EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT dated August 21, 2002 (this
"Agreement") is entered into by and between Innovative Gaming Corporation of
America, a Minnesota corporation, with principal executive offices located at
000 Xxxxxxx Xxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx 00000 (the "Company"), and the party
named on the signature page below (the "Initial Investor").
WHEREAS, the Company has authorized its officers to execute and deliver
to one or more parties, including the Initial Investor, one or more convertible
secured promissory notes in an aggregate principal amount not to exceed Five
Million and No/Dollars ($5,000,000.00) (the "Notes") which are convertible into
shares (the "Preferred Shares") of the Company's Series A-1 5.5% Convertible
Preferred Stock, par value $0.01 per share, in a series of transactions exempt
from registration under the Securities Act (as defined below) (such
transactions, collectively, the "Private Placement").
WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of August 20, 2002 between the Initial Investor and
the Company (the "Securities Purchase Agreement"), the Company has agreed to
issue and sell to the Initial Investor certain of the Notes;
WHEREAS, the Preferred Shares are convertible into shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), upon the
terms of and subject to the conditions of the Company's Certificate of
Designation of Series A-1 5.5% Convertible Preferred Stock (the "Certificate of
Designation"); and
WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement and consummate the transactions contemplated
thereby, the Company has agreed to provide with respect to the Common Stock
issued or issuable upon conversion of the Preferred Shares certain registration
rights under the Securities Act.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions
(a) Unless the context requires otherwise, the terms defined in this Section 1
shall have the following meanings for all purposes of this Agreement:
(i) "Affiliate" shall have the meaning set forth in Rule 405
under the Securities Act.
(ii) "Claim" is defined in Section 7(c).
(iii) "Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the
Securities Act.
(iv) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute, all as the
same shall be in effect from time to time.
(v) "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form
under the Securities Act subsequently adopted by the
Commission which permits inclusion or incorporation of
substantial information by reference to other documents
filed by the Company with the Commission.
(vi) "Holder" means the Initial Investor and any transferee or
assignee of Registrable Securities which agrees to become
bound by all of the terms and provisions of this Agreement
in accordance with Section 9 hereof.
(vii) "Indemnified Party" is defined in Section 7(c).
(viii) "Indemnified Person" is defined in Section 7(a).
(ix) "Indemnifying Party" is defined in Section 7(c).
(x) "Initiating Holders" means the record holder or holders of
at least 30% of the Registrable Securities.
(xi) "Losses" is defined in Section 7(a).
(xii) "NASD Rules" is defined in Section 4(w).
(xiii) "Non-Responsive Holder" is defined in Section 5(a).
(xiv) "Other Shares" is defined in Section 2(f).
(xv) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association,
trust, unincorporated organization, or a government or
agency or political subdivision thereof.
(xvi) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions
by the Company of its Common Stock and made pursuant to the
Securities Act.
(xvii) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a
registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement.
(xviii) "Registrable Securities" means (a) the shares of Common
Stock (or any other equity securities) at any time issued or
subject to issuance upon the conversion of the Preferred
Shares and (b) any shares of Common Stock (or any other
equity securities) issued as (or subject to issuance upon
the conversion or exercise of any warrant, right or other
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security that is issued as) a dividend or other distribution
with respect to, or in exchange for, or in replacement of,
the shares referenced in (a) above; excluding, in all cases,
however, any Registrable Securities when (aa) such
securities shall have been sold to the public either (i)
pursuant to a registration statement that has been declared
effective under the Securities Act or (ii) pursuant to an
exemption from such registration, (bb) such securities shall
be eligible for transfer without restriction pursuant to
paragraph (k) of Rule 144 under the Securities Act (or any
successor provision thereto) or (cc) such securities shall
have ceased to be outstanding.
