EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is entered into as of April 23,
2004, between PowerHouse Technologies Group, Inc., a Delaware corporation with
offices at 0000 Xxxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, XX 00000 (the "Company") and
each of the parties listed under "Purchasers" hereto (collectively and
individually, the "Purchaser").
W I T N E S S E T H:
WHEREAS, pursuant to those certain Series A Senior Units Purchase
Agreements, dated on or about the date hereof, by and between the Company and
the Purchaser (the "Purchase Agreement") of the 10% Secured Convertible
Promissory Notes (the "Notes") issued by the Company, the Company has agreed to
sell and issue to the Purchaser, and the Purchaser has agreed to purchase from
the Company, (i) Notes in the aggregate principal amount of up to $2.639 million
United States dollars ("Dollars") ($2,639,000), the amount of Notes being
purchased by each Purchaser as shall be set forth on the Note accepted by each
respective Purchaser or (ii) Series A Senior Units (each a "Unit") composed of
(a) "Series A Preferred Stock of the Company (the "Preferred Stock") with a
liquidation preference of up to $15 million Dollars ($15,000,000) and (b)
Warrants (the "Warrants") to purchase shares of the Company's Common Stock, par
value $0.0001 per share, subject to the terms and conditions set forth therein;
and
WHEREAS, the Notes will be convertible into or exercisable for shares of
Preferred Stock, and the Preferred Stock and Warrants will be convertible into
or exercisable for shares (the "Common Shares") of the Company's Common Stock,
par value $0.0001 per share (the "Common Stock"), pursuant to the terms and
conditions set forth in the Note, the Certificate of Designations for the
Preferred Stock and the Warrants.
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Note, the Purchase
Agreement, the Warrants and this Agreement, the Company and the Purchaser agree
as follows:
1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Note. As used in this Agreement, the following terms shall have
the following respective meanings:
"Closing" and "Closing Date" shall have the meanings ascribed to such
terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" and "Holders" shall include the Purchaser and any permitted
transferee or transferees of Registrable Securities (as defined below), the
Notes and/or Warrants which have not been sold to the public to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement and/or the Purchase Agreement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Original Purchase Price" shall mean $3.06 per share based upon a
fully-diluted pre-money valuation of $12,500,000, excluding an unissued reserved
employee pool of 1,125,000 shares of Common Stock, appropriately adjusted for
antidilution effects, stock splits, stock dividends and the like.
"Registrable Securities" shall mean: (i) the Common Shares (without regard
to any limitations on beneficial ownership contained in the Notes, the Warrants,
or the Purchase Agreement) or other securities issued or issuable to each Holder
or its permitted transferee or designee (a) upon conversion of the Preferred
Stock and exercise of the Warrants, or (b) upon any distribution with respect
to, any exchange for or any replacement of a Note or Warrant, (c) upon any
conversion, exercise or exchange of any securities issued in connection with any
such distribution, exchange or replacement, or (d) as payment of principal
amount or interest in lieu of cash with respect to the Note or as payment of
dividends on the Preferred Stock; (ii) securities issued or issuable upon any
stock split, stock dividend, recapitalization or similar event with respect to
the foregoing; and (iii) any other security issued as a dividend or other
distribution with respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses; provided that all such shares
shall cease to be Registrable Securities at such time as they have been sold
under a Registration Statement or pursuant to Rule 144 under the Securities Act
or otherwise or at such time as they are eligible to be sold pursuant to Rule
144(k). For purposes of this Agreement, the terms "Registrable Securities" and
"Common Shares" shall include any shares of the Company's Common Stock that are
issued (i) pursuant to the terms of that certain Placement Agent Common Stock
Purchase Warrant of even date herewith between the Company and Middlebury
Capital LLC or (ii) upon conversion of Preferred Stock issued to Middlebury
Capital LLC upon exercise of the Placement Agent Preferred Stock Purchase
Warrant of even date herewith between the Company and Middlebury Capital LLC.
