|
Exhibit 10.3
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “
Agreement ”)
is dated as of October 11, 2006, among VendingData
Corporation, a Nevada corporation (the “
Company ”),
and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “
Purchaser ”
and collectively the “
Purchasers ”).
RECITALS
WHEREAS,
subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities
Act of 1933, as amended (the “
Securities Act ”)
and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and
not jointly, desires to purchase from the Company, certain
securities of the Company as more fully described in this
Agreement.
AGREEMENT
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained
in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and each Purchaser agree as
follows:
ARTICLE
I.
DEFINITIONS
1.2
Definitions .
In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:
“
Action ”
shall have the meaning ascribed to such term in Section
3.1(j).
“
Affiliate ”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 144 under the Securities Act.
“
Amendment ”
means the filing of an amendment to the Company’s Articles of
Incorporation, in the form and substance acceptable to the
Purchaser’s in their reasonable discretion, with the Nevada
Secretary of State for purposes of increasing the Company’s
authorized Common Stock to an amount sufficient to provide for the
Company’s issuance of all of the Securities pursuant to this
Agreement.
“
Business Day ”
means any day except Saturday, Sunday and any day which shall be a
federal legal holiday in the United States.
“
Change of Control Offer ”
means a written offer to the Company or its stockholders to enter
into a transaction or a series of related transactions which will
result in either (i) a change in ownership of the Company’s
capital stock or voting power in an amount greater than fifty
percent (50%) or (ii) the acquisition of substantially all of the
Company’s assets, in either case whether by merger,
consolidation, acquisition of assets, tender offer or the
like.
“
Closing ”
means the Closing of the purchase and sale of the Shares and
Warrants pursuant to Section 2.1.
“
Closing Date ”
means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and
all conditions precedent to (i) the Purchasers’
obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the applicable Shares and
Warrants have been satisfied or waived.
“
Commission ”
means the Securities and Exchange Commission.
“
Common Stock ”
means the common stock of the Company, par value $0.001 per share,
and any other class of securities into which such securities may
hereafter be reclassified or changed into.
“
Common Stock Equivalents ”
means any securities of the Company or any Subsidiary which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instruments that are at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“
Company Counsel ”
means Preston Gates & Ellis LLP.
“
Disclosure Schedules ”
means the Disclosure Schedules of the Company delivered to the
Purchasers prior to the date hereof.
“
Effective Date ”
means the date that the initial Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
“
Exchange Act ”
means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
“
GAAP ”
shall have the meaning ascribed to such term in
Section 3.1(h).
“
Intellectual Property Rights ”
shall have the meaning ascribed to such term in
Section 3.1(q).
“
Liens ”
means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other restriction of any
kind.
“
Material Adverse Effect ”
shall have the meaning assigned to such term in
Section 3.1(b).
“
Material Permits ”
shall have the meaning ascribed to such term in
Section 3.1(o).
“
Melco ”
means Melco International Development Limited, a Hong Kong
company.
“
Melco-PBL Joint Venture ”
means the joint venture established between Melco and Publishing
and Broadcasting Limited.
“
Person ”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“
Proceeding ”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or
threatened.
“
Purchaser Counsel ”
means Latham & Watkins, with offices located at 41
st Floor,
One Exchange Square, 8 Connaught Place, Central, Hong
Kong.
“
Registration Rights Agreement ”
means the Registration Rights Agreement, to be delivered at the
Closing, among the Company and the Purchasers, substantially in the
form of
Exhibit A attached
hereto.
“
Registration Statement ”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the
Purchasers of the Registrable Securities (as defined in the
Registration Rights Agreement).
“
Required Approvals ”
shall have the meaning ascribed to such term in
Section 3.1(e).
“
Rule 144 ”
means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
“
SEC Reports ”
shall have the meaning ascribed to such term in
Section 3.1(h).
“
Securities ”
means the Shares, the Warrants and the Warrant Shares.
“
Shares ”
means the shares of Common Stock issued to the Purchasers at the
Closing.
“
Shareholder Approval ”
means such approval as may be required by the applicable rules and
regulations of the American Stock Exchange (or any successor
entity) from the shareholders of the Company in accordance with
Section 14 of the Exchange Act with respect to the
Company’s issuance of the Shares
and the Warrants .
“
Short Sales ”
shall include all “short sales” as defined in
Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“
Subscription Amount ”
means, as to each Purchaser, the aggregate amount specified below
such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount”, in
United States Dollars.
“
Subsidiary ”
means any subsidiary of the Company as set forth on
Schedule 3.1(a) .
“
Trading Day ”
means a day on which the Common Stock is traded on a Trading Market
provided that, in the event that the Common Stock is not listed or
quoted on a Trading Market, Trading Day shall mean a Business
Day.
“
Trading Market ”
means the following markets or exchanges on which the Common Stock
is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
“
Transaction Documents ”
means this Agreement, the Registration Rights Agreement, and the
Warrants and
any other documents or agreements executed
in connection with this Agreement, the Registration Rights
Agreement or the Warrants but excluding the agreements identified
in Section 2.3(a)(v).
“
Warrants ”
mean s
the Common Stock purchase warrants, substantially in the form
of
Exhibit B attached
hereto, issued to the Purchasers at the Closing.
