FORM OF REPRESENTATIVES' OPTION AGREEMENT
THE OPTIONS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. HOWEVER, NEITHER THE OPTIONS NOR SUCH SHARES MAY BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE AMENDMENT TO SUCH
REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION STATEMENT UNDER SUCH
ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THE TRANSFER OF THIS OPTION IS
RESTRICTED AS DESCRIBED HEREIN.
INTERNATIONAL SPORTS WAGERING INC.
Option for the Purchase of Shares of Common Stock,
par value $.001 per Share
No. __ [150,000] Shares
THIS CERTIFIES that, for receipt in hand of [$150.00] and other value
received, ____________________________, ____________________________________
(the "Holder"), is entitled to subscribe for and purchase from International
Sports Wagering Inc., a Delaware corporation (the "Company"), upon the terms and
conditions set forth herein, at any time or from time to time after [effective
date], and before 5:00 P.M. on [five years after effective date], New York time
(the "Exercise Period"), [150,000] shares (the "Option Shares") of the Company's
Common Stock, par value $.001 per share (the "Common Stock"), at a price of
$_____ per Share (the "Exercise Price"). This Option is the option or one of
the options (collectively, including any options issued upon the exercise or
transfer of any such options in whole or in part, the "Options") issued pursuant
to the Underwriting Agreement, dated __________, between the Company and
Barington Capital Group, L.P. and GKN Securities Corp., as representatives of
the several Underwriters named therein. As used herein the term "this Option"
shall mean and include this Option and any Option or Options hereafter issued as
a consequence of the exercise or transfer of this Option in whole or in part.
This Option may not be sold, transferred, assigned or hypothecated until [one
year after the effective date] except that it may be transferred, in whole or in
part, to (i) one or more officers or partners of the Holder (or the officers or
partners of any such partner); (ii) any other underwriting firm or member of the
selling group which participated in the public offering of Common Stock which
commenced on [effective date] (or the officers or partners of any such firm);
(iii) a successor to the Holder, or the officers or partners of such successor;
(iv) a purchaser of substantially all of the assets of the Holder; or (v) by
operation of law; and the term
the "Holder" as used herein shall include any transferee to whom this Option has
been transferred in accordance with the above.
The number of shares of Common Stock issuable upon exercise of the
Option (the "Option Shares") and the Exercise Price may be adjusted from time to
time as hereinafter set forth.
1. This Option may be exercised during the Exercise Period, as to the
whole or any lesser number of whole Option Shares, by the surrender of this
Option (with the election at the end hereof duly executed) to the Company at its
office at 000 Xxxxx Xxxxx Xxxx, Xxxxxx Xxxxx, Xxx Xxxxxx 00000, or at such other
place as is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Option Shares for which this
Option is being exercised (the "Stock Purchase Price").
2. (a) In lieu of the payment of the Stock Purchase Price, the
Holder shall have the right (but not the obligation), to require the Company to
convert this Option, in whole or in part, into shares of Common Stock (the
"Conversion Right") as provided for in this Section 2. Upon exercise of the
Conversion Right, the Company shall deliver to the Holder (without payment by
the Holder of any of the Stock Purchase Price) that number of shares of Common
Stock (the "Conversion Shares") equal to the quotient obtained by dividing (x)
the value of this Option (or portion thereof as to which the Conversion Right is
being exercised if the Conversion Right is being exercised in part) at the time
the Conversion Right is exercised (determined by subtracting the aggregate Stock
Purchase Price of the shares of Common Stock as to which the Conversion Right is
being exercised in effect immediately prior to the exercise of the Conversion
Right from the aggregate Current Market Price (as defined in Section 6(e)
hereof) of the shares of Common Stock as to which the Conversion Right is being
exercised) by (y) the Current Market Price of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Rights provided under this Section 2 may be
exercised in whole or in part and at any time and from time to time while any
Options remain outstanding. In order to exercise the Conversion Right, the
Holder shall surrender to the Company, at its offices, this Option with the
Notice of Conversion at the end hereof duly executed. The presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay all or any
portion of the aggregate purchase price payable for the shares of Common Stock
as to which such Conversion Right is being exercised. This Option (or so much
thereof as shall have been surrendered for conversion) shall be deemed to have
been converted immediately prior to the close of business on the day of
surrender of such Option for conversion in accordance with the foregoing
provisions.
