Contract
EXHIBIT
10.1
CREDIT
AGREEMENT dated as of October 5, 2005, between VENDING DATA CORPORATION, a
Nevada corporation (hereinafter called the "Company"), LC Capital Master Fund,
Ltd., a New York limited liability company ("Xxxxx"), and Triage Capital
Management L.P., a Delaware limited partnership ("Triage") Triage Capital
Management B, L.P., a Delaware limited partnership ("Triage B"), and Triage
Offshore Fund, Ltd. ("Triage Offshore," and Triage, Triage B, Triage Offshore
and Xxxxx being hereinafter collectively called the "Lenders"), and Xxxxx,
as
agent for the Lenders (Xxxxx in such capacity being hereinafter called the
"Agent").
The
Company has applied to the Lenders for loans (the "Loans") in the aggregate
principal amount of $5,000,000 during the period from the date hereof to a
final
maturity date of the Loans of October 1, 2006. The proceeds of the Loans are
to
be used by the Company for the purpose set forth in Section 1A hereof and for
working capital purposes. The Lenders are willing to make the Loans to the
Company, upon the terms and subject to the conditions hereinafter set forth,
in
amounts equal, for Xxxxx, to 50% of the applicable Loan; for Triage, to 17.5%
of
the applicable Loan; for Triage B, to 22.5% of the applicable Loan, and for
Triage Overseas, to 10% of the applicable Loan (each such Lender's "Share").
Accordingly, the Company, the Lenders and the Agent agree as
follows:
SECTION
1. Loans.
Each
Lender agrees, upon the terms and subject to the conditions hereinafter set
forth, to make its Share of the Loans to the Company. Each Loan shall be in
the
aggregate principal amount of at least $100,000, which may be increased for
each
Loan in increments of at least $25,000, up to a maximum principal amount for
the
first Loan of $1,000,000 and for any subsequent Loan of $500,000; provided,
however, that if on or before November 15, 2005, the Company fails to acquire
the intellectual property (the "IP Acquisition") described in that certain
letter from the Company to the Lenders dated the date of this Agreement for
the
amount specified therein (the "IP Acquisition Amount") then the maximum amount
of both the Loans in the aggregate and the applicable Loans to be made on the
next date for the making of Loans shall be reduced by the IP Acquisition Amount.
Each Loan shall be made, subject as aforesaid, in two-week intervals, in each
case on five business days' prior written notice from the Company to the Agent
that the applicable conditions set forth in Section 5 hereof have been
satisfied. Each Loan shall be evidenced by a promissory note, substantially
in
the form attached hereto as Exhibit A (hereinafter collectively called the
"Notes"), payable to the order of the applicable Lender, duly executed on behalf
of the Company, dated the date of issuance and in the principal amount of such
Lender's Share of such Loan. The principal amount of the Notes shall be due
and
payable on October 1, 2006, subject to mandatory prepayment as provided in
Sections 1A(c) and 2(b) hereof. Each Note shall bear interest from its date
(computed on the basis of the actual number of days elapsed over a year of
365/366 days) at a rate equal to nine percent (9%) per annum. Interest on each
Note shall be due and payable monthly in arrears on the first day of each month,
commencing on the first of such dates following the date of the issuance of
the
applicable Note.
SECTION
1A. Cure
of Default Under February/March Notes; Related Condition of Lending and
Mandatory Prepayment.
The
Company acknowledges that it is currently in default in the payment of interest
in the amount of $600,000 (the "Interest Amount") on the Company's 10% secured
convertible notes due February and March 2008 (the "February/March Notes").
The
Company agrees that (a) the first $600,000 of the initial Loans hereunder will
be applied directly to the payment in full of the Interest Amount; (b) as a
condition to the obligation of the Lenders to make any Loans hereunder in
addition to the initial Loans, within two weeks after the date of the initial
Loans hereunder the Company will obtain the consent of a majority in principal
amount of the holders of the February/March Notes not affiliated with either
Lender to the execution and delivery of this Agreement and the Amendment to
Security Agreement in the form of Exhibit C attached and the consummation of
all
transactions provided for herein and therein; and (c) if the condition set
forth
in Section 1A (b) is not fulfilled, the Lenders may by written notice to the
Company terminate their obligation to make further Loans hereunder and demand
payment in full of the entire principal amount of all Notes then outstanding
and
all accrued and unpaid interest thereon and all other amounts then owed the
Lenders, whereupon all such amounts shall become so due and
payable.
