STOCK PURCHASE AGREEMENT
This Agreement is made and entered into as of the 16th day of February,
2001, between Datakey, Inc., a Minnesota corporation (the "Company") and each of
the persons listed on Schedule 1 to this Agreement (the "Investors"). Reference
to any exhibits herein refers to the exhibits included in the Company's offering
materials dated February 16, 2001 (the "Offering Materials").
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by the Company and each of the Investors, the Company
and the Investors agree as follows:
1. Sale and Purchase of Securities. Subject to the terms and conditions
hereof, the Company agrees to sell to each Investor at the Closing (as defined
herein), and each Investor severally agrees to purchase from the Company at the
Closing, that number of shares of the Company's Common Stock (the "Shares") set
forth opposite each Investor's name on Schedule 1 at a purchase price of three
dollars ($3.00) per share, together with a five-year warrant in the form
attached hereto as Exhibit A (the "Warrant") to purchase that number of Shares
of the Company's Common Stock set forth on Schedule 1 at an exercise price per
share equal to 101% of the Market Value, with Market Value defined as the
average of the closing prices of the Company's Common Stock as reported by
Nasdaq over the five (5) business days preceding the date of this Agreement. The
Shares and the Warrants are referred to herein collectively as the "Securities."
2. Closing. The closing shall take place at the offices of Xxxxxxxxxx &
Xxxxx, P.A., Xxxxxxxxxxx, Xxxxxxxxx 00000, at 1:00 p.m., Minneapolis time, on
Tuesday, February 20, 2001 (the "Closing") and/or at such other place or time as
may be mutually acceptable to the Investors and the Company. At the Closing,
subject to the satisfaction of the conditions in Section 6 below, the Company
will deliver to each Investor a certificate representing the Shares purchased by
such Investor, together with a Warrant representing the right to purchase that
number of shares of Common Stock of the Company set forth opposite each
Investor's name on Schedule 1, against payment of the purchase price therefor by
certified check or wire transfer to the Company in the amounts set forth after
their respective names in Schedule 1 hereto.
3. Representations and Warranties by the Company. To induce each
Investor to enter into this Agreement and to purchase the number of Securities
set forth after his or its name on Schedule 1, the Company hereby represents and
warrants to each Investor that:
3.1 Organization, Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, and has the requisite corporate power and authority to own
its properties and to carry on its business in all material respects as it is
now being conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all states or jurisdictions in which the
ownership or lease of its property or the conduct of its business requires such
qualification and the failure to be so qualified would have a materially adverse
effect on the Company's business.
3.2 Authorization and Enforceability. The Company has full
legal power, right and authority to enter into this Agreement and the
Registration Rights Agreement among the Company and the Investors, the form of
which is attached hereto as Exhibit B (the "Registration Rights Agreement") and
to issue the Securities. This Agreement, the Registration Rights Agreement and
the Securities, have been duly authorized, executed and delivered on behalf of
the Company and are the valid and binding obligations of the Company,
enforceable in accordance with their respective terms and subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the rights of creditors generally, to the exercise of
judicial discretion as to the availability of equitable remedies such as
specific performance in injunction and subject, as to enforcement of the
indemnification provisions, to limitations under applicable securities laws. The
Securities when delivered pursuant to the terms of this Agreement will be
validly issued, fully paid and nonassessable.
3.3 Subsidiaries. The Company has one wholly owned subsidiary,
Datakey FSC.
