1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of June 1, 1999 (this
"Agreement"), is made by and among Innovative Gaming Corporation of America, a
Minnesota corporation (the "Company"), and the person named on the signature
page hereto (the "Initial Investor").
WITNESSETH:
WHEREAS, in connection with the Subscription Agreement, dated
as of June 1, 1999, between the Initial Investor and the Company (the
"Subscription Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Subscription Agreement, to issue and
sell to the Initial Investor shares of Series C Convertible Preferred
Stock (such shares, including any additional shares of Series C
Convertible Preferred Stock issued as dividends on such shares, are
referred to as the "Shares"), convertible into shares of Common Stock,
$.01 par value (the "Common Stock"); and
WHEREAS, to induce the Initial Investor to execute and
deliver the Subscription Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "Securities Act"), with respect to
the Shares;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Initial Investor hereby agree as
follows:
1. DEFINITIONS.
(a) As used in this Agreement, the following terms shall
have the following meanings:
(i) "Certificate of Designation" means the
Certificate of Designation of Series C Convertible Preferred Stock as
filed with the Minnesota Secretary of State and as amended from time to
time.
(ii) "Investor" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 hereof.
2
(iii) "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the Securities Act on such
appropriate registration form promulgated by the Commission as shall be
selected by the Company and the declaration or ordering of
effectiveness of such Registration Statement by the United States
Securities and Exchange Commission ("SEC").
(iv) "Registrable Securities" means the Common Stock
issuable upon conversion of the Shares.
(v) "Registration Statement" means a registration
statement under the Securities Act registering securities of the
Company.
(b) Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the
Subscription Agreement.
2. REGISTRATION.
(A) REGISTRATION. The Company shall prepare and file
a shelf- Registration Statement covering the sale by the Investor of
Registrable Securities (the "Registration Statement") with the SEC
pursuant to Rule 415 of the Securities Act within thirty (30) business
days after the closing of the purchase of the Shares pursuant to the
Subscription Agreement (the "Closing"). As part of such Registration
Statement, with the approval of the Investor (with such approval being
given hereby for the registration of up to 422,500 shares issued upon
exercise of certain Warrants issued to the parties indicated in Annex
A), the Company may include additional shares of Common Stock
registered on behalf of the Company or the holders of such additional
shares. In light of the fact that the number of shares of Common Stock
into which the Shares are convertible is variable, the Company shall
include in the Registration Statement a number of Registrable
Securities equal to not less than 1,331,500 shares. If at any time the
number of Registrable Securities included in the Registration Statement
is insufficient to enable the Investor to sell all Registrable
Securities, the Company shall promptly, but no later than ten (10)
business days thereafter, file an additional registration statement to
register for resale such additional Registrable Securities as may be
required.
(B) PIGGYBACK OBLIGATIONS. 1. If the Company proposes
to register any of its warrants, Common Stock or any other shares of
common stock of the Company under the Securities Act (other than a
registration (A) on Form S-8 or S-4 or any successor or similar forms,
(B) relating to Common Shares or any other shares of common stock of
the Company issuable upon exercise of employee share options or in
connection with any employee benefit or similar
-2-
3
plan of the Company or (C) in connection with a direct or indirect
acquisition by the Company of another Person or any transaction with
respect to which Rule 145 (or any successor provision) under the
Securities Act applies), whether or not for sale for its own account,
it will each such time, give prompt written notice at least twenty (20)
days prior to the anticipated filing date of the registration statement
relating to such registration to the Initial Investor, which notice
shall set forth such Initial Investor' rights under this Section 2(b)
and shall offer the Initial investor the opportunity to include in such
registration statement such number of Registrable Securities as the
Initial Investor may request. Upon the written request of an Initial
Investor made within ten (10) days after the receipt of notice from the
Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Initial Investor), the
Company will use its best efforts to effect the registration under the
Securities Laws of all Registrable Securities that the Company has been
so requested to register by the Initial Investor, to the extent
requisite to permit the disposition of the Registrable Securities so to
be registered; provided, however, that (A) if such registration
involves a public offering, the Initial investor must sell its
Registrable Securities to the underwriters on the same terms and
conditions as apply to the Company and (B) if, at any time after giving
written notice of its intention to register any Registrable Securities
pursuant to this Section 2 and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Initial
Investor and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration. The Company's obligations under this Section 2(b) shall
terminate on the date that the registration statement to be filed in
accordance with Section 2(a) is declared effective by the Commission.