(xix) "Registration Expenses" means all expenses incurred in
effecting any registration pursuant to this Agreement,
including, without limitation, all registration,
qualification, and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or
special audits incident to or required by any such
registration, but shall not include Selling Expenses (but
excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
(xx) "Registration Period" means the period beginning on the date
a registration statement is declared effective and ending on
earlier of (a) such time as all of the Registrable
Securities included in such registration statement have been
disposed of in accordance with the intended methods of
disposition by the holder or holders thereof as set forth in
such registration statement or (b) 120 days after such
registration statement becomes effective (provided, however,
that (i) such 120 day period shall be extended for a period
of time equal to the period the Holder refrains from selling
any securities included in such registration at the request
of an underwriter of Common Stock (or other securities) of
the Company; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be
offered on a continuous or delayed basis, such 120 day
period shall be extended to a period of one year).
(xxi) "Requested Information" is defined in Section 5(a).
(xxii) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the Commission
thereunder, or any similar successor statute, all as the
same shall be in effect from time to time.
(xxiii) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable
Securities and fees and disbursements of counsel for any
Holder.
(b) Certain other terms are defined elsewhere in this Agreement.
(c) All capitalized terms used and not defined herein have the
meanings assigned to them in the Securities Purchase
Agreement.
2. Demand Registration
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(a) Request for Registration. If the Company shall receive from the
Initiating Holders a written request that the Company effect a registration with
respect to all or any part of the Registrable Securities, the Company will:
(i) within ten days of receipt thereof, give written notice of
the proposed registration to all other Holders; and
(ii) use its best efforts to effect such registration (including,
without limitation, filing post-effective amendments,
appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with
the Securities Act) and facilitate the sale and distribution
of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion
of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written
request received by the Company within 20 days after such
written notice from the Company is delivered, as promptly as
possible.
(b) Exceptions to Requirement to Effect Registration. The Company
shall not be obligated to effect, or to take any action to effect, any
registration pursuant to Section 2(a):
(i) As to more than two such registrations per year (counting
for these purposes only (A) registrations which have been
declared or ordered effective and pursuant to which
securities have been sold and (B) registrations which have
been withdrawn by the Holders as to which the Holders have
not elected to bear the Registration Expenses pursuant to
Section 6 except in cases where such withdrawal is based
upon material adverse information relating to the Company
that is different from the information known or available
(upon request from the Company or otherwise) to the Holders
requesting registration at the time of their request for
registration under Section 2(a));
(ii) If the Company delivers written notice to all Holders within
30 days of a request for registration pursuant to this
Section 2(a) that the Company intends to file for an public
offering of shares of its Common Stock within 90 days of
such written notice (in which case the Company shall afford
all Holders their rights pursuant to Section 3 with respect
to such offering); or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered
on Form S-3 pursuant to a request made under Section 2(g).
(c) Registration Statement. Subject to Section 2(b), the Company shall
file a registration statement covering the Registrable Securities requested to
be registered as soon as practicable, and in any event within 60 days after
receipt of the request or requests of the Initiating Holders.
(d) Inclusion of Other Securities. The registration statement filed
pursuant to the request of the Initiating Holders may, subject to the provisions
of Sections 2(e) and 2(f), include other securities of the Company with respect
to which registration rights have been granted, and may include securities of
the Company being sold for the account of the Company. If the Company shall
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request inclusion in any registration pursuant to Section 2(a) of securities
being sold for its own account, or if other Persons shall request inclusion in
any registration pursuant to Section 2(a), the Initiating Holders shall, on
behalf of all Holders, offer to include such securities in the underwriting and
may condition such offer on their acceptance of the further applicable
provisions of this Section 2.
(e) Underwriting. The Initiating Holders may elect that the offering
shall be underwritten by an underwriter or underwriters selected by a
majority-in-interest of the Initiating Holders and reasonably acceptable to the
Company. The Company shall (together with all Holders and other Persons
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders, which underwriters are reasonably acceptable
to the Company, and the right of any Person (including any Holder) to
registration pursuant to this Section 2 shall be conditioned upon such Person's
participation in such underwriting and the inclusion of such Person's securities
in the underwriting (unless otherwise mutually agreed by a majority in interest
of the Initiating Holders and such Person with respect to such participation and
inclusion) to the extent provided herein. If a Person who has requested
inclusion in such registration as provided above does not agree to the terms of
any such underwriting, such Person shall be excluded therefrom by written notice
from the Company, the underwriter or the Initiating Holders. The securities so
excluded shall also be withdrawn from registration. If shares are so withdrawn
when the number of shares to be included in such registration had previously
been reduced as provided in Section 2(f), then the Company shall offer to all
Holders who have retained rights to include securities in the registration the
right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among such Holders requesting additional inclusion.