3.4 Financial Statements. Included in the Offering Materials
are (a) the Company's annual report on Form 10-KSB for the year ended December
31, 1999, (b) the Company's quarterly reports on Form 10-QSB for the quarters
ended April 1, 2000, July 1, 2000, and September 30, 2000 (c) the Company's
Proxy Statement for the Annual Meeting of Shareholders held in 2000, and (d) the
Company's 1999 Annual Report. The financial statements included in such reports
(i) are in accordance with the books and records of the Company, (ii) present
fairly the financial condition of the Company at the balance sheet dates and the
results of its operations for the periods therein specified, subject, in the
case of the April 1, 2000, July 1, 2000, and the September 30, 2000 financial
statements, to normal year-end adjustments, and (iii) have, in all material
respects, been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods. Without
limiting the generality of the foregoing, the balance sheets included in such
reports or notes thereto disclose all of the debts, liabilities and obligations
of any nature (whether absolute, accrued or contingent and whether due or to
become due) of the Company at December 31, 1999, April 1, 2000, July 1, 2000,
and September 30, 2000, which, individually, or in the aggregate, are material
or which in accordance with generally accepted accounting principles would be
required to be disclosed in such balance sheets, and includes appropriate
reserves for all taxes and other liabilities accrued as of such dates but not
yet payable.
3.5 Tax Returns and Audits. All required federal, state and
local tax returns and appropriate extension requests of the Company have been
filed, and all federal, state and local taxes required to be paid with respect
to such returns have been paid or due provision for the payment thereof has been
made. The Company is not delinquent in any material respect in the payment of
any such tax or in the payment of any assessment or governmental charge. The
Company has not received notice of any tax deficiency proposed or assessed
against it, and it has not executed any waiver of any statute of limitations on
the assessment or collection of any tax.
3.6 Changes, Dividends, Etc. Except for the transactions
contemplated by this Agreement, since September 30, 2000, the Company has not:
(i) incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due, except current liabilities incurred
in the ordinary course of business which (individually or in the aggregate) will
not materially and adversely affect the business, properties or prospects of the
Company; (ii) paid any obligation or liability other than, or discharged or
satisfied any liens or encumbrances other than those securing, current
liabilities, in each case in the ordinary course of business; (iii) declared or
made any payment to or distribution to its shareholders as such, or purchased or
redeemed any of its shares of capital stock, or obligated itself to do so; (iv)
mortgaged, pledged or subjected to lien, charge, security interest or other
encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business; (v) sold, transferred or leased any of its assets except in
the ordinary course of business; (vi) suffered any physical damage, destruction
or loss (whether or not covered by insurance) materially and adversely affecting
the tangible properties, business or prospects of the Company; (vii) encountered
any labor difficulties or labor union organizing activities; (viii) issued or
sold any shares of capital stock or other securities or granted any options
(other than to employees), warrants, or other purchase rights with respect
thereto other than pursuant to this Agreement; (ix) made any acquisition or
disposition of any material assets or became involved in any other material
transaction, other than for fair value in the ordinary course of business; (x)
materially increased the compensation payable, or to become payable, to any of
its directors or employees, or made any bonus payment or similar arrangement
with any directors or employees or increased the scope or nature of any fringe
benefits provided of its employees or directors; or (xi) agreed to do any of the
foregoing other than pursuant hereto. Except as otherwise disclosed in the
Offering Materials, there has been no material adverse change in the financial
condition, operations, results of operations or business of the Company since
September 30, 2000.
3.7 Title to Properties and Encumbrances. The Company has good
and marketable title to all of its properties and assets, except for property
disposed of in the ordinary course of business since September 30, 2000, which
properties and assets are not subject to any mortgage, pledge, lease, lien,
charge, security interest, encumbrance or restriction, except (a) those which
are shown and described on the September 30, 2000, balance sheet or the notes
thereto, (b) liens for taxes and assessments or other governmental charges or
levies not at the time due or in respect of which the validity thereof shall
currently be contested in good faith by appropriate proceedings, (c) statutory
liens that have arisen in the ordinary course of business, or (d) those which do
not materially affect the value of or interfere with the use made of such
properties and assets.
3.8 Conditions. The plant, offices and equipment of the
Company have been kept in good condition and repair in the ordinary course of
business.
