SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT
SECOND
AMENDED AND RESTATED JOINT VENTURE AGREEMENT
THIS
SECOND AMENDMENT AND RESTATED JOINT VENTURE AGREEMENT
(the
“Agreement”)
is
made as of August 31, 2006 (the “Effective
Date”),
by
and between Solidus
Networks, Inc.,
a
Delaware corporation (“PBT”),
and
WinWin
Gaming, Inc.,
a
Delaware corporation (“WinWin”).
PBT
and WinWin are each referred to in this Agreement as a “Party”
and
collectively as the “Parties.”
RECITALS
A. On
September 30, 2005, the Parties entered into a Joint Venture Agreement (the
“Original
Agreement”)
in
order to establish a framework for cooperation through joint marketing and
other
efforts in order to gain mutual benefit by taking advantage of the relationships
and synergies between their respective businesses.
B. On
April
14, 2006, the Parties amended and restated the Original Agreement and entered
into an Amended and Restated Joint Venture Agreement (the “Restated
Agreement”).
C. The
Parties now desire to amend and restate the Restated Agreement in order to
expand the scope of the joint venture established by the Parties under the
Original Agreement and the Restated Agreement.
D. Contemporaneously
with the execution and delivery hereof, PBT entered into voting agreements
with
certain holders of WinWin common stock relating to the approval of the Restated
Charter (as defined below) and certain other items as set forth
therein.
E. By
agreements dated April 21, 2006 and June 13, 2006, the maturity date of the
Note
(as defined below) has been extended to September 30, 2006.
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as
follows:
AGREEMENT
1. Purchase
and Sale; Authority.
(a) Authorization.
WinWin’s Board of Directors has approved the terms of this Agreement and all
exhibits attached hereto, including authorizing the issuance and sale, pursuant
to the terms and conditions of this Agreement, of shares of the Series A-1
Preferred Stock of WinWin, par value $0.01 per share (the “WinWin
Series A-1 Shares”),
and
Series A Preferred Stock of WinWin, par value $0.01 per share (the “WinWin
Series A Shares
and,
together with the WinWin Series A-1 Shares, the “WinWin Shares”).
(b) Agreement
to Purchase and Sell.
Subject
to the terms and conditions of this Agreement, PBT agrees to purchase, and
WinWin agrees to sell and issue to PBT at each Closing (as defined in
Section 2), that number and series of WinWin Shares to be issued and sold
to PBT at each Closing, as set forth in Section 2. The purchase price of
each WinWin Share at each Closing (the “Purchase
Price”)
shall
be $79.10 for the WinWin Series A-1 Shares and $7.91 for the WinWin Series
A
Shares.
2. Closings.
(a) Initial
Closing.
An
initial Closing (the “Initial
Closing”)
of the
purchase and sale of WinWin Shares shall take place at the offices of Xxxxxx
Godward llp,
000
Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx, at 10:00 a.m. Pacific time, on the date that is
three
business days following the date on which the parties have satisfied all of
the
conditions to the Initial Closing (the “Initial
Closing Date”);
provided,
that
the Initial Closing shall only occur, if at all, on such date that is chosen
by
PBT; and provided
further, that
the
Initial Closing shall occur, if at all, on or prior to September 30, 2006.
At the Initial Closing, PBT shall purchase, and WinWin shall issue and sell,
against delivery of payment therefor, a number of WinWin Shares (the
“Initial
Closing WinWin Shares”)
such
that, following the issuance of the Initial Closing WinWin Shares, PBT will
hold
19% of the outstanding capital stock of WinWin on an as-converted-to-common
basis, and WinWin shall authorize its transfer agent to issue to PBT a
certificate registered in the name of PBT, representing the Initial Closing
WinWin Shares and bearing the legend set forth in Section 4(x)(vi). The
purchase price for the Initial Closing WinWin Shares will be paid by PBT’s
delivery to WinWin at the Initial Closing of (i) that certain original
promissory note issued by WinWin to PBT and dated as of September 30, 2005
and
with a principal amount of $2.5 million (the “Note”),
all
principal and accrued interest on which shall be canceled in exchange for a
number of Initial Closing WinWin Shares equal to the quotient obtained by
dividing the principal and accrued interest under the Note by the Purchase
Price
and, (ii) a number of fully paid and nonassessable newly issued shares of
PBT Series C Preferred Stock (the “Initial
Closing PBT Shares”),
each
with a deemed value of $5.00, which shares will have the rights, preferences
and
privileges as set forth in PBT’s Amended and Restated Certificate of
Incorporation as in effect as of the date of this Agreement (the “PBT
Charter”).
In
advance of the Initial Closing the PBT Board of Directors shall have authorized
the issuance and sale to WinWin of the Initial Closing PBT Shares, and shall
have reserved a sufficient number of shares of the common stock of PBT (the
“PBT
Common Stock”)
for
issuance upon the conversion of the Initial Closing PBT Shares.
(b) Second
Closing.
A
second Closing (the “Second
Closing”)
of the
purchase and sale of WinWin Shares shall take place at the offices of Xxxxxx
Godward llp,
000
Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx,
Xxx Xxxxxxxxx, Xxxxxxxxxx, at 10:00 a.m. Pacific time, at PBT’s sole option, at
any time after the Initial Closing Date and on or before the one-year
anniversary of the date of this Agreement (the “Second
Closing Date”).
At
the Second Closing, PBT shall purchase, and WinWin shall issue and sell, against
delivery of payment therefor, a number of WinWin Shares (the “Second
Closing WinWin Shares”)
such
that, following the issuance of the Second Closing WinWin Shares, PBT will
hold,
at PBT’s option, up to 35% of the capital stock of WinWin on a fully diluted,
as-converted-to-common basis, and WinWin shall authorize its transfer agent
to
issue to PBT a certificate registered in the name of PBT, representing the
Second Closing WinWin Shares and bearing the legend set forth in
Section 4(x)(vi). The purchase price for the Second Closing WinWin Shares
will be paid by PBT’s delivery to WinWin at the Second Closing, at PBT’s option,
of (i) cash, (ii) fully paid and nonassessable newly issued shares of
PBT’s Series C Preferred Stock (the “Second
Closing PBT Shares”),
each
with a deemed value of $5.00, which shares will have the rights, preferences
and
privileges accorded to such shares in the PBT Charter, or (iii) a
combination of cash and Second Closing PBT Shares. In advance of the Second
Closing the PBT Board of Directors shall have authorized the issuance and sale
to WinWin of the Second Closing PBT Shares, and shall have reserved a sufficient
number of shares of PBT Common Stock for issuance upon the conversion of the
Second Closing PBT Shares. In no event shall the Second Closing occur following
the date on which this Agreement has terminated in accordance with Section
13
hereof. The Initial Closing PBT Shares and the Second Closing PBT Shares are
referred to collectively as the “PBT
Shares.”
The
Initial Closing and the Second Closing are referred to collectively as the
“Closings”
and
individually as a “Closing.”
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(c) Series
of WinWin Shares to be Issued.
The
WinWin Shares issued at any Closing shall be WinWin Series A-1 Shares if such
Closing occurs before the Restated Charter (as defined below) becomes effective
and WinWin Series A Shares if such Closing occurs after such Restated Charter
becomes effective.
3. Representations
and Warranties of WinWin.
WinWin
hereby represents and warrants to PBT that, except as set forth in the SEC
Documents (as defined below) or in the Disclosure Schedule delivered by WinWin
to PBT as of the date of this Agreement (the “WinWin
Disclosure Schedule”)
(for
purposes of this Section 3 (other than Sections 3(b), 3(d), 3(e), 3(k)
and 3(w)), all references to “WinWin” shall include each other entity in which
WinWin holds, beneficially or of record, a controlling interest, either directly
or indirectly):
(a) Organization
Good Standing and Qualification.
WinWin
is a corporation duly organized, validly existing and in good standing under
the
laws of the State of Delaware and has all corporate power and authority required
to (i) carry on its business as presently conducted and (ii) enter
into this Agreement and the other agreements, instruments and documents
contemplated hereby, and to consummate the transactions contemplated hereby
and
thereby. WinWin is qualified to do business and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect. As used in this Agreement, “Material
Adverse Effect”
means
a
material adverse effect on, or a material adverse change in, or a group of
such
effects on or changes in, the business, operations, financial condition, results
of operations, assets or liabilities of the relevant Party and its subsidiaries,
taken as a whole.
(b) Capitalization.
The
capitalization of WinWin, assuming the issuance of no WinWin Shares at any
Closing, is as follows:
(i) the
authorized capital stock of WinWin consists of 300,000,000 shares of Common
Stock, $0.01 par value per share (“WinWin
Common Stock”)
and
10,000,000 shares of preferred stock, $0.01 par value per share (“WinWin
Preferred Stock”),
of
which 6,000,000 shares of WinWin Preferred Stock will be designated as Series
A-1 Preferred Stock upon the filing of WinWin’s Certificate of Designation of
Preferences of Series A-1 Preferred Stock, in the form attached hereto as
Exhibit
G
(the
“Designation”);
upon
the filing and acceptance of the Designation, shares of WinWin Series A-1
Preferred Stock shall have the rights, preferences, privileges and restrictions
set forth in the Designation.
(ii) the
issued and outstanding capital stock of WinWin consists of
63,692,171 shares
of
WinWin Common Stock. The shares of issued and outstanding capital stock of
WinWin have been duly authorized and validly issued, are fully paid and
nonassessable and have not been issued in violation of, or are not otherwise
subject to, any preemptive or other similar rights.
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(iii) there
are
no issued and outstanding shares of WinWin Preferred Stock.
(iv) WinWin
has (A) 14,099,026 shares of WinWin Common Stock reserved for issuance upon
exercise of outstanding options granted under WinWin’s 2003 Stock Plan (the
“Option
Plan”)
and
(B) 17,582,161
shares
of WinWin Common Stock reserved for issuance upon exercise of outstanding
warrants.
(v) WinWin
has 5,900,974 shares
of
WinWin Common Stock available for future grant under the Option
Plan.
With
the
exception of the foregoing in this Section 3(b), there are no outstanding
subscriptions, options, warrants, convertible or exchangeable securities or
other rights granted to or by WinWin to purchase shares of WinWin Common Stock
or other securities of WinWin and there are no commitments, plans or
arrangements to issue any shares of WinWin Common Stock or any security
convertible into or exchangeable for WinWin Common Stock.
(c) Subsidiaries.
WinWin
does not have any subsidiaries, and does not own any capital stock of, assets
comprising the business of, obligations of, or any other interest (including
any
equity or partnership interest) in, any person or entity.
(d) Due
Authorization.
All
corporate actions on the part of WinWin necessary for the authorization,
execution, delivery of, and the performance of all obligations of WinWin under
this Agreement and the authorization, issuance, reservation for issuance and
delivery of all of the WinWin Shares being sold under this Agreement have been
taken, no further consent or authorization of WinWin’s Board of Directors or its
stockholders is required, and this Agreement constitutes the legal, valid and
binding obligation of WinWin, enforceable against WinWin in accordance with
its
terms, except (i) as may be limited by (A) applicable bankruptcy,
insolvency, reorganization or others laws of general application relating to
or
affecting the enforcement of creditors’ rights generally and (B) the effect
of rules of law governing the availability of equitable remedies and
(ii) as rights to indemnity or contribution may be limited under federal or
state securities laws or by principles of public policy thereunder.
(e) Valid
Issuance of WinWin Shares.
(i) Purchased
Shares.
The
WinWin Shares will be, upon payment therefor by PBT in accordance with this
Agreement, duly authorized, validly issued, fully paid and non-assessable,
free
from all taxes, liens, claims and encumbrances with respect to the issuance
of
such WinWin Shares (other than any liens, claims or encumbrances created by
or
imposed upon PBT) and will not be subject to any pre-emptive rights or similar
rights.
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(ii) Underlying
Shares of Common Stock.
The
issuance of the shares of WinWin Common Stock issued or issuable from time
to
time upon the conversion of the WinWin Shares (the “Underlying
WinWin Shares”)
will
be, and at all times prior to such conversion, will have been, duly authorized,
duly reserved for issuance upon such conversion, and will be, upon such
conversion, validly issued, fully-paid and non-assessable free from all taxes,
liens, claim, encumbrances with respect to the issuance of such shares and
will
not be subject to any pre-emptive rights or similar rights.
(iii) Compliance
with Securities Laws.
Subject
to the accuracy of the representations made by PBT in Section 4(x), the
WinWin Shares (assuming no change in applicable law and no unlawful distribution
of the WinWin Shares by PBT or other parties) will be issued to PBT in
compliance with applicable exemptions from (A) the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended
(the
“Securities
Act”)
and
(B) the registration and qualification requirements of all applicable
securities laws of the states of the United States.
(f) Governmental
Consents.
No
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, or notice to, any
federal, state or local governmental authority or self regulatory
agency
on the
part of WinWin is required in connection with the issuance of the WinWin Shares
to PBT, or the consummation of the other transactions contemplated by this
Agreement, except (i) such filings as have been made prior to the date
hereof and (ii) such additional post-Closing filings as may be required to
comply with applicable state and federal securities laws.
(g) Non-Contravention.
The
execution, delivery and performance of this Agreement by WinWin, and the
consummation by WinWin of the transactions contemplated hereby (including
issuance of the WinWin Shares), do not: (i) contravene or conflict with the
Certificate of Incorporation of WinWin, as amended and in effect as of the
date
of this Agreement (the “WinWin Certificate
of Incorporation”),
the
Designation or the Bylaws of WinWin (the “WinWin Bylaws”);
(ii) constitute a violation of any provision of any federal, state, local
or foreign law, rule, regulation, order or decree applicable to WinWin; or
(iii) constitute a default or require any consent under, give rise to any
right of termination, cancellation or acceleration of, or to a loss of any
material benefit to which WinWin is entitled under, or result in the creation
or
imposition of any lien, claim or encumbrance on any assets of WinWin under,
any
material mortgage, indenture, contract, agreement, permit, license or instrument
to which WinWin or any of its subsidiaries is a party or by which WinWin or
any
of its subsidiaries is bound or subject.
(h) Litigation.
There
is no action, suit, proceeding, claim, arbitration or investigation
(“Action”)
pending or, to WinWin’s knowledge, threatened in writing: (i) against
WinWin, its activities, properties or assets, or any officer, director or,
to
WinWin’s knowledge, employee of WinWin in connection with such officer’s,
director’s or employee’s relationship with, or actions taken on behalf of,
WinWin, that is reasonably likely to have a Material Adverse Effect on WinWin;
or (ii) that seeks to prevent, enjoin, alter, challenge or delay the
transactions contemplated by this Agreement (including the issuance of the
WinWin Shares). WinWin is not a party to or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency
or
instrumentality. No Action is currently pending nor does WinWin intend to
initiate any Action that is reasonably likely to have a Material Adverse Effect
on WinWin.
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(i) Compliance
with Law and Charter Documents.
WinWin
is not in violation or default of any provisions of the WinWin Certificate
of
Incorporation or the WinWin Bylaws. WinWin has complied and is currently in
compliance with all applicable statutes, laws, rules, regulations and orders
of
the United States of America and all states thereof, foreign countries and
other
governmental bodies and agencies having jurisdiction over WinWin’s business or
properties, except for any instance of non-compliance that has not had, and
would not reasonably be expected to have, a Material Adverse Effect on
WinWin. WinWin has
all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it and as presently proposed
to be conducted, the lack of which could materially and adversely affect the
business, properties or financial condition of WinWin.
(j) Full
Disclosure.
WinWin
has provided PBT with all information requested by PBT in connection with its
decision to purchase the WinWin Shares. To WinWin’s knowledge, neither this
Agreement, the exhibits hereto, nor any other document delivered by WinWin
to
PBT or its attorneys or agents in connection herewith or therewith at the
Initial Closing or with the transactions contemplated hereby or thereby, contain
any untrue statement of a material fact nor, to WinWin’s knowledge, omit to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances in which they were made, not
misleading. Without limiting the foregoing, (i) WinWin has disclosed to PBT
or
the Representatives of PBT all significant or pending transactions with
customers, vendors, stockholders, affiliates and other current and potential
contracting parties and (ii) the April 4, 2006 letter regarding WinWin China
Business Clarifications from Xxxx Xxxxxx of WinWin to Xxx Xxxxxx of PBT is
true,
correct and complete in all material respects.
(k) SEC
Documents.
(i) Reports.