SECTION
2. Prepayments.
(a) Optional
Prepayment of Notes.
Upon at
least three business days=
prior
written or telegraphic notice to the Lenders, the Company may at its option
prepay the Notes in whole at any time or in part from time to time without
penalty or premium. Each optional prepayment of the Notes shall be applied
to
the outstanding Notes in the inverse order of maturity, pro rata
in
accordance with each Lender's Share. Each partial prepayment pursuant to this
Section 2(a) on the Notes shall be in the aggregate principal amount of $10,000
or an integral multiple thereof and shall be accompanied by the payment of
accrued interest on the amount of such prepayment to the date
thereof.
(b) Mandatory
Prepayment of Notes.
The
Notes shall be subject to mandatory prepayment as follows:
(X)
If
the Company or any subsidiary thereof shall (i) issue any capital stock or
other
equity securities of the Company or any such subsidiary or any equivalents
(however designated) of equity securities of the Company or any subsidiary
thereof (including, without limitation, any equity securities issued upon the
exercise of any warrants or options or other rights to purchase equity
securities of the Company or any such subsidiary); or (ii) sell, lease, license,
or otherwise transfer for value any of its assets (including, without
limitation, any intellectual property), the Company shall immediately apply
the
net cash proceeds thereof (x) to the payment of all accrued and unpaid interest
on the Notes and any other amounts then owed the Lenders and then (y) to the
payment of the principal amount of the Notes then outstanding, in the inverse
order of maturity.
(Y)
If
the Lenders deem themselves, in their sole discretion, to be insecure, the
Lenders may, by notice given on November 15, 2005, terminate their obligation
to
make further Loans hereunder and demand payment in full of the entire principal
amount of all Notes then outstanding and all accrued and unpaid interest thereon
and all other amounts then owed the Lenders on or before March 15, 2006,
whereupon all such amounts shall become so due and payable.
(c) No
Reborrowing.
The
Company may not reborrow any amount prepaid under this Section 2, and the
obligation of the Lenders to make Loans hereunder in respect of any such
prepayment shall be terminated.
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SECTION
3. Cash
Flow Forecast.
Attached
hereto as Exhibit B is a Cash Flow Forecast for the Company for the 13-week
period commencing September 30, 2005, and ending December 30, 2005 (the "Initial
Forecast"). At the initial Closing, the Company will provide to the Agent and
the Lenders, as condition to closing, an updated forecast in the form of the
Initial Forecast (the "Closing Forecast"). At the end of the first calendar
two
weeks following the initial Closing and for each calendar two-week period
thereafter until payment in full of the Notes and all other liabilities and
obligations of the Company to the Lenders and the Agent, the Company will
provide to the Agent and the Lenders (a) an updated forecast in the form of
the
Closing Forecast for the ensuing 13-week period (the "Current Forecast") and
(b)
a statement of actual cash flow for the preceding two-week period using the
format of the Current Forecast (the "Current Cash Flow Report"). If for any
period of either (x) three consecutive two-week periods or (y) three two-week
periods of any consecutive four two-week periods the actual cash flow shown
on
the applicable Current Cash Flow Reports is less than 90% of forecast cash
flow
for the applicable Current Forecasts, (a "Cash Flow Shortfall") then the
Lenders, in their discretion, may (i) refuse to make further Loans to the
Company and/or (ii) declare an Event of Default pursuant to Section 8 (e) of
this Agreement.
SECTION
4. Representations
and Warranties of the Company.
The
Company represents and warrants to the Agent and the Lenders as
follows:
4.1. Organization
and Qualification.
The
Company and each of its subsidiaries is a corporation duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated, and has the requisite corporate power to own its properties and
to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so
to
qualify would have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on (i) the Notes, (ii) the ability of the Company
to
perform its obligations hereunder or under the Loan Documents, or (iii) the
business, operations, properties, prospects or financial condition of the
Company and its subsidiaries, taken as a whole.
4.2.
Authorization;
Enforcement.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under the Loan Documents, to issue the Notes in
accordance with the terms hereof, and to issue the Warrants and the Warrant
Shares upon exercise of the Warrants in accordance with the terms of the
Warrants, (ii) the execution, delivery and performance of the Loan Documents
by
the Company and the consummation by it of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the Notes and the
issuance of the Warrant Shares) have been duly authorized by the Company's
Board
of Directors and no further consent or authorization of the Company, its Board
of Directors, any or any committee of the Board of Directors is required, and
(iii) the Loan Documents, upon execution and delivery, will constitute valid
and
binding obligations of the Company enforceable against the Company in accordance
with their terms.