3. Upon each exercise of the Holder's rights to purchase Option
Shares or Conversion Shares, the Holder shall be deemed to be the holder of
record of the Option Shares or Conversion Shares issuable upon such exercise or
conversion, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Option Shares or Conversion Shares
shall not then have been actually delivered to the Holder. As soon as
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practicable after each such exercise or conversion of this Option, the Company
shall issue and deliver to the Holder a certificate or certificates for the
Option Shares or Conversion Shares issuable upon such exercise or conversion,
registered in the name of the Holder or its designee. If this Option should be
exercised or converted in part only, the Company shall, upon surrender of this
Option for cancellation, execute and deliver a new Option evidencing the right
of the Holder to purchase the balance of the Option Shares (or portions thereof)
subject to purchase hereunder.
4. Any Options issued upon the transfer or exercise or conversion in
part of this Option shall be numbered and shall be registered in a Option
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Option on the Option Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Option on the part of any other person, and
shall not be liable for any registration or transfer of Options which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Option shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Option or Options to the person
entitled thereto. This Option may be exchanged, at the option of the Holder
thereof, for another Option, or other Options of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Option Shares (or portions thereof), upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Options to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations thereunder.
5. The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of providing
for the exercise of the rights to purchase all Option Shares and/or Conversion
Shares granted pursuant to the Options, such number of shares of Common Stock as
shall, from time to time, be sufficient therefor. The Company covenants that
all shares of Common Stock issuable upon exercise of this Option, upon receipt
by the Company of the full Exercise Price therefor, and all shares of Common
Stock issuable upon conversion of this Option, shall be validly issued, fully
paid, nonassessable, and free of preemptive rights.
6. (a) In case the Company shall at any time after the date the
Options were first issued (i) declare a dividend on the outstanding Common Stock
payable in shares of its capital stock, (ii) subdivide the outstanding Common
Stock, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock by reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then, in each case, the Exercise Price,
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and the number and kind of securities issuable upon exercise or conversion of
this Option, in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, or reclassification, shall
be proportionately adjusted so that the Holder after such time shall be entitled
to receive the aggregate number and kind of shares which, if such Option had
been exercised or converted immediately prior to such time, he would have owned
upon such exercise or conversion and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, warrants, or options to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion or
exchange price per share, if a security convertible into or exchangeable for
Common Stock) less than the Current Market Price per share of Common Stock on
such record date, then, in each case, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so to be offered (or the aggregate initial conversion or exchange price of the
convertible or exchangeable securities so to be offered) would purchase at such
Current Market Price and the denominator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable). Such adjustment shall become effective at the
close of business on such record date; PROVIDED, HOWEVER, that, to the extent
the shares of Common Stock (or securities convertible into or exchangeable for
shares of Common Stock) are not delivered, the Exercise Price shall be
readjusted after the expiration of such rights, options, or warrants (but only
with respect to Options exercised after such expiration), to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights, options, or warrants been made upon the basis of delivery of only the
number of shares of Common Stock (or securities convertible into or exchangeable
for shares of Common Stock) actually issued. In case any subscription price may
be paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the account
of the Company or any majority-owned subsidiary shall not be deemed outstanding
for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other than cash
dividends or distributions and dividends payable in shares of Common Stock), or
rights, options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for shares of Common Stock
(excluding those with respect to the issuance of which an adjustment of the
Exercise Price is provided pursuant to Section 6(b) hereof),
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then, in each case, the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such distribution by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on such record date, less the fair market value (as determined in
good faith by the board of directors of the Company, whose determination shall
be conclusive absent manifest error) of the portion of the evidences of
indebtedness or assets so to be distributed, or of such rights, options, or
warrants or convertible or exchangeable securities, applicable to one share, and
the denominator of which shall be such Current Market Price per share of Common