(f) Priority on Demand Registration. Notwithstanding any other
provision of this Section 2, if the representative of the underwriters advises
the Initiating Holders in writing that marketing factors require a limitation on
the number of shares to be underwritten, then the Initiating Holders shall so
advise all Holders of Registrable Securities that would otherwise be
underwritten, and the number of shares to be included in the underwriting or
registration shall be allocated (i) first among all Holders thereof (including
Initiating Holders) and all other holders of Common Shares of the Company issued
or issuable, directly or indirectly, on conversion of Notes issued in the
Private Placement in proportion (as nearly as practicable) to the amount of
Registrable Securities or other Common Shares of the Company held by each such
holder and (ii) second to any other Common Shares of the Company (including
Common Shares issued or issuable upon conversion of shares of any currently
unissued series of preferred stock of the Company) or other securities of the
Company (the "Other Shares"). The Other Shares shall be excluded until the
aggregate number of shares of Registrable Securities requested for inclusion may
be included in such registration.
(g) Registrations on Form S-3. At any time at which the Company
qualifies for the use of Form S-3, in addition to the rights contained in
Sections 2(a) and 3, Initiating Holders shall have the right to request
registrations on Form S-3 or any similar short form registration (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
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shares by such Holder or Holders) up to four times per year (which number shall
be increase to five or six, as the case may be, if the Company elects to any
registration demands made pursuant to Section 2(a) be subject to this Section
2(g) as provided in Section 2(b)(iii)). The provisions of Sections 2(a) and 2(c)
and the allocation provision of clause (i) of Section 2(f) shall apply to any
registration on Form S-3 pursuant to this Section 2(g); the relevant provisions
of Section 2(e) shall also apply if the registration is for an underwritten
offering.
3. Company Registration
(a) Company Registration. If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or
holders (other than pursuant to Sections 2), other than a registration relating
solely to employee benefit plans, or a registration relating solely to a
transaction covered by Rule 145 under the Securities Act (or any successor
thereto), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its reasonable best efforts to include in such
registration (and any related qualification under blue sky
laws or other compliance), except as set forth in Section
3(c) below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or
requests, made by any Holder and received by the Company
within 20 days after the written notice from the Company
described in clause (i) above is delivered by the Company.
Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company. If any Holder does not agree to the terms of any such underwriting,
such Holder shall be excluded therefrom by written notice from the Company or
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
shares are so withdrawn from the registration and if the number of shares of
Registrable Securities to be included in such registration had previously been
reduced pursuant to Section 3(c), the Company shall then offer to all Persons
who have retained the right to include securities in the registration the right
to include additional securities in the registration in an aggregate amount
equal to the number of shares so withdrawn, with such shares to be allocated
among the Persons requesting additional inclusion in accordance with Section
3(c).
(c) Priority on Company Registrations. Notwithstanding any other
provision of this Section 3, if the representative of the underwriters advises
the Company in writing that marketing factors require a limitation on the number
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of shares to be underwritten, the representative may limit or exclude the amount
of securities (including Registrable Securities) to be included in the
registration by the Company's stockholders (including the Holders), provided
that (i) first, (A) if the Company initiated the registration to cover the offer
and sale of securities for its own account, the securities the Company proposes
to sell shall be included, or (B) if the Company initiated the registration to
cover the offer and sale of securities for the account of any of its security
holders, the securities to be sold by such security holders shall be included
(provided, that all holders of Common Shares of the Company issued or issuable,
directly or indirectly, on conversion of Notes issued in the Private Placement,
including all Holders, shall all be treated together for purposes of this clause
(i)(B)), (ii) second, the Registrable Securities requested to be included in the
registration shall be included, pro rata among the holders of such Registrable
Securities on the basis of the number of Registrable Securities held by each
such Holder and all other holders of Common Shares of the Company issued or
issuable, directly or indirectly, on conversion of Notes issued in the Private
Placement and (iii) third, Other Shares shall be included, pro rata among the
holders of such Other Shares on the basis of the number of Other Shares held by
each such holder.