4.3.
Stockholder
Authorization.
Neither
the execution, delivery or performance by the Company of the Loan Documents
nor
the consummation by it of the transactions contemplated hereby or thereby
requires any consent or authorization of the Company's stockholders, including
but not limited to consent under Section 705 of the Amex Company Guide or any
similar rule.
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4.4.
Capitalization.
The
capitalization of the Company as of the date hereof, including the authorized
capital stock, the number of shares issued and outstanding, the number of shares
issuable and reserved for issuance pursuant to the Company's stock option plans,
the number of shares issuable and reserved for issuance pursuant to securities
(other than the Warrants) exercisable or exchangeable for, or convertible into,
any shares of capital stock is set forth on Schedule
X.
All of
such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such warrants, options, preferred stock or
other securities will be, validly issued, fully paid and non-assessable. No
shares of capital stock of the Company (including the Warrant Shares) are
subject to preemptive rights or any other similar rights of the stockholders
of
the Company or any liens or encumbrances. Except for the Warrants and as set
forth on Schedule
X,
as of
the date of this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, or arrangements by which the Company or any of its subsidiaries
is
or may become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, nor are any such issuances or arrangements
contemplated, and (ii) there are no agreements or arrangements under which
the
Company or any of its subsidiaries is obligated to register the sale of any
of
its or their securities under the Securities Act (except the Convertible Notes
of the Company issued in February and March 2005 and the Warrant Shares (as
defined in the Warrants). Schedule
X
sets
forth all of the Company-issued securities or instruments containing
antidilution or similar provisions that will be triggered by, and all of the
resulting adjustments that will be made to such securities and instruments
as a
result of, the issuance or exercise of the Warrants in accordance with the
terms
of this Agreement. The Company has furnished to the Agent and the Lenders true
and correct copies of the Company's Articles of Incorporation as in effect
on
the date hereof ("Articles of Incorporation"), the Company's By-laws as in
effect on the date hereof (the "By-laws"), and all other instruments and
agreements governing securities convertible into or exercisable or exchangeable
for capital stock of the Company.
4.5.
Issuance
of Notes, etc.
The
Notes, upon issuance in accordance with the terms of this Agreement, will be
validly issued and free from all taxes, liens, claims and encumbrances and
will
not be subject to preemptive rights, rights of first refusal or other similar
rights of stockholders of the Company and will not impose personal liability
on
the holders thereof. The Warrant Shares are duly authorized and, as applicable,
reserved for issuance, and, upon issuance pursuant to the exercise of the
Warrants in accordance with the terms thereof, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances
and will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof. Upon the amendment and restatement of the
Company's Articles of Incorporation, the Company will upon reserve for issuance
pursuant to the Warrants an aggregate number of shares of Common Stock,
representing the maximum number of Warrant Shares initially issuable upon the
exercise in full of the Warrants (the "Reserved Amount").
4.6.
No
Conflicts.
Unless
otherwise noted in this Agreement, the execution, delivery and performance
of
the Loan Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Articles of Incorporation or By-laws 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, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its subsidiaries is a party, or result in a violation
of
any law, rule, regulation, order, judgment or decree (including United States
federal and state securities laws and regulations and rules or regulations
of
any self-regulatory organizations to which either the Company or its securities
are subject and gaming laws and regulations) applicable to the Company or any
of
its subsidiaries or by which any property or asset of the Company or any of
its
subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that
would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has
occurred which, with notice or lapse of time or both, would put the Company
or
any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for actual or possible violations, defaults or rights that would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its subsidiaries are not being conducted, and shall not
be
conducted so long
as a
Lender holds any Notes, in violation of any law, ordinance or regulation of
any
governmental entity, except for possible violations the sanctions for which
either singly or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by the Loan Documents, the Company is not
required to obtain any consent, approval, authorization or order of, or make
any
filing or registration with, any court or governmental agency or any regulatory
or self regulatory agency in order for it to execute, deliver or perform any
of
its obligations under the Loan Documents, in each case in accordance with the
terms hereof or thereof. The Company is not in violation of the listing
requirements of the American Stock Exchange ("Market/Exchange") and does not
reasonably anticipate that the Common Stock will be delisted by the
Market/Exchange for the foreseeable future.
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4.7.
SEC
Documents, Financial Statements.