"Registration Expenses" shall mean all expenses, exclusive of underwriting
discounts and commissions, to be incurred in connection with each Holder's
registration rights under this Agreement not included in Selling Expenses,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and one counsel for
the Holders, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company, which shall be paid in any event by the
Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Regulation D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. Registration Requirements. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as would permit or facilitate the sale or distribution of all
the Registrable Securities in the manner (including manner of sale) and in all
states reasonably requested by the Holder. Such best efforts by the Company
shall include, without limitation, the following:
(a) The Company shall, as expeditiously as possible after the
Closing Date:
(i) But in any event by the later (i) of May 31, 2004,
or (ii) forty-five (45) days after the Closing Date, prepare and
file a registration statement with the Commission pursuant to Rule
415 under the Securities Act on Form S-3 under the Securities Act
(or in the event that the Company is ineligible to use such form,
such other form as the Company is eligible to use under the
Securities Act provided that such other form shall be converted into
an S-3 as soon as Form S-3 becomes available to the Company)
covering resales by the Holders as selling stockholders (not
underwriters) of the Registrable Securities ("Registration
Statement"), which Registration Statement, to the extent allowable
under the Securities Act and the rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Preferred Stock
and exercise of the Warrants. The number of shares of Common Stock
initially included in such Registration Statement shall be no less
than the sum of 1.5 times the number of Registrable Securities as of
the date of this Agreement. Thereafter the Company shall use its
best efforts to cause such Registration Statement and other filings
to be declared effective as soon as possible, and in any event no
later than (i) as to Holders of the Notes, the 90th day following
the date of issuance of each Holder's respective Note (the "Bridge
Closing Date") or (ii) as to Holders of the Preferred Stock, the
120th day following the Closing Date (each a "Required Effective
Date"). Without limiting the foregoing, the Company will promptly
respond to all SEC comments, inquiries and requests, and shall
request acceleration of effectiveness at the earliest possible date.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used
in connection with such Registration Statement as may be necessary
to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration
Statement and notify the Holders of the filing and effectiveness of
such Registration Statement and any amendments or supplements.
(iii) Furnish to each Holder that has Common Shares
included in the Registration Statement such numbers of copies of a
current prospectus conforming with the requirements of the
Securities Act, copies of the Registration Statement, any amendment
or supplement thereto and any documents incorporated by reference
therein and such other documents as such Holder may reasonably
require in order to facilitate the disposition of Registrable
Securities owned by such Holder.
(iv) Register and qualify the securities covered by such
Registration Statement under the securities or "Blue Sky" laws of
all domestic jurisdictions; provided that the Company shall not be
required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(v) Notify promptly each Holder that has Registrable
Securities included in the Registration Statement of the happening
of any event (but not the substance or details of any such event) of
which the Company has knowledge as a result of which the prospectus
(including any supplements thereto or thereof) included in such
Registration Statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing
(each an "Event"), and use its best efforts to promptly update
and/or correct such prospectus. Each Holder will hold in confidence
and will not make any disclosure of any such Event and any related
information disclosed by the Company.
(vi) Notify each Holder of the issuance by the
Commission or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or
the threat or initiation of any proceedings for that purpose. The
Company shall use its best efforts to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible time.
(vii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare and
file any required filings with the NASDAQ National Market System or
any other exchange or market where the Common Shares are traded.
(viii) Take all steps reasonably necessary to enable
Holders to avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(b) Notwithstanding the obligations under Section 2(a)(v) or
any provision of this Agreement, if (i) in the good faith judgment of the
Company, following consultation with legal counsel, it would be detrimental to
the Company and its stockholders for resales of Registrable Securities to be
made pursuant to the Registration Statement due to the existence of a material
development or potential material development involving the Company that the
Company would be obligated to disclose in the Registration Statement, which
disclosure would be premature or otherwise inadvisable at such time or would
have a material adverse effect upon the Company and its stockholders, or (ii) in
the good faith judgment of the Company, it would adversely affect or require
premature disclosure of the filing of a Company-initiated registration of any
class of its equity securities, then the Company will have the right to suspend
the use of the Registration Statement for one period of not more than 40
calendar days in any 12 month period, but only if the Company reasonably
concludes, after consultation with outside legal counsel, that the failure to
suspend the use of the Registration Statement as such would create a material
liability or violation under applicable securities laws or regulations.
(c) Set forth below in this Section 2(c) are (I) events that
may arise that the Purchaser considers will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement, the Warrants and the
Notes (the "Interfering Events"), and (II) certain remedies applicable in each
of these events.