Stock. Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the record date for the determination of
stockholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or securities
convertible into or exchangeable for Common Stock (excluding shares, rights,
options, warrants, or convertible or exchangeable securities, issued or issuable
(i) in any of the transactions with respect to which an adjustment of the
Exercise Price is provided pursuant to Sections 6(a), 6(b), or 6(c) above, (ii)
upon any issuance of securities pursuant to the Underwriting Agreement,
(Iii) upon exercise of the Options, or (iv) upon the grant of options to
purchase 1,467,398 shares of Common Stock pursuant to the Company's existing
stock option plans), at a price per share (determined, in the case of such
rights, options, warrants, or convertible or exchangeable securities, by
dividing (x) the total amount received or receivable by the Company in
consideration of the sale and issuance of such rights, options, warrants, or
convertible or exchangeable securities, plus the minimum aggregate consideration
payable to the Company upon exercise, conversion, or exchange thereof, by
(y) the maximum number of shares covered by such rights, options, warrants, or
convertible or exchangeable securities) lower than the Current Market Price per
share of Common Stock in effect immediately prior to such issuance, then the
Exercise Price shall be reduced on the date of such issuance to a price
(calculated to the nearest cent) determined by multiplying the Exercise Price in
effect immediately prior to such issuance by a fraction, (iii) the numerator of
which shall be an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issuance plus (B) the quotient
obtained by dividing the consideration received by the Company upon such
issuance by such Current Market Price, and (iv) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
issuance. For the purposes of such adjustments, the maximum number of shares
which the holders of any such rights, options, warrants, or convertible or
exchangeable securities, shall be entitled to initially subscribe for or
purchase or convert or exchange such securities into shall be deemed to be
issued and outstanding as of the date of such issuance, and the consideration
received by the Company therefor shall be deemed to be the consideration
received by the Company for such rights, options, warrants, or convertible or
exchangeable securities, plus the minimum aggregate consideration or premiums
stated in such rights, options, warrants, or convertible or exchangeable
securities, to be paid for the shares covered thereby. No further adjustment of
the Exercise Price shall be made as a result of the actual issuance of shares of
Common Stock on exercise of such rights, options, or warrants, or on conversion
or exchange of such convertible or exchangeable securities. On the expiration
or the termination of such rights, options, or warrants, or the termination of
such right to convert or exchange, the Exercise Price shall forthwith be
readjusted (but only with respect to
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Options exercised or converted after such expiration or termination) to such
Exercise Price as would have obtained had the adjustments made upon the issuance
of such rights, options, warrants, or convertible or exchangeable securities,
been made upon the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such rights, options, or warrants,
or upon the conversion or exchange of any such securities; and on any change of
the number of shares of Common Stock deliverable upon the exercise of any such
rights, options, or warrants or conversion, or exchange of such convertible or
exchangeable securities, or any change in the consideration to be received by
the Company upon such exercise, conversion, or exchange, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Exercise Price, as then in effect, shall forthwith be readjusted (but only with
respect to Options exercised or converted after such change) to such Exercise
Price as would have been obtained had an adjustment been made upon the issuance
of such rights, options, or warrants not exercised prior to such change, or
securities not converted or exchanged prior to such change, on the basis of such
change. In case the Company shall issue shares of Common Stock or any such
rights, options, warrants, or convertible or exchangeable securities, for a
consideration consisting, in whole or in part, of property other than cash or
its equivalent, then the "price per share" and the "consideration received by
the Company" for purposes of the first sentence of this Section 6(d) shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
(e) For the purpose of any computation under this Section 6, the
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices for the 30 consecutive trading days
immediately preceding the date in question. The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sale takes place on such day, the closing bid price regular way, in either case
on the principal national securities exchange (including, for purposes hereof,
the NASDAQ National Market System) on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to trading
on any national securities exchange, the highest reported bid price for the
Common Stock as furnished by the National Association of Securities Dealers,
Inc. through NASDAQ or a similar organization if NASDAQ is no longer reporting
such information. If on any such date the Common Stock is not listed or
admitted to trading on any national securities exchange and is not quoted by
NASDAQ or any similar organization, the fair value of a share of Common Stock
on such date, as determined in good faith by the board of directors of the
Company, whose determination shall be conclusive absent manifest error, shall be
used.