Since
December 31, 2004, the Company has timely filed (within applicable extension
periods) all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act all of which are listed in Schedule
Y
hereof
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as
the
"SEC Documents"). The Company has delivered
to each Lender true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with
the
requirements of the Exchange Act or the Securities Act, as the case may be,
and
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state
a
material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended
or
updated in subsequent filings made prior to the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements,
to
the extent they may not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the
date
hereof, the Company has no liabilities, contingent or otherwise, other than
(i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements,
which liabilities and obligations referred to in clauses (i) and (ii),
individually or in the aggregate, are not material to the financial condition
or
operating results of the Company.
4.8.
Absence
of Certain Changes.
Since
December 31, 2004, there has been no material adverse change and no material
adverse development in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, except as disclosed in the SEC Documents filed
prior to the date hereof.
4.9.
Absence
of Litigation.
Except
as disclosed in the SEC Documents filed prior to the date hereof, there is
no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body,
including, without limitation, the SEC or the Market Exchange, pending or,
to
the knowledge of the Company or any of its subsidiaries, threatened against
or
affecting the Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such. There are no facts which,
if
known by a potential claimant or governmental authority, could rise to a claim
or proceeding which, if asserted or conducted with results unfavorable to the
Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect.
4.10.
Intellectual
Property.
Each of
the Company and its subsidiaries owns or is licensed to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, permits, inventions, discoveries,
processes, scientific, technical, engineering and marketing data, object and
source codes, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures)
and
other similar rights and proprietary knowledge (collectively, "Intangibles")
necessary for the conduct of its business as now being conducted. To the best
knowledge of the Company, neither the Company nor any subsidiary of the Company
infringes or is in conflict with any right of any other person with respect
to
any Intangibles. Except as disclosed in the SEC Documents filed prior to the
date hereof, neither the Company nor any of its subsidiaries has received
written notice of any pending conflict with or infringement upon such third
party Intangibles. Neither the Company nor any of its subsidiaries has entered
into any consent agreement, indemnification agreement, forbearance to xxx or
settlement agreement with respect to the validity of the Company's or its
subsidiaries' ownership or right to use its Intangibles and, to the best
knowledge of the Company, there is no reasonable basis for any such claim to
be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing.
The Company and its subsidiaries have complied, in all material respects, with
their respective contractual obligations relating to the protection of the
Intangibles used pursuant to licenses. To the best knowledge of the Company,
no
person is infringing on or violating the Intangibles owned or used by the
Company or its subsidiaries.
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4.11.
Foreign
Corrupt Practices.
Neither
the Company, nor any of its subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any subsidiary
has,
in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4.12.
Disclosure.
All
information relating to or concerning the Company set forth in this Agreement
or
provided to the Agent or the Lenders in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or exists
with respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on
the
date hereof by the Company under the Securities Act with respect to the primary
issuance of the Company's securities.
4.13.
Acknowledgment
Regarding Lenders' Acquisition of the Notes.
The
Company acknowledges and agrees that none of the Agent or the Lenders is acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Agent and the Lenders is "arms-length"
and any statement made by any either Lender or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to such Lender's making the Loans or acquiring
of
the Notes and has not been relied upon by the Company, its officers or directors
in any way. The Company further acknowledges that the Company's decision to
enter into this Agreement has been based solely on an independent evaluation
by
the Company and its representatives.
4.13A.
Form
S-3 Eligibility.
The
Company is currently eligible to register the resale of its Common Stock on
a
registration statement on Form S-3 under the Securities Act. There exist no
facts or circumstances that would prohibit or delay the preparation and filing
of a registration statement on Form S-3 with respect to the Warrant Shares.
The
Company has no basis to believe that its past or present independent public
auditors will withhold their consent to the inclusion, or incorporation by
reference, of their audit opinion concerning the Company's financial statements
which are included in the registration statement required to be filed pursuant
to the Warrants.
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4.14.
Title.
Except
for the first priority security interest granted to [Premier
Trust,
Inc.],
the Company and its subsidiaries have good and marketable title in fee simple
to
all real property and good and merchantable title to all personal property
owned
by them that is material to the business of the Company and its subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
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 its subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
4.15.
Tax
Status.
Except
as set forth in the SEC Documents, the Company and each of its subsidiaries
has
made or filed all foreign, U.S. federal, state and local income and all other
tax returns, reports and declarations required by any jurisdiction to which
it
is subject (unless and only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions reasonably adequate for
the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by
the
taxing authority of any jurisdiction, and the officers of the Company know
of no
basis for any such claim. The Company has not executed a waiver with respect
to
any statute of limitations relating to the assessment or collection of any
federal, state or local tax. None of the Company's tax returns
is presently being audited by any taxing authority.