4. Obligations of the Company
If and whenever the Company is required by the provisions of Section 2
or Section 3 to effect a registration of Registrable Securities under the
Securities Act, the Company shall, as promptly as possible and as provided in
such Section:
(a) In the case of a demand registration pursuant to Section 2,
prepare and file with the Commission the requisite registration statement to
effect such registration (including such audited financial statements as may be
required by the Securities Act) and use its best efforts to cause such
registration statement to become effective.
(b) As far in advance as practical before filing any registration
statement or any amendment thereto and the distribution or delivery of any
prospectus (including any supplements thereto), furnish each Holder with copies
of reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and any such Holder shall have the opportunity to object
to any information pertaining solely to such Holder that is contained therein
and the Company shall make the corrections reasonably requested by such Holder
with respect to such information prior to filing such registration statement or
amendment.
(c) Permit any Holder that, in its judgment exercised in reasonable
good faith, might be deemed to be a controlling Person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material furnished to the Company in writing
relating to such Holder or its plan of distribution, which in the reasonable
judgment of the Holder and its counsel should be included
(d) Prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
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statement, in accordance with the intended methods of disposition thereof, until
the end of the Registration Period.
(e) Take all lawful action such that each of (i) the registration
statement and any amendment thereto does not, when it becomes effective, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, not misleading
and (ii) the prospectus forming part of the registration statement, and any
amendment or supplement thereto, does not at any time during the Registration
Period include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) Furnish to each Holder whose Registrable Securities are included
in the registration statement and its legal counsel identified to the Company,
(i) promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the registration statement,
each prospectus, and each amendment or supplement thereto, and (ii) such number
of copies of the prospectus and all amendments and supplements thereto and such
other documents, as such Holder may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Holder.
(g) Use its best efforts to (i) register or qualify the Registrable
Securities covered by the registration statement under such securities or "blue
sky" laws of such jurisdictions as the Holders who hold a majority-in-interest
of the Registrable Securities being offered reasonably request, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 4(g), (B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction except
as may be required by the Securities Act.
(h) As promptly as practicable after becoming aware of such event,
notify each Holder of the occurrence of any event, as a result of which the
prospectus included in the registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the registration statement and supplement to
the prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Holder as such Holder
may reasonably request.
(i) Notify the Holders of Registrable Securities and the underwriters,
if any, of the following events and (if requested by any such persons) confirm
such notification in writing: (i) the filing of the prospectus or any prospectus
supplement and the registration statement and any amendment or post-effective
8
amendment thereto and, with respect to the registration statement or any
post-effective amendment thereto, the declaration of the effectiveness of such
document; (ii) any requests by the Commission for amendments or supplements to
the registration statement or the prospectus or for additional information;
(iii) the issuance or threat of issuance by the Commission of any stop order or
other suspension of the effectiveness of the registration statement or the
initiation of any proceedings for that purpose; and (iv) the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the initiation or
threat of initiation of any proceeding for such purpose.
(j) Take all lawful action (i) to prevent the entry of any order
suspending the effectiveness of the registration statement, suspending or
preventing the use of any related prospectus or suspending the qualification of
any security included in such registration statement for sale in any
jurisdiction and (ii) in the event of the issuance of any such stop, to obtain
the withdrawal, recession or removal of such order.
(k) Cause all the Registrable Securities covered by the registration
statement to be listed, upon official notice of issuance, on the principal
national securities exchange, and included in an inter-dealer quotation system
of a registered national securities association, on or in which securities of
the same class or series issued by the Company are then listed or included.
(l) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
registration statement.
(m) Cooperate with each Holder of Registrable Securities being offered
to facilitate the timely preparation and delivery of certificates for the
Registrable Securities to be offered pursuant to the registration statement and
enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Holder reasonably may
request and registered in such names as the Holder may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Holders whose Registrable Securities
are included in such registration statement) an appropriate instruction and, to
the extent necessary, an opinion of such counsel.
(n) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Holders of their Registrable
Securities in accordance with the intended methods therefor provided in the
prospectus which are customary under the circumstances.