3.9 Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, or its properties or business, and the Company
is not aware of any facts which are likely to result in or form the basis for
any such action, suit or other proceeding. The Company is not in default with
respect to any judgment, order or decree of any court or any governmental agency
or instrumentality with respect to which it is a party or is named as an
affected person, nor to the best of its knowledge is the Company in default with
respect to any other judgment, order or decree. The Company has not been
threatened with any action or proceeding under any business or zoning ordinance,
law or regulation.
3.10 Compliance With Applicable Laws or Other Instruments. To
the best of the Company's knowledge, the business and operations of the Company
have been and are being conducted in all material respects in accordance with
all applicable laws, rules and regulations of all governmental authorities.
3.11 Shares, Warrants and Warrant Shares. The Shares and
Warrants, when issued and paid for pursuant to the terms of this Agreement, will
be duly authorized, validly issued and outstanding, fully paid and nonassessable
and shall be free and clear of all pledges, liens, encumbrances and
restrictions, except securities restrictions as set forth in Section 4 hereof.
The Warrant Shares have been reserved for issuance and when issued upon exercise
of the Warrants, will be duly authorized, validly issued and outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4.
3.12 Securities Laws. Based in part upon the representations
of the Investors, no consent, authorization, approval, permit or order of or
filing with any governmental or regulatory authority is required under current
laws and regulations in connection with the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the Shares, Warrants or
Warrant Shares, other than the qualification thereof, if required, under
applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. The Company has not, directly or through
an agent, offered the Securities or any similar securities for sale to, or
solicited any offers to acquire such securities from, persons other than the
Investors and other accredited investors. Under the circumstances contemplated
by this Agreement, the offer, issuance, sale and delivery of the Shares,
Warrants or Warrant Shares will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements of the
federal Securities Act of 1933, as amended (the "Securities Act"). The Company
has filed all reports or other documentation that it is required to file by the
federal Securities Exchange Act of 1934, as amended, any rules or regulations
promulgated thereunder, the applicable rules and regulations of the National
Association of Securities Dealers ("NASD") and all applicable state securities
laws, and the information contained in such reports or other documents did not
make any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
3.13 Patents and Other Intangible Rights. To the best of its
knowledge, the Company (a) owns or has the exclusive right to use, free and
clear of all material liens, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted without
infringing upon or otherwise acting adversely to the right or claimed right of
any person under or with respect to any of the foregoing, (b) is not obligated
or under any liability whatsoever to make any payments of a material nature by
way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise, (c) owns or has the unrestricted right to use all trade
secrets, including know-how, customer lists, inventions, designs, processes,
computer programs and technical data necessary to the development, operation and
sale of all products and services sold or proposed to be sold by it, free and
clear of any rights, liens or claims of others, and (d) is not using any
confidential information or trade secrets of others.
3.14 Capital Stock. At the date hereof, the Company is
authorized by its articles of incorporation to issue 30,000,000 shares of
capital stock, which consists of the following: (a) 20,000,000 shares of common
stock, $.05 par value, of which there are outstanding 8,284,539 shares, (b)
400,000 shares of Convertible Preferred Stock, of which there are outstanding
150,000 shares, and (c) 9,600,000 undesignated shares. All of the outstanding
shares of the Company were duly authorized, validly issued and are fully paid
and nonassessable. Other than with regard to the outstanding Convertible
Preferred Stock, or as otherwise disclosed on Exhibit 3.14, there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatever, other than this Agreement, under which the Company
is obligated to issue any securities of any kind representing an ownership
interest in the Company. All outstanding securities of the Company have been
issued in full compliance with an exemption or exemptions from the registration
and prospectus delivery requirements of the Securities Act and from the
regulation and qualification requirements of all applicable state securities
laws.
3.15 License and Approvals. The Company has all licenses,
certificates, permits and other approvals from governmental and regulatory
authorities necessary for the conduct of its business as it is currently being
conducted and as proposed to be conducted except those which would not have a
material adverse effect or the Company if not obtained.