4.16.
Insurance.
The
Company has in force fire, casualty, product liability and other insurance
policies, with extended coverage, sufficient in amount to allow it to replace
any of its material properties or assets which might be damaged or destroyed
or
sufficient to cover liabilities to which the Company may reasonably become
subject, and such types and amounts of other insurance with respect to its
business and properties, on both a per occurrence and an aggregate basis, as
are
customarily carried by persons engaged in the same or similar business as the
Company. No default or event has occurred that could
give rise to a default under any such policy.
4.17.
Environmental
Matters.
There
is no environmental litigation or other environmental proceeding pending or
threatened by any governmental regulatory authority or others with respect
to
the current or any former business of the Company or any partnership or joint
venture currently or at any time affiliated with the Company. No state of facts
exists as to environmental matters or Hazardous Substances (as defined below)
that involves the reasonable likelihood of a material capital expenditure by
the
Company or that may otherwise have a Material Adverse Effect. No Hazardous
Substances have been treated,
stored or disposed of, or otherwise deposited, in or on the properties owned
or
leased by the Company or by any partnership or joint venture currently or at
any
time affiliated with the Company in violation of any applicable environmental
laws. The environmental compliance programs of the Company comply in all
respects with all environmental laws, whether federal, state or local, currently
in effect. As used herein, "Hazardous Substances" means any substance, waste,
contaminant, pollutant or material that has been determined by any governmental
authority to be capable of posing a risk of injury to health, safety, property
or the environment.
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4.18.
Inventory.
All
inventory of the Company and its subsidiaries is valued on the Company's
consolidated books and records at the lower of cost, determined by the "first
in, first out" method of accounting, or the fair market value thereof. Except,
to the extent of the Company's actual and potential reserves for obsolete or
unmerchantable inventory reflected and discussed in the Company's SEC Documents,
all such inventory, after consideration of reserves consisting of finished
goods
is of merchantable quality and is saleable in the ordinary course of business
consistent with past practice.
4.19.
Xxxxxxxx-Xxxxx
Act.
The
Company is in compliance with the applicable provisions of the Xxxxxxxx-Xxxxx
Act of 2002 (the "Xxxxxxxx-Xxxxx Act" ), and the rules and regulations
promulgated thereunder, that are effective as of the date hereof, and intends
to
comply with other applicable provisions of the Xxxxxxxx-Xxxxx Act, and the
rules
and regulations promulgated thereunder, upon the effectiveness of such
provisions.
4.20.
Indebtedness.
Schedule
XX
hereto
sets forth as of a recent date all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or
any
subsidiary has commitments. For purposes of this Agreement, "Indebtedness"
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the ordinary course
of
business), (b) all guaranties, endorsements and other contingent obligations
in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection
or
similar transactions in the ordinary course of business and (c) the present
value of any lease payments in excess of $25,000 due under leases required
to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is
in default with respect to any Indebtedness.
SECTION
5. Conditions
of Lending.
(1)
The
obligation of the Lenders to make the first Loan hereunder to the Company is
subject to the following conditions precedent:
(a) No
Event
of Default shall have occurred and be continuing or shall result from the making
of the first Loan.
(b) The
Lenders shall have received certified copies of all documents evidencing
corporate action taken by the Company relative to the completion and carrying
out of this Credit Agreement, all in form and substance satisfactory to the
Lenders and their counsel.
(c) The
representations and warranties contained in Section 4 hereof shall, except
as
affected by transactions expressly contemplated hereby, be true and accurate
on
and as of the date of the first Loan as though made on and as of such
date.
(d) The
Lenders shall have received a certificate or certificates of one or more of
the
principal officers of the Company dated the date of the first Loan to the effect
specified in paragraph (a) and in paragraph (c) of this Section 5.
(e) The
Lenders shall have received the Closing Forecast.
-8-
(f) The
Company shall have executed and delivered to the Agent for the benefit of the
Lenders an Amendment to Security Agreement (such Security Agreement, together
with this Agreement and the Notes, being herein sometimes collectively called
the "Loan Documents") in the form of Exhibit C attached creating the lien on
the
assets of the Company as described therein, and the security interest created
thereby shall have been perfected.
(g) The
Company shall have issued the Warrants to the Lenders.