(f) No adjustment in the Exercise Price shall be required if such
adjustment is less than $.05; PROVIDED, HOWEVER, that any adjustments which by
reason of this Section 6 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or to the nearest
one-thousandth of a share, as the case may be.
(g) In any case in which this Section 6 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect
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to defer, until the occurrence of such event, issuing to the Holder, if the
Holder exercised or converted this Option after such record date, the shares of
Common Stock, if any, issuable upon such exercise or conversion over and above
the shares of Common Stock, if any, issuable upon such exercise or conversion on
the basis of the Exercise Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to the Holder a due xxxx or other
appropriate instrument evidencing the Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(h) Upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 6(b), 6(c), or 6(d) hereof, this Option shall
thereafter evidence the right to purchase, at the adjusted Exercise Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (i)
the product obtained by multiplying the number of shares purchasable upon
exercise of this Option prior to adjustment of the number of shares by the
Exercise Price in effect prior to adjustment of the Exercise Price, by (ii) the
Exercise Price in effect after such adjustment of the Exercise Price.
(i) Whenever there shall be an adjustment as provided in this Section
6, the Company shall promptly cause written notice thereof to be sent by
registered mail, postage prepaid, to the Holder, at its address as it shall
appear in the Option Register, which notice shall be accompanied by an officer's
certificate setting forth the number of Option Shares purchasable upon the
exercise of this Option and the Exercise Price after such adjustment and setting
forth a brief statement of the facts requiring such adjustment and the
computation thereof, which officer's certificate shall be conclusive evidence of
the correctness of any such adjustment absent manifest error.
(j) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise or
conversion of this Option. If any fraction of a share would be issuable on the
exercise or conversion of this Option (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the same
fraction of the Current Market Price of such share of Common Stock on the date
of exercise or conversion of this Option.
7. (a) In case of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation), or in case of any sale,
lease, or conveyance to another corporation of the property and assets of any
nature of the Company as an entirety or substantially as an entirety, such
successor, leasing, or purchasing corporation, as the case may be, shall (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise or conversion of this Option solely
the kind and amount of shares of stock and other securities, property, cash, or
any combination thereof receivable upon such consolidation, merger, sale, lease,
or conveyance by a holder of the number of shares of Common Stock for which this
Option might have been exercised or converted immediately prior to such
consolidation, merger, sale, lease, or conveyance, and (ii) make effective
provision in its certificate of incorporation or
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otherwise, if necessary, to effect such agreement. Such agreement shall provide
for adjustments which shall be as nearly equivalent as practicable to the
adjustments in Section 6.
(b) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise or conversion of the Option (other than a change in
par value or from no par value to a specified par value, or as a result of a
subdivision or combination, but including any change in the shares into two or
more classes or series of shares), or in case of any consolidation or merger of
another corporation into the Company in which the Company is the continuing
corporation and in which there is a reclassification or change (including a
change to the right to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from no par value to a specified par
value, or as a result of a subdivision or combination, but including any change
in the shares into two or more classes or series of shares), the Holder shall
have the right thereafter to receive upon exercise or conversion of this Option
solely the kind and amount of shares of stock and other securities, property,
cash, or any combination thereof receivable upon such reclassification, change,
consolidation, or merger by a holder of the number of shares of Common Stock for
which this Option might have been exercised or converted immediately prior to
such reclassification, change, consolidation, or merger. Thereafter,
appropriate provision shall be made for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 6.
