EXHIBIT 10.1
INTERNET GAMING TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
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September 5, 1996
TABLE OF CONTENTS
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Page
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Section 1. Purchase and Sale of Securities.............. 1
Section 2. Closing...................................... 2
Section 3. Conditions to Close.......................... 3
Section 4. Representations and Warranties of the Company 4
Section 5. Representations, Warranties and Covenants
of the Purchaser............................ 10
Section 6. Registration Rights.......................... 12
Section 7. Miscellaneous................................ 22
SECURITIES PURCHASE AGREEMENT
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This Securities Purchase Agreement ("Agreement") is entered into this 5th
day of September 1996 between INTERNET GAMING TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and UNISTAR ENTERTAINMENT, INC., a Colorado
corporation ("Purchaser").
R E C I T A L S
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A. The Company desires to obtain funds from the Purchaser in order to
further the operations of the Company.
B. In order to obtain such funds, the Company desires to sell and issue
to the Purchaser up to 600,000 shares (the "Shares") of the Company's $.00001
per value common stock ("Common Stock") at a price of $5.00 per Share.
C. Purchaser desires to purchase the Shares subject to the Company's
ability to provide or arrange for the development and delivery of a turn-key
Internet gaming system ("System"), on the terms and subject to the conditions
set forth herein.
D. Concurrent with the execution of this Agreement, Purchaser and
CasinoWorld Holdings, Ltd., a Delaware corporation ("CWH"), have entered into
that certain Nonexclusive License Agreement ("License Agreement") providing for
the development and delivery of the System.
E. In addition to the foregoing transactions, the Company is currently
conducting a private placement ("Private Placement") of 1,000,000 shares of its
Common Stock, at $5.00 per share, pursuant to a Private Placement Memorandum
dated July 24, 1996 ("Memorandum").
A G R E E M E N T
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It is agreed as follows:
1. Purchase and Sale of Securities.
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1.1 Purchase and Sale of Securities. Subject to the terms and
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conditions herein stated, the Company agrees to sell and issue to Purchaser, and
Purchaser agrees to purchase from the Company, up to 600,000 Shares at a
purchase price of $5.00 per Share. Concurrent with the execution of this
Agreement, the Company shall sell and deliver to Purchaser a certificate for
140,000 Shares, and Purchaser shall purchase said Shares and deliver to the
Company by cashier's check or wire transfer $700,000. Purchaser shall purchase,
and the Company shall sell and issue to Purchaser, the balance of the Shares
subject to the following incremental development of the System:
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1.1.1 Milestone Phase I - Purchaser shall purchase 20,000 Shares,
and deliver to the Company $100,000, upon the installation of the hardware and
software necessary to launch the National Indian Lottery ("NIL") homepage
("Homepage") for the website and virtual CasinoWorld/TM/ site pursuant to
Section 2.2.2 of the License Agreement.
1.1.2 Milestone Phase II - Purchaser shall purchase 30,000 Shares,
and deliver to the Company $150,000, upon the installation of all gaming
software necessary to launch the NIL Homepage pursuant to Section 2.2.3 of the
License Agreement.
1.1.3 Milestone Phase III - Purchaser shall purchase 50,000
Shares, and deliver to the Company $250,000, upon the installation of all
business systems necessary to launch the NIL Homepage pursuant to Section 2.2.4
of the License Agreement.
1.1.4 Milestone Phase IV - Purchaser shall purchase 50,000 Shares,
and deliver to the Company $250,000, upon the installation of all hardware and
software necessary to launch the commercial/public release version of the NIL
Homepage pursuant to Section 2.2.5 of the License Agreement.
1.1.5 Milestone Phase V - Purchaser shall purchase 70,000 Shares,
and deliver to the Company $350,000, upon the installation of all carrier
equipment and related hardware necessary to launch the NIL telephone system
pursuant to Section 2.2.6 of the License Agreement.
1.1.6 Milestone Phase VI - Purchaser shall purchase 90,000 Shares,
and deliver to the Company $450,000, upon the completion of all IVR software
necessary to launch the NIL IVR system pursuant to Section 2.2.7 of the License
Agreement.
1.1.7 Milestone Phase VII - Purchaser shall purchase 150,000
Shares, and deliver to the Company $750,000, upon the installation of all IVR
hardware necessary to launch the NIL IVR system pursuant to Section 2.2.8 of the
License Agreement.
2. Closing. The initial close of the transactions contemplated by this
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Agreement ("Close") shall take place at 10:00 a.m., Pacific Daylight Time
("PDT"), at the offices of the Company, 0000 Xxx Xxx Xxxxx Xxxxx, Xxxxx 000, Xxx
Xxxxx, Xxxxxxxxxx 00000 on September 6, 1996, or at such other time or place as
the parties hereto shall by written instrument designate. At the initial Close,
the Company shall deliver to Purchaser certificates representing 140,000 Shares
to be purchased by the Purchaser under this Agreement in definitive form and
registered in the name of Purchaser, against delivery to the Company by the
Purchaser of a check or wire transfer in the amount of $700,000. Additional
Closes, upon substantially identical terms and conditions to those contained
herein, shall be held in accordance with the increments and timetable set forth
in Section 1 until all 600,000 Shares have been sold. Unless otherwise stated,
the initial Close and any additional Closes shall be referred to herein as the
"Close."
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3. Conditions to Close.
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3.1 Purchaser Conditions to Close. The obligations of each of the
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Purchaser to purchase the Shares hereunder shall be subject to the satisfaction
of the following conditions precedent at or before each Close.
(a) Performance of Covenants. The Company shall have performed
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all of its covenants and obligations under this Agreement to be performed by the
Company on or prior to the Close.
(b) Representations and Warranties Correct. The representations
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and warranties of the Company contained in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Close with the same force and effect as if
they had been made on and as of said date.