(h) The
Lenders shall have received the favorable written opinion of Preston, Gates
& Xxxxx, counsel to the Company, dated on the date of the first Loan,
satisfactory in form and substance to the Lenders and their counsel, covering
such matters as the Lenders and their counsel shall request.
(i) All
legal
matters incidental to the transactions contemplated hereby shall be satisfactory
to counsel for the Lenders.
(2) The
obligation of the Lender to make additional Loans shall be subject (a) to the
satisfaction of the conditions precedent set forth in Section 5 (1)(a), (c),
(d)
and (i) as of the date of each such Loan and (b) to the compliance by the
Company with all requirements of Section 1A hereof and of Section 3 hereof
with
respect to all Current Forecasts and related minimum cash flow requirements.
SECTION
6. Covenants.
From
and
after the date of execution hereof and so long as any of the Notes shall be
outstanding, unless the Lenders shall otherwise consent in writing, the Company
will observe and perform for the benefit of the Lenders each of the terms,
covenants and conditions contained in Sections 7.5, 7.7, 7.9, 7.10 and 7.11
of
the form of Subscription Agreement with respect to the Company's March 2005
Note
Issue, on its part to be observed and performed. All such terms, covenants
and
conditions are incorporated by reference herein in haec verba,
except
(a) the term "Purchaser" whenever used therein shall be deemed to refer to
the
Lenders; and (b) the term "Notes" whenever appearing therein shall be deemed
to
refer to the Notes hereunder. In addition to the foregoing, the Company will
(a)
keep and observe all provisions of Section 3 hereof and (b) use its best efforts
in good faith to obtain amendments to the February/March Notes1
to
enable the Lenders to obtain a first lien on the Company's accounts receivable,
domestic inventory and intellectual property assets.
SECTION
7. The
Warrants.
At
delivery of the first Note, the Company shall issue to each Lender detachable
warrants in the forms attached hereto as Exhibits D-1 and D-2, exercisable
as
set forth therein, to purchase, in the case of each Warrant, such Lender's
Share
of a total of 3,000,000 shares of Common Stock of the Company at an exercise
price of $1.25 per share (the "Warrant Shares). If, on the date which is four
months from the date of the initial Closing, the Lenders are no longer obligated
to make Loans or are in breach of their obligations hereunder (unless the
Company has borrowed the maximum amount of Loans hereunder), the number of
Warrant Shares shall be reduced from 3,000,000 in the aggregate for all Warrants
to 1,500,000 in the aggregate for all Warrants. If no reduction occurs pursuant
to the immediately preceding sentence and, on the date which is eight months
from the date of the initial Closing, the Lenders are no longer obligated to
make Loans or are in breach of their obligations hereunder (unless the Company
has borrowed the maximum amount of Loans hereunder), the number of Warrant
Shares shall be reduced from 3,000,000 in the aggregate for all Warrants to
2,250,000 in the aggregate for all Warrants.
-9-
SECTION
8. Events
of Default.
The
occurrence of any of the following events shall constitute an event of default
hereunder (an AEvent
of
Default@):
(a) The
Company fails to pay any principal, interest or any other payment required
under
the Notes when due and payable and whether upon stated maturity or
otherwise;
(b) The
Company fails to comply with any other covenant herein contained and does not
cure such failure within five (5) days after written notice thereof by the
Agent
or either Lender to the Company;
(c) Any
representation or warranty made by the Company proves to have been untrue in
any
material respect when made;
(d) The
Company commences a voluntary case or proceeding as debtor under the Bankruptcy
Code, or a voluntary petition or an answer seeking readjustment of its debts
or
for any other relief under any bankruptcy, insolvency, or other similar act
or
law of any jurisdiction, now or hereafter existing, or takes any action
indicating its consent to, approval of, or acquiescence in, any such petition
or
proceeding; the Company applies for, or consents to or acquiesces in the
appointment of, a receiver or trustee for it or for all or a substantial part
of
its property; the Company makes an assignment for the benefit of creditors;
or
the Company admits in writing its inability to pay its debts as they
mature;
(e) A
Cash
Flow Shortfall (as defined in Section 3 above) shall have occurred;
(f) An
event
shall have occurred and be unremedied which, in the discretionary judgment
of
the Lenders, has a Material Adverse Effect; or
(g) An
event
of default, or event which, with notice or lapse of time or both, would become
an event of default, under any other agreement or instrument in respect of
any
indebtedness or equivalent obligation of the Company shall occur and not be
remedied in accordance with such agreement or instrument.