(i) Payments by the Company. If (i) at any time after
effectiveness of the Registration Statement, sales thereunder during
the registration period (as described in Section 5) cannot be made
for any reason, other than by reason of the operation of Section
2(b), for a period of more than 10 consecutive business days, (ii)
at any time after effectiveness of the Registration Statement, sales
thereunder during the Registration Period cannot be made for a
period of time that exceeds the limitations set forth in Section
2(b), or (iii) at any time after the Registrable Securities are
listed in accordance with Section 2(a)(viii), the Common Shares are
not listed or included for quotation on the NASDAQ National Market
or other exchange or market where shares of the Company's common
stock are then traded for more than 10 consecutive calendar days,
then the Company will thereafter make a payment to each Holder equal
to 3% of the purchase price paid for (1) the Notes and Preferred
Stock then held by the Holder and (2) Common Shares obtained upon
conversion of the Notes or Preferred Stock or exercise of the
Warrants for each 30 business days that either (i) sales cannot be
made under the effective Registration Statement or (ii) the Common
Shares are not listed or included for quotation on the NASDAQ or
other exchange or market where shares of the Company's common stock
are then traded; provided however, that any day on which both
conditions exist shall count as a single day and no day taken into
account for purposes of determining whether any payment is due under
Section 2 (c)(ii) shall be taken into account for purposes of
determining whether any payment is due under this Section 2(c)(i) or
the amount of such payment). The Company shall have the option, in
its sole discretion, to pay the penalty amount for each of the first
three months with additional shares of Preferred Stock, with the
price of such additional shares of Preferred Stock to be deemed
equal to the Original Purchase Price. The number of shares not
previously sold as specified in the previous sentence shall be
determined as of the end of the respective 30-business day period.
In no event shall payment pursuant to this Section exceed 30% in the
aggregate of the purchase price paid for (i) the Notes and Preferred
Stock then held by the Holder and (ii) Common Shares obtained upon
conversion of the Notes or Preferred Stock or exercise of the
Warrants (including such Holder's predecessors and successors) for
the entire registration period (as described in Section 5). These
payments will be prorated on a daily basis during the 30-business
day period and will be paid to each Holder within ten business days
following the end of each 30- business day period as to which
payment is due hereunder or provided that the respective Holder
delivered to the Company at least two business days prior thereto
information with respect to the number of Notes, Warrants, shares of
Preferred Stock and Common Shares not previously sold by such Holder
(together with reasonable supporting documentation). The Holders may
make a claim for additional damages as a remedy for the Company's
failure to comply with the timelines set forth in this Section, but
acknowledgement of such right in this Agreement shall not constitute
an admission by the Company that any such damages exist or may
exist.. Nothing contained in the preceding sentence shall be read to
limit the ability of the Holders to seek specific performance of
this Agreement.
(ii) Effect of Late Registration. If the Registration
Statement related to a Holder's Common Shares has not been declared
effective by the Required Effective Date related to such Holder,
other than by reason of the operation of Section 2(b), then the
Company will make a payment to such Holder for such delay (each a
"Late Registration Payment"). Each Late Registration Payment will be
equal to 3% of the purchase price paid for (i) the Notes and
Preferred Stock then held by the Holder and not previously converted
into Common Shares and sold by the Holder and (ii) Common Shares
obtained by such Holder upon conversion of the Notes or Preferred
Stock or exercise of the Warrants for the first 30 business days
after the Required Effective Date, and 3% of such purchase price for
each period of 30 business days thereafter (but no day taken into
account for purposes of determining whether any payment is due under
Section 2(c)(i) shall be taken into account for purposes of
determining whether any payment is due under this Section 2(c)(ii)
or the amount of such payment). The Company shall have the option,
in its sole discretion, to pay the Late Registration Payment for
each of the first three months with additional shares of Preferred
Stock, with the price of such additional shares of Preferred Stock
to be deemed equal to the Original Purchase Price. In no event shall
payment pursuant to this Section exceed 30% in the aggregate of the
purchase price paid for (i) the Notes and Preferred Stock then held
by the Holder and not previously converted into Common Shares and
sold by the Holder and (ii) Registrable Securities obtained upon
conversion of the Notes or Preferred Stock and exercise of the
Warrants (including such Holder's predecessors and successors) for
the entire registration period (as described in Section 5). The Late
Registration Payments will be prorated on a daily basis during the
30-business day period and will be paid to the initial Holders
within ten business days following the end of each 30-business day
period as to which payment is due hereunder, provided that the