3.16 Defaults. The Company is not in breach, default or
violation of, and the execution of this Agreement and the Registration Rights
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in any breach of, any of the terms
or conditions of, or constitute a default or violation under, (i) the Articles
of Incorporation, as amended, or Bylaws, as amended, of the Company, (ii) any
indenture, agreement or other instrument to which the Company is now a party, or
(iii) to the best of the Company's knowledge, any law or any order, rule or
regulation applicable to the Company of any court or of any federal or state
regulatory body or administrative agency having jurisdiction over the Company or
its property.
3.17 Insurance Coverage. There are in full force policies of
insurance issued by insurers of recognized responsibility insuring the Company
and its properties and business against such losses and risks, and in such
amounts, as in the Company's best judgment, after advice from its insurance
broker, are acceptable for the nature and extent of such business and its
resources.
3.18 No Brokers or Finders. Except for First Albany
Corporation, which is assisting the Company in the transactions contemplated by
this Agreement, no person, firm or corporation has or will have, as a result of
any act or omission of the Company, any right, interest or valid claim against
the Company or any Investor for any commission, fee or other compensation as a
finder or broker in connection with the transactions contemplated by this
Agreement. The Company will indemnify and hold each of the Investors harmless
against any and all liability with respect to any such commission, fee or other
compensation which may be payable or determined to be payable in connection with
the transactions contemplated by this Agreement.
3.19 Disclosure. The Company has not knowingly withheld from
the Investors any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule or other document furnished or
to be furnished to any Investor pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.
3.20 Reporting. The Company is subject to the reporting
requirements of the Securities Act and the Exchange Act and (i) has timely filed
all reports and statements required to be filed thereunder in the 12-month
period prior to the date hereof, and (ii) each report and statement was true and
complete in all material respects when filed.
4. Representations of the Investors. Each Investor represents for
itself that:
4.1 Investment Intent. The Securities being acquired by such
Investor are being purchased for investment for such Investor's own account and
not with the view to, or for resale in connection with, any distribution or
public offering thereof. Such Investor understands that the Securities have not
been registered under the Securities Act or any state securities laws by reason
of their contemplated issuance in transactions exempt from the registration
requirements of the Securities Act and applicable state securities laws, and
that the reliance of the Company and others upon these exemptions is predicated
in part upon this representation by each Investors. Such Investor further
understands that the Securities may not be transferred or resold without (i)
registration under the Securities Act and any applicable state securities laws,
or (ii) an exemption from the requirements of the Securities Act and applicable
state securities laws.
Such Investor understands that an exemption from such
registration is presently available pursuant to Rule 144 promulgated under the
Securities Act by the Securities and Exchange Commission (the "Commission") but
that in any event an Investor may not sell any securities pursuant to Rule 144
prior to the expiration of a one-year period after such Investor has acquired
such securities. Such Investor understands that any sales pursuant to Rule 144
can be made only in full compliance with the provisions of Rule 144.
4.2 Location of Principal Office, Qualification as an
Accredited Investor, Etc. The state in which such Investor's principal office
(or domicile, if such Investor is an individual) is located is the state set
forth in such Investor's address on Schedule 1. Unless otherwise indicated on
such Investor's signature page to this Agreement, such Investor qualifies as an
"accredited investor" for purposes of Regulation D promulgated under the
Securities Act for the reasons specified after such investor's name on such
signature page. Such Investor acknowledges that the Company has made available
to such Investor at a reasonable time prior to the execution of this Agreement
the opportunity to ask questions and receive answers concerning the business and
affairs of the Company and the terms and conditions of the sale of securities
contemplated by this Agreement and to obtain any additional information (which
the Company possesses or can acquire without unreasonable effort or expense) as
may be necessary to verify the accuracy of information furnished to such
Investor. Such Investor (a) is able to bear the loss of its entire investment in
the Shares without any material adverse effect on its business, operations or
prospects, and (b) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
to be made by it pursuant to this Agreement.
4.3 Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of such Investor, has been duly
executed and delivered by such Investor, and is a valid and binding agreement of
such Investor.