WinWin
has filed in a timely manner all reports, schedules, forms, statements and
other
documents required to be filed by it with the Securities and Exchange Commission
(the “SEC”)
pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “Exchange
Act”),
and
the rules and regulations promulgated thereunder. WinWin has made available
to
PBT prior to the date hereof copies of its Annual Report on Form 10-K for the
fiscal year ended December 31, 2005 (the “Form
10-KSB”),
its
Quarterly Reports on Forms 10-QSB for the first and second quarters of the
fiscal year ending December 31, 2006 (the "Forms
10-QSB")
any
information statement or proxy statement filed by WinWin since December 31,
2005, and any Current Report on Form 8-K for events occurring since
December 31, 2005 (“Forms
8-K”)
filed
by WinWin with the SEC (the Form 10-KSB, the Forms 10-QSB, the information
statements and proxy statements referenced above and the Forms 8-K are
collectively referred to herein as the “SEC
Documents”).
Each
of the SEC Documents, as of the respective dates thereof, did not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Each SEC Document, as it may have
been subsequently amended by filings made by WinWin with the SEC prior to the
date hereof, complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Document.
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(ii) Xxxxxxxx-Xxxxx.
The
Chief Executive Officer and the Chief Financial Officer of WinWin have signed,
and WinWin has furnished to the SEC, all certifications required by
Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of 2002 (“SOX”).
Such
certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither WinWin nor any
of
its officers has received notice from any governmental entity questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications. WinWin is otherwise in compliance in all material
respects with all applicable effective provisions of SOX and the rules and
regulations issued thereunder by the SEC.
(iii) Financial
Statements.
The
financial statements of WinWin in the SEC Documents present fairly, in
accordance with United States generally accepted accounting principles
(“GAAP”),
consistently applied, the financial position of WinWin as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified, subject, in the case of unaudited financial statements for
interim periods, to normal year-end audit adjustments. There are no material
financial transactions or arrangements that are not reflected on the financial
statements included in the SEC Documents.
(iv) Sufficiency
of Disclosure.
To
WinWin’s knowledge, no circumstance exists that could reasonably be expected to
lead to a restatement of any filing made by WinWin with the SEC.
(l) Absence
of Certain Changes Since the Balance Sheet Date.
Except
as set forth in the WinWin Disclosure Schedule, since December 31, 2005, the
business and operations of WinWin have been conducted in the ordinary course
consistent with past practice, and there has not been:
(i) any
declaration, setting aside or payment of any dividend or other distribution
of
the assets of WinWin with respect to any shares of capital stock of the WinWin
or any repurchase, redemption or other acquisition by WinWin or any subsidiary
of WinWin of any outstanding shares of the WinWin’s capital stock;
(ii) any
damage, destruction or loss, whether or not covered by insurance, except for
such occurrences, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect on
WinWin;
(iii) any
waiver by WinWin of a valuable right or of a material debt owed to it, except
for such waivers, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect on
WinWin;
(iv) any
material change or amendment to, or any waiver of any material right under
a
material contract or arrangement by which WinWin or any of its assets or
properties is bound or subject;
(v) any
change by WinWin in its accounting principles, methods or practices or in the
manner in which it keeps its accounting books and records, except any such
change required by a change in GAAP or by the SEC; or
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(vi) any
other
event or condition of any character, except for such events and conditions
that
have not resulted, and are not expected to result, either individually or
collectively, in a Material Adverse Effect on WinWin.
(m) Intellectual
Property.
(i) WinWin
owns or possesses sufficient rights to use all patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names,
copyrights, information and other proprietary rights and processes
(collectively, “Intellectual
Property”)
that
are necessary to conduct its businesses as currently conducted or as proposed
to
be conducted, free and clear of all liens, encumbrances and other adverse
claims, except where the failure to own or possess such Intellectual Property
free and clear of all liens, encumbrances and other adverse claims would not
reasonably be expected to result, either individually or in the aggregate,
in a
Material Adverse Effect on WinWin.
(ii) WinWin
has not received any written notice of, and has no knowledge of, any
infringement of or conflict with rights of others with respect to any
Intellectual Property used by WinWin to conduct its business as conducted or
as
proposed to be conducted and WinWin has no knowledge of any infringement,
misappropriation or other violation of any Intellectual Property by any third
party, which, in either case, either individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would reasonably be
expected to have a Material Adverse Effect on WinWin.
(iii) WinWin
neither owns nor licenses any patent rights.
(iv) Each
employee, consultant and contractor of WinWin who has had access to the
Intellectual Property has executed a valid and enforceable agreement to maintain
the confidentiality of such Intellectual Property and assigning all rights
to
WinWin to any inventions, improvements, discoveries or information relating
to
the business of WinWin. WinWin is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of
any nature) or other agreement, or subject to any judgment, decree or order
of
any court or administrative agency, that would interfere with their duties
to
WinWin or that would conflict with WinWin’s business.
(v) WinWin
is
not subject to any “open source” or “copyleft” obligations or otherwise required
to make any public disclosure or general availability of source code either
used
or developed by WinWin.
(n) Registration
Rights.
Except
for the WinWin Registration Rights Agreement, in substantially the form attached
hereto as Exhibit A
(the
“WinWin
Registration Rights Agreement”),
WinWin is not currently subject to any agreement providing any person or entity
any rights (including piggyback registration rights) to have any securities
of
WinWin registered with the SEC or registered or qualified with any other
governmental authority.
(o) Title
to Property and Assets.
The
properties and assets of WinWin are owned or leased by WinWin free and clear
of
all mortgages, deeds of trust, liens, charges, encumbrances and security
interests except for (i) statutory liens for the payment of current taxes
that are not yet delinquent and (ii) liens, encumbrances and security
interests that arise in the ordinary course of business and do not in any
material respect affect the properties and assets of WinWin. With respect to
the
property and assets it leases, WinWin is in compliance with such leases in
all
material respects.
-8-
(p) Taxes.
WinWin
has filed or has valid extensions of the time to file all necessary federal,
state, local and foreign income and franchise tax returns due prior to the
date
hereof and has paid or accrued all taxes shown as due thereon, and WinWin has
no
knowledge of any material tax deficiency which has been or might be asserted
or
threatened against it.
(q) Insurance.
WinWin
maintains insurance of the types and in the amounts that are reasonable for
companies conducting the business conducted and proposed to be conducted by
WinWin, all of which insurance is in full force and effect.
(r) Labor
Relations.
No
material labor dispute exists or, to the knowledge of WinWin, is imminent with
respect to any of the employees of WinWin.
(s) Internal
Accounting Controls.
WinWin
and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(t) Transactions
With Officers and Directors.
None of
the officers or directors of WinWin has entered into any transaction with WinWin
or any subsidiary that would be required to be disclosed pursuant to Item
404(a), (b) or (c) of Regulation S-K of the SEC.
(u) Investment
Company.
WinWin
is not now, and after the sale of the WinWin Shares under this Agreement and
the
application of the net proceeds from the sale of the WinWin Shares will not
be,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.
(v) Executive
Officers.
To
the
knowledge of WinWin, no executive officer or person nominated to become an
executive officer of WinWin (i) has been convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding minor traffic
violations) or (ii) is or has been subject to any judgment or order of, the
subject of any pending civil or administrative action by the SEC or any
self-regulatory organization.
(w) Investment
Representations and Warranties.
(i) Purchase
for Own Account.
WinWin
represents that it is acquiring the PBT Shares solely for its own account and
beneficial interest for investment and not for sale or with a view to
distribution of the PBT Shares or any part thereof, has no present intention
of
selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
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(ii) Information
and Sophistication.
Without
lessening or obviating the representations and warranties of PBT set forth
in
Section 4, WinWin hereby acknowledges that it has had an opportunity
to ask questions and receive answers from PBT regarding the terms and conditions
of the offering of the PBT Shares and further represents that it has such
knowledge and experience in financial and business matters that it is capable
of
evaluating the merits and risk of this investment.
(iii) Ability
to Bear Economic Risk.
WinWin
acknowledges that investment in the PBT Shares involves a high degree of risk,
and represents that it is able, without materially impairing its financial
condition, to hold the PBT Shares for an indefinite period of time and to suffer
a complete loss of its investment.
(iv) Accredited
Investor Status.
WinWin
is an “accredited investor” within the meaning of Regulation D promulgated under
the Securities Act.
(v) Restricted
Securities.
WinWin
understands that the PBT Shares have not been registered under the Securities
Act and will not sell, offer to sell, assign, pledge, hypothecate or otherwise
transfer any of the PBT Shares unless (A) pursuant to an effective
registration statement under the Securities Act, (B) such holder provides
PBT with an opinion of counsel, in form and substance reasonably acceptable
to
PBT, to the effect that a sale, assignment or transfer of the PBT Shares may
be
made without registration under the Securities Act and the transferee agrees
to
be bound by the terms and conditions of this Agreement, (C) such holder
provides PBT with reasonable assurances (in the form of seller and broker
representation letters) that the PBT Shares or the PBT Conversion Shares, as
the
case may be, can be sold pursuant to Rule 144 promulgated under the Securities
Act (“Rule
144”)
or
(D) pursuant to Rule 144(k) promulgated under the Securities Act following
the applicable holding period.
(vi) Legends.
WinWin
agrees that the certificates for the PBT Shares shall bear the following
legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
-10-
WinWin
agrees that PBT may place stop transfer orders with its transfer agent with
respect to such certificates in order to implement the restrictions on transfer
set forth in this Agreement. The appropriate portion of the legend and the
stop
transfer orders will be removed promptly upon delivery to PBT of such
satisfactory evidence as reasonably may be required by PBT that such legend
or
stop orders are not required to ensure compliance with the Securities
Act.
4. Representations
and Warranties of PBT.
PBT
hereby represents and warrants to WinWin that, except as set forth in the
Disclosure Schedule delivered by PBT to WinWin as of the date of this Agreement
(the “PBT
Disclosure Schedule”):
(a) Organization,
Good Standing and Qualification.
PBT is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. PBT has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, to issue and sell the PBT Shares and the shares of PBT common
stock into which the PBT Shares convert (the “PBT
Conversion Shares”),
to
carry out the provisions of this Agreement and to carry on its business as
presently conducted. PBT is duly qualified to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature
of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to
do
so would not have a material adverse effect on PBT or its business.
(b) Subsidiaries.
PBT
does not own or control any equity security or other interest of any other
corporation, limited partnership or other business entity. PBT is not a
participant in any joint venture, partnership or similar arrangement. Since
its
inception, PBT has not consolidated or merged with, acquired all or
substantially all of the assets of, or acquired the stock of or any interest
in
any corporation, partnership, association, or other business
entity.
(c) Capitalization;
Voting Rights.
(i) The
authorized capital stock of PBT as of the date hereof consists of
(A) 800,000,000 shares of Common Stock, par value $0.0001 per share, and
(B) 2,300,000,000 shares of Preferred Stock, par value $0.00001 per share
(“PBT
Preferred Stock”),
1,900,000,000
of which have been designated Class 1 Preferred Stock,
150,000,000 of which have been designated Series B Preferred Stock, 30,000,000
of which have been designated Series B-1 Preferred Stock, 40,000 of which have
been designated Series C-1 Preferred Stock, 200,000 of which have been
designated Series C-2 Preferred Stock, 200,000 of which have been designated
Series C-3 Preferred Stock and 75,000,000 of which have been designated Series
C
Preferred Stock.
(ii) Section
4(c) of the PBT Disclosure Schedule sets forth, as of immediately prior to
the
Initial Closing, the number of outstanding shares of each class and series
of
PBT's equity securities.
-11-
(iii) Section 4(c)
of the PBT Disclosure Schedule sets forth, as of immediately prior to the
Initial Closing, under PBT’s 2003 Equity Incentive Plan (the “PBT
Plan”),
(A) the number of shares of PBT Common Stock that have been issued and are
currently outstanding pursuant to restricted stock purchase agreements and/or
the exercise of options, (B) the number of shares of Class 1 Preferred
that have been issued and are currently outstanding pursuant to restricted
stock
purchase agreements and/or the exercise of options, (C) the number of
options to purchase shares of PBT Common Stock and Class 1 Preferred that
have been granted and are currently outstanding and (D) the number of
shares of PBT Common Stock and Class 1 Preferred that remain available for
future issuance to officers, directors, employees and consultants of PBT. PBT
has not made any representations regarding equity incentives to any officer,
employee, director or consultant that are inconsistent with the share amounts
and terms set forth in PBT’s board minutes.
(iv) Other
than the shares reserved for issuance under the PBT Plan, and except as may
be
granted pursuant to this Agreement, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, or agreements of any kind for the purchase
or
acquisition from PBT of any of its securities.
(v) All
issued and outstanding shares of PBT Common Stock and PBT Preferred Stock
(A) have been duly authorized and validly issued and are fully paid and
nonassessable and (B) were issued in compliance with all applicable state
and federal laws concerning the issuance of securities.
(vi) The
rights, preferences, privileges and restrictions of the PBT Shares are as stated
in the PBT Charter. Each outstanding series of PBT Preferred Stock is
convertible into PBT Common Stock on a one-for-one basis as of the date hereof
and the consummation of the transactions contemplated hereunder will not result
in any anti-dilution adjustment or other similar adjustment to the outstanding
shares of PBT Preferred Stock. The
PBT
Conversion Shares have been duly and validly reserved for issuance. When issued
in compliance with the provisions of this Agreement and the PBT Charter, the
PBT
Shares and the PBT Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances other than
(A) liens and encumbrances created by or imposed upon WinWin and
(B) any right of first refusal set forth in PBT’s Bylaws; provided,
however, that the PBT Shares and the PBT Conversion Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set
forth
herein or as otherwise required by such laws at the time a transfer is proposed.
(d) Authorization;
Binding Obligations.
All
corporate action on the part of PBT, its officers, directors and stockholders
necessary for the authorization of this Agreement and the transactions
contemplated by this Agreement, the performance of all obligations of PBT
hereunder at the Initial Closing and the authorization, sale, issuance and
delivery of the PBT Shares pursuant hereto and the PBT Conversion Shares
pursuant to the PBT Charter has been taken. This Agreement, when executed and
delivered, will be the valid and binding obligation of PBT enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, (ii) general principles of
equity that restrict the availability of equitable remedies and (iii) to
the extent that the enforceability of indemnification provisions may be limited
by applicable laws. The sale of the PBT Shares and the subsequent conversion
of
the PBT Shares into PBT Conversion Shares are not and will not be subject to
any
preemptive rights or rights of first refusal that have not been properly waived
or complied with.
-12-
(e) Financial
Statements.
PBT has
delivered to WinWin (i) its unaudited statement of income for the year
ended December 31, 2005 (the “Statement
Date”),
and
(ii) its unaudited balance sheet as of December 31, 2005
(collectively, the “PBT
Financial Statements”).
The
PBT Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated, except as disclosed therein, and present fairly the financial
position of PBT as of the Statement Date in all material respects; provided,
however, that the unaudited financial statements are subject to year-end audit
adjustments (which are not expected to be material either individually or in
the
aggregate), and do not contain footnotes.
(f) Liabilities.
PBT has
no material liabilities and, to the best of its knowledge, knows of no material
contingent liabilities not disclosed in the PBT Financial Statements, except
current liabilities incurred in the ordinary course of business subsequent
to
the Statement Date which have not been, either in any individual case or in
the
aggregate, materially adverse.
(g) Agreements;
Action.
(i) Except
for agreements explicitly contemplated hereby and agreements between PBT and
its
employees with respect to the sale of PBT Common Stock and PBT Preferred Stock,
there are no agreements, understandings or proposed transactions between PBT
and
any of its officers, directors, employees, affiliates or any affiliate
thereof.
(ii) There
are
no agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which PBT is a party or to its knowledge
by which it is bound that may involve (A) future obligations (contingent or
otherwise) of, or payments to, PBT in excess of $100,000 (other than obligations
of, or payments to, PBT arising from purchase or sale agreements entered into
in
the ordinary course of business), (B) the transfer or license of any
patent, copyright, trade secret or other proprietary right to or from PBT (other
than licenses by PBT of “off the shelf” or other standard products) or
(C) indemnification by PBT with respect to infringements of proprietary
rights (other than indemnification obligations arising from purchase, sale
or
license agreements entered into in the ordinary course of
business).