“
Warrant Shares ”
means the shares of Common Stock underlying the Warrants
issuable
upon exercise of the Warrants .
ARTICLE
II.
PURCHASE
AND SALE
2.1
Closing .
Upon the terms and subject to the conditions set forth herein, at
the Closing the Company hereby
agrees to issue
and sell to each Purchaser, and each Purchaser hereby
agrees to purchase
from the Company, severally and not jointly, the number of Shares
and Warrants set forth on each respective Purchaser’s
signature page attached hereto, for the Subscription Amount set
forth thereon. The aggregate Subscription Amount shall equal
$2,650,000 and the Shares and Warrants shall in the aggregate
consist of:
(b)
1,000,000
Shares; and
(c)
Warrants
to purchase the following:
(i)
6,000,000
shares of Common Stock at $2.65 per share;
(ii)
4,000,000
shares of Common Stock at $3.00 per share;
(iii)
2,000,000
shares of Common Stock at $3.50 per share;
(iv)
1,000,000
shares of Common Stock at $4.00 per share;
(v)
1,000,000
shares of Common Stock at $4.50 per share;
(vi)
1,000,000
shares of Common Stock at $5.00 per share; and
(vii)
1,000,000
shares of Common Stock at $5.50 per share.
On
the Closing Date (the “
Closing Date ”),
each Purchaser shall deliver to the Company, via wire transfer or a
certified check, immediately available funds equal to their
Subscription Amount, and the Company shall deliver to each
Purchaser full
legal
and beneficial ownership of
their
respective Shares and Warrants. Upon satisfaction of the conditions
set forth in Sections 2.2 and 2.3, the Closing shall occur at
the offices of Latham & Watkins, 41
st Floor,
One Exchange Square, 8 Connaught Place, Central, Hong Kong, or such
other location as the parties shall mutually agree.
2.2
Deliveries .
(b)
On
or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the
following:
(i)
this
Agreement duly executed by the Company;
(ii)
one
or more certificates evidencing the number of Shares as set
forth opposite such Purchaser’s name on the signature
page of this Agreement, registered in the name of such
Purchaser;
(iii)
a
legal opinion of Company Counsel, in the form and substance
satisfactory to the Purchasers;
(iv)
The
Warrants purchased by each Purchaser hereunder registered in
the name of each Purchaser and duly executed by the Company;
and
(v)
the
Registration Rights Agreement duly executed by the
Company.
(c)
On
or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company the
following:
(i)
this
Agreement duly executed by such Purchaser;
(ii)
such
Purchaser’s Subscription Amount by wire transfer or
cashier’s check to the account specified by the Company
in writing; and
(iii)
the
Registration Rights Agreement duly executed by such
Purchaser.
2.3
Closing Conditions .
(b)
The
obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being
met:
(i)
the
representations and warranties of the Purchasers contained in
the Transaction Documents and qualified as to materiality
shall be true and correct and any such representations and
warranties not so qualified shall be true and correct in all
material respects, as of the date hereof and as of the Closing
Date;
(ii)
all
obligations, covenants and agreements of the Purchasers
required to be performed at or prior to the Closing Date shall
have been performed;
(iii)
the
delivery by the Purchasers of the items set forth in Section
2.2(b) of this Agreement;
(iv)
the
Company’s receipt of Shareholder Approval, if
required;
(v)
the
execution and delivery by the parties thereto of (a) an
amendment to the Sales Representative Agreement dated January
5, 2006 (“
Sales Representative Agreement ”)
entered into between the Company and Elixir Group Limited, a Hong
Kong company (“
Elixir ”),
in form and substance satisfactory to the parties thereto; and (b)
an Alliance Agreement (“
Alliance Agreement ”)
between the Company and Elixir, in form and substance satisfactory
to the parties thereto;
(vi)
the
filing of the Amendment by the Company with the Nevada
Secretary of State and the effectiveness of the
Amendment;
(vii)
on
the Closing Date, (A) no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or
prohibit the transactions contemplated by the Transaction
Documents and (B) there shall exist no actual or potential
regulatory impediment to the legal and beneficial ownership of
the Securities by the Purchasers; and
(viii)
all
consents, waivers, approvals, authorizations, registrations,
filings with governmental entities should have been
obtained.
(c)
The
respective obligations of the Purchasers hereunder in
connection with the
Closing are subject to the following conditions being
met:
(i)
the
representations and warranties of the Company contained in the
Transaction Documents and qualified as to materiality shall be
true and correct and any such representations and warranties
not so qualified shall be true and correct in all material
respects, as of the date hereof and as of the Closing
Date;
(ii)
all
obligations, covenants and agreements of the Company required
to be performed at or prior to the Closing Date shall have
been performed;
(iii)
on
the Closing Date, (A) no legal action, suit or proceeding
shall be pending or threatened which seeks to restrain or
prohibit the transactions contemplated by the Transaction
Documents and (B) there shall exist no actual or potential
regulatory impediment to the legal and beneficial ownership of
the Securities by the Purchasers;
(iv)
the
execution and delivery by the parties thereto of (a) an
amendment to the Sales Representative Agreement, in form and
substance satisfactory to the parties thereto; and (b) an
Alliance Agreement between the Company and Elixir, in form and
substance satisfactory to the parties thereto;
(v)
the
Company shall have received Shareholder Approval, if
required;
(vi)
the
filing of the Amendment by the Company with the Nevada
Secretary of State and the effectiveness of the
Amendment;
(vii)
the
delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;
(viii)
the
Purchasers shall have completed such due diligence as they
consider necessary in connection with the Transaction
Documents and the transactions contemplated therein, to their
satisfaction, in their sole discretion;
(ix)
all
consents, waivers, approvals, authorizations, registrations,
filings with governmental entities should have been
obtained.