respective Holder delivered to the Company at least two business
days prior thereto information with respect to the number of Notes,
shares of Preferred Stock and Common Shares not previously sold by
such Holder (together with reasonable supporting documentation). The
Holders may make a claim for additional damages as a remedy for the
Company's failure to comply with the timelines set forth in this
Section, but acknowledgement of such right in this Agreement shall
not constitute an admission by the Company that any such damages
exist or may exist. Nothing contained in the preceding sentence
shall be read to limit the ability of the Holders to seek specific
performance of this Agreement. Notwithstanding the foregoing, if the
Registration Statement has not yet been declared effective and the
Holders are no longer entitled to receive Late Registration Payments
as a result of the above-described percentage limitation on said
payments, then each Holder shall have the right, at any time upon at
least thirty (30) days written notice, to sell all (but not less
than all) of its Notes, Preferred Stock or Common Shares to the
Company for a cash purchase price equal to (i) the outstanding
Principal Amount of the Notes plus any accrued but unpaid interest,
(ii) the liquidation preference of the Preferred Stock plus any
accrued but unpaid dividends or (iii) the purchase price paid for
such Common Shares.
(d) During the registration period and consistent with
standard inspection and visitation rights under the Delaware General
Corporations Law, the Company will make available, upon reasonable advance
notice during normal business hours, for inspection by any Holder whose
Registrable Securities are being sold pursuant to a Registration Statement, all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as reasonably necessary
to enable each such Holder to exercise its due diligence responsibility in
connection with or related to the contemplated offering. The Company will cause
its officers, directors and employees to supply all information that any Holder
may reasonably request for purposes of performing such due diligence. Recipients
of such information will be required to acknowledge their intention to comply
with the requirements of the federal securities laws that govern trading on the
basis of material, non-public information.
(e) Each Holder will hold in confidence, use only in
connection with the contemplated offering and not make any disclosure of all
Records and other information that the Company determines in good faith to be
confidential, and of which determination the Holders are so notified, unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, (iii) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement (to the knowledge of the relevant Holder), (iv) the
Records or other information was developed independently by the Holder without
breach of this Agreement, (v) the information was known to the Holder before
receipt of such information from the Company, or (vi) the information was
disclosed to the Holder by a third party not under an obligation of
confidentiality. However, a Holder may make disclosure of such Records and other
information to any attorney, adviser, or other third party retained by it that
needs to know the information as determined in good faith by the Holder (the
"Holder Representative"), if the Holder advises the Holder Representative of the
confidentiality provisions of this Section 2(e), but the Holder will be liable
for any act or omission of any of its Holder Representatives relative to such
information as if the act or omission was that of the Holder. The Company is not
required to disclose any confidential information in the Records to any Holder
unless and until such Holder has entered into a confidentiality agreement (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially to the effect of this Section 2(e). Unless legally
prohibited from so doing, each Holder will, upon learning that disclosure of
Records containing confidential information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein will be deemed to
limit the Holder's ability to sell Registrable Securities in a manner that is
otherwise consistent with applicable laws and regulations.
(f) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
consisting of Common Shares described in clause (i) of the definition of
Registrable Securities within ten (10) business days of any stockholders'
meeting authorizing same and shall use its best efforts to cause such
Registration Statement to become effective within one hundred twenty (120) days
of such stockholders' meeting. If the Holders become entitled, pursuant to an
event described in clause (ii) and (iii) of the definition of Registrable
Securities, to receive any securities in respect of Registrable Securities that
were already included in a Registration Statement, subsequent to the date such
Registration Statement is declared effective, and the Company is unable under
the securities laws to add such securities to the then effective Registration
Statement, the Company shall promptly file, in accordance with the procedures
set forth herein, an additional Registration Statement with respect to such
newly Registrable Securities. The Company shall use its best efforts to (i)
cause any such additional Registration Statement, when filed, to become
effective within 30 days of that date that the need to file the Registration
Statement arose. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved shares and such
new Registrable Securities.