(c) Approvals and Consents. The Company shall have received all
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necessary approvals required by any state or province for the offer and sale of
the Shares pursuant to this Agreement and all necessary approvals and consents
shall have been obtained from any and all government departments and agencies
and from all other commissions, boards, agencies and from any other person or
persons whose approval or consent is necessary to consummate the transactions
contemplated under this Agreement.
(d) Proceedings and Documents. All corporate and other
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proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and the
Purchaser's counsel, and the Purchaser or the Purchaser's counsel shall have
received all such counterpart originals or certified or other copies of such
documents as the Purchaser or they may reasonably request.
(e) Opinion of Company Counsel. Purchaser shall have received
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from Xxxxx & Xxxxx, counsel for the Company, an opinion, dated as of the date of
the initial Close, in the form attached hereto as Exhibit A.
(f) Shareholders Agreement. The Company, Purchaser and Xxxxxx
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Xxxxx shall have executed a shareholder's agreement substantially in the form
attached hereto as Exhibit B relating to the election of a member of the Board
of Directors.
(g) License Agreement. Purchaser and CWH shall have executed the
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License Agreement as of the date hereof.
3.2 Company Conditions to Close. The obligations of the Company to
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sell the Shares hereunder shall be subject to the satisfaction of the following
conditions precedent at or before the Close.
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(a) Performance of Covenants. The Purchaser shall have performed
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all of its covenants and obligations under this Agreement to be performed by the
Purchaser on or prior to the Close.
(b) Representations and Warranties Correct. The representations
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and warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Close with the same force and effect as if
they had been made on and as of said date.
(c) Approvals and Consents. The Company shall have received all
----------------------
necessary approvals required by any state or province for the offer and sale of
the Shares pursuant to this Agreement and all necessary approvals and consents
shall have been obtained from any and all government departments and agencies
and from all other commissions, boards, agencies and from any other person or
persons whose approval or consent is necessary to consummate the transactions
contemplated under this Agreement.
3.3 Access to Information. The Company has given and shall continue
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to give to the Purchaser and its counsel, accountants and other advisors,
agents, consultants and representatives (collectively, "Representatives"), full
access, during normal business hours throughout the period prior to Close, to
all of the properties, books, contracts, commitments and records of the Company,
and has furnished and will continue to furnish during such period all such
information concerning it (including its operations, financial condition and
business plan) as the Purchaser may reasonably request. Provided, that any
furnishing of such access or information to the Purchaser or its Representatives
or any investigation by the Purchaser or its Representatives shall not affect
the right of the Purchaser to rely on the representations and warranties of the
Company made in this Agreement. The Purchaser agrees to hold in strict
confidence all documents and information concerning the Company so furnished
which is of a trade secret or confidential nature ("Confidential Information")
unless the same shall have become public knowledge other than through disclosure
by the Purchaser or its Representatives and, if the transactions contemplated by
this Agreement are not consummated, such confidence shall be maintained and all
such Confidential Information (in written form) shall be immediately returned by
the Purchaser to the Company. The Company agrees to clearly identify such
Confidential Information.
4. Representation and Warranties of the Company.
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As a material inducement to the Purchaser to enter into this Agreement
and to purchase the Shares, the Company represents and warrants that the
following statements are true and correct in all material respects as of the
date hereof and will be true and correct in all material respects at Close,
except as expressly qualified or modified herein.
4.1 Organization and Good Standing. The Company is a corporation
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duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full corporate power and authority to enter into and
perform its obligations under this Agreement, and to own its properties and to
carry on its business as presently
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conducted and as proposed to be conducted. The Company is duly qualified to do
business as a foreign corporation in every jurisdiction in which the failure to
so qualify would have a material adverse effect upon the Company.
4.2 Capitalization. The authorized capital stock of the Company
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consists of 15,000,000 shares of Common Stock of which 5,675,000 shares of
Common Stock are issued and outstanding as of the date of this Agreement (and
prior to the issuance of the 1,000,000 shares ("Private Placement Shares") of
Common Stock pursuant to the Private Placement). All outstanding shares of
Common Stock have been duly authorized and validly issued, and are fully paid,
nonassessable, and free of any preemptive rights. Except for subscriptions or
sales of the Private Placement Shares, at Close there will not be outstanding,
nor will the Company be subject to any agreement under which there may become
outstanding, any right to purchase, or security convertible into or exchangeable
for, any capital stock of the Company, including, but not limited to, options,
warrants, or rights. Except as set forth herein, the Company is under no
obligation (contingent or otherwise) to purchase or otherwise acquire or retire
any of its securities.
4.3 Subsidiaries. The Company does not own, directly or indirectly,
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any equity or debt securities of any corporation, partnership, or other entity,
other than its equity interest in Internet Gaming Technologies, Inc., a Nevada
corporation, and Emerald Riviera Ltd., an Irish corporation (the
"Subsidiaries"), both of which are wholly-owned subsidiaries of the Company.
4.4 Validity of Transactions. This Agreement, and each document
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executed and delivered by the Company in connection with the transactions
contemplated by this Agreement, have been duly authorized, executed and
delivered by the Company and is each the valid and legally binding obligation of
the Company, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency reorganization and moratorium laws and other
laws affecting enforcement of creditor's rights generally and by general
principles of equity. The Shares issuable hereunder, when issued and paid for
by Purchaser in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
4.5 No Violation. The execution, delivery and performance of this
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Agreement has been duly authorized by the Company's Board of Directors and, to
the extent necessary, the shareholders of the Company, will not violate any law
or any order of any court or government agency applicable to the Company, or the
Certificate of Incorporation or Bylaws of the Company, as amended, and will not
result in any breach of or default under, or, except as expressly provided
herein, result in the creation of any encumbrance upon any of the assets of the
Company pursuant to the terms of any agreement or instrument by which the
Company or any of its assets may be bound. No approval of or filing with any
governmental authority is required for the Company to enter into, execute or
perform this Agreement.