(x)
the
Company shall have delivered to the Purchasers a certificate,
dated the Closing Date, duly executed by its Chief Executive
Officer to the effect set forth in clauses (i) and (ii) above;
and
(xi)
the
Company shall have delivered to the Purchasers a certificate,
dated the Closing Date, of the Secretary or Assistant
Secretary of the Company certifying (i) the certificate of
incorporation and bylaws of the Company as in effect on the
Closing Date, (ii) all resolutions of the board of directors
(and committees thereof) of the Company relating to the
Transaction Documents and the transactions contemplated
thereby (including a resolution concerning the matters set
forth in clause (i) of Section 4.10(b)) and (iii) the
incumbency of all officers of the Company executing the
Transaction Documents and any other agreement or document
contemplated thereby.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1
Representations and Warranties of the Company
.
Except
as set forth under the corresponding section of the disclosure
schedules delivered to the Purchasers prior
to the date hereof (the
“
Disclosure Schedules ”)
which Disclosure Schedules shall be deemed a part hereof, the
Company hereby makes the representations and warranties set forth
below to each Purchaser:
(a)
Subsidiaries .
All of the direct and indirect subsidiaries of the Company are set
forth on
Schedule 3.1(a) .
The Company owns, directly or indirectly, all of the capital stock
or other equity interests of each Subsidiary free and clear of any
Liens, and all the issued and outstanding shares of capital stock
of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b)
Organization and Qualification .
The Company and each of the Subsidiaries is an entity duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, have or
reasonably be expected to result in (i) a material adverse
effect on the legality, validity or enforceability of any
Transaction Document, (ii) a material adverse effect on
the results
of operations, assets, business or condition (financial or
otherwise) of the
Company
and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to consummate the
transactions contemplated by the Transaction Documents or to
perform its obligations under any Transaction Document (any of (i),
(ii) or (iii), a “
Material Adverse Effect ”)
and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c)
Authorization; Enforcement .
The
Company has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement and each other
Transaction Document and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the other Transaction Documents
and the consummation of the transactions contemplated herein and
therein have been duly authorized by all necessary action on the
part of the Company and no further corporate proceedings by the
Company are necessary to authorize this Agreement or the other
Transaction Documents (other than the Shareholder Approval, if
required, and approval of the Amendment by the shareholders of the
Company). This Agreement and each other Transaction Document has
been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms except
(i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(d)
No Conflicts .
The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Securities
and the consummation by the Company of the other transactions
contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement
(including, without limitation, the Gaming Chip Manufacturing and
License Agreement between Progressive Gaming International
Corporation and Dolphin Advanced Technologies Pty Limited dated
June 22, 2006), credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii)
assuming
receipt of the
Required Approvals, conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not
individually or in the aggregate have or reasonably be expected to
result in a Material Adverse Effect.
(e)
Filings, Consents and Approvals .
T he
Company is not required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing
or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required
pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) the
Company’s receipt of Shareholder Approval ,
if required; (iv) application(s) to each applicable Trading
Market for the listing of the Shares and the Warrant Shares for
trading thereon in the time and manner required thereby, (v)
approval of the Amendment by the shareholders of the Company and
the filing of the Amendment by the Company with the Nevada
Secretary of State and (vi) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “
Required Approvals ”).
(f)
Issuance of the Securities .
Upon the filing of the Amendment by the Company with the Nevada
Secretary of State, and no later than the Closing, the Securities
will be duly authorized and, when issued and paid for in accordance
with the applicable Transaction Documents, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens
caused by the Company (except as resulting from the restrictions on
transfer set forth in the Transaction Documents) or imposed under
any U.S. law, rule or regulation. Upon the filing of the Amendment
with the Nevada Secretary of State, and no later than the Closing,
the Company will have reserved from its duly authorized capital
stock, all of the Shares issuable pursuant to this Agreement and
the Warrants.
(g)
Capitalization .
The capitalization of the Company is as set forth on
Schedule 3.1(g) .
No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a
result of the purchase and sale of the Securities or as set forth
on
Schedule 3.1(g), there
are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. The issuance and sale of
the Shares and the Warrants will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange
or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are duly authorized and
validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase
securities. Other
than the
Shareholder
Approval, if required, and approval of the Amendment by the
shareholders of the Company, no further approval or authorization
of any stockholder, the Board of Directors of the Company or any
other person is required for the issuance and sale of the
Securities. Except as set forth on
Schedule 3.1(g) ,
there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s
stockholders.
(h)
SEC Reports; Financial Statements .
The Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it under the Securities Act
and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the period commencing January 1, 2005 through the date
hereof (the foregoing materials, including the exhibits and
schedules thereto and documents incorporated by reference therein,
being collectively referred to herein as the “
SEC Reports ”)
on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration
of any such extension. Except as set forth on
Schedule 3.1(h) ,
as of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, as applicable, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
Except as set forth on
Schedule 3.1(h) ,
the financial statements of the Company included in the SEC Reports
complied in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Except as set
forth on
Schedule 3.1(h) ,
such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“
GAAP ”),
except as may be otherwise specified in such financial statements
or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and
its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i)
Material Changes; Undisclosed Events, Liabilities or
Developments .
Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a
subsequent SEC Report, (i) there has been no event, occurrence
or development that has had or that could reasonably be
expected to
result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and
(B)
liabilities
not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the
Commission, in
each case that could not reasonably be expected to have a Material
Adverse Effect ,
(iii) the
Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of
cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its
capital stock, (v) none of the Company nor any of its
Subsidiaries has (A) sold, assigned, transferred, abandoned,
mortgaged, pledged or subjected to lien any of its material
properties, tangible or intangible, or rights under any material
contract, permit, license, franchise or other agreement
or
(B) waived or cancelled any material amounts of indebtedness
or other obligations owed to the Company or any such Subsidiary;
and (vi) the Company has not issued any equity securities to
any officer, director or Affiliate, except pursuant to existing
Company stock option plans and in amounts in accordance with past
practice. The Company does not have pending before the Commission
any request for confidential treatment of information.
(j)
Litigation .
There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“
Action ”)
which materially adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or
the Securities. Except as previously disclosed in writing to
Purchaser Counsel,
neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any material Action
involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not
pending or contemplated, any material investigation by the
Commission involving the Company or any current or former director
or officer of the Company. The Commission has not issued any stop
order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under
the Exchange Act or the Securities Act.
(k)
Labor Relations .
No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the
Company which could reasonably be expected to result in a Material
Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company, and neither
the Company or any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. No
executive officer, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l)
Business Relationships .
(i) No
major customer of the Company or any Subsidiary has, since December
31, 2005, canceled or otherwise terminated or indicated an intent
to cancel or otherwise terminate its relationship with the Company
or any Subsidiary or to materially decrease the volume of business
it conducts with the Company or any Subsidiary. (ii) No major
supplier of the Company or any Subsidiary has stopped or indicated
an intent to stop or materially reduce the rate at which it
supplies materials, products or services to the Company or any
Subsidiary.
(m)
Solvency .
Based on the financial condition of the Company as of the Closing
the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature.
(n)
Compliance .
Neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental
body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to
taxes, the environment, occupational health and safety and gaming
matters, except in each case as could not have or reasonably be
expected to result in a Material Adverse Effect.
(o)
Regulatory Permits .
The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not have or
reasonably be expected to result in a Material Adverse Effect
(“
Material Permits ”),
and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any
Material Permit.
(p)
Title to Assets .
The Company and the Subsidiaries have good and marketable title in
fee simple to all real property owned by them that is material to
the business of the Company and the Subsidiaries and good and
marketable title to all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in
each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the
payment of federal, state or other taxes, the payment of which is
neither delinquent nor subject to penalties. Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in full
compliance.
(q)
Patents and Trademarks .
The Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective
businesses as currently conducted, and which the failure to so have
could have a Material Adverse Effect (collectively, the
“
Intellectual Property Rights ”).
Neither the Company nor any Subsidiary has received a notice
(written or otherwise) or has any knowledge that the Intellectual
Property Rights used by the Company or any Subsidiary violates or
infringes upon the asserted rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(r)
Insurance .
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(s)
Transactions With Affiliates and Employees .
Except as set forth in the SEC Reports, none of the officers or
directors of the Company and, to the knowledge of the Company, none
of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner, in each case in excess of $60,000, other than
(i) for payment of salary, (ii) reimbursement for
expenses properly incurred on behalf of the Company and
(iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(t)
Sarbanes-Oxley; Internal Accounting Controls
. The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the
Closing Date. Except as disclosed in the SEC Reports, the Company
and its Subsidiaries maintain a system of internal accounting
controls sufficient to
provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(u)
Certain Fees .
No brokerage or finder’s fees or commissions are or will be
payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons (save and except for the Purchasers’
own financial advisor) for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents as a result of any action
taken by the Company or its Affiliates.
(v)
Private Placement .
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2(b)-(e), (g) and (h), no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers under the
Transaction Documents. Assuming Shareholder Approval
,
if required pursuant to the AMEX Rules, the issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(w)
Investment Company. The
Company is not, and is not an Affiliate of, and immediately after
giving effect to the transactions contemplated by this Agreement,
will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of
1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company
Act.
(x)
Certain Registration Matters.
The
Company will be eligible to register the Common Stock for resale by
the Purchasers under Form S-3 promulgated under the Securities Act
no later than September 29, 2007. Except
as set forth on
Schedule 3.1(x) ,
no Person has any mandatory right (including
“piggy-back” registration rights) to cause the Company
to effect the registration under the Securities Act of any
securities of the Company.
(y)
Listing and Maintenance Requirements .