(g) If at any time during the term of this Agreement, the
registration statement described in Section 2(a) is not effective with respect
to some or all of the Registrable Securities, the Purchaser shall have the
following "piggyback" registration rights. If the Company at any time following
the Closing Date proposes for any reason to register Common Shares under the
Securities Act (other than registrations relating to employee benefit plans,
business combinations or other registrations on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), it shall promptly give
written notice to the Purchaser of its intention to so register such equity
securities and, upon the written request, given within 20 days after delivery of
such notice by the Company, of Purchaser to include in such registration
Registrable Securities held by Purchaser (which request shall specify the number
of Registrable Shares proposed to be included in such registration by Purchaser
and shall state the intended method of disposition of such Registrable
Securities by Purchaser), the Company shall use its best efforts to cause all
such Registrable Securities to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; provided, however, that the Company shall have the right to delay
such a registration under customary circumstances for a period not in excess of
90 days each in any twelve month period and if the managing underwriter advises
the Company in writing that the inclusion of all Registrable Securities proposed
to be included in such registration would interfere materially with the
successful marketing (including pricing) of primary shares (the "Primary
Shares") proposed to be registered by the Company, then the number of Primary
Shares and Registrable Securities proposed to be included in such registration
shall be included in the following order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Securities requested to be
included in such registration pursuant to this Section 2(g)
provided, that in the case of any such underwritten offering of Common Shares by
the Company that is in satisfaction of a demand registration pursuant to Section
2(h), the order for inclusion of Primary Shares and Registrable Securities shall
be as set forth in that section. In no event shall the number of shares to be
sold by the Purchaser be less than 25% of the total amount of securities
included for securities holders in the registration. No shareholder of the
Company shall be granted piggyback registration rights that would reduce the
number of shares that may be included by the holders of the Registrable
Securities in such registration without the consent of the holders of at least
two-thirds of the Registrable Securities.
(h) If at any time during the period beginning (i) as to
Holders of the Notes, 90 days after the Bridge Closing Date or (ii) as to
Holders of the Preferred Stock, 120 days after the Closing Date, and ending two
years after the Closing Date, the registration statement described in Section
2(a) is not effective with respect to some or all of the Registrable Securities,
any Purchasers who holds together more than $500,000 in value of the Registrable
Securities shall have the following demand registration rights. If the Company
shall be requested in writing by an eligible Purchaser to effect a registration
on Form S-1 under the Securities Act of Registrable Securities, then the Company
shall promptly use its best efforts to effect such registration under the
Securities Act of such Registrable Securities which the Company has been so
requested to register in the manner described in Section 2(a); provided,
however, that the Company shall not be obligated to effect any registration
under this Section 2(h) except in accordance with the following provisions:
(i) The Company shall not be obligated to use its best efforts
to file and cause to become effective (x) more than two registration
statements on Form S-1 with respect to Registrable Securities initiated by
Purchaser pursuant to this Section 2(h); (y) any registration statement
covering less than $500,000 in value of Registrable Securities; or (z) any
registration statement during any period in which any other registration
statement pursuant to which Common Shares are to be or were sold has been
filed and not withdrawn or has been declared effective within the prior 60
days;
(ii) The Company may delay the filing or effectiveness of any
registration statement for a period of up to 60 days after the date of a
request for registration pursuant to this Section 2(h) if the Company
determines in good faith that (A) it is in possession of material,
non-public information concerning an acquisition, merger,
recapitalization, consolidation, reorganization or other material
transaction by or of the Company or concerning pending or threatened
litigation and (B) disclosure of such information would jeopardize any
such transaction or litigation or otherwise materially harm the Company;
provided, however, that the Company may not exercise such deferral right
more than once in any twelve month-period.