(o) Use its best efforts to comply with all applicable rules and
regulations of the Commission.
(p) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
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(including, at the option of the Company, Rule 158).
(q) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
registration statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such prospectus supplement or post-effective amendment.
(r) Make reasonably available for inspection by the Holders, any
underwriter participating in any disposition pursuant to the registration
statement, and any attorney, accountant or other agent retained by such Holders
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by such Holders or any such underwriter, attorney,
accountant or agent in connection with the registration statement, in each case,
as is customary for similar due diligence examinations; provided, however, that
all records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any material
nonpublic information shall be kept confidential by such Holders and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such holder or agent), unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided, further, that, if the
foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Holders
and the other parties entitled thereto by one firm of counsel designed by and on
behalf of the majority in interest of the Holders.
(s) In connection with any underwritten offering, enter into and
perform its obligations under an underwriting agreement reasonably in usual and
customary form with respect to such underwriting.
(t) If such securities are being sold through underwriters, furnish,
at the request of any such underwriter and on the date that such Registrable
Securities are delivered to the underwriters for sale, (i) an opinion, dated as
of such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering and reasonably satisfactory to such
underwriters, addressed to the underwriters and (ii) a "comfort" letter dated as
of such date, from the independent certified public accountants of the Company,
in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and reasonably
satisfactory to such underwriters, addressed to the underwriters.
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(u) If such securities are being sold in a registration pursuant to
Section 2 but are not being sold through underwriters, furnish, at the request
of any Holder requesting registration of Registrable Securities and on the date
the registration statement with respect to such securities becomes effective,
(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given in connection with such offerings and reasonably satisfactory to a
majority-in-interest of the Holders of Registrable Securities requesting
registration, addressed to the Holders requesting such opinion and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants in connection with such offerings and
reasonably satisfactory to a majority-in-interest of the Holders of Registrable
Securities requesting registration, addressed to the Holders requesting such
letter.
(v) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any.
(w) In the event that any broker-dealer registered under the Exchange
Act shall be an "affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the registration
statement, whether as a Holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the registration statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 7(a) hereof, and (C)
providing such information to such broker-dealer as may be required in order for
such broker-dealer to comply with the requirements of the NASD Rules.
5. Obligations of the Holders
In connection with the registration of the Registrable Securities, the
Holders shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete a registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Holder that such Holder shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. As least seven days prior to
the first anticipated filing date of the relevant registration statement, the
Company shall notify each Holder of the information the Company requires from
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each such Holder (the "Requested Information") if such Holder elects to have any
of its Registrable Securities included in such registration statement. If at
least two business days prior to the anticipated filing date the Company has not
received the Requested Information from a Holder (a "Non-Responsive Holder"),
then the Company may file such registration statement without including
Registrable Securities of such Non-Responsive Holder and have no further
obligations to the Non-Responsive Holder with respect to such registration
statement.
(b) Each Holder agrees that, upon receipt of any notice from the
Company (i) of the occurrence of any event of the kind described in Section 4(h)
or (ii) the issuance by the Commission of any stop order or other suspension of
the effectiveness of the registration statement, it shall (x) immediately
discontinue its disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until (A) such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by 4(h) and/or (B) the withdrawal, recession or removal of such
stop order or other suspension of effectiveness and (y) , if so directed by the
Company, deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in such Holder's
possession of the prospectus covering such Registrable Securities current at the
time of receipt of such notice.