(c) The above provisions of this Section 7 shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales, leases, or conveyances.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on shares of
Common Stock in shares of Common Stock or make any other distribution
(other than regularly scheduled cash dividends which are not in a greater
amount per share than the most recent such cash dividend) to all holders of
Common Stock; or
(b) to issue any rights, warrants, or other securities to all
holders of Common Stock entitling them to purchase any additional shares of
Common Stock or any other rights, warrants, or other securities; or
(c) to effect any reclassification or change of outstanding
shares of Common Stock, or any consolidation, merger, sale, lease, or
conveyance of property, described in Section 7; or
(d) to effect any liquidation, dissolution, or winding-up of
the Company; or
(e) to take any other action which would cause an adjustment to
the Exercise Price;
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then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Option Register, mailed at least 15
days prior to (i) the date as of which the holders of record of shares of Common
Stock to be entitled to receive any such dividend, distribution, rights,
warrants, or other securities are to be determined, (ii) the date on which any
such reclassification, change of outstanding shares of Common Stock,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up is expected to become effective, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up, or (iii) the date of such action which would require
an adjustment to the Exercise Price.
9. The issuance of any shares or other securities upon the exercise
or conversion of this Option, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made without
charge to the Holder for any tax or other charge in respect of such issuance.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of any certificate
in a name other than that of the Holder and the Company shall not be required to
issue or deliver any such certificate unless and until the person or persons
requesting the issue thereof shall have paid to the Company the amount of such
tax or shall have established to the satisfaction of the Company that such tax
has been paid.
10. (a) If, at any time during the seven-year period commencing upon
completion of the Company's initial public offering, the Company shall file a
registration statement (other than on Form X-0, Xxxx X-0, or any successor form)
with the Securities and Exchange Commission (the "Commission") while any
Underwriters' Securities (as hereinafter defined) are outstanding, the Company
shall give all the then holders of any Underwriters' Securities (the "Eligible
Holders") at least 45 days prior written notice of the filing of such
registration statement. If requested by any Eligible Holder in writing within
30 days after receipt of any such notice, the Company shall, at the Company's
sole expense (other than the fees and disbursements of counsel for the Eligible
Holders and the underwriting discounts, if any, payable in respect of the
Underwriters' Securities sold by any Eligible Holder), register or qualify all
or, at each Eligible Holder's option, any portion of the Underwriters'
Securities of any Eligible Holders who shall have made such request,
concurrently with the registration of such other securities, all to the extent
requisite to permit the public offering and sale of the Underwriters' Securities
through the facilities of all appropriate securities exchanges and the
over-the-counter market, and will use its best efforts through its officers,
directors, auditors, and counsel to cause such registration statement to become
effective as promptly as practicable. Notwithstanding the foregoing, if the
managing underwriter of any such offering shall advise the Company in writing
that, in its opinion, the distribution of all or a portion of the Underwriters'
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by the Company for its own account, then any
Eligible Holder who shall have requested registration of his or its
Underwriters' Securities shall delay the offering and sale of such
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Underwriters' Securities (or the portions thereof so designated by such managing
underwriter) for such period, not to exceed 90 days (the "Delay Period"), as the
managing underwriter shall request, provided that no such delay shall be
required as to any Underwriters' Securities if any securities of the Company are
included in such registration statement and eligible for sale during the Delay
Period for the account of any person other than the Company and any Eligible
Holder unless the securities included in such registration statement and
eligible for sale during the Delay Period for such other person shall have been
reduced pro rata to the reduction of the Underwriters' Securities which were
requested to be included and eligible for sale during the Delay Period in such
registration. As used herein, "Underwriters' Securities" shall mean the Options
and the Option Shares and the Conversion Shares which, in each case, have not
been previously sold pursuant to a registration statement or Rule 144
promulgated under the Act.