4.6 Litigation. Except as set forth on the Company Disclosure
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Schedule attached hereto as Exhibit C ("Company Disclosure Schedule"), there are
no suits or proceedings (including without limitation, proceedings by or before
any arbitrator,
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government commission, board, bureau or other administrative agency) pending or,
to the knowledge of the Company, threatened against or affecting the Company
which, if adversely determined, would have a material adverse effect on the
consolidated financial condition, results of operations, prospects or business
of the Company, and the Company is subject to or in default with respect to any
order, writ, injunction or decree of any federal, state, local or other
governmental department.
4.7 Use of Proceeds. The Company represents and warrants that up to
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$1,000,000 of the proceeds from the sale of the shares will be applied towards
the payment of equipment pursuant to the terms of that certain Hardware, Mutual
Use and Emergency Backup Agreement of even date herewith by and among Purchaser,
CWH and the Company. The Company intends to use, and will use its best efforts
to see that it does use, the balance of the proceeds from the sale of the Shares
solely for the purpose of furthering the operations of the Company.
4.8 Taxes. Federal income tax returns and state and local income tax
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returns for the Company have been filed as required by law; all taxes as shown
on such returns or on any assessment received subsequent to the filing of such
returns have been paid, and there are no pending assessments or adjustments or
any income tax payable for which reserves, which are reasonably believed by the
Company to be adequate for the payment of any additional taxes that may come
due, have not been established. All other taxes imposed on the Company have
been paid and any reports or returns due in connection herewith have been filed.
4.9 No Defaults. Except as set forth on the Company Disclosure
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Schedule, no material default (or event which, with the passage of time or the
giving of notice, or both, would become a material default) exists or is alleged
to exist with respect to the performance of any obligation of the Company under
the terms of any indenture, license, mortgage, deed of trust, lease, note,
guaranty, joint venture agreement, operating agreement, partnership agreement,
or other contract or instrument to which the Company is a party or any of their
assets are subject, or by which they are otherwise bound, and, to the best
knowledge of the Company, no such default or event exists or is alleged to exist
with respect to the performance of any obligation of any party thereto.
4.10 Securities Law Compliance. Assuming the accuracy of the
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representations and warranties of Purchaser set forth in Section 5 of this
Agreement, the offer, issue, sale and delivery of the Shares under the
circumstances contemplated by this Agreement constitutes or will constitute an
exempt transaction under the Securities Act of 1933 (the "1933 Act"), as now in
effect, and registration of the Shares under the Securities Act, is not
required, and no notice, filing, registration, or qualification under any U.S.
state securities or "Blue Sky" law is required in connection therewith except
for such filings as may be necessary to comply with the Blue Sky laws of any
state, which filings will be made in a timely manner.
4.11 Corporate Documents. The Company has furnished to Purchaser, or
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will furnish upon request, true and complete copies of the Certificate of
Incorporation and Bylaws of the Company certified by its secretary and copies of
the resolutions adopted by
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the Company's Board of Directors authorizing and approving this Agreement and
the transactions contemplated hereby.
4.12 Compliance with Laws. The Company has complied in all material
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respects with all laws, regulations and orders affecting its business and
operations and is not in default under or in violation of any provision of any
federal, state or local rule, regulation or law.
4.13 Anti-Dilution Adjustment. In the event that the Company shall at
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any time or from time to time during the twelve (12) month period immediately
following the date of this Agreement issue, sell or otherwise dispose of shares
of Common Stock without consideration, or for a consideration per share less
than $5.00 (in each case, a "Disposition"), then simultaneously with such
Disposition the Company shall issue to the Purchaser, for no additional
consideration, an additional number of shares of Common Stock equal to the
amount obtained by subtracting (x) from (y), where (y) equals the number of
shares of Common Stock issued to the Purchaser under this Agreement (including
this Section 4.14) prior to the Disposition and (x) equals the total amount of
cash consideration paid by the Purchaser to the Company divided by the cash
consideration per share received by the Company in the Disposition.
4.14 Co-Signature Arrangement. Until such time as the Company has
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received equity or debt capital in an amount of not less than $2,000,000, in
addition to the payments received from Purchaser hereunder, the Company shall
not disburse any portion of the $700,000 in cash proceeds delivered by the
Purchaser at the initial Close without the Purchaser's prior written consent
which shall not be unreasonably withheld. At the Purchaser's request, the
Company shall deposit the $700,000 in a special operating account that requires
two signatures, one from the Company and one of the Purchaser, for any
withdrawals, transfers or check drafts.
4.15 Governmental Consents. No consent, approval, order or
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authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement.
4.16 Patents and Trademarks. The Company has sufficient title and
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ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted as described in the
Memorandum without any conflict with or infringement of the rights of others.
Except as disclosed in the Memorandum, there are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. Except as set forth on the Company Disclosure Schedule,
the Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The
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Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed in the
Memorandum, will, to the Company's knowledge, conflict with or result in a
material breach of the terms, conditions, or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
4.17 Compliance with Other Instruments.
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(a) The Company is not in material violation or material default
of any provisions of its Certificate of Incorporation or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time and giving of notice, either
a default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any material portion of the assets of the Company.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement which loss
would have a material adverse effect on the Company.
4.18 Agreements; Action.
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(a) Except for agreements disclosed in the Memorandum or
explicitly contemplated hereby, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof which are material to the business,
affairs, prospects, operations, properties, assets or financial condition of the
Company.