2. If a registration pursuant to this Section 2(b)
involves a public offering and the managing underwriter thereof advises
the Company that, in its view, the number of shares of Common Stock,
Warrants or other shares of Common Stock that the Company and the
Initial Investor and all other prospective sellers holding registration
rights intend to include in such registration exceeds the largest
number of shares of Common Stock (including any other shares of Common
Stock of the Company) that can be sold without having an adverse effect
on such public offering (the "Maximum Offering Size"), the Company will
include in such registration, only that number of shares of Common
Stock, such that the number of securities registered does not exceed
the Maximum Offering Size, with the difference between the number of
shares in the Maximum Offering Size and the number of shares to be
issued by the Company to be allocated (after including all shares to be
issued and sold by the Company) among the Initial Investor and such
other prospective holders pro rata on the basis
-3-
4
of the relative number of securities offered for sale under such
registration by each of the initial Investor and such other prospective
holders.
If as a result of the proration provisions of this Section
2(b)(ii), any Initial Investor is not entitled to include all such
Registrable Securities in such registration, such Initial Investor may
elect to withdraw its request to include any Registrable Securities in
such registration. With respect to registrations pursuant to this
Section 2(b), the number of securities required to satisfy any
underwriters' over-allotment option shall be allocated pro rata among
the Company and the Initial Investor on the basis of the relative
number of securities otherwise to be included by each of them in the
registration with respect to which such over-allotment option relates.
(C) PAYMENTS BY THE COMPANY. The Company will use its best
efforts to have the Registration Statement become effective with the
SEC no later than 90 days from the closing of the purchase of the
Preferred Shares (the "Closing"). If the Registration Statement
covering the Registrable Securities is not effective within 120 days
after the closing, then the Company will make payments to each holder
of Registrable Securities (each, a "Holder") in such amounts and at
such times as shall be determined pursuant to this Section 2(b). The
amount to be paid by the Company to the Holders shall be determined as
of each Computation Date, and such amount shall be equal to (1) in the
case of the first Computation Date, one percent (1%) and (2) in the
case of each other Computation Date, two percent (2%), in each case of
the aggregate subscription price paid by the Investor for the Shares
pursuant to the Subscription Agreement (the "Periodic Amount");
provided, however, that if any Computation Date is less than 30 days
subsequent to another Computation Date, then the Periodic Amount
payable on the later Computation Date shall be prorated. The Periodic
Amount shall be divided among all the Holders in the same proportion as
each Holder's Registrable Securities bears to the total of the
outstanding Registrable Securities (assuming, for purposes of such
computation, that all Shares have been converted into Common Stock).
The Periodic Amount shall be paid by the Company within ten business
days after each Computation Date and shall be payable in cash;
provided, however, that the Company may elect in lieu of payment of any
Periodic Amount in cash to deliver to the Investor shares of Common
Stock having an Aggregate Market Value equal to the amount of the
Periodic Amount if, but only if, (1) such shares are freely tradable by
the Investor without any restriction under the Securities Act or any
state securities or "blue sky" law and (2) after the issuance of such
shares to Holder, the aggregate number of shares of Common Stock
beneficially owned by the Holder (determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) would not exceed 4.9% of the outstanding shares of Common Stock.
-4-
5
As used in this Section 2(b), the following terms shall have
the following meanings:
"Aggregate Market Value" of any shares of Common Stock as of
any Computation Date means the product obtained by multiplying (a) such
number of shares of Common Stock times (b) the Average Market Price of
the Common Stock for the Measurement Period for such Computation Date.
"Average Market Price" of any security for any period shall
be computed as the average closing price of the shares over the
Measurement Period.