4.4 No Brokers or Finders. Except for First Albany
Corporation, which is assisting the Company in the transactions contemplated by
this Agreement, no person, firm or corporation has or will have, as a result of
any act or omission by such Investor, any right, interest or valid claim against
the Company for any commission, fee or other compensation as a finder or broker,
or in any similar capacity, in connection with the transactions contemplated by
this Agreement. Such Investor will indemnify and hold the Company harmless
against any and all liability with respect to any such commission, fee or other
compensation which may be payable or determined to be payable as a result of the
actions of such Investor in connection with the transactions contemplated by
this Agreement.
4.5 Exculpation Among Investors. Such Investor acknowledges
that in making his or its decision to invest in the Company, he or it is not
relying on any other Investor or upon any person, firm or company, other than
the Company and its officers, employees and/or directors. Such Investor agrees
that no other Investor, nor the partners, employees, officers or controlling
persons of any other Investor shall be liable for any actions taken by such
Investor, or omitted to be taken by such Investor, in connection with such
investment.
4.6 Legends. It is understood that the certificates evidencing
the Shares may bear legends required by applicable federal and state securities
laws as well as the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATE SECURITIES LAWS. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT DATED FEBRUARY
16, 2001, AMONG DATAKEY, INC. AND CERTAIN OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
5. Conditions of Each Investor's Obligation. The obligation to purchase
and pay for the Securities which each Investor has agreed to purchase on the
closing date is subject to the fulfillment prior to or on the closing date of
the conditions set forth in this Article 5.
5.1 Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be true in all material
respects as of the closing date with the same effect as though made on and as of
the closing date.
5.2 Compliance with Agreement. The Company shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed and complied with prior to or as of the closing date.
5.3 Certificate of Officers. The Company shall have delivered
to First Albany Corporation, as representative of the Investors, a certificate,
dated the closing date, executed by the President and the senior financial
officers of the Company and certifying to the satisfaction of the conditions
specified in Sections 5.1 and 5.2.
5.4 Opinion of the Company's Counsel. The Company shall have
delivered to First Albany Corporation, as representative of the Investors, an
opinion of Xxxxxxxxxx & Xxxxx, P.A., counsel for the Company, dated the closing
date, to the effect that:
(a) The Company is a corporation duly organized and
validly existing in good standing under the laws of the state
of its incorporation, and has the corporate power and
authority to own and hold the properties owned and leased by
it and to carry on the business in which it is engaged. The
Company has the corporate power and authority to enter into
this Agreement, to issue and sell the Shares, Warrants and the
Warrant Shares and to carry out the provisions of this
Agreement.
(b) This Agreement has been duly authorized, executed
and delivered by the Company, and is the legal, valid and
binding agreement of the Company and is enforceable against
the Company in accordance with its terms, subject, as to the
enforcement of remedies, to limitations under applicable
bankruptcy, insolvency, moratorium, reorganization, and other
laws affecting the rights of creditors generally and to
judicial limitations on the enforcement of the remedy of
specific performance and other equitable remedies.
(c) The Securities being purchased on the closing
date have been duly authorized, validly issued and delivered
by the Company, are fully paid and nonassessable, and are
entitled to the rights, preferences and provisions of the
Company's articles of incorporation and the benefits of the
provisions of this Agreement applicable thereto. The
certificates evidencing the Shares and the Warrants are in
valid and sufficient form.
(d) All corporate proceedings required by law or by
the provisions of this Agreement to be taken by the Board of
Directors and shareholders of the Company on or prior to such
closing date in connection with the execution and delivery of
this Agreement, the offer, issuance and sale of the Securities
and the consummation of the transactions contemplated by this
Agreement, have been duly and validly taken.