(b) Except for agreements disclosed in the Memorandum or
explicitly contemplated hereby, there are no agreements, understandings,
instruments, contracts, proposed transactions, judgments, orders, writs or
decrees to which the Company is a party or by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
in excess of, $25,000 except as entered into or made in connection with the
business of the Company as contemplated proposed in the Memorandum, or (ii) the
license of any patent, copyright, trade secret or other proprietary
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right to or from the Company, or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
(c) Except as disclosed in the Memorandum, the Company has not
(i) declared or paid any dividends, or authorized or made any distribution upon
or with respect to any class or series of its capital stock, (ii) except for
legal fees incurred in connection with this transaction and loans received from
Xxxxxx Xxxxx, incurred any indebtedness for money borrowed or any other
liabilities individually in excess of $5,000 or, in the case of indebtedness
and/or liabilities individually less than $5,000, in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Except for agreements disclosed in the Memorandum, the
Company is not a party to and is not bound by any contract, agreement or
instrument, or subject to any restriction under its Certificate of Incorporation
or Bylaws, which materially adversely affects its business as now conducted or
as proposed to be conducted, its properties or its financial condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
4.19 Disclosure. The Company believes it has fully provided the
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Purchaser with all the information which the Purchaser has requested for
deciding whether to purchase the Common Stock and all information which the
Company believes is reasonably necessary to enable the Purchaser to make such
decision. Neither this Agreement nor any other statements or certificates made
or delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
4.20 Memorandum. The Company has presented to the Purchaser a copy of
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the Memorandum. The Memorandum has been prepared in good faith by the Company
and does not contain any untrue statement of a material fact nor does it omit to
state a material fact necessary to make the statements made therein not
misleading, except that
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with respect to projections contained in the Memorandum, the Company represents
only that such projections were prepared in good faith and that the Company
reasonably believes there is a reasonable basis for such projections.
4.21 Registration Rights. Except as provided in Section 6 of this
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Agreement and the Registration Rights Agreement attached as Exhibit II to the
Memorandum, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
4.22 Corporate Documents. The Certificate of Incorporation and Bylaws
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of the Company are in the form attached hereto as Exhibit D and Exhibit E,
respectively.
4.23 Title to Property and Assets. The Company owns its property and
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assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
4.24 Minute Books. The minute books of the Company and its
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subsidiaries provided to the Purchaser contain a complete summary of all
meetings of directors and stockholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
5. Representations, Warranties and Covenants of the Purchaser.
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As a material inducement to the Company to enter into this Agreement
and to sell and issue the Shares, the Purchaser represents, warrants and
covenants that the following statements are true and correct as of the date
hereof and will be materially true and correct at Close.
5.1 Domicile and Accredited Purchaser. The Purchaser is domiciled in
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the State of Connecticut, is a wholly-owned subsidiary of Executone Information
Systems, Inc., a Virginia corporation, and is an accredited investor as that
term is defined by Rule 501 under the 1933 Act.
5.2 Power and Authority. The Purchaser is duly organized, validly
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existing and in good standing under the laws of the State of Colorado, and has
taken all corporate and other action on the part of the Purchaser, as
applicable, necessary for the execution, delivery and consummation of the
transactions contemplated by this Agreement. Purchaser has full and absolute
right, power and authority and legal capacity to execute, deliver and perform
this Agreement and all other agreements contemplated hereby to be executed by
such Purchaser and, upon such execution, this Agreement and all such other
agreements will be the valid and binding obligation of Purchaser, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors rights generally.
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5.3 No Violation. The execution, delivery and performance of this
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Agreement and all other agreements contemplated hereby to be executed and
delivered by Purchaser, and the consummation of the transactions contemplated
hereby and thereby will not materially violate, with or without the giving of
notice or the lapse of time, or both, any provision of law applicable to
Purchaser and will not conflict with or result in the breach or termination of
any provision of, or constitute a default under, or give any person the right to
accelerate any material obligation under, or result in the creation of any lien,
security interest, charge or encumbrance upon any material properties, assets or
business of Purchaser, pursuant to the organizational or charter documents of
Purchaser, if any, or any indenture, mortgage, deed of trust, lien, lease or
other instrument or agreement or any order, judgment, arbitration award or
decree to which Purchaser is a party or by which Purchaser or any of its assets
and properties is or may be bound.
5.4 Acquisition for Investment. Purchaser is acquiring the Shares
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for its or its own account, for investment purposes only and not with a view to,
or for sale in connection with, a distribution, as that term is used in Section
2(11) of the 1933 Act thereof in a manner which would require registration under
the 1933 Act or any state securities laws.
5.5 Restrictive Legend. Purchaser understands that the Shares have
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not been registered under the 1933 Act, or the securities laws of any state, in
reliance upon exemption from registration for nonpublic offers and sales of
securities. Consequently, the right to transfer, sell, pledge or otherwise
dispose of the Shares will be limited by the 1933 Act and the rules thereunder.
Purchaser understands and acknowledges that the certificates evidencing the
Shares issued pursuant to this Agreement shall bear the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF A CURRENT AND
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT
TO SUCH SHARES, OR AN OPINION OF THE ISSUER'S COUNSEL TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT
or such other restrictive legend as counsel to the Company may reasonably deem
appropriate at the time of such issuance.
5.6 Confidentiality of Information. Purchaser agrees that any
------------------------------
information obtained by Purchaser pursuant to Section 3.1, 3.2 or 3.3 which is
proprietary to the Company or otherwise confidential, and clearly identified by
the Company as such, will not be disclosed without the prior written consent of
the Company. Provided, that Purchaser may disclose such information without the
prior written consent of the Company to its
-11-
partners, associates, representatives or employees for purposes of evaluating,
or otherwise taking action, in respect of its investment.
5.7 Speculative Nature and Risk. Purchaser understands and
---------------------------
acknowledges the speculative nature of and substantial risk of loss associated
with an investment in the Shares. Purchaser represents and warrants that the
Shares constitute an investment which is suitable and consistent with
Purchaser's financial condition and that Purchaser is able to bear the risks of
this investment for an indefinite period of time, which may include the total
loss of Purchaser's investment in the Company. Purchaser further represents
that Purchaser has adequate means of providing for Purchaser's current financial
needs and corporate contingencies and that there is no need for liquidity in
Purchaser's investment in the Shares and that Purchaser has sufficient financial
and business experience to evaluate the merits and risks of an investment in the
Company.