6. Expenses of Registration
All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Sections 2 and 3 shall be
borne by the Company; provided, however, that, with respect to any registration
proceeding begun pursuant to Section 2(a) or 2(g), if the registration request
is subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered, the Holders of such a majority may
elect to have the participating Holders bear such expenses. All Selling Expenses
relating to securities registered pursuant to Sections 2 and 3 (together with
any Registration Expenses elected to be borne by the participating Holders
pursuant to the preceding sentence) shall be borne by the holders of such
securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
7. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Holder and each
underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective partners, stockholders, officers and
directors and each Person who controls such Holder or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such Person being sometimes hereinafter referred to as a "Indemnified
Person") from and against any losses, claims, damages, expenses or liabilities,
joint or several (collectively, "Losses"), to which such Indemnified Person may
become subject under the Securities Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or 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, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
12
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under any state securities
law in connection with the offering covered by such registration statement; and
the Company hereby agrees to reimburse each such Indemnified Person for all
reasonable legal and other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim as and when
such expenses are incurred; provided, however, that the Company shall not be
liable to any such Indemnified Person in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon (x) an
untrue statement or alleged untrue statement made in, or an omission or alleged
omission from, such registration statement or prospectus in reliance upon and in
conformity with written information furnished to the Company by such Indemnified
Person expressly for use therein or (ii) in the case of the occurrence of an
event of the type specified in Section 4(h), the use by the Indemnified Person
of an outdated or defective prospectus after the Company has provided to such
Indemnified Person an updated prospectus correcting the untrue statement or
alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
(b) Each Holder agrees, as a consequence of the inclusion of any of
its Registrable Securities in a registration statement, and each underwriter, if
any, which facilitates the disposition of Registrable Securities shall agree, as
a consequence of facilitating such disposition of Registrable Securities,
severally and not jointly, to (i) indemnify and hold harmless the Company, its
directors (including any Person who, with his or her consent, is named in the
registration statement as a director nominee of the Company), its officers who
sign any registration statement and each Person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, against any Losses to which the Company or such other
Persons may become subject, under the Securities Act or otherwise, insofar as
such Losses (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
such registration statement or prospectus or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in light of the
circumstances under which they were made, in the case of the prospectus), not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter expressly for use therein; provided,
however, that no Holder or underwriter shall be liable under this Section 7(b)
for any amount in excess of the net proceeds paid to such Holder or underwriter
in respect of shares sold by it, and (ii) reimburse the Company for any legal or
other expenses incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by a party seeking indemnification pursuant
to this Section 7 (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 7 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
13
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party shall reasonably have concluded that
representation of the Indemnified Party by the Indemnifying Party by the same
legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) If the indemnification provided for in this Section 7 is
unavailable to or insufficient to hold harmless an Indemnified Person under
Section 7(a) or Section 7(b) in respect of any Losses (or actions in respect
thereof) referred to therein, then each Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of such Losses
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified Party in
connection with the statements or omissions which resulted in such Losses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by such
Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Holders or any underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 7(d).
The amount paid or payable by an Indemnified Party as a result of the Losses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
14
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of the Holders
and any underwriters in this Section 7(d) to contribute shall be several in
proportion to the percentage of Registrable Securities registered or
underwritten, as the case may be, by them and not joint.
(e) Notwithstanding any other provision of this Section 7, in no event
shall any (i) Holder be required to undertake liability to any person under this
Section 7 for any amounts in excess of the dollar amount of the proceeds
received by such Holder from the sale of such Holder's Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto) and
(ii) underwriter be required to undertake liability to any Person hereunder for
any amounts in excess of the aggregate discount, commission or other
compensation payable to such underwriter with respect to the Registrable
Securities underwritten by it.
(f) The obligations of the Company under this Section 7 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 7 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
(g) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in such underwriting agreement
shall control, unless such underwriting agreement does not specifically provide
for indemnification between the Company and the Holders.
8. Reporting
(a) With a view to making available to the Holders the benefits of
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Holders to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(i) comply with the provisions of paragraph (c) (1) of Rule 144;
(ii) file with the Commission in a timely manner all reports and
other documents required to be filed by the Company pursuant
to Section 13 or 15(d) under the Exchange Act; and, if at
any time it is not required to file such reports but in the
past had been required to or did file such reports, it will,
upon the request of any Investor, make available other
information as required by, and so long as necessary to
permit sales of, its Registrable Securities pursuant to Rule
144; and
(iii) so long as a Holder owns any Registrable Securities, furnish
to the Holder forthwith upon written request a written
statement by the Company as to its compliance with the
reporting requirements of Rule 144, and of the Securities
Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports
and documents so filed as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission
allowing a Holder to sell any such securities without
registration.
15
(b) Eligibility For Use Of Form S-3. The Company shall use its
reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. The Company agrees that at such time as
it meets all the requirements for the use of Form S-3 it shall file all reports
and information required to be filed by it with the Commission in a timely
manner and take all such other action so as to maintain such eligibility for the
use of such form.