(e) The Company is authorized by its articles of
incorporation to issue 30,000,000 shares of capital stock,
which consists of the following: (a) 20,000,000 shares of
common stock, $.05 par value, of which there are outstanding
8,284,539 shares, (b) 400,000 shares of convertible preferred
stock, of which there are outstanding 150,000 shares, and (c)
9,600,000 undesignated shares. All shares outstanding
immediately prior to the closing date have been duly
authorized and validly issued. Except for the Common Stock,
and the convertible preferred stock, the Company has no other
authorized series or class of capital stock and, to the best
of such counsel's knowledge and without any special inquiry
into this matter, has no outstanding options, warrants or
other rights to acquire securities of the Company, other than
as disclosed in Exhibit 3.14.
(f) The requisite number of Warrant Shares have been
validly authorized and reserved for issuance upon exercise of
the Warrants, and when issued upon such exercise, will be
authorized, validly issued and outstanding, fully paid and
nonassessable. To the best of such counsel's knowledge, except
for with regard to the outstanding shares of Stock, no
security holder of the Company is entitled to preemptive or
similar rights as a result of the execution or delivery of
this Agreement or the issuance of the Shares, Warrants, or
Warrant Shares.
(g) Assuming the accuracy of the representations made
by the Investors in their Acceptances and Section 4 hereof,
the offer, sale, issuance and delivery of the Securities to
the Investors under the circumstances contemplated by this
Agreement are exempt from the registration and prospectus
delivery requirements of the Securities Act and all applicable
state securities laws.
(h) Except for matters disclosed as part of Exhibit
B, such counsel has no knowledge of any litigation, proceeding
or governmental investigation pending or threatened against
the Company or its properties or business.
(i) Nothing has come to the attention of counsel
which would lead counsel to reasonably believe that the
Company's business and operations are not being conducted in
all material respects in compliance with applicable laws,
rules, and regulations.
5.5 Supporting Documents. First Albany Corporation, as
representative for each investor, shall have received the following:
(a) A copy of resolutions of the Board of Directors
of the Company certified by the Secretary of the Company
authorizing and approving the execution, delivery and
performance of this Agreement and issuance of the Securities;
(b) A certificate of incumbency executed by the
Secretary of the Company certifying the names, titles and
signatures of the officers authorized to execute this
Agreement and further certifying that the articles of
incorporation and bylaws of the Company delivered to legal
counsel for the Investors at the time of the execution of this
Agreement have been validly adopted and have not been amended
or modified;
(c) The certificates contemplated by Section 5.3
above; and
(d) Such additional supporting documentation and
other information with respect to the transactions
contemplated hereby as legal counsel for the Investors may
reasonably request.
5.6 Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Securities to the Investors at
the closing shall have been obtained.
5.7 Proceeding and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to legal counsel for the Investors.
5.8 Registration Rights Agreement. The Company, each Investor
and each of the parties listed on the signature page of Exhibit 5.8 shall enter
into the Registration Rights Agreement dated as of the Closing in the form
attached as Exhibit 5.8.
6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor.
6.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have
delivered the purchase price as specified in Section 1.
7. Affirmative Covenants of the Company. The Company covenants and
agrees as follows:
7.1 Corporate Existence. The Company will maintain its
corporate existence in good standing and comply with all applicable laws and
regulations of the United States or of any state or political subdivision
thereof and of any government authority where failure to so comply would have a
material adverse impact on the Company or its business or operations.
7.2 Books of Accounts and Reserves. The Company will keep
books of record and account in which full, true and correct entries are made of
all of its respective dealings, business and affairs, in accordance with
generally accepted accounting principles. The Company will employ certified
public accountants who are "independent" within the meaning of the accounting
regulations of the Commission.
7.3 Application of Proceeds. Unless otherwise approved by the
Investors, the net proceeds received by the Company from the sale of the Shares
on the closing date shall be used for the purposes set forth in the Use of
Proceeds section of the Offering Materials.
7.4 Filing of Reports. The Company will make timely filings of
such reports as are required to be filed by it with the Commission so that Rule
144 under the Securities Act or any successor provision thereto will be
available to the security holders of the Company who were otherwise able to take
advantage of the provisions of such Rule.