The Company’s Common Stock is registered pursuant to Section
12(b) or 12(g) of the Exchange Act, and the Company has taken no
action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that
the Commission is contemplating terminating such registration. The
Company has not, in the two years preceding the date hereof,
received notice from any Trading Market on which the Common Stock
is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of
such Trading Market. Subject to the Company’s receipt of
Shareholder Approval, if required, the Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements.
(z)
Application of Takeover Protections .
The Company and its Board of Directors have taken all necessary
action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of
incorporation (or similar charter documents), the Company’s
by-laws (as amended and in effect) or the laws of its state of
incorporation that is or could reasonably be expected to become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(aa)
No Integrated Offering .
Assuming
the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2(b)-(e), neither the Company,
nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
the Securities Act or any applicable shareholder approval
provisions of any Trading Market on which any of the securities of
the Company are listed or designated.
(bb)
Tax Status .
Except as set forth on
Schedule 3.1(bb) ,
the
Company has filed all material federal, state and local income and
franchise and other tax returns required to be filed and has paid
all taxes due in accordance therewith, and no tax deficiency has
been determined adversely to the Company which has had (nor does
the Company have any knowledge of any tax deficiency which, if
determined adversely to the Company, could have) a Material Adverse
Effect.
(cc)
No General Solicitation .
Neither the Company nor any person acting on behalf of the Company
has offered or sold any of the Shares or Warrants by any form of
general solicitation or general advertising. The Company has
offered the Shares and Warrants for sale only to the Purchasers and
certain other “accredited investors” within the meaning
of Rule 501 under the Securities Act.
(dd)
Acknowledgment Regarding Purchasers’ Purchase of Shares and
Warrants .
The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Shares and
Warrants. The Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(ee)
Disclosure .
All disclosure furnished by or on behalf of the Company to the
Purchasers regarding the Company, its business and the transactions
contemplated hereby, (including the Company’s representations
and warranties set forth in this Agreement and the Disclosure
Schedules to this Agreement)
,
are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company has not
taken and will not take any action designed to or that might
reasonably be expected to cause or result in an unlawful
manipulation of the price of the Common Stock to facilitate the
sale or resale of the Securities.
3.2
Representations and Warranties of the Purchasers
.
Each Purchaser hereby, for itself and for no other Purchaser,
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows:
(a)
Organization; Authority .
Such Purchaser is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
organization with all
requisite corporate
or partnership power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder.
The execution ,
delivery
and
performance of this Agreement and each of the other
Transaction
Document s
by
such Purchaser and
the consummation by it of
the transactions contemplated by this Agreement and
each other Transaction Document have been or
upon delivery will have been duly
authorized by all necessary corporate or similar action on the part
of such Purchaser. Each Transaction Document to which it is a party
has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies
and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b)
Own Account .
Such Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof without prejudice, however, to such
Purchaser’s right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to
sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws.
Subject to the immediately preceding sentence, nothing contained
herein shall be deemed a representation or warranty by such
Purchaser to hold the Securities for any period of time. Such
Purchaser does not have any agreement, plan or understanding,
directly or indirectly, with any Person to distribute any of the
Securities. Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business.
(c)
Purchaser Status .
At the time such Purchaser was offered the Securities, it was, and
at the date hereof it is, an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act. Such Purchaser is not required to be registered
as a broker-dealer under Section 15 of the Exchange
Act.
(d)
Experience of Such Purchaser .
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Shares and Warrants, and
has so evaluated the merits and risks of such investment. Such
Purchaser is able to bear the economic risk of an investment in the
Shares and Warrants and, at the present time, is able to afford a
complete loss of such investment.
(e)
General Solicitation .
Such Purchaser is not purchasing the Shares and Warrants as a
result of any advertisement, article, notice or other communication
regarding the Shares published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general
advertisement.
(f)
Short Sales and Confidentiality Prior To The Date Hereof
.
Other than the transactions contemplated hereunder, such Purchaser
has not directly or indirectly, nor has any Person acting on behalf
of or pursuant to any understanding with such Purchaser, engaged in
any transaction, including Short Sales, in the securities of the
Company since the earlier to occur of (i) the time that such
Purchaser was first contacted by the Company regarding an
investment in the Company, or (ii) the 30
th day
prior to the date of this Agreement (such
earlier date, “
Discussion Date ”)
.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the representation set
forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Shares and Warrants covered by this Agreement.
Purchaser at all times acted in compliance with Confidentiality
Deed dated April 21, 2006 between the parties.
(g)
Access to Information .
Such Purchaser acknowledges that it has received and had the
opportunity to review copies of the SEC Reports. Such Purchaser
further acknowledges that it or its representatives have been
afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Securities, and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the
Company’s financial condition, results of operations,
business, properties, management and prospects sufficient to enable
it to evaluate its investment in the Securities; and (iii) the
opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to verify the accuracy and completeness of the
information contained in the SEC Reports. Neither such inquiries
nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or
affect such Purchaser’s right to rely on the truth, accuracy
and completeness of the SEC Reports and the Company’s
representations and warranties contained in this Agreement and the
other Transaction.
(h)
Restrictions on Shares and Warrants .
Such Purchaser understands that the Securities have not been
registered under the Securities Act and may not be offered, resold,
pledged or otherwise transferred except (a) pursuant to an
exemption from registration under the Securities Act or pursuant to
an effective registration statement in compliance with Section 5
under the Securities Act and (b) in accordance with all applicable
securities laws of the states of the United States and other
jurisdictions.
