, but, in no event shall the Company be required to
qualify to do business in such states solely as a result of the
Offering; and will notify the Agent (i) of the receipt of any
comments from the SEC or any other regulatory authority with
respect to the Offering or any other matter referred to in the
Subscription Documents, (ii) of any request by the SEC or any other
regulatory authority for any amendment or supplement to the
Subscription Documents, the Blue Sky Materials (as hereinafter
defined) or for additional information, (iii) of the issuance by
the SEC or any other regulatory authority of any order or other
action suspending the Offering or the use of the Subscription
Documents or any other filing of the Company under applicable state
law or the threat of any such action, and (iv) of the issuance by
the SEC or any regulatory authority of any stop order suspending
the use of the Subscription Documents or of the initiation or
threat of initiation of any proceedings for that purpose. The
Company will make every reasonable effort to prevent the issuance
by the SEC or any regulatory authority of any such order, and if
any such order shall at any time be issued, to obtain the lifting
thereof at the earliest possible time. The Company shall file with
the state securities authorities of the states listed above (and
any other states subsequently added), to the extent necessary,
appropriate registration materials in order to comply with the laws
of such states applicable to the sale of the Notes (“Blue Sky
Materials”).
5.2
Amendment . The Company will provide to the Agent notice
of its intention to amend the Subscription Documents and will not
amend the Subscription Documents in a manner to which the Agent
shall reasonably object. If any event relating to or affecting the
Company shall occur, as a result of which it is necessary, in the
reasonable opinion of counsel for the Company, to amend or
supplement the Subscription Documents in order to make the
Subscription Documents not misleading in light of the circumstances
existing at the time they are delivered to an Investor, the Company
will forthwith prepare and furnish to the Agent a reasonable number
of copies of an amendment or amendments of, or a supplement or
supplements to, the Subscription Documents (in form and substance
satisfactory to each of Company’s counsel and the
Agent’s counsel) which will amend or supplement the
Subscription Documents so that, as amended or supplemented, they
will not contain any untrue statement of any material fact or omit
to state any material fact necessary in order to make the
statements therein, in light of the circumstances existing at the
time the Subscription Documents are delivered to a prospective
Investor or an Investor, not misleading. For the purpose of this
Section 5.2, the Company will furnish to the Agent such information
with respect to itself as the Agent may from time to time
reasonably request; provided, however , that any
information which is of a confidential or proprietary nature shall
not be delivered to any third party other than the Agent’s
legal counsel or accountants (who shall be instructed by Agent to
maintain such information as confidential) in connection with the
Offering, or as otherwise required by law.
5.3
Provision of Documents
. The Company has or will deliver to
the Agent and to the Agent’s counsel at least one (1)
conformed copy of the Subscription Documents and the Blue Sky
Materials, as originally filed, and each amendment thereto or
correspondence in connection therewith. The Company will furnish to
the Agent, from time to time, such number of copies of the
Subscription Documents (as amended or supplemented) as the Agent
may reasonably request for the purposes contemplated by the
respective applicable rules and regulations of the NASD.
5.4
Compliance with
Regulations . As of the
effective date of the Subscription Documents and continuing through
each Closing Date, the Company will comply, at its own expense,
with all requirements imposed upon it by the SEC, state securities
regulators and by any other applicable regulatory authority, so far
as necessary to permit the continuance of sales of Notes during
such period in accordance with the provisions hereof and the
Subscription Documents, provided, however , that the
Company may, in its sole discretion, withdraw from selling Notes in
any state listed in Section 5.1 above after prior written notice to
and consultation with the Agent.
5.5
Reports . The Company will timely file such reports
pursuant to the Exchange Act as are necessary in order to make
generally available to its security holders as soon as practicable
pursuant to Rule 158 of the Securities Act an earnings statement
for the purposes of, and to provide the benefits contemplated by,
the last paragraph of Section 11(a) of the Securities Act. During
the period of eighteen (18) months from the latest Closing Date,
the Company will furnish to the Agent as soon as available, a copy
of each report of the Company furnished generally to stockholders
of the Company or, to the extent required, filed with the SEC, or
any national securities exchange or system on which any class of
securities of the Company may be listed or quoted.
5.6
Use of Proceeds
. The Company will use the net
proceeds from the sale of the Notes in the manner set forth in the
Subscription Documents under the caption, “Use of
Proceeds.”
5.7
No Additional Offering
Documents . Other than
the Subscription Documents or as permitted by applicable law, the
Company will not distribute any Subscription Documents, offering
circular or other offering material in connection with the offer
and sale of the Notes and will not publish any writing which
constitutes an offer or Subscription Documents.
5.8
Acceptance of Offer
. The Company shall not be deemed
to have accepted any subscription offer accompanied by a check or
comparable instrument until final payment has been made on such
check or instrument and the Company accepts the
subscription.
5.9
Complete Performance
. The Company covenants and agrees
to use its commercially reasonable efforts to do and perform all
things required or necessary to be done and performed under this
Agreement by the Company and to satisfy all conditions precedent to
the delivery of the Notes.
6.