"Computation Date" means the date which is 120 days after the
Closing and each 30 days thereafter for the purposes of this Section
2(b).
"Measurement Period" means the period of ten consecutive
trading days for the Common Stock ending on (or on the last trading day
preceding) each Computation Date.
3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall:
(a) prepare promptly and file with the SEC promptly (but in
no event later than 30 business days) after the Closing, a Registration
Statement or Statements with respect to all Registrable Securities
pursuant to Rule 415 under the Securities Act, and thereafter use its
best efforts to cause the Registration Statement to become effective
within 90 days after Closing. In the event the Registration Statement
is not effective within 180 days after the Closing, the Investor shall
have the right to require the Company to redeem all Registrable
Securities as provided in the Subscription Agreement. The Company shall
keep the Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (1) the Registrable Securities have been
disposed thereunder or (2) two years from the date of Closing (or the
aggregate period of two years of effectiveness in the event that the
effectiveness of such Registration Statement is temporarily suspended
(which may not exceed 60 days in any twelve (12) month period) (the
"Registration Period"). In any case, the Registration Statement
(including any amendments or supplements thereto and prospectuses
contained therein) filed by the Company shall not contain any 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
case of a prospect in light of the circumstances in which they were
made), not misleading; provided, however, that if at any time the
Investors shall be entitled to sell all Registrable Securities held by
them pursuant to Rule 144 promulgated under the Securities Act or any
other similar rule or regulation of the SEC that may at any time permit
the Investors to sell securities
-5-
6
of the Company to the public without registration, without volume or
other restrictions, and without imposing restrictions arising under the
federal securities laws on the purchases thereof in a period of three
consecutive months, then the Company shall, so long as it meets the
current public information requirements of Rule 144, thereafter no
longer be required to maintain the registration of Registrable
Securities pursuant to this Agreement;
(b) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration
Statement effective at all times through the Registration Period, and,
during such period, comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statement until such time as all of
such Registrable Securities have been disposed of in accordance with
the intended methods of disposition by the seller or sellers thereof as
set forth in the Registration Statement or prospectus supplement;
(c) (i) Prior to the filing with the commission of any
Registration Statement (including any amendments thereto) and the
distribution or delivery of any Prospectus (including any supplements
thereto), provide (A) draft copies thereof to the Investors and reflect
in such documents all such comments as the Investors (and their
counsel) reasonably may propose and (B) to the Investors a copy of the
accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in
the Registration Statement and its legal counsel identified to the
Company, (A) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy
of the Registration Statement, each Prospectus, and each amendment or
supplement thereto, and (E) such number of copies of the Prospectus and
all amendments and supplements thereto and such other documents, as
such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor;
(d) prepare promptly and file all necessary documents relating to
the Registration Securities with State gaming authorities whose consent
or approval of the Registration Statement is required.
(e) furnish to each Investor whose Registrable Securities are
included in the Registration Statement, such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
-6-
7
(f) if necessary, use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration
Statement under such other securities or blue sky laws of such
jurisdictions as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare
and file in those jurisdictions such amendments (including
post-effective amendments) and supplements, (iii) take such other
actions as may be necessary to maintain such registrations and
qualifications in effect at all times through the Registration Period
and (iv) take all other 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 (I) qualify to do business in
any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(e), (II) subject itself to general taxation in
any such jurisdiction, (III) file a general consent to service of
process in any such jurisdiction, (IV) provide any undertakings that
cause more than nominal expense or burden to the Company or (V) make
any change in its charter or bylaws;
(g) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold
pursuant to such registration of the happening of any event of which
the Company has knowledge, 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 use its best efforts promptly to prepare a supplement or amendment
to the Registration Statement to correct such untrue statement or
omission, and deliver a number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request;
(h) as promptly as practicable after becoming aware of such
event, notify each Investor who holds Registrable Securities being sold
pursuant to such registration (or, in the event of an underwritten
offering, the managing underwriters) of the issuance by the SEC of any
stop order or other suspension of effectiveness of the Registration
Statement at the earliest possible time and use its best efforts to
take all lawful action to effect the withdrawal, recession or removal
of such stop order or other suspension;
(i) permit a single firm of counsel designated as selling
stockholders' counsel by the Investors who hold a majority in interest
of the Registrable Securities being sold pursuant to such registration
to review the Registration Statement and all amendments and supplements
thereto a reasonable period of time prior to their filing with the SEC,
and shall not file any document in a form to which such counsel
reasonably objects;
-7-
8
(j) use its best efforts either to (i) cause all the Registrable