(iii) PBT
has
not (A) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock,
(B) incurred or guaranteed any indebtedness for money borrowed or any other
liabilities (other than with respect to dividend obligations, distributions,
indebtedness and other obligations incurred in the ordinary course of business
or as disclosed in the PBT Financial Statements) individually in excess of
$100,000 or, in the case of indebtedness and/or liabilities individually less
than $100,000, in excess of $250,000 in the aggregate, (C) made any loans
or advances to any person, other than ordinary advances for travel expenses,
or
(D) sold, exchanged or otherwise disposed of any of its assets or rights,
other than the sale of its inventory in the ordinary course of
business.
(iv) For
the
purposes of subsections (ii) and (iii) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
PBT has reason to believe are affiliated therewith) shall be aggregated for
the
purpose of meeting the individual minimum dollar amounts of such
subsections.
-13-
(h) Obligations
to Related Parties.
There
are no obligations of PBT to officers, directors, stockholders, or employees
of
PBT other than (i) for payment of salary for services rendered,
(ii) reimbursement for reasonable expenses incurred on behalf of PBT and
(iii) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the PBT Board of Directors). No officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with PBT (other than such
contracts as relate to any such person’s ownership of capital stock or other
securities of PBT).
(i) Changes.
Since
the Statement Date, there has not been to PBT’s knowledge:
(i) Any
change in the assets, liabilities, financial condition or operations of PBT
from
that reflected in the PBT Financial Statements, other than changes in the
ordinary course of business, none of which individually or in the aggregate
has
had a material adverse effect on such assets, liabilities, financial condition
or operations of PBT;
(ii) Any
resignation or termination of any officer, key employee or group of employees
of
PBT;
(iii) Any
material change, except in the ordinary course of business, in the contingent
obligations of PBT by way of guaranty, endorsement, indemnity, warranty or
otherwise;
(iv) Any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the properties, business or prospects or financial condition
of PBT;
(v) Any
waiver by PBT of a valuable right or of a material debt owed to it;
(vi) Any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(vii) Any
labor
organization activity related to PBT;
(viii) Any
sale,
assignment, or exclusive license or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(ix) Any
change in any material agreement to which PBT is a party or by which it is
bound
that materially and adversely affects the business, assets, liabilities,
financial condition or operations of PBT;
-14-
(x) Any
other
event or condition of any character that, either individually or cumulatively,
has materially and adversely affected the business, assets, liabilities,
financial condition or operations of PBT; or
(xi) Any
arrangement or commitment by PBT to do any of the acts described in
subsection (i) through (x) above.
(j) Title
to Properties and Assets; Liens, Etc.
PBT has
good and marketable title to its properties and assets and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes which have
not yet become delinquent, (ii) minor liens and encumbrances that do not
materially detract from the value of the property subject thereto or materially
impair the operations of PBT, and (iii) those that have otherwise arisen in
the ordinary course of business. PBT is in compliance with all material terms
of
each lease to which it is a party or is otherwise bound.
(k) Intellectual
Property.
(i) PBT
owns
or possesses sufficient legal rights to (A) all trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes and (B) to PBT’s knowledge, all patents,
in each instance as necessary for its business as now conducted and as presently
proposed to be conducted, without any known infringement of the rights of
others. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing proprietary rights, nor is PBT bound by or a party
to
any options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and other proprietary rights and processes of any other person
or
entity other than such licenses or agreements arising from the purchase of
“off
the shelf” or standard products.
(ii) PBT
has
not received any communications alleging that PBT has violated or, by conducting
its business as presently proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
(iii) PBT
is
not aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to PBT or that would conflict with PBT’s
business as proposed to be conducted. Each employee, officer and consultant
of
PBT has executed a proprietary information and inventions agreement in the
form(s) as delivered to WinWin. No employee, officer or consultant of PBT has
excluded works or inventions made prior to his or her employment with PBT from
his or her assignment of inventions pursuant to such employee, officer or
consultant’s proprietary information and inventions agreement. PBT does not
believe it is or will be necessary to utilize any inventions, trade secrets
or
proprietary information of any of its employees made prior to their employment
by PBT, except for inventions, trade secrets or proprietary information that
have been assigned to PBT.
-15-
(l) Compliance
with Other Instruments.
PBT is
not in violation or default of any term of its charter documents, each as
amended, or of any provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound or of any
judgment, decree, order or writ other than any such violation that would not
have a material adverse effect on PBT. The execution, delivery, and performance
of and compliance with this Agreement and the issuance and sale of the PBT
Shares pursuant hereto and of the PBT Conversion Shares pursuant to the PBT
Charter, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute
a
material default under any such document, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of PBT or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to
PBT,
its business or operations or any of its assets or properties. To its knowledge,
PBT has avoided every condition, and has not performed any act, the occurrence
of which would result in PBT’s loss of any right granted under any license,
distribution agreement or other agreement required to be disclosed on the PBT
Disclosure Schedule.
(m) Litigation.
There
is no action, suit, proceeding or investigation pending or, to PBT’s knowledge,
currently overtly threatened against PBT that questions the validity of this
Agreement, or the right of PBT to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or that would
reasonably be expected to result, either individually or in the aggregate,
in
any material adverse change in the assets, condition, affairs or prospects
of
PBT, financially or otherwise, or any change in the current equity ownership
of
PBT, nor is PBT aware that there is any basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or, to PBT’s knowledge,
threatened in writing involving the prior employment of any of PBT’s employees,
their use in connection with PBT’s business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. PBT is not a party or subject to
the
provisions of any order, writ, injunction, judgment or decree of any court
or
government agency or instrumentality. There is no action, suit, proceeding
or
investigation by PBT currently pending or that PBT intends to
initiate.
(n) Tax
Returns and Payments.
PBT is
and always has been a subchapter C corporation. PBT has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be
due
and payable on such returns, any assessments imposed, and to PBT’s knowledge all
other taxes due and payable by PBT on or before the Initial Closing, have been
paid or will be paid prior to the time they become delinquent. PBT has not
been
advised (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in
assessment or proposed judgment to its federal, state or other taxes. PBT has
no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided
for.
-16-
(o) Employees.
PBT has
no collective bargaining agreements with any of its employees. There is no
labor
union organizing activity pending or, to PBT’s knowledge, threatened with
respect to PBT. To PBT’s knowledge, no employee of PBT, nor any consultant with
whom PBT has contracted, is in violation of any term of any employment contract,
proprietary information agreement or any other agreement relating to the right
of any such individual to be employed by, or to contract with, PBT; and to
PBT’s
knowledge the continued employment by PBT of its present employees, and the
performance of PBT’s contracts with its independent contractors, will not result
in any such violation. PBT has not received any notice alleging that any such
violation has occurred. No employee of PBT has been granted the right to
continued employment by PBT or to any material compensation following
termination of employment with PBT. PBT is not aware that any officer, key
employee or group of employees intends to terminate his, her or their employment
with PBT, nor does PBT have a present intention to terminate the employment
of
any officer, key employee or group of employees. There are no actions pending,
or to PBT’s knowledge, threatened, by any former or current employee concerning
such person’s employment by PBT.
(p) Obligations
of Management.
Each
officer and key employee of the PBT currently devoting substantially all of
his
or her business time to the conduct of the business of PBT. PBT is not aware
that any officer or key employee of PBT is planning to work less than full
time
at PBT in the future. No officer or key employee is currently working or, to
PBT’s knowledge, plans to work for a competitive enterprise, whether or not such
officer or key employee is or will be compensated by such
enterprise.
(q) Registration
Rights and Voting Rights.
Except
as required pursuant to the PBT Registration Rights Agreement and that certain
Investor Rights Agreement, dated as of November 14, 2003, by and among PBT
and the other parties thereto, PBT is presently not under any obligation, and
has not granted any rights, to register any of PBT’s presently outstanding
securities or any of its securities that may hereafter be issued. To PBT’s
knowledge, no stockholder of PBT has entered into any agreement with respect
to
the voting of equity securities of PBT.
(r) Compliance
with Laws; Permits.
To its
knowledge, PBT is not in violation of any applicable statute, rule, regulation,
order or restriction of any domestic or foreign government or any
instrumentality or agency thereof in respect of the conduct of its business
or
the ownership of its properties which violation would materially and adversely
affect the business, assets, liabilities, financial condition, operations or
prospects of PBT. No United States domestic governmental orders, permissions,
consents, approvals or authorizations are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement or the issuance of the PBT Shares
or
the PBT Conversion Shares, except such as have been duly and validly obtained
or
filed, or with respect to any filings that must be made after the Initial
Closing, as will be filed in a timely manner. PBT has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business
as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties or financial condition of PBT and believes
it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted.
-17-
(s) Environmental
and Safety Laws.
To its
knowledge, PBT is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. No Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by PBT or,
to
PBT’s knowledge, by any other person or entity on any property owned, leased or
used by PBT. For the purposes of the preceding sentence, “Hazardous
Materials”
shall
mean (i) materials that are listed or otherwise defined as “hazardous” or
“toxic” under any applicable local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control
of
hazardous wastes, or other activities involving hazardous substances, including
building materials, or (ii) any petroleum products or nuclear
materials.
(t) Offering
Valid.
Assuming the accuracy of the representations and warranties of WinWin contained
in Section 3(w), the offer, sale and issuance of the PBT Shares and the PBT
Conversion Shares will be exempt from the registration requirements of the
Securities Act, and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither PBT nor any agent
on its behalf has solicited or will solicit any offers to sell or has offered
to
sell or will offer to sell all or any part of the PBT Shares to any person
or
persons so as to bring the sale of such PBT Shares by PBT within the
registration provisions of the Securities Act or any state securities
laws.
(u) Full
Disclosure.
PBT has
provided WinWin with all information requested by WinWin in connection with
its
decision to purchase the PBT Shares. To PBT’s knowledge, neither this Agreement,
the exhibits hereto, nor any other document delivered by PBT to WinWin or its
attorneys or agents in connection herewith or therewith at the Initial Closing
or with the transactions contemplated hereby or thereby, contain any untrue
statement of a material fact nor, to PBT’s knowledge, omit to state a material
fact necessary in order to make the statements contained herein or therein,
in
light of the circumstances in which they were made, not misleading.
(v) Real
Property Holding Corporation.
PBT is
not a real property holding corporation within the meaning of
Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and any
regulations promulgated thereunder.
(w) Insurance.
PBT has
or will obtain promptly following the Initial Closing general commercial,
product liability, fire and casualty insurance policies with coverage customary
for companies similarly situated to PBT.
(x) Investment
Representations and Warranties.
(i) Purchase
for Own Account.
PBT
represents that it is acquiring the WinWin Shares solely for its own account
and
beneficial interest for investment and not for sale or with a view to
distribution of the WinWin Shares or any part thereof, has no present intention
of selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention.
(ii) Information
and Sophistication.
Without
lessening or obviating the representations and warranties of WinWin set forth
in
Section 3, PBT hereby acknowledges that it has had an opportunity to
ask questions and receive answers from WinWin regarding the terms and conditions
of the offering of the WinWin Shares and further represents that it has such
knowledge and experience in financial and business matters that it is capable
of
evaluating the merits and risk of this investment.
-18-
(iii) Ability
to Bear Economic Risk.
PBT
acknowledges that investment in the WinWin Shares involves a high degree of
risk, and represents that it is able, without materially impairing its financial
condition, to hold the WinWin Shares for an indefinite period of time and to
suffer a complete loss of its investment.
(iv) Accredited
Investor Status.
PBT is
an “accredited investor” within the meaning of Regulation D promulgated under
the Securities Act.
(v) Restricted
Securities.
PBT
understands that the WinWin Shares have not been registered under the Securities
Act and will not sell, offer to sell, assign, pledge, hypothecate or otherwise
transfer any of the WinWin Shares unless (A) pursuant to an effective
registration statement under the Securities Act, (B) such holder provides
WinWin with an opinion of counsel, in form and substance reasonably acceptable
to WinWin, to the effect that a sale, assignment or transfer of the WinWin
Shares may be made without registration under the Securities Act and the
transferee agrees to be bound by the terms and conditions of this Agreement,
(C) such holder provides WinWin with reasonable assurances (in the form of
seller and broker representation letters) that the WinWin Shares or the
Underlying WinWin Shares, as the case may be, can be sold pursuant to Rule
144
or (D) pursuant to Rule 144(k) promulgated under the Securities Act
following the applicable holding period.
(vi) Legends.
PBT
agrees that the certificates for the WinWin Shares and Underlying WinWin Shares
shall bear the following legend:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
PBT
agrees that WinWin may place stop transfer orders with its transfer agent with
respect to such certificates in order to implement the restrictions on transfer
set forth in this Agreement. The appropriate portion of the legend and the
stop
transfer orders will be removed promptly upon delivery to WinWin of such
satisfactory evidence as reasonably may be required by WinWin that such legend
or stop orders are not required to ensure compliance with the Securities
Act.
-19-
5. No
Finders or Brokers.
Each of
the Parties represents that, on the basis of any actions and agreements by
it,
there are no brokers or finders entitled to compensation in connection with
the
transactions contemplated hereby. WinWin hereby indemnifies PBT for any broker
or finder fees or costs incurred by WinWin, and PBT hereby indemnifies WinWin
for any broker or finder fees or costs incurred by PBT.
6. Conditions
to PBT’s Obligations at Each Closing.
The
obligations of PBT under Section 1(b) of this Agreement at each Closing are
subject to the fulfillment or waiver, on or before such Closing, of each of
the
following conditions:
(a) Securities
Exemptions.
The
offer and sale of the WinWin Shares to PBT at such Closing pursuant to this
Agreement shall be exempt from the registration requirements of the Securities
Act and the registration and/or qualification requirements of all applicable
state securities laws.
(b) No
Suspension of Trading or Listing of Common Stock.
The
WinWin Common Stock (i) shall be designated for quotation or listed on the
Over-The-Counter market and on the Pink Sheets or on any other U.S. exchange
or
national quotation system and (ii) shall not have been suspended from
trading or quotation on either the Over-The-Counter Market or the Pink
Sheets.
(c) Good
Standing Certificates.
WinWin
shall have delivered to PBT a certificate of the Secretary of State of the
State
of Delaware, dated as of a date within five days prior to the date of such
Closing, with respect to the good standing of WinWin.
(d) Secretary’s
Certificate.
WinWin
shall have delivered to PBT a certificate of WinWin executed by WinWin’s
Secretary and dated as of such Closing attaching and certifying to the accuracy
and correctness of (i) the WinWin Certificate of Incorporation,
(ii) the WinWin Bylaws and (iii) the resolutions adopted by WinWin’s
Board of Directors in connection with the transactions contemplated by this
Agreement.
(e) Opinion
of WinWin Counsel.
PBT
shall have received an opinion, dated as of such Closing, from Xxxxxx Xxxx
&
Priest LLP, counsel to WinWin, in the form attached as Exhibit B.
(f) No
Statute or Rule Challenging Transaction.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
(g) Update
of Disclosure Schedule.
WinWin
shall have delivered to PBT an updated WinWin Disclosure Schedule, dated as
of
the date of such Closing.
-20-
(h) Other
Actions.
WinWin
shall have executed such certificates, agreements, instruments and other
documents, and taken such other actions as shall be customary or reasonably
requested by PBT in connection with the transactions contemplated
hereby.
7. Additional
Conditions to PBT’s Obligations at the Initial Closing.
The
obligations of PBT under Sections 1(b) and 2(a) of this Agreement at the
Initial Closing are subject to the fulfillment or waiver, on or before the
Initial Closing, in addition to the conditions set forth in Section 6, of
each of the following conditions:
(a) Accuracy
of Representations and Warranties.
Each of
the representations and warranties of WinWin contained in Section 3 shall
have been true and correct in all material respects on and as of the date of
this Agreement and on and as of the date of the Initial Closing with the same
effect as though such representations and warranties had been made as of the
Initial Closing; provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(i) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the WinWin Disclosure Schedule made or purported to have
been
made after the date of this Agreement shall be disregarded.
(b) Performance.
WinWin
shall have performed and complied in all material respects with all agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before the Initial Closing and shall
have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Compliance
Certificate.
WinWin
shall have delivered to PBT a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer certifying that the conditions
specified in Sections 7(a) and 7(b) hereof have been
fulfilled.
(d) Delivery
of Stock Certificates.
A stock
certificate registered in the name of PBT representing the Initial Closing
WinWin Shares shall have been delivered to PBT.
(e) Option
Agreement.
WinWin
shall have executed and delivered to PBT the Investment Option Agreement in
substantially the form attached hereto as Exhibit C.
(f) Board
of Directors.
The
authorized number of members of WinWin’s Board of Directors shall be seven (7),
with at least two (2) vacancies.