(b) If, at any time during the five-year period commencing [one year
after effective date,] the Company shall receive a written request, from
Eligible Holders who in the aggregate own (or upon exercise of all Options then
outstanding would own) a majority of the total number of shares of Common Stock
then included (or upon such exercise would be included) in the Underwriters'
Securities (the "Majority Holders"), to register the sale of all or part of such
Underwriters' Securities, the Company shall, as promptly as practicable, prepare
and file with the Commission a registration statement sufficient to permit the
public offering and sale of the Underwriters' Securities through the facilities
of all appropriate securities exchanges and the over-the-counter market, and
will use its best efforts through its officers, directors, auditors, and counsel
to cause such registration statement to become effective as promptly as
practicable; PROVIDED, HOWEVER, that the Company shall only be obligated to file
one such registration statement for which all expenses incurred in connection
with such registration (other than the fees and disbursements of counsel for the
Eligible Holders and underwriting discounts, if any, payable in respect of the
Underwriters' Securities sold by the Eligible Holders) shall be borne by the
Company and one additional such registration statement for which all such
expenses shall be paid by the Eligible Holders. Within three business days
after receiving any request contemplated by this Section 10(b), the Company
shall give written notice to all the other Eligible Holders, advising each of
them that the Company is proceeding with such registration and offering to
include therein all or any portion of any such other Eligible Holder's
Underwriters' Securities, provided that the Company receives a written request
to do so from such Eligible Holder within 30 days after receipt by him or it of
the Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall use its best efforts to cause the Underwriters'
Securities so registered to be registered or qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder or such holders
may reasonably request; PROVIDED, HOWEVER, that the Company shall not be
required to qualify to do business in any state by reason of this Section 10(c)
in which it is not otherwise required to qualify to do business.
(d) The Company shall keep effective any registration or
qualification contemplated by this Section 10 and shall from time to time amend
or supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document, and communication for
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such period of time as shall be required to permit the Eligible Holders to
complete the offer and sale of the Underwriters' Securities covered thereby.
The Company shall in no event be required to keep any such registration or
qualification in effect for a period in excess of nine months from the date on
which the Eligible Holders are first free to sell such Underwriters' Securities;
PROVIDED, HOWEVER, that, if the Company is required to keep any such
registration or qualification in effect with respect to securities other than
the Underwriters' Securities beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Underwriters'
Securities for so long as such registration or qualification remains or is
required to remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall furnish to each Eligible Holder such number of
copies of the registration statement and of each amendment and supplement
thereto (in each case, including all exhibits), such reasonable number of
copies of each prospectus contained in such registration statement and each
supplement or amendment thereto (including each preliminary prospectus), all of
which shall conform to the requirements of the Act and the rules and regulations
thereunder, and such other documents, as any Eligible Holder may reasonably
request to facilitate the disposition of the Underwriters' Securities included
in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 10, the Company shall furnish each Eligible Holder of any Underwriters'
Securities so registered with an opinion of its counsel (reasonably acceptable
to the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor has the Commission or any securities or
blue sky authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order, (ii) the registration statement and
each prospectus forming a part thereof (including each preliminary prospectus),
and any amendment or supplement thereto, complies as to form with the Act and
the rules and regulations thereunder, and (iii) such counsel has no knowledge of
any material misstatement or omission in such registration statement or any
prospectus, as amended or supplemented. Such opinion shall also state the
jurisdictions in which the Underwriters' Securities have been registered or
qualified for sale pursuant to the provisions of Section 10(c).