9. Assignment
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assigned by any Holder to any permitted
transferee of all or any portion of such Registrable Securities (or all or any
portion of any Preferred Shares which are convertible into Registrable
Securities) only if: (a) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the
Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee and
(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) immediately following such transfer or assignment,
the securities so transferred or assigned to the transferee or assignee
constitute Restricted Securities and (d) at or before the time the Company
received the written notice contemplated by clause (b) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein.
10. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of (i) the
Company, (ii) Holders who hold 75% of the Registrable Securities and (iii) if
any principal or interest remains unpaid on any of the Notes, the holders of 75%
of the aggregate principal amount of the Notes that are then unpaid (provided,
that any amendment to the provisions with respect to the treatment of all
persons holding Common Shares issued or issuable, directly or indirectly, on
conversion of Notes issued in the Private Placement shall require the written
consent of the holders of 75% of such Common Shares that are "Registrable
Securities" under the terms of the respective holders' registration rights
agreements with the Company, all of which are in the same form as this
Agreement). Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Holder and the Company.
11. Other Registration Rights Agreements
(a) Other than entering into other agreements in the same form as this
Agreement with other purchasers of Notes in the Private Placement, the Company
shall not on or after the date of this Agreement enter into any agreement with
any holder or prospective holder of any securities of the Company that (i) gives
such holder or prospective holder any registration rights with respect to any
securities of the Company or (ii) is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise conflicts with
the provisions hereof.
16
(b) Other than other agreements in the same form as this Agreement
entered into with other purchasers of Notes in the Private Placement, the
Company is not currently a party to any agreement granting any registration
rights with respect to any of its securities to any person which conflicts with
the Company's obligations hereunder or gives any other party the right to
include any securities in any registration statement filed pursuant hereto.
12. Miscellaneous
(a) A person or entity shall be deemed to be a Holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall (1) be in
writing and shall be delivered personally, by certified mail (postage prepaid),
by a nationally recognized overnight courier service, or by electronic mail or
facsimile transmission, and (2) and shall be deemed given when so delivered
personally, if mailed, three (3) days after the date of deposit in the United
States mails, when delivered by overnight courier service, or, if transmitted
electronically or by facsimile, upon receipt of electronic confirmation of
transmission, as follows::
(i) if to the Company, to:
Innovative Gaming Corporation of America
000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxx, General Counsel
(000) 000-0000
(000) 000-0000 (Fax)
with a copy to:
Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
3300 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
(ii) if to any Holder, at such address as such Holder shall have
provided in writing to the Company.
The Company or any Holder may change the foregoing address by notice given
pursuant to this Section 12(b).
17
(c) This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all which counterparts when so
executed shall together constitute one and the same instrument. A facsimile or
digital transmission of this signed Agreement shall be legal and binding on all
parties hereto.
(d) The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
(e) This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations, and discussions, whether oral or written, of the
parties. No amendment, supplement, modification, or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided in writing.
Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
(f) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Minnesota, without regard to the conflicts-of-law
principles of such state. Each of the parties hereto consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of Minneapolis or the state courts of the State of Minnesota sitting in the
City of Minneapolis in connection with any dispute arising under this Agreement.
Each party hereto hereby irrevocably and unconditionally waives, to the fullest
extent it may effectively do so, any defense of an inconvenient forum or
improper venue to the maintenance of such action or proceeding in any such court
and any right of jurisdiction on account of its place of residence or domicile.
Each party hereto irrevocably and unconditionally consents to the service of any
and all process in any such action or proceeding in such courts by the mailing
of copies of such process by certified or registered airmail at its address
specified in Section 12(b). Each party hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(g) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(h) Subject to the requirements of Section 9, the terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
18
(i) If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which such party may be entitled.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The Company acknowledges that any failure by the Company to
perform its obligations under this Agreement, or any delay in such performance
could result in direct damages to the Holders and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
INNOVATIVE GAMING CORPORATION OF AMERICA
By:_____________________________________________
Name:
Title:
Initial Investor
By:_____________________________________________
19