Representations and Warranties of
the Company . Subject to
the information set forth in this Agreement and the Subscription
Documents, and other than as set forth on Schedule 6 hereto the
Company represents, warrants, covenants and agrees with the Agent
as follows:
6.1
Organization and Corporate
Power . The Company is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada. The Company has all
requisite corporate power and authority and all material licenses,
permits, and authorizations necessary to own and operate its
properties and to carry on its business as now conducted and as
presently proposed to be conducted, and is in good standing in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or
qualification, except where the failure to so register or qualify
does not have a Material Adverse Effect. The copies of the articles
of incorporation and bylaws which have previously been provided to
the Agent reflect all amendments made thereto at any time prior to
the date of this Agreement and are correct and complete.
6.2
Subsidiaries
. The Subsidiaries are listed on
Schedule 6.2 . Each Subsidiary is a corporation
duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Each Subsidiary is
duly authorized to conduct business and is in good standing under
the laws of each jurisdiction where such qualification is required,
except those jurisdictions where the failure to so qualify would
not have a Material Adverse Effect.
6.3
Capital Stock and Related
Matters . The authorized,
issued, and outstanding capital stock of the Company is as set
forth in the Subscription Documents. Except as set forth in the
Subscription Documents, the Company does not have outstanding any
stock or securities convertible or exchangeable for any shares of
its capital stock, and it is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock. All of the outstanding
shares of the Company’s capital stock have been duly
authorized and validly issued and are fully paid and
non-assessable. The Notes have been duly and validly authorized for
issuance and, when issued and delivered by the Company against
payment of the consideration therefor, the Notes will be duly and
validly issued, fully paid and non-assessable and will be free and
clear of any security interest, pledge, lien, encumbrance, claim or
equity other than created by the purchase or purchases thereof;
neither the issuance of the Notes or of the shares of the
Company’s common stock, par value $.001 (“Common
Stock”), upon the conversion of the Notes will be in
violation of any preemptive rights or other rights to subscribe for
or to purchase, or any restriction upon the voting or transfer of,
any shares of Common Stock pursuant to the Company’s articles
of incorporation, bylaws or other governing documents or any
agreement or other instrument to which the Company is a party or by
which it is bound.
6.4
Authorizations; No
Breach . The execution,
delivery, and performance of this Agreement and all other
agreements and transactions contemplated hereby have been duly
authorized by the Company. This Agreement and all other agreements
contemplated hereby each constitutes a valid and binding obligation
of the Company, enforceable in accordance with its terms subject,
as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors’ rights, to general principles of equity
and to the extent that rights to indemnity hereunder may be limited
under applicable laws. Except as set forth on Schedule
6.4 , the consummation of the
Offering and the transactions described in the Subscription
Documents, and the execution and delivery by the Company of this
Agreement and all other agreements contemplated hereby and the
fulfillment of and compliance with the respective terms hereof and
thereof by the Company do not and will not (i) conflict with or
result in a breach of the terms, conditions, or provisions of, (ii)
constitute a default under, (iii) result in the creation of any
lien, security interest, charge, or encumbrance upon the
Company’s or any Subsidiary’s capital stock or assets
pursuant to, (iv) give any third party the right to accelerate any
obligation under, (v) result in a violation of, the articles of
incorporation or bylaws of the Company, or any law, statute, rule,
regulation or order to which the Company is subject, or any
agreement, instrument, order, judgment, or decree to which the
Company is subject; or require any authorization, consent,
approval, exemption, or other action by or notice to, any court or
administrative or governmental body required to be filed as of the
date of this representation.
6.5
Financial Statements
. The Subscription Documents shall
contain audited balance sheets of the Company as of the last full
completed fiscal year immediately prior to start of the Offering,
and the related audited statements of operations,
stockholders’ equity, and cash flows of the Company including
the footnotes thereto, together with the opinion of the independent
certified public accountants with respect thereto. The Subscription
Documents may also contain unaudited financial statements and the
notes thereto (such unaudited financial statements, if any,
together with the latest audited financial statements, are referred
to herein as the “Latest Financial Statements”). The
Latest Financial Statements shall have been prepared in accordance
with generally accepted accounting principles consistently followed
throughout the periods indicated.
The Company shall not have had, as of the date
of the balance sheets contained in the Latest Financial Statements,
except as and to the extent reflected or reserved against therein
(including the notes thereto), any liabilities or obligations
(absolute or contingent) of a nature customarily reflected in a
balance sheet or the notes thereto prepared in accordance with
generally accepted accounting principles. The balance sheets of the
Latest Financial Statements shall present fairly, as of their
dates, the financial condition of the Company on such dates. The
statements of operations of the Latest Financial Statements shall
present fairly the results of operations of the Company for the
periods indicated. The statements of stockholders’ equity and
cash flows of the Latest Financial Statements shall present fairly
the information which should be presented therein in accordance
with generally accepted accounting principles. The presentation of
the unaudited portion of the Latest Financial Statements in
accordance with Regulation S-X promulgated by the SEC regarding the
form and content of and requirements for financial statements to be
filed with the SEC would not materially and adversely affect the
reported amount of the Company’s assets, stockholders’
equity, or results of operations as of any date or for any period
included therein.