(g) In the event of a registration pursuant to the provision of this
Section 10, the Company shall enter into a cross-indemnity agreement and a
contribution agreement, each in customary form, with each underwriter, if any,
and, if requested, enter into an underwriting agreement containing conventional
representations, warranties, allocation of expenses, and customary closing
conditions, including, but not limited to, opinions of counsel and accountants'
cold comfort letters, with any underwriter who acquires any Underwriters'
Securities.
(h) The Company agrees that until all the Underwriters' Securities
have been sold under a registration statement or pursuant to Rule 144 under the
Act, it shall keep current in filing
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all reports, statements and other materials required to be filed with the
Commission to permit holders of the Underwriters' Securities to sell such
securities under Rule 144.
(i) Except for rights granted to holders of the Options and rights
existing prior to the issuance of the Options, the Company will not, without the
written consent of the Majority Holders, grant to any persons the right to
request the Company to register any securities of the Company, provided that the
Company may grant such registration rights to other persons so long as such
rights are subordinate to the rights of the Eligible Holders.
11. (a) Subject to the conditions set forth below, the Company agrees
to indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and
against any and all loss, liability, charge, claim, damage, and expense
whatsoever (which shall include, for all purposes of this Section 11, but not be
limited to, attorneys' fees and any and all reasonable expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), as and when incurred, arising out of,
based upon, or in connection with (i) any untrue statement or alleged untrue
statement of a material fact contained (A) in any registration statement,
preliminary prospectus, or final prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, relating to the sale of
any of the Underwriters' Securities, or (B) in any application or other document
or communication (in this Section 11 collectively called an "application")
executed by or on behalf of the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
register or qualify any of the Underwriters' Securities under the securities or
blue sky laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to such Eligible
Holder by or on behalf of such person expressly for inclusion in any
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Option. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Option.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability pursuant to this Section 11(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such
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counsel shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
promptly employed counsel reasonably satisfactory to such indemnified party or
parties to have charge of the defense of such action or such indemnified party
or parties shall have reasonably concluded that there may be one or more legal
defenses available to it or them or to other indemnified parties which are
different from or additional to those available to the Company, in any of which
events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 11 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company shall not, without the prior written consent
of each indemnified party that is not released as described in this sentence,
settle or compromise any action, or permit a default or consent to the entry of
judgment in or otherwise seek to terminate any pending or threatened action, in
respect of which indemnity may be sought hereunder (whether or not any
indemnified party is a party thereto), unless such settlement, compromise,
consent, or termination includes an unconditional release of each indemnified
party from all liability in respect of such action. The Company agrees promptly
to notify the Eligible Holders of the commencement of any litigation or
proceedings against the Company or any of its officers or directors in
connection with the sale of any Underwriters' Securities or any preliminary
prospectus, prospectus, registration statement, or amendment or supplement
thereto, or any application relating to any sale of any Underwriters'
Securities.