Securities covered by the Registration Statement to be listed on a
national securities exchange and on each additional national securities
exchange on which similar securities issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange or (ii) secure designation
of all the Registrable Securities covered by the Registration Statement
as a National Association of Securities Dealers Automated Quotations
System ("Nasdaq") "national market system security" within the meaning
of Rule 11Aa2-1 of the SEC under the Exchange Act and the quotation of
the Registrable Securities on the Nasdaq National Market System or, if,
despite the Company's best efforts to satisfy the preceding clause (i)
or (ii), the Company is unsuccessful in satisfying the preceding clause
(i) or (ii), to secure listing on a national securities exchange or
Nasdaq authorization and quotation for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at
least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such
Registrable Securities;
(k) provide 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;
(l) cooperate with the Investors who hold Registrable Securities
being sold to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing
Registrable Securities to be sold pursuant to the denominations or
amounts as the case may be, and registered in such names as the
Investors may reasonably request and, within three (3) 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 Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
and
(m) take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration
of the Registrable Securities, the Investors shall have the following
obligations:
-8-
9
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Agreement with respect to
each Investor that such Investor 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 the
Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least
ten (10) business days prior to the first anticipated filing date of
the Registration Statement, the Company may notify each Investor of the
information the Company requires from each such Investor (the
"Requested Information"). If within two (2) business days prior to the
filing date the Company has requested and not received the Requested
Information from an Investor (a "Non-Responsive Investor"), then the
Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor;
(b) Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation
and filing of the Registration Statement hereunder;
(c) Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
Section 3(f) such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(f)
and, if so directed by the Company, such Investor shall 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 Investor's
possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice; and
5. EXPENSES OF REGISTRATION. All expenses (other than fees and
expenses of investment bankers and other than brokerage commissions)
incurred in connection with registrations, filings or qualifications
pursuant to Section 3, including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the
fees and disbursements of counsel for the Company, shall be borne by
the Company; provided, however, that the Investors shall bear the fees
and out-of-pocket expenses of its legal counsel and accountants and
agents selected by it.
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
-9-
10
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Investor who holds such Registrable Securities,
the directors, if any, of such Investor, the officers, if any, of such
Investor, each person, if any, who controls any Investor within the
meaning of the Securities Act or the Exchange Act, and each broker,
dealer or underwriter selling shares on behalf of the Investor, and the
controlling persons thereof (each, an "Indemnified Person"), against
any losses, claims, damages, expenses or liabilities (joint or several)
(collectively "Claims") to which any of them become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included
therein: (i) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any
post-effective amendment thereof or the 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 preliminary prospectus if used prior to the effective
date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission
or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under
which the statements therein were made, not misleading or (iii) any
violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities law or any rule or regulation
(the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). Subject to the restrictions set forth in
Section 6 (d) with respect to the number of legal counsel, the Company
shall reimburse the Investors promptly as such expenses are incurred
and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending
any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a)
(I) shall not apply to a Claim arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person expressly
for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section
3(d) hereof; (II) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting
any such Claim purchased the Registrable Securities that are the
subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected in the prospectus, as then
amended or supplemented, if such prospectus was timely made available
by the Company
-10-
11
pursuant to Section 3(d) hereof; and (III) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
Indemnified Persons and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to indemnify and
hold harmless, to the same extent and in the same manner set forth in
Section 6(a), the Company, each of its directors, each of its officers
who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange
Act, and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any
person who controls such stockholder within the meaning of the
Securities Act or the Exchange Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange
Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and such Investor will
promptly reimburse any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed
the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure
to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) The Company shall be entitled to receive indemnities from
selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as
provided above, with
-11-
12
respect to information such persons so furnished in writing by such
persons expressly for inclusion in the Registration Statement.