5.8 Independent Investigation and Advisors. Purchaser confirms that
--------------------------------------
(i) Purchaser has received, reviewed, understands and has fully considered for
purposes of Purchaser's acquisition of the Shares the Company's Memorandum and
organizational documents, (ii) Purchaser has been expressly offered the
opportunity to be provided a copy of and to review all reports, documents and
exhibits referenced therein and such other agreements, documents and information
as Purchaser deems necessary or appropriate in determining to make an investment
in the Company; (iii) the Company has limited financial resources and will need
sources of capital, in addition to the proceeds from the sale of the Shares
under this Agreement, to implement its current business plan, the availability
of which is uncertain and cannot be assured, and (iv) the Shares are highly
speculative investments with a high degree of risk of loss by Purchaser of his
investment therein. Purchaser represents and warrants that in making the
decision to acquire the Shares, it has relied upon its own independent
investigation of the Company and the independent investigations of the Company
by its representatives, including his own professional legal, tax, and business
advisors, and that Purchaser and its representatives have been given the
opportunity to examine all relevant documents and to ask questions of and to
receive answers from the Company, or person(s) acting on its behalf, concerning
the terms and conditions of acquisition by Purchaser of the Shares and any other
matters concerning an investment in the Company, and to obtain any additional
information Purchaser deems necessary or appropriate to verify the accuracy of
the information provided.
6. Registration Rights. To induce the Purchaser to purchase the Shares,
-------------------
the Company has agreed to provide registration rights with respect to the
Registrable Securities (as defined below) as set forth in this Section 6. The
Company hereby covenants and agrees as follows:
6.1 Definitions. As used in this Section 6, the following terms have
-----------
the meanings indicated:
"Demand Registration" has the meaning assigned such term in Section
6.3(a).
"Designated Holder" means each of the Holders and any transferee of
any of them to whom Registrable Securities have been transferred, other than a
transferee to whom
-12-
such securities have been transferred pursuant to a registration statement under
the 1933 Act or Rule 144 under the 1933 Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Inspector" has the meaning assigned such term in Section
6.6(a)(viii).
"Holders" means the Purchaser and any Person to whom Registrable
Securities are transferred by any of them.
"NASD" has the meaning assigned such term in Section 6.6(a)(xiv).
"Person" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, government (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Registrable Securities" mean each of the following: (a) the Shares,
(b) any shares of Common Stock issued pursuant to Section 4.14, and (c) any
shares of Common Stock issued or issuable to the Holders of the Shares by way of
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise and
shares of Common Stock issuable upon conversion, exercise or exchange thereof.
"Registration Expenses" has the meaning assigned to such term in
Section 6.5(d).
"SEC" means the Securities and Exchange Commission.
"Underwriter" has the meaning assigned such term in Section 6.3(e).
6.2 Securities Subject to this Agreement.
------------------------------------
(a) Registrable Securities. For the purposes of this Agreement,
----------------------
Registrable Securities will cease to be Registrable Securities when a
registration statement covering such Registrable Securities has been declared
effective under the 1933 Act by the SEC and such Registrable Securities have
been disposed of pursuant to such effective registration statement.
(b) Holders of Registrable Securities. A Person is deemed to be a
---------------------------------
holder of Registrable Securities whenever such Person owns of record Registrable
Securities, or holds an option to purchase, or a security convertible into or
exercisable or exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected and disregarding any legal
restrictions upon the exercise of such rights. If the Company receives
conflicting instructions, notices or elections from two or more persons with
respect to the same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the registered owner of
such Registrable
-13-
Securities. Registrable Securities issuable upon exercise of an option or upon
conversion of another security shall be deemed outstanding for the purposes of
this Agreement.
6.3 Demand Registration.
-------------------
(a) Request for Demand Registration. At any time during the eighteen
-------------------------------
(18) month period commencing six (6) months from the initial Close, subject to
extension as provided in Section 6.5 hereof, the Holders holding more than 50%
of the Registrable Securities then held by all of the Holders may make a written
request for registration (such Designated Holders making such request being
deemed to be "Initiating Holders") of Registrable Securities under the 1933 Act,
and under the securities or blue sky laws of any jurisdiction reasonably
designated by such holder or holders (a "Demand Registration"); provided, the
Company will not be required to effect more than two (2) Demand Registrations at
the request of the Holders pursuant to this Section 6.3. Such request for a
Demand Registration shall specify the amount of the Registrable Securities
proposed to be sold, the intended method of disposition thereof and the
jurisdictions in which registration is desired. Upon a request for a Demand
Registration, the Company shall promptly take such steps as are necessary or
appropriate to prepare for the registration of the Registrable Securities to be
registered. Within 15 days after the receipt of such request, the Company shall
give written notice thereof to all other Designated Holders holding Registrable
Securities (the "Non-Initiating Holders") and include in such registration all
Registrable Securities held by a Designated Holder with respect to which the
Company has received written requests for inclusion therein within 15 days of
the receipt by such Designated Holder of such written notice. Each such request
shall specify the number of Registrable Securities to be registered, the
intended method of disposition thereof and the jurisdictions in which
registration is desired. Unless Designated Holders holding the majority of the
Registrable Securities to be included in the Demand Registration consent in
writing, no other party, including the Company (but not including any other
Designated Holder), shall be permitted to offer securities under any such Demand
Registration.
(b) Effective Demand Registration. A registration shall not constitute
-----------------------------
a Demand Registration until it has become effective and remains continuously
effective until the earlier of (i) the date of sale of all Registrable
Securities registered thereunder or (ii) 90 days from the effective date. The
Company shall use its best efforts to cause any such Demand Registration to
become effective not later than 90 days after it receives a request under
Section 3(a) hereof.