(i)
Compliance .
Neither
Elixir or any of its subsidiary (i) is in violation of any order of
any court, arbitrator or governmental body, or (ii) is or has been
in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state
and local laws relating to taxes, the environment, occupational
health and safety and gaming regulatory matters, except in each
case in
(i) and (ii) as
could not have or reasonably be expected to result in a material
adverse effect.
(j)
Regulatory Permits .
Elixir and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or gaming and other regulatory authorities necessary
to conduct their respective current businesses as currently
conducted, except where the failure to possess such permits could
not have or reasonably be expected to result in a material adverse
effect (“
Material Elixir Permits ”),
and Elixir has not received any notice of proceedings relating to
the revocation or modification of any Material Elixir
Permit.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1
Transfer Restrictions .
(b)
The
Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer
of the Securities other than (i) pursuant to an effective
registration statement, (ii) pursuant to Rule 144;
(iii) to the Company or (iv) to an Affiliate of a
Purchaser, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such
transferred Shares under the Securities Act.
(c)
The
Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities
in the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR
THE SECURITIES LAWS OF ANY STATE AND ARE “RESTRICTED
SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE SECURITIES ACT. SUCH SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND THE APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION THEREUNDER, AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY
4.2
Furnishing of Information .
As long as any Purchaser owns any Securities, the Company covenants
to timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act. As long as any Purchaser owns any Securities, if the Company
is not required to file reports pursuant to the Exchange Act, it
will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144.
The Company further covenants that it will take such further action
as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such
Shares and Warrant Shares without registration under the Securities
Act within the requirements of the exemption provided by
Rule 144.
4.3
Integration .
The Company shall not ,
and shall use its best efforts to ensure that no Affiliate of the
Company shall not sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of
the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the
Purchasers or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent
transaction.
4.4
Securities Laws Disclosure; Publicity .
The Company shall, within one Business Day of the Closing Date,
issue a press release disclosing the material terms of the
transactions contemplated hereby, and shall file a Current Report
on Form 8-K which shall attach the Transaction Documents
thereto by the fourth Business Day following the Closing
Date. The
press release and Form 8-K shall be acceptable to the
Purchasers in their reasonable discretion. No Purchaser shall issue
any such press release or otherwise make a public announcement,
statement or other disclosure without the prior consent of the
Company unless such public announcement, statement or disclosure is
required by the laws, rules or regulations applicable to such
Purchaser (including, without limitation, those stipulated by any
applicable stock exchange), in which case such Purchaser shall
provide the Company with prior notice of its requirement to do so.
The Company shall not publicly disclose the name of any Purchaser,
or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the
prior written consent of such Purchaser, except (i) as
required by federal securities law in connection with (A) any
registration statement contemplated by the Registration Rights
Agreement, (B) any proxy or information statement filed in
connection with the Company’s receipt of Shareholder Approval
and (C) the filing of final Transaction Documents (including
signature pages thereto) with the Commission and (ii) to the
extent such disclosure is required by law or Trading Market
regulations in which case the Company shall provide the Purchasers
with prior notice of such disclosure.
4.5
Use of Proceeds .
The Company shall use the net proceeds from the sale of the Shares
and Warrants hereunder as set forth on Schedule 4.5 of the
Disclosure Schedule.
4.6
Listing of Common Stock .
The
Company hereby agrees to use best efforts to maintain the listing
of the Common Stock on each Trading Market in which it is traded,
and as soon as reasonably practicable but in no event later than
45 days following the Closing, to list all of the Shares
and not
later
than 15 days following issuance thereof to list
any
Warrant
Shares ,
on
each such Trading Market). The Company further agrees, if the
Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application all of the
Shares and the Warrant Shares, and will take such other action as
is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The
Company will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market.
4.7
Short Sales and Confidentiality After The Date Hereof
.
Each
Purchaser, severally and not jointly with the other Purchasers,
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will engage in any
transactions, including any Short Sales, in the securities of the
Company during the period commencing at the Discussion Time and
ending at the time that the transactions contemplated by this
Agreement are first publicly announced as described
in
Section 4.4. Each
Purchaser, severally and not jointly with the other Purchasers,
covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will engage in any Short
Sales in the securities of the Company during the period commencing
at the Discussion Time and ending on the Effective Date
(“
Black-out Termination Date ”)
.
Each Purchaser, severally and not jointly with the other
Purchasers, covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain
the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this
transaction). Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the
Commission currently takes the position that coverage of short
sales of shares of the Common Stock “against the box”
prior to the Effective Date of the Registration Statement with the
Shares is a violation of Section 5 of the Securities Act, as set
forth in Item 65, Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office
of Chief Counsel, Division of Corporation Finance.
Notwithstanding
the foregoing, no Purchaser makes any representation, warranty or
covenant hereby that it will not engage in Short Sales in the
securities of the Company after the Black-out Termination
Date. Notwithstanding
the foregoing, in the case of a Purchaser that is a
multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the covenant set forth above shall
only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.
4.8
Form D; Blue Sky Filings .