(d) Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of
any action (including any governmental action), such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to made
against any indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof and
this indemnifying party shall have the right to participate in, and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying parties;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified
Party and the indemnifying party would be inappropriate due to actual
or potential differing interests between such Indemnified Person or
Indemnified Party and other party represented by such counsel in such
proceeding. The Company shall pay for only one separate legal counsel
for the Investors; such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities.
The failure to deliver written notice to the indemnifying party within
a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified
Person or Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such
action. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
(e) The obligations of the Company under this Section 6 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 6 shall be in addition to any liability which such
Indemnified Person may otherwise have to the Company. The remedies
provided in this Section 6 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.
7. CONTRIBUTION. To the extent any indemnification provided for
herein is prohibited or limited by law, the indemnifying party agrees
to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 6 in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
the Indemnified Party in connection with the
-12-
13
statements or omissions which resulted in such losses, claims, damages
or liabilities (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 Indemnified 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 were
determined by pro rata allocation (even if the Investors 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. The amount paid or
payable by an Indemnified Party as a result of the losses, claims,
damages or liabilities (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; provided, however,
that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault
standards set forth in Section 6, (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation and (c) contribution by any
seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration, until
such time as the Investors have sold all the Registrable Securities
pursuant to a Registration Statement or Rule 144, the Company agrees
to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC all reports and other documents required
of the Company under the Securities Act and the Exchange Act; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the
most recent annual or quarterly report of the
-13-
14
Company and such other reports and documents so filed by the Company
and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement
shall be automatically assigned by the Investors to transferees or
assignees of all or any portion of such securities only if: (a) 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, (b)
immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities
laws, (c) at or before the time the Company received the written notice
contemplated by clause (a) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein, and (d) such transfers of Registered Securities
complies with the Subscription Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. 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 the Company and
Investors who hold a majority in interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
(a) A person or entity is 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) Notices required or permitted to be given hereunder shall be
in writing and shall be deemed to be sufficiently given when personally
delivered or when sent by registered mail, return receipt requested,
addressed (i) if to the Company, at Innovative Gaming Corporation of
America, 0000 Xxxxxxxxx Xxxxxx, Xxxx, Xxxxxx, 00000, Attention: Chief
Financial Officer (ii) if to the Initial Investor, at the address set
forth under its name in the Subscription Agreement and (iii) if to any
other Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b), and
shall be effective, when
-14-
15
personally delivered, upon receipt, and when so sent by certified mail,
four business days after deposit with the United States Postal Service.
(c) 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.
(d) This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of Minnesota applicable to the
agreements made and to be performed entirely within such state, without
giving effect to rules governing the conflict of laws. In the event
that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law.
Any provision hereof which may prove invalid or unenforceable under any
law shall not affect the validity or enforceability of any other
provision hereof.
(e) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those
set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings among the parties hereto with respect to
the subject matter hereof.
(f) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(g) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may
require .
(h) The headings in the Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning
hereof.
(i) The Company shall not enter into any agreement with respect
to its securities that is inconsistent with the rights granted to the
holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Holders of a
majority in interest of the Registrable Securities, the Company shall
not grant to any person the right to request it to register any of its
securities under the Securities Act unless the rights so granted are
subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement.
-15-
16
(j) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by
a party, may be delivered to the other party hereto by telephone line
facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as
of day and year first above written.
INNOVATIVE GAMING CORPORATION
OF AMERICA
By: s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------------------
Xxxxxx X. Xxxxxxxxx, Chairman and CEO
INVESTOR:
THE SHAAR FUND, LTD.
By: Xxxxxx Xxxxxxxx
---------------------------------------------------
Its:
--------------------------------------------------
Address for Notices:
The Shaar Fund, Ltd.
c/x Xxxxxxxx Capital Management
Two Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
-16-