(c) Expenses. The Company shall pay all Registration Expenses (other
--------
than underwriting discounts and commissions) in connection therewith, whether or
not such Demand Registration becomes effective; provided, however, that each
Designated Holder participating in such Demand Registration shall bear the costs
of its own legal counsel.
(d) Underwriting Procedures. If Initiating Holders holding a majority
-----------------------
of the Registrable Securities held by all such Initiating Holders so elect, the
offering of such Registrable Securities pursuant to such Demand Registration
shall be in the form of a firm commitment underwritten offering and the managing
underwriter or underwriters selected for such offering shall be the Underwriter
selected in accordance with Section 6.3(e). In
-14-
such event, if the Underwriter advises the Company in writing that in its
opinion the aggregate amount of such Registrable Securities requested to be
included in such offering is sufficiently large to have a material adverse
affect on the success of such offering, the Company shall include in such
registration only the aggregate amount of Registrable Securities that in the
opinion of the Underwriter may be sold without any such material adverse affect
and shall reduce, first as to any stockholders who are the Non-Initiating
Holders as a group and then as to the Initiating Holders as a group, pro rata
within each group based on the number of Registrable Securities included in the
request for Demand Registration, the amount of Registrable Securities to be
included by each Designated Holder in such registration.
(e) Selection of Underwriters. If any Demand Registration of
-------------------------
Registrable Securities is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable Securities held by all
such Initiating Holders shall, in their discretion, select and obtain an
investment banking firm to act as the managing underwriter of the offering (the
"Underwriter"), subject to approval by the Company which shall not be
unreasonably withheld.
6.4 Piggy-Back Registration.
-----------------------
(a) Piggy-Back Rights. If the Company proposes to file a registration
-----------------
statement under the Act, other than pursuant to Section 6.3 hereof, with respect
to an offering by the Company for its own account of any class of security
(other than a registration statement on Form S-4 or S-8 or any successor or
other forms not available for registering capital stock for sale to the public),
then the Company shall give written notice of such proposed filing to each of
the Designated Holders of Registrable Securities at least 30 days before the
anticipated filing date, and such notice shall describe in detail the proposed
registration and distribution (including those jurisdictions where registration
under the securities or blue sky laws is intended) and offer such Designated
Holders the opportunity to register the number of Registrable Securities as each
such holder may request. The Company shall use its best efforts (within ten
days of the notice provided for in the preceding sentence) to cause the managing
underwriter or underwriters of a proposed underwritten offering (the "Company
Underwriter") to permit the Designated Holders of Registrable Securities who
have requested to participate in the registration for such offering to include
such Registrable Securities in such offering on the same terms and conditions as
the securities of the Company included therein. Notwithstanding the foregoing,
if the Company Underwriter delivers a written opinion to the Designated Holders
of Registrable Securities that the total amount or kind of securities which
they, the Company and any other persons or entities intend to include in such
offering (the "Total Securities") is sufficiently large so as to have a material
adverse effect on the distribution of the Total Securities, then the amount or
kind of securities to be offered for the account of such Designated Holders and
such other persons or entities (other than the Company) shall be reduced pro
rata to the extent necessary to reduce the Total Securities to the amount
recommended by the Company Underwriter. Unless waived by a Designated Holder in
writing, each Designated Holder shall have the right to participate pro rata
based upon the proportion of the Registrable Securities held by them bears to
all Registrable Securities.
-15-
6.5 Holdback Agreements and Termination.
-----------------------------------
(a) Delay of Rights Under Special Circumstances. Upon receipt by the
-------------------------------------------
Company of a request for Demand Registration pursuant to Section 6.3(a) hereof,
the Company shall have the right, in the event that the Company is then engaged
in business negotiations which would be materially adversely affected by a
Demand Registration, or any other material business development or event has
occurred which the Company believes in its reasonable judgment would be
adversely affected by a Demand Registration, to delay the effectiveness of such
request by the Initiating Holders for a period of up to 120 days; provided,
however, that this right may only be exercised by the Company on one occasion.
The Company shall exercise the foregoing delay right by delivering to the
Initiating Holders, within 15 days after the receipt of such request, a written
notice attesting to the necessity of such a delay.
(b) Restrictions on Demands by Designated Holders and Termination of
----------------------------------------------------------------
Demand Rights. Each Designated Holder of Registrable Securities agrees that the
-------------
right to request a Demand Registration shall be suspended for a period of up to
180 days commencing upon the date the Company executes a letter of intent with
an underwriter for a firm commitment underwritten public offering of its
securities having an aggregate offering price of not less than $5,000,000,
provided that a registration statement with respect to such offering is filed by
the Company with the SEC within 45 days from the date of execution of such
letter of intent. The foregoing suspension of the rights of the Holders will
cease if such registration statement is not declared effective by the SEC within
60 days of the filing thereof.