(g) Registration
Rights Agreement.
WinWin
shall have executed and delivered to PBT the WinWin Registration Rights
Agreement.
(h) Opinion
of WinWin Delaware Counsel.
PBT
shall have received an opinion, dated as of such Closing, from Xxxxxxx Xxxxxx
LLP, counsel to WinWin, in substantially the form attached as Exhibit F.
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(i) Filing
of Designation. WinWin
shall have caused the Designation to be filed with the Secretary of State of
the
State of Delaware, and shall have provided evidence to PBT to that effect.
The
Designation shall be in full effect as of the Initial Closing.
8. Additional
Conditions to PBT’s Obligations at the Second Closing.
The
obligations of PBT under Sections 1(b) and 2(c) of this Agreement at the
Second Closing are subject to the fulfillment or waiver, on or before the Second
Closing, in addition to the conditions set forth in Section 6, of the
following conditions:
(a) Accuracy
of Representations and Warranties.
(i) Each
of
the representations and warranties of WinWin contained in Section 3 shall
have been true and correct in all material respects on and as of the date of
this Agreement; provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(A) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (B) any update of
or modification to the WinWin Disclosure Schedule made or purported to have
been
made after the date of this Agreement shall be disregarded.
(ii) The
representations and warranties of WinWin contained in Section 3 shall be
accurate in all respects as of the Second Closing as if made on and as of the
Second Closing, except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and could not
reasonably be expected to have, a Material Adverse Effect on WinWin;
provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(A) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (B) any update of
or modification to the WinWin Disclosure Schedule made or purported to have
been
made after the date of this Agreement shall be disregarded.
(b) Performance.
WinWin
shall have performed and complied in all material respects with all agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before the Second Closing and shall
have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Compliance
Certificate.
WinWin
shall have delivered to PBT a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer, dated as of the Second Closing,
certifying that the conditions specified in Sections 8(a) and 8(b) hereof
have been fulfilled.
(d) Delivery
of Stock Certificates.
Stock
certificate(s) registered in the name of PBT representing the Second Closing
WinWin Shares shall have been delivered to PBT.
-22-
9. Conditions
to WinWin’s Obligations at Each Closing.
The
obligations of WinWin to PBT under this Agreement are subject to the fulfillment
or waiver, on or before each Closing, of each of the following
conditions:
(a) Securities
Exemptions.
The
offer and sale of the WinWin Shares to PBT pursuant to this Agreement shall
be
exempt from the registration requirements of the Securities Act and the
registration and/or qualification requirements of all applicable state
securities laws.
(b) Good
Standing Certificates.
PBT
shall have delivered to WinWin a certificate of the Secretary of State of the
State of Delaware, dated as of a date within five days prior to the date of
such
Closing, with respect to the good standing of PBT.
(c) Secretary’s
Certificate.
PBT
shall have delivered to WinWin a certificate of PBT executed by PBT’s Secretary
attaching and certifying to the accuracy and correctness of (i) the PBT
Certificate of Incorporation, (ii) the PBT Bylaws and (iii) the
resolutions adopted by PBT’s Board of Directors in connection with the
transactions contemplated by this Agreement.
(d) No
Statute or Rule Challenging Transaction.
No
statute, rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
(e) Update
of Disclosure Schedule.
At each
Closing at which PBT Shares are issued to WinWin, PBT shall have delivered
to
WinWin an updated PBT Disclosure Schedule, dated as of the date of such
Closing.
(f) Other
Actions.
PBT
shall have executed such certificates, agreements, instruments and other
documents, and taken such other actions as shall be customary or reasonably
requested by WinWin in connection with the transactions contemplated
hereby.
10. Additional
Conditions to WinWin’s Obligations at the Initial Closing.
The
obligations of WinWin to PBT at the Initial Closing under this Agreement are
subject to the fulfillment or waiver, on or before the Initial Closing,
in
addition to the conditions set forth in Section 9,
of each
of the following conditions:
(a) Accuracy
of Representations and Warranties.
Each of
the representations and warranties of PBT contained in Section 4 shall have
been true and correct in all material respects on and as of the date of this
Agreement and on and as of the date of the Initial Closing with the same effect
as though such representations and warranties had been made as of the Initial
Closing; provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(i) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (ii) any update of
or modification to the PBT Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded.
-23-
(b) Performance.
PBT
shall have performed and complied in all material respects with all agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before the Initial Closing and shall
have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Compliance
Certificate.
PBT
shall
have delivered to WinWin a certificate dated as of the Initial Closing signed
on
its behalf by an authorized officer of PBT certifying that the conditions
specified in Sections 10(a) and 10(b) hereof have been
fulfilled.
(d) Receipt
of Consideration.
PBT
shall have delivered to WinWin the original Note, marked cancelled and initialed
by an officer of PBT, and a stock certificate registered in the name of WinWin
representing the Initial Closing PBT Shares.
(e) Registration
Rights Agreement.
PBT
shall have executed and delivered to WinWin the WinWin Registration Rights
Agreement.
(f) Addition
to PBT Registration Rights Agreement.
PBT
shall have provided a counterpart signature page to the PBT Amended and Restated
Registration Rights, Agreement dated as of January 6, 2006, as in effect as
of
immediately prior to the Initial Closing, which, upon execution by WinWin,
shall
be sufficient to afford to WinWin all rights associated with being an “Investor”
thereunder.
(g) Sales
Representative Agreement.
The
Parties shall have entered into a sales representative agreement substantially
in accordance with the terms described on Exhibit D;
provided that if all other conditions to WinWin's obligations at the Initial
Closing (including the conditions set forth in Section 9) have been or will
be
met as of the proposed date of the Initial Closing, then WinWin may not refuse
to comply with its obligations at the Initial Closing unless WinWin is able
to
demonstrate that it has taken commercially reasonable efforts to pursue the
negotiation and execution of the sales representative agreement in the period
between the date of this Agreement and the intended date of the Initial Closing.
(h) Filing
of Designation. WinWin
shall have caused the Designation to be filed with the Secretary of State of
the
State of Delaware. The Designation shall be in full effect as of the Initial
Closing.
11. Additional
Conditions to WinWin’s Obligations at The Second Closing.
The
obligations of WinWin to PBT under this Agreement at the Second Closing are
subject to the fulfillment or waiver, on or before the Second Closing, in
addition to the conditions set forth in Section 9, of the following
conditions:
-24-
(a) Accuracy
of Representations and Warranties.
(i) If
PBT is
issuing PBT Shares at the Second Closing, each of the representations and
warranties of PBT contained in Section 4 shall have been true and correct
in all material respects on and as of the date of this Agreement; provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(A) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (B) any update of
or modification to the PBT Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded.
(ii) If
PBT is
issuing PBT Shares at the Second Closing, the representations and warranties
of
PBT contained in Section 4 shall be accurate in all respects as of the
Second Closing as if made on and as of the Second Closing, except that any
inaccuracies in such representations and warranties will be disregarded if
the
circumstances giving rise to all such inaccuracies (considered collectively)
do
not constitute, and could not reasonably be expected to have, a Material Adverse
Effect on PBT; provided,
however
that,
for purposes of determining the accuracy of such representations and warranties,
(A) all “Material Adverse Effect” qualifications and other materiality
qualifications, and any similar qualifications, contained in such
representations and warranties shall be disregarded and (B) any update of
or modification to the PBT Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded.
(b) Performance.
PBT
shall have performed and complied in all material respects with all agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before the Second Closing and shall
have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.
(c) Compliance
Certificate.
PBT
shall have delivered to WinWin a certificate, dated as of the Second Closing,
signed on its behalf by its Chief Executive Officer or Chief Financial Officer
certifying that the conditions specified in Sections 11(a) and 11(b) hereof
have been fulfilled.
(d) Receipt
of Consideration.
PBT
shall have delivered to WinWin a stock certificate registered in the name of
WinWin representing the Second Closing PBT Shares, if any.
(e) Sales
Representative Agreement.
The
Parties shall have entered into a sales representative agreement substantially
in accordance with the terms described on Exhibit D
(the
“Sales
Representative Agreement”).
12. Covenants.
(a) Securities
Law Filings.
The
Parties shall file in a timely manner all securities filings required to be
filed in connection with the issuances of securities as contemplated by this
Agreement, including the filing by each Party of Forms D relating to the sale
of
the WinWin Shares and the PBT Shares under this Agreement, pursuant to
Regulation D promulgated under the Securities Act.
-25-
(b) WinWin
Stockholders Consent.
(i) As
promptly as practicable after the date of the Initial Closing, WinWin shall
prepare and cause to be filed with the SEC a preliminary information statement
relating to the WinWin Stockholders’ Consent (as defined below) and shall use
all commercially reasonable efforts to cause the information statement to comply
with the rules and regulations promulgated by the SEC, to respond promptly
to
any comments of the SEC or its staff, to file a definitive information statement
(the “Information
Statement”)
and to
cause the Information Statement to be mailed to WinWin’s stockholders as
promptly as practicable.
(ii) WinWin
shall take all action necessary to obtain and give notice (pursuant to the
Information Statement) of the written consent of the WinWin stockholders (the
“WinWin
Stockholders’ Consent”)
to
approve and adopt an amended and restated certificate of incorporation in the
form attached hereto as Exhibit E
(the
“Restated
Charter”)
and
approve the filing of the Restated Charter with the Secretary of State of the
State of Delaware. The WinWin Stockholders’ Consent shall be obtained and the
Information Statement shall be filed with the SEC and provided to the WinWin
stockholder as promptly as practicable following the Initial Closing, in
compliance with all applicable legal requirements.
(iii) the
Information Statement shall include a statement to the effect that the WinWin
Board of Directors voted to recommend that the WinWin stockholders vote to
adopt
the Restated Charter, including the unanimous recommendation of the
disinterested members of the WinWin Board of Directors. Such recommendation
shall not be withdrawn or modified, and no resolution of the WinWin Board of
Directors or any committee thereof to withdraw or modify such recommendation
shall be adopted or proposed.
(c) Board
of Directors.
Promptly
upon the written request of PBT, WinWin shall use its best efforts to cause
WinWin’s Board of Directors to nominate the directors designated for election,
if any, by the holders of the Series A Preferred Stock (the “PBT
Representatives”)
for
election or re-election at each meeting of WinWin’s stockholders at which the
composition of WinWin’s Board of Directors is subject to a proposal. During any
such time that the holders of Series A Preferred Stock have the right to elect
any PBT Representative(s) to the WinWin Board of Directors, but have not elected
such PBT Representative(s) to the WinWin Board of Directors, WinWin will
maintain sufficient authorized but vacant seats on its Board of Directors to
permit the election of such PBT Representative(s).
(d) Access;
Provision of Information.
(i) Each
Party shall permit representatives of the other Party to have reasonable access
at reasonable times and upon reasonable advance written notice, to senior
management of the Party, its accountants, records (including tax and financial
records), contracts and other documents of or pertaining to the Party.
(ii) From
and
after the Initial Closing, PBT shall promptly provide WinWin with information
of
the type that, in PBT’s reasonable judgment upon consultation with counsel,
would be required to be disclosed by WinWin under Form 8-K as a result of
WinWin’s ownership interest in the PBT Shares.
-26-
(iii) WinWin
will provide PBT, on a monthly basis, with all financial information that PBT
requires in order to meet its financial reporting obligations (to investors,
regulatory authorities and otherwise) on a timely basis (the “WinWin
Financial Reporting Covenant”).
If
WinWin breaches the WinWin Financial Reporting Covenant, PBT can obtain
reimbursement from WinWin for direct and indirect costs and other damages
incurred in connection with or relating to the untimely delivery of PBT
financials resulting from such breach, including reimbursement of legal fees
incurred by or reimbursable by PBT, and PBT may exercise any and all other
remedies available under applicable law.
(e) Additional
WinWin Financial Covenants. WinWin
will comply with SOX and all applicable rules and standards promulgated under
SOX. To the extent that, at any time, WinWin or its accountants determines
that
WinWin has material weaknesses in its internal controls over financial reporting
(as such terms are defined in SOX, together with the rules and standards
promulgated by the SEC relating to SOX), WinWin will promptly provide notice
of
such determination to PBT and, upon the written request of PBT, will remediate
such material weakness within three months of such determination, provided
that
either (i) WinWin has Available Funds (as defined below) or (ii) PBT agrees
to
reimburse the reasonable, documented costs of such remediation over and above
the sum of (A) the Available Funds and (B) any amounts allocated for any
applicable tasks in the budget most recently approved by WinWin’s board of
directors. PBT will be entitled to approve in advance any expenses requested
to
be reimbursed by PBT hereunder. For purposes of this Section 12(f) "Available
Funds"
means,
as of the date of PBT’s written request, the cash and cash equivalents held
by WinWin that is in excess of the greater of (1) an amount equal to the cash
used in WinWin’s operations during the most recent quarter for which WinWin has
filed financial results with the SEC multiplied by 3 and (2)
$2,000,000.
(f) Cooperative
Activities.
(i) Selling
Support.
During
the period from the date of this Agreement through at least December 31,
2006 (the “Cooperation
Term”),
WinWin shall provide PBT with a reasonable amount of selling support to assist
in driving PBT’s biometric authentication and payment solutions into the Chinese
Video Lottery Terminal (“VLT”)
solution that is being prepared for rollout across China. This support shall
include, among other things (and in compliance with all applicable legal
requirements), both the direct promotion of PBT’s solutions to key government
officials and other decision makers/influencers and the arrangement of key
meetings between these individuals/groups and PBT employees.
(ii) Access.
During
the Cooperation Term, in compliance with all applicable legal requirements,
WinWin shall provide PBT with access to all senior Chinese government officials
with current WinWin relationships for the purpose of promoting PBT solutions
into other applications beyond VLTs.
(iii) Attorney
Support.
During
the Cooperation Term, in compliance with all applicable legal requirements,
WinWin shall provide PBT with the support of WinWin’s Chinese/American
VP/attorney for the purpose of making introductions and helping provide tactical
and strategic guidance to PBT in connection with its entry into
China.
-27-
(iv) Physical
and Logistical Support.
During
the Cooperation Term, in compliance with all applicable legal requirements,
WinWin shall provide PBT with physical and logistical support for PBT’s entry
into China, including providing access to WinWin’s distribution channels and
making available without charge a limited amount of office space in
Shanghai.
(v) Identification
of Mutual Opportunities.
During
the Cooperation Term, each of WinWin and PBT shall use commercially reasonable
efforts to identify and exploit opportunities for the benefit of both parties.
The senior executive officers of each Party shall meet, whether telephonically
or in person, on at least a monthly basis to discuss any such identified
opportunities and the best means of exploiting such opportunities.
(vi) PBT
Support.
During
the Cooperation Term and upon the written request of WinWin, PBT shall provide
WinWin with reasonable support and assistance in promotional consideration
and
exposure of WinWin products, services and technologies. In addition, PBT shall
provide WinWin with reasonable support and assistance in identifying sources
of
equity and debt financing and strategic partners and in assisting WinWin to
obtain financing from such sources.
(vii) Sales
Representative Agreement.
Promptly following the Initial Closing, the Parties shall commence good faith
negotiation to enter into the Sales Representative Agreement.
(g) Confidentiality.
Neither
Party shall issue, or permit any of its Subsidiaries or any Representative
of
itself or any subsidiary to issue, any press releases or any other public
statements with respect to the transactions contemplated by this Agreement;
provided,
however,
that
either Party shall be entitled, without the prior written approval of the other
Party, to make any public disclosure with respect to such transactions to the
extent that (i) such Party shall have provided the other Party with at least
one
business day to review any such proposed press release or public statement
and
consulted with the other before issuing such press release or public statement,
and (ii) such Party shall have been advised in writing by its outside legal
counsel that such disclosure, including any specific disclosure to which the
other Party has objected, is required by applicable law or regulations. The
Parties acknowledge that the provisions of the letter agreement between the
Parties, dated as of January 24, 2005, regarding the non-disclosure and non-use
of confidential information shall remain in force.
(h) Negative
Pledge.