-10-
Upon
the
occurrence of an Event of Default, the Agent or either Lender may, in addition
to any rights and remedies (including the rights and remedies contained in
the
Security Agreement) otherwise available to the Lenders, by notice of default
given to the Company, declare the then outstanding principal balance of and
accrued interest on the Notes to be forthwith due and payable, whereupon the
unpaid principal amount, together with accrued interest thereon, shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived, notwithstanding anything
contained to the contrary therein.
SECTION
9. The
Agent.
Each
Lender hereby appoints and authorizes the Agent to take such action as agent
on
its behalf and to exercise such powers and discretion under this Agreement
as
are delegated to the Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement (including, without limitation, enforcement
or
collection of the Notes), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Lenders, and such instructions shall be binding
upon all Lenders and all holders of Notes; provided,
however,
that
the Agent shall not be required to take any action which exposes the Agent
to
personal liability or which is contrary to this Agreement or applicable
law.
SECTION
9.1. Agent's
Reliance, Etc.
Neither
the Agent nor any of its directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement, except for its or their own gross negligence
or
willful misconduct. Without limitation of the generality of the foregoing,
the
Agent: (i) may treat the payee of any Note as the holder thereof until the
Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form satisfactory to the Agent; (ii) may consult with legal counsel
(including counsel for the Company), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement; (iv) shall not
have any duty to ascertain or to inquire as to the performance or observance
of
any of the terms, covenants or conditions of this Agreement on the part of
the
Company or to inspect the property (including the books and records) of the
Company; (v) shall not be responsible to any Lenders for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; and
(vi) shall incur no liability under or in respect of this Agreement by acting
upon any notice, consent, certificate or other instrument or writing (which
may
be by telecopy, telegram, cable or telex) believed by it to be genuine and
signed or sent by the proper party or parties.
SECTION
9.2. Xxxxx
and Affiliates.
With
respect to the Loans made by it and the Notes issued to it, Xxxxx shall have
the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated include Xxxxx in its individual
capacity. Xxxxx and its affiliates may generally engage in any kind of business
with the Company, any of its subsidiaries and any person who may do business
with or own securities of the Company or any such subsidiary, all as if Xxxxx
were not the Agent and without any duty to account therefor to the
Lenders.
-11-
SECTION
9.3. Lender
Credit Decision.
Each
Lender acknowledges that it has, independently and without reliance upon the
Agent or any other Lender and based on the SEC Documents and financial
statements referred to in Section 4.7 and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to
enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to
make its own credit decisions in taking or not taking action under this
Agreement.
SECTION
9.4. Indemnification.
The
Lenders agree to indemnify the Agent (to the extent not reimbursed by the
Company), ratably according to the respective principal amounts of the Notes
then held by each of them (or if no Notes are at the time outstanding or if
any
Notes are held by persons which are not Lenders, ratably according to the
respective amounts of their Loans), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence
or
willful misconduct. Without limitation of the foregoing, each Lender agrees
to
reimburse the Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modifications, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the Agent is not
reimbursed for such expenses by the Company.
SECTION
9.5. Successor
Agent.
The
Agent
may resign at any time by giving written notice thereof to the Lenders and
the
Company and may be removed at any time with or without cause by the Lenders.
Upon any such resignation or removal, the Lenders shall have the right to
appoint a successor Agent.
SECTION
10. Lenders'
Investment Representation.
Each
Lender represents that it is acquiring the Notes for its own account and not
with a view to the public distribution thereof, and that no Lender has any
present intention of distributing or reselling the Notes.
SECTION
11. Amendments.
This
Credit Agreement may be amended only by an express written agreement signed
by
the Lenders, the Agent and the Company.
-12-
SECTION
12. Financial
Advisor.
The
Agent
may engage The Recovery Group, a Massachusetts corporation, or
a firm
of comparable expertise (the "Financial Advisor") to provide financial advisory
services to the Lenders, including, without limitation, review of the Company's
operations, business plan, cash management and related matters. The Company
will
afford the Financial Advisor its complete cooperation and will be responsible
for payment of its fees and expenses.
SECTION
13. Expenses.
The
Company will be responsible for all fees and expenses associated with this
Agreement, including the fees and expenses of counsel to the Lenders and of
the
Financial Advisor. In addition, if the Company defaults hereunder, it shall
reimburse the Agent and the Lenders for all reasonable costs of collection,
including reasonable attorneys=
fees and
expenses awarded by a court or other tribunal of competent jurisdiction in
an
action brought by the Lenders to enforce the terms of this Agreement, the Loan
Documents or the Notes.