6.6
Independent Public
Accountants . The
independent public accountants, whose report respecting the audited
financial statements of the Company is included in the Subscription
Documents and who, as expert, having reviewed certain other
information of a financial nature contained in the Subscription
Documents, shall be independent certified public accountants as
required by the Securities Act.
6.7
No Material Adverse
Change . Except as set
forth in the Subscription Documents, since the date of the Latest
Financial Statements, there has been no material adverse change in
the Company’s financial condition, operating results,
business prospects, employee relations, customer relations, or
otherwise, other than changes occurring in the ordinary course of
business which in the aggregate have not had a Material Adverse
Effect.
6.8
Absence of Certain
Developments .
6.8.1
Except as expressly provided by this
Agreement or except as disclosed in or contemplated by the
Subscription Documents, since the date of the Latest Financial
Statements the Company has not:
(a)
issued any equity stock, bonds, or
other securities;
(b)
borrowed any amount or incurred or
become subject to any liabilities, except current liabilities
incurred in the ordinary course of business and liabilities under
contracts entered into in the ordinary course of
business;
(c)
discharged or satisfied any lien or
encumbrance or paid any obligation or liability, other than current
liabilities paid in the ordinary course of business;
(d)
declared or made any payment or
distribution of cash or other property to stockholders with respect
to its stock, or purchased or redeemed any shares of its capital
stock;
(e)
mortgaged or pledged any of its
properties or assets, or subjected them to any lien, security
interest, charge, or any other encumbrance, except liens for
current property taxes not yet due and payable;
(f)
sold, assigned, or transferred any
of its tangible assets, except in the ordinary course of business,
or canceled any debts or claims;
(g)
sold, assigned, or transferred any
patents, trademarks, trade names, copyrights, trade secrets, or
other intangible assets, or disclosed any proprietary confidential
information to any person, except for licenses or disclosures in
the ordinary course of the Company’s business;
(h)
suffered any extraordinary losses or
intentionally waived any rights of material value or compromised
any material claims, whether or not in the ordinary course of
business of consistent with past practice;
(i)
made capital expenditures or
commitments therefore that aggregate in excess of
$50,000;
(j)
entered into any other transaction
other than in the ordinary course of business, or entered into any
other material transaction, whether or not in the ordinary course
of business;
(k)
made charitable contributions or
pledges; or
(l)
suffered any damage, destruction, or
casualty loss, whether or not covered by insurance.
6.8.2
The Company has not at any time made
any political contributions (except those permitted under state and
federal law) or any bribes, kickback payments, or other illegal
payments.
6.9.1
Except as set forth in the
Subscription Documents or the Latest Financial Statements, the
Company has good and marketable title to, or a valid leasehold
interest in, the material properties and assets shown on the Latest
Financial Statements or in the Subscription Documents or acquired
thereafter, free and clear of all material liens, security
interests, charges and encumbrances, other than liens for current
property taxes not yet due and payable and as disclosed in the
Subscription Documents or the Latest Financial
Statements.
6.9.2
Except as set forth in the
Subscription Documents, the Company’s buildings, equipment,
and other tangible assets are in good condition in all material
respects and are usable in the ordinary course of
business.
6.9.3
Except as set forth in the
Subscription Documents, the Company owns, or has a valid leasehold
interest in, all assets necessary for the conduct of its business
as presently conducted.
6.10
Material Contracts
. Except as set forth in the
Subscription Documents or the Subscription Documents, the Company
is not a party to any material lease or contract (meaning thereby a
lease or contract materially affecting its business or properties).
No default of any material significance exists in the due
performance and observance by the Company of any term, covenant, or
condition of any such lease or contract; all such leases or
contracts are in full force and effect and are binding on the
parties thereto in accordance with their terms; and to the
knowledge of the Company, no other party to any such material lease
or contract has threatened or instituted any action or proceeding
wherein the Company is alleged to be in default
thereunder.
6.11
Tax Returns
. Except as set forth in the
Subscription Documents, the Company has filed all federal, state
and local tax returns which are required to be filed and has paid
all taxes shown on such returns and all assessments received by it
to the extent such taxes have become due. All taxes with respect to
which the Company is obligated have been paid or provided for by
adequate reserves.
6.12
Proprietary Rights
. Except as set forth in the
Subscription Documents, the Company possesses all material
proprietary rights necessary to the conduct of its business. Except
as set forth in the Subscription Documents, (i) the Company to the
best of its knowledge, owns or licenses all such proprietary
rights, (ii) there have been no claims made against the Company for
the assertion of the invalidity, abuse, misuse, or unenforceability
of any of such rights, and to the best of the Company’s
knowledge, there are no grounds for the same, (iii) the Company has
not received a notice of conflict with the asserted rights of
others, and (iv) to the best of the Company’s knowledge, the
conduct of the Company’s business has not infringed any
proprietary rights of others.
6.13
Litigation, Etc
. Except as set forth in the
Subscription Documents, (i) there are no actions, suits,
proceedings, orders, investigations, or claims pending or, to the
Company’s knowledge, threatened against or affecting the
Company at law or in equity, or before or by any
governmental