(i) WinWin
covenants and agrees that, beginning on the date of this Agreement and until
the
date following an initial public offering of PBT common stock on which any
lockup or market standoff restrictions applicable to the PBT Shares
expire:
(1) WinWin
shall not directly or indirectly sell, assign, transfer or pledge, or otherwise
take any action that could lead directly or indirectly to the creation of any
lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance,
equity, trust, equitable interest, adverse claim, proxy, option, right of first
refusal, preemptive right, community property interest, legend or restriction
of
any nature (including any restriction on the voting or transfer of any security
and any restriction on the receipt of any dividend or other payment receivable
by the owner of any security, but excluding any restriction imposed under
applicable securities laws) on any of WinWin’s rights in or to any of the PBT
Shares or any unpaid dividends or other distributions or payments with respect
to any of the PBT Shares;
-28-
(2) WinWin
shall maintain, preserve and defend the title to the PBT Shares against the
claim of any other person or entity;
(3) Each
stock certificate and other instrument representing or evidencing the PBT Shares
shall bear a legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS SET
FORTH
IN THAT CERTAIN SECOND AMENDED AND RESTATED JOINT VENTURE AGREEMENT DATED AS
OF
AUGUST 31, 2006, BY AND BETWEEN SOLIDUS NETWORKS, INC. AND WINWIN GAMING, INC.
AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED IN ANY
MANNER.
(ii) Immediately
following the date following an initial public offering of PBT common stock
on
which any lockup or market standoff restrictions applicable to the PBT Shares
expire, PBT shall, at WinWin’s request and following receipt of the stock
certificates and other instruments representing or evidencing the PBT Shares,
issue a replacement stock certificate without the legend referred to in Section
12(h)(i)(3).
13. Termination.
This
Agreement shall terminate upon the mutual agreement of the Parties. In any
event, either Party may terminate this Agreement on or after September 30,
2006 if the Initial Closing has not occurred prior to such date and such failure
to close was not due to the failure of the Party electing to terminate the
Agreement to perform an obligation or satisfy a condition to the Initial
Closing.
14. Indemnification,
Etc.
(a) Definitions.
For
purposes of this Section 14, the following capitalized terms shall have the
following meanings:
(i) A
“Claim
Notice”
relating
to a particular representation or warranty shall be deemed to have been given
if
any Indemnitee, acting in good faith, delivers to the Party making the
representation or warranty a written notice stating that such Indemnitee
believes that there is or has been an inaccuracy in such representation or
warranty and containing (A) a brief description of the specific facts
supporting such Indemnitee’s good faith belief that there is or has been such an
inaccuracy and (B) a non-binding, preliminary estimate of the aggregate
dollar amount of the Damages that have arisen and may arise as a direct or
indirect result of such inaccuracy.
(ii) “Damages”
shall
include any loss, damage, injury, decline in value, lost opportunity, liability,
claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including
any legal fee, expert fee, accounting fee or advisory fee), charge, cost
(including any cost of investigation) or expense of any nature.
-29-
(iii) “Governmental
Body”
shall
mean any: (A) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (B) federal,
state, local, municipal, foreign or other government; (C) governmental
or quasi-governmental authority of any nature (including any governmental
division, subdivision, department, agency, bureau, branch, office, commission,
council, board, instrumentality, officer, official, representative,
organization, unit, body or entity and any court or other tribunal);
(D) multi-national
organization or body; or (E) individual,
entity or body exercising, or entitled to exercise, any executive, legislative,
judicial, administrative, regulatory, police, military or taxing authority
or
power of any nature.
(iv) “Indemnitees”
shall
mean,
(A) with
respect to WinWin, the following Persons: (I) PBT;
(II) PBT’s
affiliates;
(III) the
respective Representatives of the Persons referred to in clauses “(I)” and
“(II)” above; and (IV) the
respective successors and assigns of the Persons referred to in clauses “(I),”
“(II)” and “(III)” above (collectively, the “WinWin
Indemnitees”);
and
(B) with
respect to PBT, the following Persons: (I) WinWin;
(II) WinWin’s
affiliates;
(III) the
respective Representatives of the Persons referred to in clauses “(I)” and
“(II)” above; and (IV) the
respective successors and assigns of the Persons referred to in clauses “(I),”
“(II)” and “(III)” above (collectively, the “PBT
Indemnitees”).
(v) “Legal
Proceeding”
shall
mean any action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding and any informal
proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination
or investigation that is, has been or may in the future be commenced, brought,
conducted or heard by or before, or that otherwise has involved or may involve,
any Governmental Body or self regulatory agency or any arbitrator or arbitration
panel.
(vi) “Liability”
shall
mean any debt, obligation, duty or liability of any nature (including any
unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability
would
be required to be disclosed on a balance sheet prepared in accordance with
GAAP
and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
(vii) “Person”
shall
mean any (A) individual, (B) Governmental Body or
(C) corporation, general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, cooperative, foundation,
society, political party, union, company, firm or other enterprise, association,
organization or entity.
(viii) “Representatives”
shall
mean officers, directors, employees, agents, attorneys, accountants, advisors
and representatives.
-30-
(b) Survival
of Representations and Warranties.
The
representations and warranties set forth in Sections 3 and 4 shall expire
one year following the Closing at which such representations and warranties
are
made; provided,
however,
that if
a Claim Notice relating to any representation or warranty set forth in
Section 3 or Section 4 is given on or prior to the date one year after
the Closing Date to the Party making the representation or warranty, then,
notwithstanding anything to the contrary contained in this Section 14(b),
such representation or warranty shall not expire, but rather shall remain in
full force and effect until such time as each and every claim that is based
directly or indirectly upon, or that relates directly or indirectly to, any
inaccuracy or alleged inaccuracy in such representation or warranty has been
fully and finally resolved. The representations and warranties set forth in
Sections 3 and 4 and the rights and remedies that may be exercised by the
Indemnitees, shall not be limited or otherwise affected by or as a result of
any
information furnished or made available to, or any investigation made by or
any
knowledge of, any of the Indemnitees or any of their
Representatives.
(c) Indemnification
by WinWin. WinWin
shall hold harmless and indemnify each of the WinWin Indemnitees from and
against, and shall compensate and reimburse each of the WinWin Indemnitees
for,
any Damages that are directly or indirectly suffered or incurred by any of
the
WinWin Indemnitees or to which any of the WinWin Indemnitees may otherwise
become subject at any time (regardless of whether or not such Damages relate
to
any third-party claim) and that arise directly or indirectly from or as a direct
or indirect result of, or are directly or indirectly connected
with:
(i) any
inaccuracy in any representation or warranty made by WinWin in this Agreement
as
of the date of this Agreement (without giving effect to any qualification as
to
materiality or any similar qualification contained in such representation or
warranty, and without giving effect to any update to the WinWin Disclosure
Schedule);
(ii) any
inaccuracy in any representation or warranty made by WinWin in this Agreement
as
if such representation and warranty had been made on and as of each Closing
(without giving effect to any qualification as to materiality or any similar
qualification contained in such representation or warranty, and without giving
effect to any update to the WinWin Disclosure Schedule); and
(iii) any
Legal
Proceeding relating directly or indirectly to any actual or alleged inaccuracy,
breach, Liability or matter of the type referred to in clause “(i)” or “(ii)”
above (including any Legal Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section 14).
(d) Indemnification
by PBT. PBT
shall
hold harmless and indemnify each of the PBT Indemnitees from and against, and
shall compensate and reimburse each of the PBT Indemnitees for, any Damages
that
are directly or indirectly suffered or incurred by any of the PBT Indemnitees
or
to which any of the PBT Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third-party claim)
and
that arise directly or indirectly from or as a direct or indirect result of,
or
are directly or indirectly connected with:
(i) any
inaccuracy in any representation or warranty made by PBT in this Agreement
as of
the date of this Agreement (without giving effect to any qualification as to
materiality or any similar qualification contained in such representation or
warranty, and without giving effect to any update to the PBT Disclosure
Schedule);
-31-
(ii) any
inaccuracy in any representation or warranty made by PBT in this Agreement
as if
such representation and warranty had been made on and as of each Closing
(without giving effect to any qualification as to materiality or any similar
qualification contained in such representation or warranty, and without giving
effect to any update to the PBT Disclosure Schedule); and
(iii) any
Legal
Proceeding relating directly or indirectly to any actual or alleged inaccuracy,
breach, Liability or matter of the type referred to in clause “(i)” or “(ii)”
above (including any Legal Proceeding commenced by any Indemnitee for the
purpose of enforcing any of its rights under this Section 14).
(e) Satisfaction
of Indemnification Claims.
(i) PBT
shall
have the right to claw back, and WinWin shall forever forfeit, that number
of
PBT Shares issued to WinWin, at a deemed value per share of $5.00 (as adjusted
for stock splits, stock dividends, stock combinations and similar events, the
“PBT
Share Deemed Value”))
that
are sufficient to reimburse PBT and its affiliates and Representatives for
all
Damages incurred, set forth in a Claim Notice and not disputed within ten
business days of delivering to WinWin the notice that details such Damages,
in
satisfaction of WinWin’s indemnification obligations under Section 14(c).
The claw back and forfeiture of such PBT Shares shall operate for all purposes
as a complete discharge of PBT’s obligation to make any payment, provide any
benefit or afford any right to WinWin to the extent such payment, benefit or
right would be owing as a result of WinWin’s ownership of the PBT Shares that
were clawed back and forfeited.
(ii) WinWin
shall have the right to claw back, and PBT shall forever forfeit, that number
of
WinWin Shares issued to PBT, at a deemed value per share of $79.10 for the
WinWin Series A-1 Shares and $7.91 for the WinWin Series A Shares (or, in each
case, $0.791 per Underlying WinWin Share) (as adjusted for stock splits, stock
dividends, stock combinations and similar events, the “WinWin
Share Deemed Value”)
that
are sufficient to reimburse WinWin and its affiliates and Representatives for
all Damages incurred, set forth in a Claim Notice and not disputed within ten
business days of delivering the notice that details such Damages to PBT, in
satisfaction of PBT’s indemnification obligations under Section 14(d). The
claw back and forfeiture of such WinWin Shares shall operate for all purposes
as
a complete discharge of WinWin’s obligation to make any payment, provide any
benefit or afford any right to PBT to the extent such payment, benefit or right
would be owing as a result of PBT’s ownership of the WinWin Shares that were
clawed back and forfeited.
(f) Threshold;
Ceiling.
(i) PBT
shall
not have the right to claw back any PBT Shares pursuant to Section 14(e)
for any inaccuracy in any of WinWin’s representations and warranties set forth
in Section 3 until such time as the total amount of all Damages (including
the Damages arising from such inaccuracy and all other Damages arising from
any
other inaccuracies in any WinWin representations or warranties) that have been
directly or indirectly suffered or incurred by any one or more of the WinWin
Indemnitees, or to which any one or more of the WinWin Indemnitees has or have
otherwise become subject, exceeds $50,000 in the aggregate. (If the total amount
of such Damages exceeds $50,000, then the WinWin Indemnitees shall be entitled
to be indemnified against and compensated and reimbursed for all such
Damages.)
-32-
(ii) WinWin
shall not have the right to claw back any WinWin Shares pursuant to
Section 14(e) for any inaccuracy in any of PBT’s representations and
warranties set forth in Section 4 until such time as the total amount of
all Damages (including the Damages arising from such inaccuracy and all other
Damages arising from any other inaccuracies in any PBT representations or
warranties) that have been directly or indirectly suffered or incurred by any
one or more of the PBT Indemnitees, or to which any one or more of the PBT
Indemnitees has or have otherwise become subject, exceeds $50,000 in the
aggregate. (If the total amount of such Damages exceeds $50,000, then the PBT
Indemnitees shall be entitled to be indemnified against and compensated and
reimbursed for all such Damages.)
(iii) The
maximum liability of WinWin under Section 14 for inaccuracies of WinWin’s
representations and warranties set forth in Section 3 shall be equal to the
aggregate WinWin Share Deemed Value of the WinWin Shares issued to PBT under
this Agreement. The maximum liability of PBT under Section 14 for
inaccuracies of PBT’s representations and warranties set forth in Section 4
shall be equal to the aggregate PBT Share Deemed Value of the PBT Shares issued
to WinWin pursuant to this Agreement.
(iv) The
limitations set forth in this Section 14(f) shall not apply to losses
caused by fraud.
(g) Exclusivity
of Indemnification Remedies.
The
right to indemnification provided in this Section 14 is the exclusive
remedy for inaccuracies in the representations and warranties set forth in
Sections 3 and 4.
(h) Defense
of Third Party Claims.
(i) In
the
event of the assertion or commencement by any Person of any claim or Legal
Proceeding (whether against PBT, against any other Indemnitee or against any
other Person) with respect to which WinWin may become obligated to indemnify,
hold harmless, compensate or reimburse any WinWin Indemnitee pursuant to this
Section 14: (A) PBT shall have the right to control the defense of
such claim or Legal Proceeding; (B) all expenses relating to the defense of
such claim or Legal Proceeding (whether or not incurred by PBT) shall be borne
and paid exclusively by WinWin; (C) WinWin shall make available to PBT any
documents and materials in the possession or control of WinWin or its
Representatives that may be necessary to the defense of such claim or Legal
Proceeding; and (D) PBT shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of WinWin, which
shall not be unreasonably withheld, delayed or conditioned.
(ii) In
the
event of the assertion or commencement by any Person of any claim or Legal
Proceeding (whether against PBT, against any other Indemnitee or against any
other Person) with respect to which PBT may become obligated to indemnify,
hold
harmless, compensate or reimburse any PBT Indemnitee pursuant to this
Section 14: (A) PBT shall have the right to control the defense of
such claim or Legal Proceeding; (B) all expenses incurred by PBT relating
to the defense of such claim or Legal Proceeding shall be borne and paid
exclusively by PBT; (C) WinWin shall make available to PBT any documents
and materials in the possession or control of WinWin or its Representatives
that
may be necessary to the defense of such claim or Legal Proceeding; and
(D) PBT shall have the right to settle, adjust or compromise such claim or
Legal Proceeding without the consent of WinWin.
-33-
(i) Exercise
of Remedies by Indemnitees other than the Parties.
No
Indemnitee (other than the Parties or any successors thereto or assigns thereof)
shall be permitted to assert any indemnification claim unless the Party to
which
Indemnitee is related (or any successor thereto or assign thereof) shall have
consented to the assertion of such indemnification claim.
15. Miscellaneous.
(a) Successors
and Assigns.
The
terms and conditions of this Agreement will inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties.
Neither Party shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other Party.
(b) Governing
Law.
This
Agreement will be governed by and construed and enforced under the internal
laws
of the State of California, without reference to principles of conflict of
laws
or choice of laws.
(c) Dispute
Resolution.
Any
unresolved controversy or claim arising out of or relating to this Agreement,
except as (i) otherwise provided in this Agreement, or (ii) any such
controversies or claims arising out of either party’s intellectual property
rights for which a provisional remedy or equitable relief is sought, shall
be
submitted to arbitration by one arbitrator mutually agreed upon by the parties,
and if no agreement can be reached within 30 days after names of potential
arbitrators have been proposed by the American Arbitration Association (the
“AAA”),
then
by one arbitrator having reasonable experience in corporate finance transactions
of the type provided for in this Agreement and who is chosen by the AAA. The
arbitration shall take place in San Francisco, California, in accordance with
the AAA rules then in effect, and judgment upon any award rendered in such
arbitration will be binding and may be entered in any court having jurisdiction
thereof. There shall be limited discovery prior to the arbitration hearing
as
follows: (A) exchange of witness lists and copies of documentary evidence
and documents relating to or arising out of the issues to be arbitrated,
(B) depositions of all party witnesses and (C) such other depositions
as may be allowed by the arbitrators upon a showing of good cause. Depositions
shall be conducted in accordance with the California Code of Civil Procedure,
the arbitrator shall be required to provide in writing to the parties the basis
for the award or order of such arbitrator, and a court reporter shall record
all
hearings, with such record constituting the official transcript of such
proceedings. The prevailing party shall be entitled to reasonable attorney’s
fees, costs, and necessary disbursements in addition to any other relief to
which such party may be entitled. Each of the parties to this Agreement consents
to personal jurisdiction for any equitable action sought in the U.S. District
Court for the Northern District of California or any court of the State of
California having subject matter jurisdiction.
-34-
(d) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.
(e) Headings.
The
headings and captions used in this Agreement are used for convenience only
and
are not to be considered in construing or interpreting this Agreement. All
references in this Agreement to sections, paragraphs, exhibits and schedules
will, unless otherwise provided, refer to sections and paragraphs hereof and
exhibits and schedules attached hereto, all of which exhibits and schedules
are
incorporated herein by reference.
(f) Notices.