(b) The Holder agrees to indemnify and hold harmless the Company,
each director of the Company, each officer of the Company who shall have signed
any registration statement covering Underwriters' Securities held by the Holder,
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, and its or their
respective counsel, to the same extent as the foregoing indemnity from the
Company to the Holder in Section 11(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Holder by or on behalf of the Holder expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Holder pursuant to
this Section 11(b), the Holder shall have the rights and duties given to the
Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
11(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 11(a) or
11(b) (subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
-13-
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the
Underwriters' Securities included in such registration in the aggregate
(including for this purpose any contribution by or on behalf of an indemnified
party), as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, on the
basis of relevant equitable considerations such as the relative fault of the
Company and such Eligible Holders in connection with the facts which resulted in
such losses, liabilities, claims, damages, and expenses. The relative fault, in
the case of an untrue statement, alleged untrue statement, omission, or alleged
omission, shall be determined by, among other things, whether such statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by such Eligible Holders, and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement, alleged statement, omission, or alleged omission. The Company and
the Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Eligible Holders for contribution were
determined by pro rata or per capita allocation of the aggregate losses,
liabilities, claims, damages, and expenses (even if the Holder and the other
indemnified parties were treated as one entity for such purpose) or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section 11(c). In no case shall any Eligible Holder be responsible
for a portion of the contribution obligation imposed on all Eligible Holders in
excess of its pro rata share based on the number of shares of Common Stock owned
(or which would be owned upon exercise of all Underwriters' Securities) by it
and included in such registration as compared to the number of shares of Common
Stock owned (or which would be owned upon exercise of all Underwriters'
Securities) by all Eligible Holders and included in such registration. No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section
11(c), each person, if any, who controls any Eligible Holder within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent, and counsel of each such Eligible Holder or
control person shall have the same rights to contribution as such Eligible
Holder or control person and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, each officer of the Company who shall have signed any such registration
statement, each director of the Company, and its or their respective counsel
shall have the same rights to contribution as the Company, subject in each case
to the provisions of this Section 11(c). Anything in this Section 11(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This Section 11(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
12. Unless registered pursuant to the provisions of Section 10
hereof, the Option Shares or Conversion Shares issued upon exercise or
conversion of the Options shall be subject to a stop transfer order and the
certificate or certificates evidencing such Option Shares shall bear the
following legend:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO A REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. HOWEVER, SUCH
SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) A POST-EFFECTIVE
AMENDMENT TO SUCH REGISTRATION STATEMENT, (ii) A SEPARATE REGISTRATION
STATEMENT UNDER SUCH ACT, OR (iii) AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT."
13. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction, or mutilation of any Option (and upon surrender of any
Option if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Option of like date, tenor, and denomination.
14. The Holder of any Option shall not have, solely on account of
such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Option.
15. This Option shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
16. The Company irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Option, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Option, or a breach of this Option or any such document
or instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 12 of the Underwriting Agreement.
Within 30 days after such service, or such other time as may be mutually
agreed upon in writing by the attorneys for the parties to such action or
proceeding, the Company shall appear to answer such summons, complaint or other
process.
Dated: , 1996
INTERNATIONAL SPORTS WAGERING INC.
By:
-------------------------------
Xxxxx Xxxxxx, Chairman of the Board
[Seal]
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------------------------------
Secretary
-16-
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Option.)
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns, and transfers unto __________________ a Option to purchase __________
shares of Common Stock, par value $.001 per share, of International Sports
Wagering Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint __________________
_________ attorney to transfer such Option on the books of the Company, with
full power of substitution.
Dated:
------------------
Signature:
----------------------------
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Option in every particular, without alteration or
enlargement or any change whatsoever.
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To: International Sports Wagering Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase _______
Option Shares covered by the within Option and tenders payment herewith in the
amount of $_________ in accordance with the terms thereof, and requests that
certificates for such securities be issued in the name of, and delivered to:
---------------------------------
--------------------------------
------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Option Shares shall not be all the Option Shares covered
by the within Option, that a new Option for the balance of the Option Shares
covered by the within Option be registered in the name of, and delivered to, the
undersigned at the address stated below.
Dated: Name
------------------ ------------------------
(Print)
Address:
---------------------
---------------------------
(Signature)
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To: International Sports Wagering Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
CASHLESS EXERCISE FORM
(To be executed upon conversion of the attached Option)
The undersigned hereby irrevocably elects to surrender its Option for the
number of shares of Common Stock as shall be issuable pursuant to the cashless
exercise provisions of the within Option, in respect of _____ shares of Common
Stock underlying the within Option, and requests that certificates for such
securities be issued in the name of and delivered to:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of shares shall not be all the shares exchangeable or
purchasable under the within Option, that a new Option for the balance of the
Option Shares covered by the within Option be registered in the name of, and
delivered to, the undersigned at the addressed stated below.
Dated: Name
------------------------- -----------------------------
(Print)
Address:
-------------------------------------------------------------
----------------------------------
(Signature)
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