SECTION
14. No
Usury.
Nothing
herein contained shall be construed or so operate as to require the Company
or
any other person liable for the payment of any part of the debt evidenced by
the
Notes to pay interest in an amount or at a rate greater than the highest
permissible under applicable law. The Company agrees that the interest rate
contracted includes the interest rate set forth in the Notes and any other
charge, fee, cost or expense incident hereto and paid by the Company or on
its
behalf to the extent the same are deemed to be interest under applicable
law.
SECTION
15. Entire
Agreement.
This
Agreement embodies the entire agreement and understanding by and between the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings related thereto.
SECTION
16. Addresses
for Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing and shall be deemed to have been duly made when delivered, or mailed
by
registered or certified mail, return receipt, postage prepaid, and addressed
as
follows (or at such other address(es) as a party may designate for itself by
like notice):
To the Company | VendingData Corporation |
0000 Xxxxxxx Xxxxxx | |
Xxx Xxxxx, XX 00000 | |
Attn: Xxxxxx Xxxxxxx | |
To the Lenders | LC Capital Master Fund, Ltd. |
000 Xxxxx Xxxxxx | |
00xx Xxxxx | |
Xxx Xxxx, XX 00000 | |
Attn: Xxxxxx Xxxxx | |
Triage
Capital Management L.P., Triage Capital
Management B, L.P., and Triage Offshore Fund, Ltd.
|
|
000 Xxxx Xxxxxx | |
Xxxx Xxxxxx, XX 00000 | |
Attn: Xxxx Xxxxxxx | |
To the Agent | LC Capital Master Fund, Ltd. |
000 Xxxxx Xxxxxx | |
00xx Xxxxx | |
Xxx Xxxx, XX 00000 | |
Attn: Xxxxxx Xxxxx |
-13-
SECTION
17. Miscellaneous.
(a) Replacement
of Notes.
Upon
receipt of evidence reasonably satisfactory to the Company of the ownership
of
and the loss, theft, destruction or mutilation of any Note and (in the case
of
loss, theft or destruction) upon delivery of an indemnity agreement in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of the mutilated Note, the Company will execute
and
deliver, in lieu thereof, a new Note of like tenor.
(b) Successors.
All the
covenants, agreements, representations and warranties contained in this
Agreement shall bind the Company, the Lenders and their respective heirs,
executors, administrators, distributes, successor and assigns permitted in
accordance with this Agreement.
(c) Headings.
The
section headings in this Agreement are inserted for purposes of convenience
only
and shall have no substantive effect.
(d) Severability.
In the
event of any one or more of the provisions contained in this Agreement or any
future amendment hereto shall for any reason be held to be invalid, illegal
or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and in lieu of each
such
invalid, illegal or unenforceable provision there shall be added automatically
as part of this Agreement a provision as similar in terms to such invalid,
illegal or unenforceable provision as may be possible and be valid, legal and
enforceable.
(e) Law
Governing.
This
Agreement is delivered in the State of Nevada and shall for all purposes be
construed and enforced in accordance with, and governed by, the internal laws
of
the State of Nevada, without giving effect to principles of conflict of
laws.
-14-
IN
WITNESS WHEREOF, the Company, the Lenders and the Agent have executed and
delivered this Agreement on and as of the day and year first above
written.
THE
COMPANY:
VENDINGDATA
CORPORATION,
A
Nevada
corporation,
By:
Xxxxx
X. Xxxxxx
Name:
Xxxxx
X. Xxxxxx
Title:
Chairman
of Board
THE
LENDERS:
LC
CAPITAL MASTER FUND, LTD.,
a
New
York limited liability company,
By:
X.
X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Director
TRIAGE
CAPITAL MANAGEMENT L.P.,
a Delaware
limited partnership
BY:
Xxxx
Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Senior
Manager
TRIAGE
CAPITAL MANAGEMENT B, L.P.
BY:
Xxxx
Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Senior
Manager
TRIAGE
OFFSHORE FUND, LTD.
BY:
Xxxx
Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Senior
Manager
THE
AGENT:
LC
CAPITAL MASTER FUND, LTD., LLC,
a
New
York limited liability company
BY:
X.
X.
Xxxxxx
Name:
Xxxxxxx X. Xxxxxx
Title:
Director
-15-