7.5 Patents and Other Intangible Rights. The Company will
apply for, or obtain assignments of, or licenses to use, all patents,
trademarks, trade names and copyrights which in the opinion of a prudent and
experienced businessperson operating in the industry in which the Company is
operating are desirable or necessary for the conduct and protection of the
business of the Company.
8. Miscellaneous.
8.1 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail:
(a) if to any holder of any Shares addressed to such holder at
its address as shown on the books of the Company, or at such other
address as such holder may specify by written notice to the Company, or
(b) if to the Company at 000 Xxxx Xxxxxxxxx Xxxxx, Xxxxxxxxxx,
XX 00000, Attention: President; or at such other address as the Company
may specify by written notice to the Investors;
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
8.2 Survival of Representations and Warranties, Etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Investors
or on their behalf, and the sale and purchase of the Shares and payment
therefor. All statements contained in any certificate, instrument or other
writing delivered by or on behalf of the Company pursuant to this Agreement
(other than legal opinions) at the closing shall constitute representations and
warranties by the Company hereunder.
8.3 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall inure to the benefit of and be
enforceable by the holder or holders from time to time of any of the Shares;
provided, however, that a successor or assign of an Investor shall not be
regarded as an "Investor."
8.4 Headings. The headings of the articles and sections of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
8.5 Choice of Law. The laws of New York shall govern the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties hereunder.
8.6 Counterparts. This Agreement may be executed at different
times by different Investors and in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Notwithstanding any other section of this Agreement, the
execution of this Agreement on different dates by different Investors shall not
be deemed an amendment to this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and each of the Investors has an
executed a signature page as well as an acceptance form attached to this
Agreement.
DATAKEY, INC.
By:
Xxxx X. Xxxxxx, Vice President and
Chief Financial Officer
INVESTOR
By:
Its:
SCHEDULE I
Investor Shares Warrants
Special Situations Private Equity Fund, L.P. 300,000 300,000
Special Situations Cayman Fund 166,666 166,666
Special Situations Fund III, L.P. 650,000 650,000
Special Situations Technology Fund, L.P. 216,667 216,667
Xxxxxx Xxxxx-Xxxxxxx 16,667 16,667
Xxxxxx X. Xxxxxxx 16,000 16,000
Xxxxxxxxx X. Xxxxxx 10,000 10,000
Xxxxxxxxxxx X. Dah 10,000 10,000
Xxxxxx X. Xxxxxx 10,000 10,000
Xxxxxx X. Xxxx 10,000 10,000
USB Xxxxx Xxxxxxx as Custodian 10,000 10,000
FBO Xxxx Xxxxxxx XXX
Xxxxxxx X. Xxxx 18,000 18,000
USB Xxxxx Xxxxxxx As Custodian 16,000 16,000
FBO Xxxxxxx X. Xxxxxxx XXX
USB Xxxxx Xxxxxxx as Custodian 10,000 10,000
FBO Xxxxxxx X. Xxxxxxx XXX #2
Xxxxx X. Xxxxx 10,000 10,000
MB Partnership 10,000 10,000
Xxxxxx X. Xxxxxxx and 16,000 16,000
Xxxxxxx X. Xxxxxxx JTWROS
USB Xxxxx Xxxxxxx as Custodian 32,000 32,000
FBO Xxxxxxx X. Xxxxxxx XXX
Xxxxxxx X. Xxxxxxx 35,000 35,000
USB Xxxxx Xxxxxxx as Custodian 7,000 7,000
FBO Xxxxx X. Xxxxxx XXX
USB Xxxxx Xxxxxxx as Custodian 10,000 10,000
FBO Xxxxx X. Xxxxxx XXX
Xxxx X. Xxxxxx 10,000 10,000
Xxxx X. Xxxxxx 10,000 10,000
--------- ---------
TOTALS 1,600,000 1,600,000