The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof to each Purchaser. The Company shall take such action as
the Company shall reasonably determine is necessary in order to
obtain an exemption for, or to qualify the Securities for, sale to
the Purchasers at the Closing under applicable securities or
“Blue Sky” laws of the states of the United States, and
shall provide evidence of such actions promptly upon request of any
Purchaser.
4.9
Reduction in Number of Warrants .
(b)
Acceleration/Termination upon Change in Control
.
If at any time prior to the date any Warrant first becomes
exercisable in accordance with its terms, the Company receives a
Change of Control Offer from a person other the Purchasers or one
of their Affiliates and such Change of Control Offer is not
withdrawn and is accepted by the Company, then, upon consummation
of such transaction (i) 4,000,000 of the Warrants to purchase
Common Stock at $2.65 per share described in Section 2.1(b)(i)
hereof shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of the
Warrant would have owned immediately after such Change of Control
transaction if the holder had exercised the Warrant immediately
before the effective date of such transaction in the manner and
subject to the provisions set forth in Section 4(f) of the Warrants
without further action required on the part of any party (ii) the
balance of the Warrants listed in Section 2.1(b)(i) hereof shall be
automatically cancelled without further action required on the part
of any party.
(c)
Termination upon Breach .
If Elixir or the holder of a Warrant breaches (unless such breach
is due to fault on the part of the Company or its Affiliates) any
of their material obligations under this Agreement or the Warrants,
and the breaching party does not remedy such breach within ninety
(90) days of receiving written notice of the same from the Company,
the Company may, at its option, cancel any portion or all of any
Warrant that remains unexercised at the end of such 90 day period.
Any such cancellation shall not affect the agreements of the
parties under the Transaction Documents with respect to any
exercised Warrants or the Warrant Shares.
4.10
Repurchase of Shares by the Company .
(b)
If
at any time following the Closing Elixir believes, in its sole
discretion, that it is, or may be, subject to a material
regulatory examination, review, process, investigation,
compliance obligation, prohibition or other regulatory
requirement (in each case, a “material regulatory
requirement”) arising out of, or resulting from, its
direct ownership of Securities and which may subject Melco,
Elixir or any of their Affiliates, directors or officers to
licensing, gaming or other requirements in the United States
of America and it believes, in its sole discretion, that it
is, or will be, unable to cooperate or comply, as the case may
be, with such requirements without an unreasonable amount of
time, expense or effort, Elixir may, if advised by counsel in
writing that such transfer would substantially eliminate such
time, expense or effort, take all necessary steps to transfer
ownership of the affected Securities to a voting trust. The
parties agree that a “probity” or
“suitability” review or process by United States
federal or state gaming regulators with respect to Melco
and/or Elixir or any of their subsidiaries, Affiliates,
directors or officers shall be deemed to be a “material
regulatory requirement”. If Elixir believes, in its sole
discretion, that, taking into account the time, expense and
effort that may be required to transfer the affected
Securities to a voting trust, such a course of action is not
commercially advisable, or if such transfer would not
substantially eliminate such time, expense or effort, and the
material regulatory requirement is continuing, the Company
will use its best efforts to, as expeditiously as possible,
(i) assist Elixir to sell all of the Shares, Warrant Shares
and Warrants to a third party at a price not less than (A)
with respect to such Shares, the Subscription Amount, or
ratable portion thereof, (B) with respect to such Warrant
Shares, the aggregate exercise amount and (C) with respect to
such Warrants, the relevant portion of the Subscription
Amount, if any, that was allocated to the Warrants (A, B and
C, together the “
Targeted Proceeds ”),
or, in the event such a transaction cannot be consummated within 90
days, (ii) repurchase all of the Shares, Warrant Shares and
Warrants for cash consideration in an amount not less than the
Targeted Proceeds, subject to the Board of Directors’
determination in good faith, after consultation with outside legal
counsel, that such repurchase would not be inconsistent with its
fiduciary duties to the Company’s shareholders under
applicable Law.
(c)
Reference
is made to Article IX of the Company’s Articles of
Incorporation, as amended. The parties acknowledge and agree
that Article IX permits the Company, following a determination
by the Nevada Gaming Commission or the governing gaming
regulatory agency of a jurisdiction in which the Company holds
a privileged license (collectively the “Gaming
Regulatory Authorities”) that a holder of stock or other
security of the Company is unsuitable, to require such holder
to relinquish ownership of such stock or security and to
purchase such stock or security for cash at “fair market
value” to be determined at the sole discretion of the
Company. The parties further agree that (i) if the Company at
any time requires Elixir to relinquish all of its Securities
at “fair market value” pursuant to Article IX or
any successor or similar provision, the Targeted Proceeds
shall constitute a reasonable determination of the “fair
market value” of such Securities and (ii) the Company
will not raise any objection or defense (including, without
limitation,
ultra vires or
otherwise) regarding the agreements set forth in this Section
4.10(b).
4.11
Shareholder Approval .