6.6 Registration Procedures.
-----------------------
(a) Obligations of the Company. Whenever registration of Registrable
--------------------------
Securities has been requested pursuant to Sections 6.3 or 6.4 of this Agreement,
the Company shall use its best efforts to effect the registration and sale of
such Registrable Securities in accordance with the intended method of
distribution thereof as quickly as practicable, and in connection with any such
request, the Company shall, as expeditiously as possible:
(i) diligently use its best efforts to prepare and file with the
SEC a registration statement on any form for which the Company then qualifies of
which counsel for the Company shall deem appropriate and which form shall be
available for the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and use its best efforts to cause such
registration statement to become effective; provided, however, that before
filing a registration statement or prospectus or any amendments or supplements
thereto, the Company shall (A) provide counsel selected by the Designated
Holders holding a majority of the Registrable Securities being registered in
such registration ("Holders' Counsel") and any other Inspector (as hereinafter
defined) with an adequate and appropriate opportunity to participate in the
preparation of such registration statement and each prospectus included therein
(and each amendment or supplement thereto) to be filed with the SEC, which
documents shall be subject to the review of Holders' Counsel, and (B)
-16-
notify the Holders' Counsel and each seller of Registrable Securities of any
stop order issued or threatened by the SEC and take all reasonable action
required to prevent the entry of such stop order or to remove it if entered;
(ii) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 90 days, or such shorter period which will terminate when all
Registrable Securities covered by such registration statement have been sold,
and comply with the provisions of the 1933 Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(iii) as soon as reasonably possible, furnish to each seller of
Registrable Securities, prior to filing a registration statement, copies of such
registration statement as is proposed to be filed, and thereafter such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller of Registrable Securities reasonably requests, and to continue such
qualification in effect in such jurisdiction for as long as is permissible
pursuant to the laws of such jurisdiction, or for as long as any such seller
requests or until all of such Registrable Securities are sold, whichever is
shortest, and do any and all other acts and things which may be reasonably
necessary or advisable to enable any such seller to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such seller;
provided, however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6.6(a)(iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of process
in any such jurisdiction;
(v) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers of
Registrable Securities to consummate the disposition of such Registrable
Securities;
(vi) notify each seller of Registrable Securities at any time when
a prospectus relating thereto is required to be delivered under the 1933 Act,
upon discovery that, or upon the happening of any event as a result of which,
the prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any 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, and the
-17-
Company shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, after delivery to the
purchasers of such Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any 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;
(vii) enter into and perform customary agreements (including an
underwriting agreement in customary form with the Underwriter, if any, selected
as provided in Sections 6.3 or 6.4) and take such other actions as are prudent
and reasonably required in order to expedite or facilitate the disposition of
such Registrable Securities;
(viii) make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition pursuant
to such registration statement, Holders' Counsel and any attorney, accountant or
other agent retained by any such seller or any managing underwriter (each, an
"Inspector" and collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company and its
subsidiaries (collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries, officers, directors and employees, and the
independent public accountants of the Company, to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (A) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the registration
statement, (B) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction, or (C) the information in
such records has been made generally available to the public other than through
a breach of the confidentiality requirement set forth above. Each Seller of
Registrable Securities agrees that it shall, upon learning that disclosure of
such Records is required by any court of competent jurisdiction, give notice to
the Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten offering, use its
best efforts to obtain a "cold comfort" letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by "cold comfort" letters as Holders' Counsel or the
managing underwriter reasonably request;
(x) use its best efforts to furnish, at the request of any seller
of Registrable Securities on the date such securities are delivered to the
underwriters for sale pursuant to such registration or, if such securities are
not being sold through underwriters, on the date the registration statement with
respect to such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such request,
covering such legal matters with respect to the registration in respect of which
such opinion
-18-
is being given as such seller may reasonably request and are customarily
included in such opinions;
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable but no later than 15 months after the
effective date of the registration statement, an earnings statement covering a
period of 12 months beginning after the effective date of the registration
statement, in a manner which satisfies the provisions of Section 6.11(a) of the
1933 Act;
(xii) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed, provided, that the applicable listing requirements are satisfied;
(xiii) keep each seller of Registrable Securities advised in
writing as to the initiation and progress of any registration under Sections 6.3
or 6.4 hereunder;
(xiv) cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD"); and
(xv) use best efforts to take all other steps necessary to
effect the registration of the Registrable Securities contemplated hereby.
(b) Seller Information The Company may require each seller of
------------------
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
(c) Notice to Discontinue. Each Designated Holder of Registrable
---------------------
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6.6(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6.6(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such registration statement shall be maintained effective pursuant to this
Agreement (including without limitation the period referred to in Section
6.6(a)(ii)) by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6.6(a)(vi) to and including the
date when the Designated Holder shall have received the copies of the
supplemented or amended prospectus contemplated by and meeting the requirements
of Section 6.6(a)(vi).
-19-
(d) Registration Expenses. The Company shall pay all expenses (other
---------------------
than as set forth in Section 6.3(c)) arising from or incident to the performance
of, or compliance with, this Agreement, including without limitation, (i) SEC,
stock exchange and NASD registration and filing fees, (ii) all fees and expenses
incurred in complying with securities or blue sky laws (including reasonable
fees, charges and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) the fees, charges and disbursements of counsel to the
Company and of its independent public accountants and any other accounting and
legal fees, charges and expenses incurred by the Company (including without
limitation any expenses arising from any special audits incident to or required
by any registration or qualification), and (v) any liability insurance or other
premiums for insurance obtained (which insurance the Company agrees to use its
best efforts to obtain upon the reasonable request of any seller of Registrable
Securities) retained in connection with any Demand Registration or piggy-back
registration pursuant to the terms of this Agreement, regardless of whether such
registration statement is declared effective. All of the expenses described in
this Section 6.5 are referred to herein as "Registration Expenses."
6.7 Indemnification; Contribution
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify,
------------------------------
to the fullest extent permitted by law, each Designated Holder, its officers,
directors, partners, employees, advisors and agents and each Person who controls
(within the meaning of the 1933 Act or the Exchange Act) such Designated Holder
from and against any and all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue, or allegedly untrue, statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus or notification or
offering circular (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or arising out of or based upon
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,
except insofar as the same are caused by or contained in any information
furnished in writing to the Company by such Designated Holder expressly for use
therein. The Company shall also indemnify any underwriters of the Registrable
Securities, their officers, directors and employees and each Person who controls
such underwriters (within the meaning of the 1933 Act and the Exchange Act) to
the same extent as provided above with respect to the indemnification of the
Designated Holders of Registrable Securities.