Any
notices and other communications required or permitted under this Agreement
shall be in writing and shall be delivered (i) personally by hand or by
courier, (ii) mailed by United States first-class mail, postage prepaid or
(iii) sent by facsimile, to a Party’s address or facsimile number as
follows:
| if to WinWin: |
WinWin
Gaming, Inc.
|
0000
Xxxx
Xxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxxxxxx Xxxxxx
with
a
copy to:
Xxxxxx
Xxxx & Priest LLP
000
Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Tel:
000.000.0000
Fax:
000.000.0000
Attention:
Xxxxx
X.
Xxxxxxxxxx
| if to PBT: |
Solidus
Networks, Inc.
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxx Xxxxxx
with
a
copy to:
Xxxxxx
Godward
llp
000
Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx
-35-
,
or at
such other address or facsimile number as a Party may designate by giving at
least ten days’ advance written notice to the other Party. All such notices and
other communications shall be deemed given upon (I) receipt or refusal of
receipt, if delivered personally, (II) three days after being placed in the
mail, if mailed, or (III) confirmation of facsimile transfer, if
faxed.
(g) Amendments
and Waivers.
This
Agreement may be amended and the observance of any term of this Agreement may
be
waived only with the written consent of the Parties.
(h) Severability.
If any
provision of this Agreement is held to be unenforceable under applicable law,
such provision will be excluded from this Agreement and the balance of the
Agreement will be interpreted as if such provision were so excluded and will
be
enforceable in accordance with its terms.
(i) Entire
Agreement.
This
Agreement, together with all exhibits and schedules hereto and the
Confidentiality Letter, constitutes the entire agreement and understanding
of
the parties with respect to the subject matter hereof and supersedes any and
all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter
hereof.
(j) Further
Assurances.
From
and after the date of this Agreement, upon the request of a Party, the other
Party will execute and deliver such instruments, documents or other writings,
and take such other actions, as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
(k) Meanings.
Whenever in this Agreement the word “include” or “including” is used, it shall
be deemed to mean “include, without limitation” or “including, without
limitation,” as the case may be, and the language following “include” or
“including” shall not be deemed to set forth an exhaustive list. All references
to “dollars” or “$” shall be deemed to mean United States dollars.
(l) Fees,
Costs and Expenses.
Except
as otherwise provided for in this Agreement, all fees, costs and expenses
(including attorneys’ fees and expenses) incurred by any party hereto in
connection with the preparation, negotiation and execution of this Agreement
and
the exhibits and schedules hereto and the consummation of the transactions
contemplated hereby and thereby (including the costs associated with any filings
with, or compliance with any of the requirements of any governmental
authorities), shall be the sole and exclusive responsibility of such party.
(m) Stock
Splits, Dividends and other Similar Events.
The
provisions of this Agreement shall be appropriately adjusted to reflect any
stock split, stock dividend, reorganization or other similar event that may
occur with respect to either Party after the date hereof.
-36-
(n) Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each Party will be entitled to specific
performance under this Agreement. The Parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach
of
obligations described in the foregoing sentence and hereby agrees to waive
in
any action for specific performance of any such obligation the defense that
a
remedy at law would be adequate.
[Signature
page follows]
-37-
The
parties hereto have executed this Agreement as of the date and year first above
written.
|
WinWin
Gaming, Inc.
|
|
|
/s/
Xxxxxxx Xxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Title:
President / CEO
|
|
|
Solidus
Networks, Inc.
|
|
|
|
|
|
Name:
|
|
|
Title:
|
The
parties hereto have executed this Agreement as of the date and year first above
written.
|
WinWin
Gaming, Inc.
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Title:
President / CEO
|
|
|
Solidus
Networks, Inc.
|
|
|
/s/
Xxxxx Xxxxxxxx
|
|
|
Name:
Xxxxx Xxxxxxxx
|
|
|
Title:
EVP & GC
|
Exhibits
|
Exhibit A
|
Form
of WinWin Registration Rights Agreement
|
|
|
|
||
|
Exhibit B
|
Form
of Opinion of WinWin Counsel
|
|
|
|
||
|
Exhibit C
|
Form
of Investment Option Agreement
|
|
|
|
||
|
Exhibit D
|
China
Sales Representative Term Sheet
|
|
|
|
||
|
Exhibit E
|
Form
of Restated Charter
|
|
|
|
||
|
Exhibit F
|
Form
of Opinion of WinWin Delaware Counsel
|
|
|
|
||
|
Exhibit
G
|
Form
of Certificate of Designation of Preferences of Series A-1 Preferred
Stock
|
EXHIBIT
A
(Form
of Registration Rights Agreement)
REGISTRATION
RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT is made as of August 31, 2006, by and between
WINWIN GAMING, INC., a Delaware corporation (together with any successor
thereto, the “Company”),
and
SOLIDUS NETWORKS, INC., dba PayByTouch Solutions, a Delaware corporation
(“PBT”).
BACKGROUND
The
Company and PBT have entered into a Second Amended and Restated Joint Venture
Agreement, dated as of August 31, 2006 (as amended, restated, supplement or
otherwise modified from time to time, the “JV
Agreement”),
pursuant to which, among other things, PBT has agreed to purchase shares of
the
Company’s Series A-1 Preferred Stock, US$0.01 par value per share (the
“Series
A-1 Preferred Stock”),
and
shares of the Company’s Series A Preferred Stock, US$0.01 par value per share
(the “Series
A Preferred Stock”).
The
Company and PBT desire to provide for certain arrangements with respect to
the
registration of shares of capital stock of the Company under the Securities
Act
(as defined herein).
The
execution and delivery of this Agreement is a condition precedent to the
transaction contemplated by the JV Agreement.
AGREEMENT
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Certain
Definitions.
Capitalized terms used in this Agreement and not otherwise defined shall have
the following respective meanings:
“Agreement”
shall
mean this Registration Rights Agreement, as amended, restated, supplemented
or
otherwise modified from time to time.
“Commission”
shall
mean the United States Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act and the Exchange
Act.
“Common
Stock”
shall
mean the Company’s Common Stock, US$0.01 par value per share, and any other
common equity securities now or hereafter issued by the Company, and any other
shares of stock issued or issuable with respect thereto (whether by way of
a
stock dividend or stock split or in exchange for or in replacement of or upon
conversion of such shares or otherwise in connection with a combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization).
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, or any similar successor
federal statute, and the rules and regulations of the Commission thereunder,
all
as the same shall be in effect at the time.
“New
Securities”
shall
mean equity securities of the Company, whether now authorized or not, or rights,
options, or warrants to purchase said equity securities, or securities of any
type whatsoever that are, or may become, convertible into or exchangeable into
or exercisable for said equity securities.
“Person”
shall
mean any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department
thereof).
“Preferred
Stock”
shall
mean the Series A-1 Preferred Stock and the Series A Preferred
Stock.
“Registrable
Securities”
shall
mean (a)
the
shares of Common Stock issued or issuable upon conversion of any Preferred
Stock, (b) any other shares of Common Stock issued or issuable pursuant to
the
JV Agreement or any option granted pursuant thereto, and (c) any additional
shares of Common Stock issued or distributed by way of a dividend, stock split
or other distribution in respect of any share of Preferred Stock or any share
of
Common Stock into which any share of Preferred Stock was converted, or acquired
by way of any rights offering or similar offering made in respect thereof;
provided,
however,
that
notwithstanding anything to the contrary contained herein, “Registrable
Securities” shall not at any time include any securities (i) registered and sold
pursuant to the Securities Act, or (ii) sold pursuant to Rule 144 promulgated
under the Securities Act.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended, or any similar successor federal
statute, and the rules and regulations of the Commission thereunder, all as
the
same shall be in effect at the time.
2. Registrations.
(a) Demand
Registration.
(i) If
the
Company shall be requested in writing by holders (the “Holders”)
of a
majority of the Registrable Securities to file a registration statement for
Registrable Securities having an aggregate offering price to the public of
not
less than US$15,000,000 under the Securities Act (a “Demand
Notice”)
in
accordance with this Section 2(a),
then
the Company shall use best efforts to effect such a registration statement.
Upon
receipt of a Demand Notice, the Company shall, within 10 days, give written
notice of such proposed registration to all Holders and shall offer to include
in such proposed registration any Registrable Securities requested to be
included in such proposed registration by such Holders who respond in writing
to
the Company’s notice within 30 days after delivery of such notice (which
response shall specify the number of Registrable Securities proposed to be
included in such registration). The Company shall promptly use best efforts
to
effect such registration as soon as practicable on an appropriate form,
including Form S-2 or S-3, if available, under the Securities Act of the
Registrable Securities which the Company has been so requested to register;
provided,
however,
that
the Company shall not be obligated to effect any registration under the
Securities Act in the following circumstances:
-2-
(A) after
the
Company has already filed two registration statements initiated by the Holders
of Registrable Securities pursuant to this Section 2(a);
or
(B) during
any period in which any other registration statement (other than on
Form S-4 or Form S-8 promulgated under the Securities Act or any
successor forms thereto) pursuant to which Registrable Securities are to be
or
were sold has been filed and not withdrawn or has been declared effective within
the prior 90 days.
(ii) If
the
Holders requesting to be included in a registration pursuant to this
Section 2(a)
so
elect, the offering of such Registrable Securities pursuant to such registration
shall be in the form of an underwritten offering. The Holders of a majority
of
the Registrable Securities requested to be included in such registration shall
select one or more nationally recognized firms of investment bankers reasonably
acceptable to the Company to act as the lead managing underwriter or
underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering,
which shall also be reasonably acceptable to the Company.
(iii) With
respect to any registration pursuant to this Section 2(a),
the
Company may include in such registration any Common Stock; provided,
however,
that if
the managing underwriter advises the Company that the inclusion of all
Registrable Securities and Common Stock requested to be included by the Company
in such registration would interfere with the successful marketing (including
pricing) of all such securities, then the number of Registrable Securities
and
Common Stock proposed to be included in such registration shall be included
in
the following order:
(A) first,
the
Registrable Securities shall be included, pro rata among the participating
Holders based upon the number of Registrable Securities held by such Holders
at
the time of such registration; and
(B) second,
Common
Stock requested to be included by the Company.
-3-
(iv) At
any
time before the registration statement covering Registrable Securities becomes
effective, Holders of a majority of the Registrable Securities requested to
be
included in such registration may request the Company to withdraw or not to
file
the registration statement. In that event, if such request of withdrawal shall
have been caused by, or made in response to, a material adverse effect or change
in the Company’s financial condition, operations, business or prospects, such
Holders of Registrable Securities shall not be deemed to have used one of their
demand registration rights under this Section 2(a).
(b) Registrations
on Form S-3.
Notwithstanding anything contained in Section 2
to the
contrary, at such time as the Company shall have qualified for the use of
Form S-3 promulgated under the Securities Act or any successor form
thereto, Holders of Registrable Securities shall have the right to request
in
writing up to two registrations on Form S-3 or any such successor forms of
Registrable Securities, which request or requests shall (i) specify the number
of Registrable Securities intended to be sold or disposed of and the Holders
thereof, (ii) state the intended method of disposition of such Registrable
Securities, and (iii) relate to Registrable Securities having an anticipated
aggregate offering price of at least US$5,000,000. A requested registration
on
Form S-3 or any such successor forms in compliance with this Section 2(b)
shall
not count as a demand registration pursuant to Section 2(a),
but
shall otherwise be treated as a registration initiated pursuant to and shall,
except as otherwise expressly provided in this Section 2(b),
be
subject to Section 2(a).
(c) Piggyback
Registration.
If, at
any time or times the Company shall seek to register any shares of its Common
Stock under the Securities Act for sale to the public for its own account or
on
the account of others (except with respect to registration statements on
Form X-0, X-0 or another form not available for registering the Registrable
Securities for sale to the public), the Company will promptly give written
notice thereof to all Holders. If within ten (10) business days after their
receipt of such notice one or more Holders request in writing the inclusion
of
some or all of the Registrable Securities owned by them in such registration,
the Company will use best efforts to effect the registration under the
Securities Act of such Registrable Securities. In the case of the registration
of shares of capital stock by the Company in connection with any underwritten
public offering, if the principal underwriter determines that the number of
Registrable Securities to be offered must be limited, the Company shall not
be
required to register Registrable Securities of the Holders in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in addition to any amount to be registered for the
account of the Company; provided, however, that in no event shall the
Registrable Securities to be included by PBT or its designee be reduced to
below
25% of the total amount of securities included in the registration.
(d) Obligations
Subject to Existing Obligations.
Notwithstanding anything contained in Section 2
to the
contrary, the Company’s obligations under this Section 2 shall be subject to its
obligations pursuant to Section 4(k) of the Securities Purchase Agreement by
and
between the Company and Xxx Xxxxxxx Private Opportunities Fund, dated as of
February 25, 2005 (the “Existing
Obligations”).
The
Company will not increase, extend or otherwise amend any of the Existing
Obligations without the prior written consent of the Holders of a majority
of
the then outstanding Registrable Securities, and will promptly notify the
Holders of the expiration of the Existing Obligations.
3. Further
Obligations of the Company.
Whenever the Company is required hereunder to register any Registrable
Securities, it agrees that it shall also do the following:
-4-
(a) Pay
all
expenses of such registrations and offerings in connection with any
registrations pursuant to Section 2
hereof;
provided,
however, that
the
Company shall have no obligation to pay or otherwise bear any portion of the
underwriters’ commissions or discounts attributable to the Registrable
Securities being offered and sold by the Holders or the fees and expenses of
any
counsel for the selling Holders in connection with the registration of the
Registrable Securities;
(b) Use
its
best efforts to diligently prepare and file with the Commission a registration
statement and such amendments and supplements to said registration statement
and
the prospectus used in connection therewith as may be necessary to keep said
registration statement effective until the Holder or Holders have completed
the
distribution described in the registration statement relating thereto (but
for
no more than one hundred eighty (180) days or such lesser period until all
such
Registrable Securities are sold) and to comply with the provisions of the
Securities Act with respect to the sale of securities covered by said
registration statement for such period; provided,
however,
that
(i) such 180-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 that are intended to be offered on a
continuous or delayed basis, subject to compliance with applicable Commission
rules, such 180-day period shall be extended for up to an additional 120 days,
if necessary, to keep the registration statement effective until all such
Registrable Securities are sold;
(c) Furnish
to each selling Holder such copies of each preliminary and final prospectus
as
such Holder may reasonably request to facilitate the public offering of its
Registrable Securities;
(d) Enter
into and perform its obligations under any reasonable underwriting agreement
required by the proposed underwriter, if any, in such form and containing such
terms as are customary;
(e) Use
its
best efforts to register or qualify the securities covered by said registration
statement under the securities or “blue sky” laws of such jurisdictions as any
selling Holder may reasonably request provided the Company shall not be required
to qualify to do business or file a general consent to service of process in
connection therewith;
(f) Immediately
notify each selling Holder, at any time when a prospectus relating to his,
her
or its Registrable Securities is required to be delivered under the Securities
Act, of the happening of any event (other than an event relating to a Holder
or
a plan of distribution delivered by a Holder) as a result of which such
prospectus contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading, and, to the extent
required by the Securities Act, at the request of any such selling Holder,
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not
misleading;
-5-
(g) Cause
upon or immediately after the effectiveness of a registration all such
Registrable Securities to be listed on each securities exchange or quotation
system on which the Common Stock of the Company are then listed or quoted;
(h) Make
available to each selling Holder, any underwriter participating in any
disposition pursuant to a registration statement, and any attorney, accountant
or other agent or representative retained by any such selling Holder or
underwriter, all financial and other records, pertinent corporate documents
and
properties of the Company, as shall be reasonably necessary to enable them
to
exercise their due diligence responsibility, subject to appropriate
confidentiality undertakings;
(i) use
its
best efforts to furnish, at the request of any Holder requesting registration
of
Registrable Securities pursuant to this Section 2, on the date on which
such Registrable Securities are sold to the underwriter, (i) an opinion, dated
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, addressed to the underwriters, if any, and
(ii)
a “comfort” letter dated 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, addressed to the underwriters, if any;
(j) Otherwise
use its best efforts to comply with the securities laws of the United States
and
other applicable jurisdictions and all applicable rules and regulations of
the
Commission and comparable governmental agencies in other applicable
jurisdictions and make generally available to its Holders, in each case as
soon
as practicable, but not later than forty-five (45) days after the close of
the
period covered thereby or ninety (90) days after the closing of the fiscal
year,
as the case may be, an earnings statement of the Company which will satisfy
the
provisions of Section 11(a) of the Securities Act;
(k) Provide
an institutional transfer agent and registrar and a CUSIP number for all
Registrable Securities on or before the effective date of the registration
statement; and
(l) Make
available for inspection by any Holder, any underwriter participating in any
disposition pursuant to the registration statement, and any attorney,
accountant, or other agent of any Holder or underwriter, all financial and
other
records, pertinent corporate documents, and properties of the Company, and
cause
the Company’s officers, directors and employees to supply all information
requested by any Holder, underwriter, attorney, accountant, or agent in
connection with the registration statement; provided that an appropriate
confidentiality agreement is executed by any such Holder, underwriter, attorney,
accountant or other agent.