If Shareholder Approval is required to consummate the transactions
contemplated by the Transaction Documents (a) the
Company’s Board of Directors (including Jim Crabbe and Mark
Newburg) shall take all lawful action to (i) cause a special
meeting of its shareholders (the “
Company Shareholder Meeting ”)
to be duly called and held as soon as practicable after the date
hereof for the purpose of voting on the approval and adoption of
the Transaction Documents and (ii) solicit proxies from its
shareholders to obtain the required vote for the approval and
adoption of this Agreement and the other Transaction Documents and
any action necessary or desirable to effectuate the transactions
contemplated herein and therein and (b) each of Jim Crabbe and
Mark Newburg shall
vote
all
shares over which they have voting control in favor of the approval
and adoption of the Transaction Documents and any action necessary
or desirable to effectuate the transactions contemplated herein and
therein. The Board of Directors of the Company shall
(i) recommend that the shareholders of the Company adopt this
Agreement and the other Transaction Documents and thereby approve
the transactions contemplated hereby and thereby and (ii) take
all lawful action (including the solicitation of proxies) to
solicit such adoption; provided, however, that the Board of
Directors may, at any time prior to the time of the Company
Shareholder Meeting, withdraw, modify or change any such
recommendation to the extent that the Board of Directors’
determines in good faith, after consultation with outside legal
counsel, that such repurchase would not be consistent
with
its fiduciary duties to the Company’s shareholders under
applicable Law.
4.12
S-3 Eligibility .
The Company will use its best efforts to become eligible to
register the Common Stock for resale by the Purchasers under Form
S-3 promulgated under the Securities Act as promptly as
possible.
4.13
Board Representation .
From and after the Closing, Elixir will be entitled to appoint one
director to the Board of Directors of the Company and appoint a
replacement director in the event such board seat becomes vacant.
From and after its exercise of any of the Warrants, Elixir will be
entitled to appoint a number of directors to the Board of Directors
of the Company proportionate to its equity ownership of the Company
on a Fully Diluted Basis (as well as appoint a replacement director
in respect of any of its board seats that become vacant). By way of
example, if Elixir’s equity ownership of the Company is equal
to 30%, on a Fully Diluted Basis, Elixir shall be entitled to
appoint a number of directors equal to the product of 30% and the
authorized number of directors set forth in the organizational
documents of the Company (as adjusted upwards, but not downwards,
for any modifications of such maximum number in such organizational
documents from time to time). Any fraction resulting from such
calculation shall be rounded up if it is equal to or greater than
½ and down if it is less than ½.
The
Company (including Jim Crabbe and Mark Newburg in their
capacity as shareholders) and the Board of Directors of the
Company will do and will cause to be done all things necessary
or desirable (including amending the organizational documents
of the Company) as expeditiously as possible to give effect to
this provision (it being agreed that, if incorporated in the
organizational documents of the Company such provision shall
not thereafter be amended or canceled without the written
consent of Elixir). For the purpose of this Agreement, the
term “Fully Diluted Basis” shall refer, as of any
specified date, to (i) shares of Common Stock outstanding as
of a specified date and (ii) shares of Common Stock into or
for which Common Stock Equivalents are convertible,
exercisable or exchangeable (other than the
Warrants).
4.14
Indemnification .
(a)
Except
as otherwise provided in this Section 4.14, the Company
(the “
Indemnifying Party ”)
agrees to indemnify, defend and
hold harmless each of the Purchasers and its Affiliates and their
respective officers, directors, agents, employees, subsidiaries,
partners, members and controlling persons (each, an “
Indemnified Party ”)
to the fullest extent permitted by law from and against any and all
losses, actions, suits, proceedings, claims, complaints, disputes,
arbitrations or investigations (collectively, “
Claims ”),
or written threats thereof (including, without limitation, any
Claim by a third party), damages, expenses (including reasonable
fees, disbursements and other charges of counsel incurred by the
Indemnified Party in any action between the Indemnifying Party and
the Indemnified Party or between the Indemnified Party and
any third
party or otherwise) or other liabilities (collectively,
“
Losses ”)
resulting from, arising out of or relating to:
|
(i) |
any
breach of any representation or warranty in this Agreement any
amendment thereto, the other Transaction Documents or any of the
certificates, schedules or Disclosure Schedules delivered in
connection therewith;
|
|
(ii) |
any
breach, or failure to perform any covenant or agreement by the
Company in this Agreement or the other Transaction Documents;
and
|
|
(iii) |
an
acquisition by the Company, or any of its Affiliates, of any
Securities from Elixir in breach of the agreements between the
parties set forth in Section 4.10(b) hereof.
|
In
connection with the obligation of the Indemnifying Party to
indemnify for expenses as set forth above, the Indemnifying
Party shall, upon presentation of appropriate invoices
containing reasonable detail, reimburse each Indemnified Party
for all such expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the
Indemnified Party in any action between the Indemnifying Party
and the Indemnified Party or between the Indemnified Party and
any third party) as they are incurred by such Indemnified
Party; provided, however, that if an Indemnified Party is
reimbursed under this Section 4.14 for any expenses, such
reimbursement of expenses shall be promptly refunded to the
extent it is finally judicially determined
that the Losses in question resulted primarily from the
willful misconduct or gross negligence of such Indemnified
Party.
(b)
Each
Indemnified Party under this Section 4.14 shall, promptly
after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity
may be sought from the Indemnifying Party under this
Section 4.14, notify the Indemnifying Party in writing of
the commencement thereof. The omission of any Indemnified
Party to so notify the Indemnifying
Party of any such action shall not relieve the
Indemnif
|