(i) At such time as the Company shall have qualified for the
use of Form S-3 promulgated under the Securities Act or any successor form
thereto, Purchaser shall have the right to request in writing registrations on
Form S-3 or such successor form of Registrable Shares held by Purchaser in the
manner described in Section 2(a), which request or requests shall (i) specify
the number of Registrable Shares held by Purchaser intended to be sold or
disposed of, (ii) state the intended method of disposition of such Registrable
Shares held by Purchaser and (iii) relate to Registrable Shares having an
anticipated aggregate offering price of at least $500,000. A requested
registration on Form S-3 or any such successor form in compliance with Section 4
shall not count as a registration statement initiated pursuant to Section 2(h)
but shall otherwise be treated as a registration statement initiated pursuant
to, and shall, except as otherwise expressly provided in Section 4, be subject
to Section 2. In no event will any Purchaser be entitled to demand any
registration on Form S-3 if the registration would require filing under Blue Sky
or similar state securities laws in any jurisdiction in which the Company would
be required to qualify to do business or execute a general consent to service of
process to effect such registration and filing.
3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its reasonable
best efforts to continue to meet the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form S-3 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act, provided that if such other form is used, the Company shall
convert such other form to a Form S-3 as soon as the Company becomes so
eligible.
5. Registration Period. In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such registration
effective and current until the later of (a) the date on which all the Holders
have completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier until such Registrable Securities may be sold by
the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect) or (b) the second (2nd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any final
prospectus (as amended or supplemented if the Company files any amendment or
supplement thereto with the SEC), Registration Statement filed pursuant to this
Agreement or any post-effective amendment thereof or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, for any reasonable legal fees of a single counsel and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to a Holder to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on (i) any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter (if any) therefor and stated to be specifically for
use therein, (ii) any failure by any Holder to comply with prospectus delivery
requirements or the Securities Act or Exchange Act or any other law or legal
requirement applicable to them or any covenant or agreement contained in the
Purchase Agreement or this Agreement or (iii) an offer of sale of Common Shares
occurring during a period in which sales under the Registration Statement are
suspended as permitted by this Agreement. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally but not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
any other stockholder selling securities pursuant to the Registration Statement
and any of its directors, officers, agents, partners, and any person who
controls such stockholder within the meaning of the Securities Act or Exchange
Act and each underwriter, if any, of the Company's securities covered by such a
Registration Statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any such final prospectus (as amended
or supplemented if the Company files any amendment or supplement thereto with
the SEC), Registration Statement filed pursuant to this Agreement or any
post-effective amendment thereof or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances under
which they were made or (ii) failure by any Holder to comply with prospectus
delivery requirements or the Securities Act or any other law or legal
requirement applicable to them or any covenant or agreement contained in the
Purchase Agreement or this Agreement, and will reimburse the Company and such
other Holder(s) and their directors, officers and partners, underwriters or
control persons for any reasonable legal fees or any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such final prospectus (as amended or supplemented if the
Company files any amendment or supplement thereto with the SEC), Registration
Statement filed pursuant to this Agreement or any post-effective amendment
thereof in reliance upon and in conformity with written information furnished to
the Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities pursuant to the registration statement in
question. The indemnity agreement contained in this Section 6(b) shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
if such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 6 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder(s) on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder(s) in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder(s) on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Holder(s).
In no event shall the obligation of any Indemnifying Party to contribute
under this Section 7 exceed the amount that such Indemnifying Party would have
been obligated to pay by way of indemnification if the indemnification provided
for under Section 6(a) or 6(b) hereof had been available under the
circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be required to
contribute any amount in excess of the amount by which in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement, and (ii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Holder, such Holder will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended methods of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least five business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Holder of the information the
Company requires from that Holder whether or not such Holder has elected to have
any of its Registrable Securities included in the Registration Statement. If the
Company has not received the requested information from a Holder by the business
day prior to the anticipated filing date, then the Company may file the
Registration Statement without including Registrable Securities of that Holder.
10. Further Assurances. Each Holder will cooperate with the Company,
as reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder's irrevocable election to exclude all of
such Holder's Registrable Securities from such Registration Statement.
11. Suspension of Sales. Upon receipt of any notice from the Company
under Section 2(a)(v) or 2(b), each Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until (i) it receives copies of a
supplemented or amended prospectus contemplated by Sections 2(a)(v) or (ii) the
Company advises the Holder that a suspension of sales under Section 2(b) has
terminated. If so directed by the Company, each Holder will deliver to the
Company (at the expense of the Company) or destroy all copies in the Holder' s
possession (other than a limited number of file copies) of the prospectus
covering such Registrable Securities that is current at the time of receipt of
such notice.
12. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by the Purchaser (or then Holder) may be exchanged
by the Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares, as reasonably requested by such Purchaser (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note or
certificates for the underlying Common Shares of any of the foregoing, and, in
the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it, or upon surrender and cancellation of such certificate if mutilated, the
Company will make and deliver a new Note or certificate of like tenor and dated
as of such cancellation at no charge to the holder.
13. Transfer or Assignment. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Purchaser by
the Company under this Agreement to cause the Company to register Registrable
Securities, and all other rights granted to any Purchaser by the Company
hereunder, may be transferred or assigned (in whole or in part) by such
Purchaser to (i) any partner or retired partner of such Purchaser, if such
Purchaser is a partnership, (ii) any family member of such Purchaser or trust
for the benefit thereof or of such Purchaser; or (iii) any transferee from such
Purchaser of at least 5,000 shares of Registrable Securities; provided in each
case that (i) the Company is given written notice by the Purchaser at the time
of or within a reasonable time after such transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such rights
agrees in writing to be bound by the registration provisions of this Agreement,
(ii) such transfer or assignment is not made under the Registration Statement or
Rule 144, (iii) such transfer is made according to the applicable requirements
of the Purchase Agreement, (iv) the transferee has provided to the Company an
investor questionnaire (or equivalent document) evidencing that the transferee
is a "qualified institutional buyer" or an "accredited investor" defined in Rule
501(a)(1),(2),(3), or (7) of Regulation D, and (v) no transfer is made to the
any member, or any affiliate of any member, of the "Xxxxxxx Group", any former
director or officer of Agate or any competitor of the Company, as listed on
Schedule A attached hereto. Each transferee of Registration Rights hereunder
shall be required to certify prior to the completion of such transfer that they
are not a member, or an affiliate of any member, of the "Xxxxxxx Group" by
completing and furnishing to the Company a certificate substantially in the form
of the Transfer Certification Form attached hereto as Schedule B.
14. Miscellaneous.
(a) Remedies. The Company and the Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. Each of the Company and the Purchaser (i)
hereby irrevocably submits to the exclusive jurisdiction of the United States
District Court, the New York state courts and other courts of the United States
sitting in New York County, New York for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and the Purchaser
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this paragraph
shall affect or limit any right to serve process in any other manner permitted
by law.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
PowerHouse Technologies Group, Inc.
PowerHouse Technologies Group, Inc.
0000 Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx Xxxxx, Vice-President of Finances
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Facsimile:: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
If to the Purchasers, to the addresses set forth on Schedule I to the
applicable Purchase Agreement
with a copy to:
Xxxxxxxx Xxxxx Deutsch LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Deutsch
Any party hereto may from time to time change its address for notices by giving
at least five days' written notice of such changed address to the other parties
hereto.
(d) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter. The representations and warranties and
the agreements and covenants of the Company and each Purchaser contained herein
shall survive the Closing.
(e) Execution in Counterpart. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(f) Signatures. Facsimile signatures shall be valid and
binding on each party submitting the same.
(g) Entire Agreement; Amendment. This Agreement, together with
the Purchase Agreement, the Note, the Warrant, and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 67%of the
Registrable Securities (determined on a fully-diluted, as converted basis).
(h) Governing Law. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.
(i) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(j) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(k) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
COMPANY:
POWERHOUSE TECHNOLOGIES GROUP, INC.
By:
----------------------------------------
Xxx Xxxxxx
Chief Executive Officer
COUNTERPART SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT,
DATED APRIL 23, 2004,
AMONG POWERHOUSE TECHNOLOGIES GROUP, INC. AND
THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Registration Rights Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Registration Rights Agreement and Signature Pages of the Company and
other "Purchasers" under the Registration Rights Agreement, shall constitute one
and the same document in accordance with the terms of the Registration Rights
Agreement.
PURCHASER:
-------------------------------------------
By:
------------------------------------
Name:
Title:
Schedule A
"Xxxxxxx Group"
Former director or officer of Agate
Schedule B
Transfer Certification Form