4. Cooperation
by Prospective Sellers.
(a) Each
prospective seller of Registrable Securities shall furnish to the Company in
writing such information as the Company may reasonably request from such seller
in connection with any registration statement with respect to such Registrable
Securities.
-6-
(b) The
failure of any prospective seller of Registrable Securities to furnish any
information or documents in accordance with any provision contained in this
Agreement shall not affect the obligations of the Company under this Agreement
to any remaining sellers who furnish such information and documents unless,
in
the reasonable opinion of counsel to the Company and/or the underwriters, such
failure impairs or adversely affects the offering or the legality of the
registration statement or causes the request not to meet the requirements of
Section 2
of this
Agreement.
(c) Upon
receipt of a notice (telephonic or written) from the Company or the underwriter
of the happening of an event which makes any statement made in a registration
statement or related prospectus covering Registrable Securities untrue or which
requires the making of any changes in such registration statement or prospectus
so that they will not contain any untrue statement of material fact or omit
to
state any 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, the Holders of Registrable Securities included in such registration
statement shall discontinue disposition of such Registrable Securities pursuant
to such registration statement until such Holders’ receipt of copies of the
supplemented or amended prospectus contemplated in Section 3(f)
hereof
or until advised by the Company or the underwriters that dispositions may be
resumed. If the Company gives any such notice, the time period mentioned in
Section 3(b)
shall be
extended by the number of days elapsing between the date of notice and the
date
that each seller receives copies of the supplemented or amended prospectus
contemplated by Section 3(f).
(d) Each
Holder of Registrable Securities included in any registration statement will
effect sales of such securities in accordance with the plan of distribution
given to the Company.
(e) At
the
end of any period during which the Company is obligated to keep any registration
statement current and effective as provided in this Agreement, the Holders
of
Registrable Securities included in such registration statement shall discontinue
sales of shares pursuant to such registration statement, unless it receives
notice from the Company of its intention to continue effectiveness of such
registration statement with respect to such shares which remain unsold and
such
Holders shall notify the Company of the number of shares registered which remain
unsold promptly upon expiration of the period during which the Company is
obligated to maintain the effectiveness of the registration
statement.
(f) No
Person
may participate in any underwritten registration pursuant to this Agreement
unless such Person (i) agrees to sell such Person’s securities on the basis
provided in any underwriting arrangements made with respect to such registration
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
by
the terms of such underwriting arrangements.
-7-
5. Indemnification;
Contribution.
(a) Incident
to any registration of any Registrable Securities under the Securities Act
pursuant to this Agreement, the Company will, to the extent permitted by law,
indemnify and hold harmless each Holder who offers or sells any such Registrable
Securities in connection with such registration statement (including its
partners (including partners of partners and stockholders of any such partners),
and directors, officers, stockholders, affiliates, employees, representatives
and agents of any of them, and each person who controls any of them within
the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), from and against any and all losses, claims, damages, reasonable
expenses and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claim
asserted, as the same are incurred), to which they, or any of them, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement (including any related preliminary or definitive
prospectus, or any amendment or supplement to such registration statement or
prospectus), (ii) any omission or alleged omission to state in such document
a
material fact required to be stated in it or necessary to make the statements
in
it not misleading; provided,
however,
that
the Company will not be liable to the extent that (1) such loss, claim, damage,
expense or liability arises from and is based on an untrue statement or omission
or alleged untrue statement or omission made in reliance on and in conformity
with information furnished in writing to the Company by or on behalf of such
Holder in accordance with Section 4(a)
of this
Agreement for use in such registration statement, or (2) in the case of a sale
directly by such Holder (including a sale of Registrable Securities through
any
underwriter retained by such Holder to engage in a distribution solely on behalf
of such Holder), such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and corrected
in a
final or amended prospectus, and such Holder failed to deliver a copy of the
final or amended prospectus at or prior to the confirmation of the sale of
the
Registrable Securities to the Person asserting any such loss, claim, damage
or
liability in any case where such delivery is required by the Securities Act
or
any state securities laws, or (iii) any violation or alleged violation by any
other party hereto, of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law. With respect to such untrue
statement or omission or alleged untrue statement or omission in the information
furnished in writing to the Company by or on behalf of such Holder in accordance
with Section 4(a)
of this
Agreement for use in such registration statement, such Holder will severally
and
not jointly indemnify and hold harmless the Company (including its directors,
officers, employees, representatives and agents), each other Holder (including
its partners (including partners of partners and stockholders of such partners)
and directors, officers, employees, representatives and agents of any of them,
and each person who controls any of them within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act), from and against
any and all losses, claims, damages, reasonable expenses and liabilities, joint
or several (including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, as the same are incurred), to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, provided,
however,
that
the indemnification obligations of the Holder contained in this Section
5(a)
shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; and provided,
further,
that,
in no event shall any indemnity under this Section
5(a)
exceed
the net proceeds from the offering received by such Holder, except in the case
of fraud or willful misconduct by such Holder.
-8-
(b) If
the
indemnification provided for in Section 5(a)
above
for any reason is held by a court of competent jurisdiction to be unavailable
to
an indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this
Section 5,
in lieu
of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
other Holders from the offering of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and
the other Holders in connection with the statements or omissions which resulted
in such losses, claims, damages, expenses or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Holders shall be deemed to be in the same respective proportions that
the net proceeds from the offering received by the Company and the Holders,
in
each case as set forth in the table on the cover page of the applicable
prospectus, bear to the aggregate public offering price of the Registrable
Securities. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state
a material fact relates to information supplied by or on behalf of the Company
or the Holders and the parties’ relative intent, knowledge and access to
information.
The
Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 5(b)
were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not found guilty
of such fraudulent misrepresentation.
-9-
(c) The
amount paid by an indemnifying party or payable to an indemnified party as
a
result of the losses, claims, damages and liabilities referred to in this
Section 5
shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection
with
investigating or defending any such action or claim, payable as the same are
incurred. The indemnification and contribution provided for in this Section 5
will
remain in full force and effect regardless of any investigation made by or
on
behalf of the indemnified parties or any officer, director, employee, agent
or
controlling person of the indemnified parties. No indemnifying party, in the
defense of any such claim or litigation, shall enter into a consent of entry
of
any judgment or enter into a settlement without the consent of the indemnified
party, which consent will not be unreasonably withheld. Any indemnified party
that proposes to assert the right to be indemnified under this Section 5
will,
promptly after receipt of notice of commencement or threat of any claim or
action against such party in respect of which a claim is to be made against
an
indemnifying party under this Section 5
notify
the indemnifying party in writing (such written notice, an “Indemnification
Notice”)
of the
commencement or threat of such action, enclosing a copy of all papers served
or
notices received (if applicable), but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability that the
indemnifying party may have to any indemnified party under the foregoing
provisions of this Section 5
unless,
and only to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. The indemnified party
will have the right to retain its own counsel in any such action if (i) the
employment of counsel by the indemnified party has been authorized by the
indemnifying party, (ii) the indemnified party’s counsel, shall have reasonably
concluded that there is a reasonable likelihood of a conflict of interest
between the indemnifying party and the indemnified party in the conduct of
the
defense of such action or (iii) the indemnifying party shall not in fact have
employed counsel to assume the defense of such action within a reasonable period
of time following its receipt of the Indemnification Notice, in each of which
cases the fees and expenses of the indemnified party’s separate counsel shall be
at the expense of the indemnifying party; provided,
however,
that
the indemnified party shall agree to repay any expenses so advanced hereunder
if
it is ultimately determined by a court of competent jurisdiction that the
indemnified party to whom such expenses are advanced is not entitled to be
indemnified; and provided,
further,
that so
long as the indemnified party has reasonably concluded that no conflict of
interest exists, the indemnifying party may assume the defense of any action
hereunder with counsel reasonably satisfactory to the indemnified
party.
(d) In
the
event of an underwritten offering of Registrable Securities under this
Agreement, the Company shall enter into standard indemnification and
underwriting agreements with the underwriter thereof.
6. Right
to Delay.
For
one
period not to exceed 90 days in any twelve (12) month period, the Company shall
not be obligated to prepare and file, or prevented from delaying or abandoning,
a Registration Statement pursuant to this Agreement at any time when the
Company, in its good faith judgment, reasonably believes:
(a) that
the
filing thereof at the time requested, or the offering of Registrable Securities
pursuant thereto, would materially and adversely affect (i) a pending or
scheduled public offering of the Company’s securities, (ii) any significant
acquisition, merger, recapitalization. consolidation, reorganization or other
similar transaction by or of the Company, (iii) pre-existing and continuing
negotiations, discussions or pending proposals with respect to any of the
foregoing transactions, or (iv) the financial condition of the Company in view
of the disclosure of any pending or threatened litigation, claim, assessment
or
governmental investigation which may be required thereby; and
(b) that
the
failure to disclose any material information with respect to the foregoing
would
cause a violation of the Securities Act or Exchange Act.
The
Company shall not register any securities for the account of itself or any
other
stockholder during such 90-day period other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or an SEC Rule 145
transaction, a registration on any form that does not include substantially
the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, or a registration in which
the
only Common Stock being registered is Common Stock issuable upon conversion
of
debt securities that are also being registered).
-10-
7. Transferability
of Registration Rights.
The
registration rights set forth in this Agreement are transferable to any
transferee of Registrable Securities. Each subsequent Holder of Registrable
Securities must consent in writing to be bound by the terms and conditions
of
this Agreement in order to acquire the rights granted pursuant to this
Agreement.
8. Rights
Which May Be Granted to Subsequent Investors.
Other
than transferees of Registrable Securities under Section 7
hereof,
the Company shall not, without the prior written consent of the Holders of
a
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder to include such securities in
any
registration unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only
to
the extent that the inclusion of such securities will not reduce the amount
of
the Registrable Securities of the Holders that are included.
9. Right
of First Offer.
Subject
to the terms and conditions specified in this Section 9,
and
applicable securities laws, in the event the Company proposes to offer or sell
any New Securities, the Company shall first make an offering of such New
Securities to PBT or its designee in accordance with the following provisions
of
this Section 9.
PBT or
its designee shall be entitled to apportion the right of first offer hereby
granted it among itself and its partners, members and affiliates in such
proportions as it deems appropriate.
(a) The
Company shall deliver a notice, in accordance with the provisions of
Section 10(a)
hereof,
(the “Offer
Notice”)
to PBT
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and terms,
if
any, upon which it proposes to offer such New Securities.
(b) By
written notification received by the Company, within twenty (20) calendar days
after mailing of the Offer Notice, PBT or its designee may elect to purchase
or
obtain, at the price and on the terms specified in the Offer Notice, up to
that
portion of such New Securities which equals the proportion that the number
of
shares of Common Stock issued and held, or issuable upon conversion of the
Preferred Stock (and any other securities convertible into, or otherwise
exercisable or exchangeable for, shares of Common Stock) then held, by PBT
bears
to the total number of shares of Common Stock of the Company then outstanding
(assuming full conversion and exercise of all convertible or exercisable
securities).
(c) If
all
New Securities referred to in the Offer Notice are not elected to be purchased
or obtained as provided in Section 9(b)
hereof,
the Company may, during the sixty (60) day period following the expiration
of
the period provided in Section 9(b)
hereof,
offer the remaining unsubscribed portion of such New Securities (collectively,
the “Refused
Securities”)
to any
person or persons at a price not less than, and upon terms no more favorable
to
the offeree than, those specified in the Offer Notice. If the Company does
not
enter into an agreement for the sale of the New Securities within such period,
or if such agreement is not consummated within sixty (60) days following the
execution thereof, the right provided hereunder shall be deemed to be revived
and such New Securities shall not be offered unless first reoffered to PBT
or
its designee in accordance with this Section 9.
-11-
(d) The
right
of first offer in this Section 9
shall
not be applicable to New Securities issued:
|
i.
|
upon
conversion of shares of Preferred
Stock;
|
|
ii.
|
to
officers, directors, employees and consultants of the Company pursuant
to
stock incentive plans, or other stock arrangements that have been
approved
by the Board of Directors of the Company including the directors
elected
by the holders of a majority of the Preferred Stock (the “Series
A Directors”);
|
|
iii.
|
as
a dividend or distribution on the Corporation’s Common Stock or Preferred
Stock;
|
|
iv.
|
upon
the written consent of PBT that expressly states that the right of
first
offer in this Section 9 shall not apply to such New
Securities;
|
|
v.
|
upon
the exercise or conversion of any options or other convertible securities
outstanding as of the date hereof;
|
|
vi.
|
pursuant
to a loan arrangement or debt financing from a bank, equipment lessor
or
similar financial institution approved by the Board of Directors,
including the Series A Directors;
or
|
|
vii.
|
in
connection with strategic transactions (but excluding any merger,
consolidation, acquisition or similar business combination) that
have been
approved by the Board of Directors of the Corporation including the
Series
A Directors.
|
(e) The
right
of first offer set forth in this Section 9
may not
be assigned or transferred except that such right is assignable by PBT to any
affiliate of PBT.
10. Miscellaneous.
(a) Notices.
Except
as
otherwise expressly provided herein, all notices, requests, demands, claims,
and
other communications hereunder will be in writing. Any such notice, request,
demand, claim, or
other
communication hereunder shall be deemed duly given (i) upon confirmation of
facsimile, (ii) one (1) business day following the date sent when sent by
overnight delivery and (iii) five (5) business days following the date mailed
when mailed by registered
or certified mail return receipt requested and postage prepaid at the following
addresses (or
such
other address for a party as shall be specified by such party by like
notice):
All
communications shall be sent to PBT at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, and to the Company at 0000 Xxxx Xxxxxx, Xxxxx
000,
Xxx Xxxxx, XX 00000, or at such other address(es) as PBT or the Company may
designate by ten (10) days advance written notice to the other parties
hereto.
-12-
(b) Entire
Agreement.
This
Agreement, together with the instruments and other documents hereby contemplated
to be executed and delivered in connection herewith, contains the entire
agreement and understanding of the parties hereto, and supersedes any prior
agreements or understandings between or among them, with respect to the subject
matter hereof.
(c) Successors
and Assigns.
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.
(d) Successor
Indemnification.
In the
event that the Company or any of its successors or assigns (i) consolidates
with
or merges into any other entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any person
or
entity, then, and in each such case, to the extent necessary, proper provision
shall be made so that the successors and assigns of the Company assume the
obligations of the Company with respect to indemnification of members of the
Board of Directors as in effect immediately prior to such transaction, whether
in the Company’s bylaws, Certificate of Incorporation, or elsewhere, as the case
may be.
(e) Amendments
and Waivers.
Except
as
otherwise expressly set forth in this Agreement, any term of this Agreement
may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and the Holders of
a
majority of the Preferred Stock. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall
be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
(f) Counterparts;
Facsimile Execution.
This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original but all of which shall constitute but one and the same
instrument. One or more counterparts of this Agreement may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
Facsimile execution and delivery of this Agreement is legal, valid and binding
for all purposes.
(g) Captions.
The
captions of the sections, subsections and paragraphs of this Agreement have
been
added for convenience only and shall not be deemed to be a part of this
Agreement.
(h) Severability.
Each
provision of this Agreement shall be interpreted in such manner as to validate
and give effect thereto to the fullest lawful extent, but if any provision
of
this Agreement is determined by a court of competent jurisdiction to be invalid
or unenforceable under applicable law, such provision shall be ineffective
only
to the extent so determined and such invalidity or unenforceability shall not
affect the remainder of such provision or the remaining provisions of this
Agreement; provided,
however,
that
the Company and the Holders of a majority of the Registrable Securities shall
negotiate in good faith to attempt to implement an equitable adjustment in
the
provisions of this Agreement with a view toward effecting the purposes of this
Agreement by replacing the provision that is invalid or unenforceable with
a
valid and enforceable provision the economic effect of which comes as close
as
possible to that of the provision that has been found to be invalid and
unenforceable.
-13-
(i) Governing
Law.