(b) Indemnification by Designated Holders. In connection with any
-------------------------------------
registration statement in which a Designated Holder is participating pursuant to
Sections 6.3 or 6.4 hereof, each such Designated Holder shall furnish to the
Company in writing such information with respect to such Designated Holder as
the Company may reasonably request or as may be required by law for use in
connection with any such registration statement or prospectus and each
Designated Holder agrees to indemnify, to the fullest extent permitted by law,
the Company, any underwriter retained by the Company and their respective
directors, officers, employees and each Person who controls the Company or such
underwriter (within the meaning of the 1933 Act and the Exchange Act) to the
same extent as the foregoing indemnity from the Company to the Designated
Holders, but only
-20-
with respect to any such information furnished in writing by such Designated
Holder; provided, however, that the total amount to be indemnified by such
Designated Holder pursuant to this Section 6.7(b) shall be limited to the net
proceeds received by such Designated Holder in the offering to which the
registration statement or prospectus relates.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder (the "Indemnification Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, that the failure to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment, (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (A) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (B) there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnifying
Party. In either of such cases the Indemnifying Party shall not have the right
to assume the defense of such action on behalf of such Indemnified Party. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this Section
------------
6.7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder
in respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the 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, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative faults of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
-21-
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in Sections 6.7(a), 6.7(b) and 6.7(c), any legal or
other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it would
not be just and equitable if contribution pursuant to this Section 6.7(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person.
6.8 Rule 144. The Company covenants that, from and after the date that
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the Company has a class of equity securities registered under the Exchange Act,
it shall (i) file any reports required to be filed by it under the Exchange Act
and the rules and regulations adopted by the SEC thereunder; and (ii) take such
further action as each Designated Holder of Registrable Securities may
reasonably request (including providing any information necessary to comply with
Rules 144 and 144A under the 1933 Act), all to the extent required from time to
time to enable such Designated Holder to sell Registrable Securities without
registration under the 1933 Act within the limitation of the exemptions provided
by (a) Rule 144 or Rule 144A under the 1933 Act, as such rules may be amended
from time to time, or (b) any similar rules or regulations hereafter adopted by
the SEC. The Company shall, upon the request of any Designated Holder of
Registrable Securities, deliver to such Designated Holder a written statement as
to whether it has complied with such requirements.
7. Miscellaneous.
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7.1 Survival of Representations. All representations, warranties and
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agreements contained herein or made in writing by the Company and the Purchaser
in connection with the transactions contemplated hereby except any
representation, warranty or agreement as to which compliance may have been
appropriately waived, shall survive the execution and delivery of this Agreement
and continue for a period of two years from the date of the Close, at which time
all representations, warranties and agreements hereunder shall expire.
7.2 Waiver of Conditions. At any time or times during the term
--------------------
hereof, the Company may waive fulfillment of any one or more of the conditions
to its obligations in whole or in part, and the Purchaser may waive fulfillment
of any one or more of the foregoing conditions to their obligation, in whole or
in part, by delivering to the other party a written waiver or waivers of
fulfillment thereof to the extent specified in such written waiver or waivers.
7.3 Partial Invalidity. If any term, covenant or condition of this
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Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
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7.4 Notices. Any notices relating to this Agreement shall be deemed
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sufficiently given and served for all purposes if given by a telegram filed,
charges prepaid, or a writing deposited in the United States mail, postage
prepaid and registered or certified within the United States, addressed as
follows:
If to the Company:
Internet Gaming Technologies, Inc.
0000 Xxx Xxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
If to the Purchaser:
Unistar Entertainment, Inc.
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Executive Vice President
7.5 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of the parties hereto
and no right or liability or obligation arising hereunder may be assigned by any
party hereto.
7.6 Law Governing. This Agreement shall be construed and interpreted
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in accordance with and governed and enforced in all respects by the laws of the
State of California.
7.7 Headings. The section, subsection and paragraph headings
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throughout this Agreement are for convenience and reference only, and the words
contained therein shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement.
7.8 Counterparts. This Agreement may be executed in any number of
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counterparts, each signed by different persons and all of said counterparts
together shall constitute one and the same instrument, and such instrument shall
be deemed to have been made, executed and delivered on the date first
hereinabove written, irrespective of the time or times when the same or any
counterparts thereof actually may have been executed and delivered a counterpart
thereof to the Company and the Purchaser.
-23-
7.9 Entire Agreement. This Agreement and the exhibits contain the
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entire agreement of the parties hereto and may not be modified, altered or
changed in any manner whatsoever, except by a written agreement signed by the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
INTERNET GAMING TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx, Chief Executive Officer
UNISTAR ENTERTAINMENT, INC.,
a Colorado corporation
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, Executive Vice President
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EXHIBIT C
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Company Disclosure Schedule
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Sections 4.6 and 4.17
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Pursuant to its letter to the Company dated August 8, 1996, International
Game Technology, a Nevada corporation, claims that the Company's use of the name
"Internet Gaming Technologies" and the initials "IGT" infringes on certain
trademarks held by International Game Technology.
Section 4.10
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The Company's wholly-owned subsidiary, Emerald Riviera, Ltd., an Irish
corporation, has entered into two (2) agreements with CWH, namely a Nonexclusive
License Agreement effective as of May 1, 1996 ("License Agreement") and an
Amended and Restated Operating, Revenue Sharing, and Management Services
Agreement effective as of May 16, 1996 ("Operating Agreement"). Article III of
the License Agreement and Article II.2 of the Operating Agreement contains
certain conditions precedent to the enforcement of the duties of CWH thereunder
which as of the date of this Agreement have not been satisfied by the Licensee,
including:
A. Licensee's obligation to obtain a gaming license as provided in
Section 3.1.5 of the License Agreement and Section II.2.4 of the
Operating Agreement.
B. Licensee's deposit of U.S. $1,000,000 in a financial institution to
serve as the gaming bankroll as provided in Section 3.1.3 of the
License Agreement and Section II.2.5 of the Operating Agreement.
C. Licensee's commitment of U.S. $2,000,000 to a marketing plan as
required by Section 3.1.4 of the License Agreement and Section II. 2.6
of the Operating Agreement.