The
execution, interpretation, and performance of this Agreement shall be governed
by the laws of the State of California without giving effect to any choice
in
conflict of law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the law of any other
jurisdiction other than the State
of
California.
(j) Dispute
Resolution.
Any
unresolved controversy or claim arising out of or relating to this Agreement,
except as (i) otherwise provided in this Agreement, or (ii) any such
controversies or claims arising out of either party’s intellectual property
rights for which a provisional remedy or equitable relief is sought, shall
be
submitted to arbitration by one arbitrator mutually agreed upon by the parties,
and if no agreement can be reached within 30 days after names of potential
arbitrators have been proposed by the American Arbitration Association (the
“AAA”),
then
by one arbitrator having reasonable experience in corporate finance transactions
of the type provided for in this Agreement and who is chosen by the AAA. The
arbitration shall take place in San Francisco, California, in accordance with
the AAA rules then in effect, and judgment upon any award rendered in such
arbitration will be binding and may be entered in any court having jurisdiction
thereof. There shall be limited discovery prior to the arbitration hearing
as
follows: (a) exchange of witness lists and copies of documentary evidence and
documents relating to or arising out of the issues to be arbitrated, (b)
depositions of all party witnesses and (c) such other depositions as may be
allowed by the arbitrators upon a showing of good cause. Depositions shall
be
conducted in accordance with the California Code of Civil Procedure, the
arbitrator shall be required to provide in writing to the parties the basis
for
the award or order of such arbitrator, and a court reporter shall record all
hearings, with such record constituting the official transcript of such
proceedings. The prevailing party shall be entitled to reasonable attorney’s
fees, costs, and necessary disbursements in addition to any other relief to
which such party may be entitled.
(k) Specific
Performance.
The
parties hereto agree that irreparable damage would occur in the event that
any
provision of this Agreement was not performed in accordance with the terms
hereof and that the parties hereto shall be entitled to seek specific
performance of the terms hereof (without necessity of posting a bond in
connection therewith), in addition to any other remedy at law or equity
otherwise permitted hereunder.
[Signature
page follows]
-14-
IN
WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date first set forth above.
|
Solidus
Networks, Inc.
By:
_________________________________
Name:
Title:
|
|
|
WinWin
Gaming, Inc.
By:_________________________________
Name:
Title:
|
|
EXHIBIT
B
(Form
of Opinion of WinWin Counsel)
ON
LETTERHEAD OF XXXXXX XXXX & PRIEST LLP
August
____ , 2006
Solidus
Networks, Inc.,
dba
PayByTouch Solutions
000
Xxxxxx Xxxxxx Xxxxx 0000
Xxx
Xxxxxxxxx XX 00000
Re:
WinWin Gaming, Inc.
Ladies
and Gentlemen:
We
have
acted as counsel to WinWin Gaming, Inc., a Delaware corporation (the
“Company”),
in
connection with that certain Second Amended and Restated Joint Venture
Agreement, dated as of August ___, 2006 (the “Agreement”),
between the Company and Solidus Networks, Inc., dba PayByTouch Solutions, a
Delaware corporation (“PBT”).
This
opinion is furnished to PBT pursuant to Section
6(e)
of the
Agreement. All capitalized terms not otherwise defined herein shall have the
meanings given to them in the Agreement. Items (a) through (d), below are
hereinafter referred to collectively as the “Opinion
Documents”
and
items (a) through (c) below are hereinafter referred to collectively as the
“Enforceability
Documents.”
For
purposes of the opinions expressed herein, we have examined, among other
documents, the following documents:
|
(a)
|
the
Agreement;
|
|
(b)
|
that
certain Amended and Restated Voting Agreement, Irrevocable Proxy
and Form
of Stockholders’ Written Consent, dated ____,
2006;
|
|
(c)
|
that
certain Registration Rights Agreement, of even date herewith, by
and
between the Company and PBT;
|
|
(d)
|
the
Certificate of Designation of Powers Designations, Preferences and
Relative Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions of the Series A-1 Preferred
Stock of the Company (the “Certificate
of Designation”);
|
|
(e)
|
the
Bylaws of the Company, as certified on the date hereof by an officer
of
the Company (the “Bylaws”);
|
|
(f)
|
the
Certificate of Incorporation of the Company, as filed with the Secretary
of State of the State of Delaware on December
30, 1992
(the “Certificate
of Incorporation”
and, together with the Bylaws, the “Governing
Documents”);
|
|
(g)
|
a
Good Standing Certificate issued by the Secretary of State of the
State of
Delaware on August ____, 2006, certifying as to the good standing
of the
Company in Delaware;
|
|
(h)
|
a
Good Standing Certificate issued by the Secretary of State of the
State of
Nevada on August ____, 2006, certifying as to the good standing of
the
Company in Nevada; and
|
|
(i)
|
a
Certificate from the Chief Executive Officer or Chief Financial Officer
of
the Company, certifying as to certain factual matters, corporate
documents
and actions (the “Officer’s
Certificate”).
|
In
addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such corporate records, agreements, documents
and other instruments, and of certificates or comparable documents of public
officials and of officers and representatives of the Company, and have made
such
inquiries of such officers and representatives as we have deemed relevant and
necessary as the basis for the opinions hereinafter set forth. We have not
searched any computer databases or the dockets of any court, governmental or
administrative body, agency or other filing office in any jurisdiction or
conducted any other independent investigation. In addition, the opinion
expressed in paragraph 1 below as to the existence and good standing of the
Company in Delaware is based solely upon the certificates and other documents
referred to in paragraph (g) above; the opinion expressed in paragraph 3 below
as to the qualification and good standing of the Company in Nevada is based
solely upon the certificates and other documents referred to in paragraph (h)
above; and the opinion expressed in paragraph 6 below as to the capitalization
of the Company is based solely upon our review of the Certificate of
Incorporation, the stock records of the Company and the Officer’s Certificate
referred to in paragraph (i) above. As to all questions of fact material to
the
opinions set forth herein, we have relied solely upon certificates or other
comparable documents of officers and other representatives of the Company and
upon the representations and warranties of the Company contained in the Opinion
Documents. While we have not conducted any independent investigation to
determine facts upon which our opinions are based or to obtain information
about
which this letter advises you, we confirm that we do not have any knowledge
which has caused us to conclude that our reliance and assumptions cited in
this
paragraph are unwarranted. The term “knowledge”
whenever it is used in this letter with respect to our firm means the current,
actual knowledge of the Xxxxxx Xxxx & Priest LLP attorneys who played a
material role in handling the transaction contemplated by the
Agreement.
In
such
examination, we have without independent investigation relied upon and assumed
the truth and accuracy of all factual matters contained in the Officer’s
Certificate, a copy of which is attached hereto as Exhibit A,
and the
truth and accuracy of each of the representations and warranties as to factual
matters contained in or made pursuant to the Opinion Documents and certificates
delivered thereunder. We have also assumed, with your permission and without
independent investigation, (i) the genuineness of all signatures;
(ii) the legal capacity of each individual signatory to such documents;
(iii) the authenticity of all documents submitted to us as originals;
(iv) the conformity to originals of all documents submitted to us as
certified, facsimile or photostatic copies; (v) the authenticity of the
originals of such copies; (vi) the due incorporation and organization,
valid existence and good standing of PBT under the laws of the State of
Delaware; (vii) the due execution and delivery of the Opinion Documents by
PBT; (viii) the corporate power and authority of PBT to conduct its
business and own its properties and to enter into the Opinion Documents and
perform its obligations thereunder; (ix) that each of the Opinion Documents
has been duly authorized by all necessary corporate action of PBT and is the
legal, valid and binding obligation of PBT, enforceable against PBT in
accordance with its terms; (x) that, except as to the opinion in paragraph
9, each of the Company and PBT has obtained all necessary governmental permits
and approvals for conducting its operations; and (xi) the identity and
capacity of all individuals acting or purporting to act as public
officials.
Based
solely upon the examination described above, and subject to the comments,
assumptions, qualifications, limitations and exceptions stated herein and in
the
Disclosure Schedule to the Agreement, we are of the opinion that:
1. The
Company has been duly incorporated and is a validly existing corporation in
good
standing under the laws of the State of Delaware.
2. The
Company has the requisite corporate power to own its property and assets and
to
conduct its business as it is currently being conducted.
3. The
Company is duly qualified to do business as a foreign corporation and is in
good
standing in the state of Nevada.
4. The
Company has the requisite corporate power to execute, deliver and perform its
obligations under the Opinion Documents.
5. Each
of
the Enforceability Documents has been duly and validly authorized, executed
and
delivered by the Company and each such agreement constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance with
its
respective terms.
6. As
of
immediately prior to the Initial Closing, the Company’s authorized capital stock
consists of (a) 300,000,000 shares of Common Stock, par value $0.01 per share,
of which 63,692,171 shares are issued and outstanding, and (b) 10,000,000 shares
of Preferred Stock, par value $0.01 per share, of which 6,000,000 have been
designated Series A-1 Preferred Stock, par value $0.01, none of which are issued
and outstanding. The outstanding shares of Common Stock have been duly
authorized and validly issued, and are fully paid and nonassessable, and the
shares of Series A-1 Preferred Stock have been duly authorized, and upon
issuance in accordance with the terms of the Agreement, will be validly issued,
fully paid and nonassessable. The Initial Closing WinWin Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, will be validly issued, outstanding,
fully paid and nonassessable. The shares of Common Stock issuable upon
conversion of the Initial Closing WinWin Shares have been duly authorized,
and
when issued upon conversion in accordance with the terms of the Certificate
of
Designation, will be validly issued, outstanding, fully paid and nonassessable.
To our knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of
the
authorized but unissued capital stock of the Company, other than the conversion
privileges of the Series A-1 Preferred Stock, rights created in connection
with
the transactions contemplated by the Opinion Documents, warrants to
purchase 17,582,161
shares
of
Common Stock, options to purchase 14,099,026 shares of Common Stock reserved
for
issuance upon exercise of outstanding options granted under the Company’s 2003
Stock Plan (the “Plan”)
and
5,900,974 shares of Common Stock reserved for future issuance under the Plan.
7. The
execution and delivery of the Opinion Documents by the Company and the issuance
of the Initial Closing WinWin Shares pursuant thereto do not violate any
provision of the Certificate of Incorporation or Bylaws, do not constitute
a
default under or a material breach of any material agreement that is listed
on
Annex
A1
of this
opinion letter and do not violate (a) any governmental statute, rule or
regulation which in our experience is typically applicable to transactions
of
the nature contemplated by the Opinion Documents or (b) to our knowledge, any
order, writ, judgment, injunction, decree, determination or award which has
been
entered against the Company, in each case to the extent the violation of which
would materially and adversely affect the Company and its subsidiaries, taken
as
a whole.
8. To
our
knowledge, there is no action, proceeding or investigation pending or overtly
threatened against the Company before any court or administrative agency that
questions the validity of the Agreement.
9. All
consents, approvals, authorizations, or orders of, and filings, registrations,
and qualifications with any U.S. Federal or California regulatory authority
or
governmental body required for the issuance of the Initial Closing WinWin
Shares, have been made or obtained, except (a) for the filing of a Form D
pursuant to Securities and Exchange Commission Regulation D and (b) any required
filings under applicable state securities law.
10. The
offer
and sale of the Initial Closing WinWin Shares are exempt from the registration
requirements of the Securities Act of 1933, as amended, subject to the timely
filing of a Form D pursuant to Securities and Exchange Commission Regulation
D.
Our
opinion as to enforceability set forth in paragraph 5 above is subject
to:
(a) limitations
imposed by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the enforcement of creditor’s rights generally,
including, without limitation, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination;
(b) general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law);
(c) the
qualification that certain rights, remedies, waivers and procedures contained
in
the Opinion Documents may be limited or rendered unenforceable by applicable
laws or judicial decisions governing such provisions, but such laws and judicial
decisions do not, in our opinion, render the Opinion Documents, as a whole,
unenforceable or make the remedies and procedures that are available to the
parties legally inadequate for the practical realization of the principal
benefits purported to be provided to them by the Opinion Documents;
1 Annex
A
will
include a list of all of the material agreements set forth in the exhibit index
of the Company’s annual report on form 10-KSB for the fiscal year ended December
31, 2005.
(d) the
qualification that certain provisions contained in the Opinion Documents may
be
unenforceable in whole or in part if such provisions impose restrictions or
burdens upon the debtor and it cannot be demonstrated that enforcement of such
restrictions or burdens is reasonably necessary for the protection of the
creditor or if the creditor’s enforcement of such provisions would violate the
creditor’s implied covenant of good faith and fair dealing;
(e) the
possible requirement that actions taken, or not taken, by any party pursuant
to
the Opinion Documents be taken, or not taken, in good faith;
(f) the
qualification that certain provisions contained in the Opinion Documents
regarding the rights or remedies available to any party for violations or
breaches of any provisions which are immaterial or for violations or breaches
of
any provisions if such enforcement would be unreasonable under the
circumstances, may be unenforceable in whole or in part;
(g) the
unenforceability under certain circumstances of (i) waivers or provisions
imposing penalties or liquidated damages and (ii) provisions purporting to
release or exculpate any party from liability for its acts or omissions, or
purporting to impose a duty upon any party to indemnify any other party when
any
claimed damages result from the negligence, gross negligence or willful
misconduct of the party seeking such indemnity;
(h) the
qualification that certain provisions of any such document to the effect that
rights or remedies are not exclusive, that every right or remedy is cumulative
and may be exercised in addition to any other right or remedy, that the election
of some particular remedy does not preclude recourse to one or more others
or
that failure to exercise or delay in exercising rights or remedies will not
operate as a waiver of any such right or remedy, may be unenforceable in whole
or in part;
(i) the
qualification that provisions in any such document that contain a waiver of
(A) the benefits of statutory, regulatory, or constitutional rights, unless
and to the extent the statute, regulation or constitution explicitly allows
such
waivers, (B) unknown future defenses, and (C) rights to damages, may
be unenforceable in whole or in part;
(j) limitations
imposed by California Civil Code Section 1670.5 on the enforceability of
provisions which a court finds as a matter of law to have been unconscionable
at
the time when made;
(k) the
qualification that certain provisions which require written amendments or
waivers of documents may be unenforceable in whole or in part insofar as certain
oral or other modifications, amendments or waivers may be effectively agreed
upon by the parties or the doctrine of promissory estoppel may apply in certain
circumstances;
(l) the
unenforceability under certain circumstances of any provision insofar as it
provides for the payment or reimbursement of costs and expenses of
indemnification for claims, losses or liabilities in excess of a reasonable
amount or any provision purporting to require the payment of attorneys’ fees,
expenses or costs, where such provisions do not satisfy the requirements of
California Civil Code Section 1717; and
(m) the
unenforceability, in certain circumstances, of consent to jurisdiction clauses
and forum selection clauses.
We
are
not opining as to the authorization, execution, delivery or enforceability
of
the Investment Option or the Certificate of Designation. We understand that
the
Company’s special Delaware counsel is rendering an opinion of even date herewith
that addresses the enforceability of the Investment Option and the Certificate
of Designation.
We
are
members of the bar of the State of California and we express no opinion on
the
laws of any jurisdiction other than the federal laws of the United States and
the laws of the State of California. We also express no opinion as to
(i) any governmental rule or other legal requirement relating to labor,
employee rights and benefits, including without limitation the Employee
Retirement Income Security Act of 1974, as amended, and taxation, (ii) any
choice-of-law or conflict of laws matters, (iii) any patent, trademark or
copyright statute, rules or regulations, (iv) any provision appointing one
party as an attorney-in-fact of an adverse party, (v) the effect of any
state or federal antitrust laws, including, without limitation, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as currently in effect,
(vi) any securities laws, rules or regulations (except for the opinions set
forth in paragraphs 6, 9 and 10 hereof), or (vii) the Company’s rights in
or title to any property or assets.
The
opinions expressed herein are solely for your benefit in connection with the
above transactions and may not be relied upon in any manner or for any purpose
by any other person. This opinion speaks only as of the date hereof, and we
assume no obligation to advise you of any changes to this opinion that may
come
to our attention after the date hereof. This opinion is limited to the matters
expressly stated herein and no opinion or other statement may be inferred or
implied beyond the matters expressly stated herein.
|
Very
truly yours,
|
|
|
|
|
|
XXXXXX
XXXX & PRIEST LLP
|
Annex
A to Opinion of Xxxxxx Xxxx & Priest LLP
|
1.
|
Stock
Exchange Agreement dated December 31, 2002, regarding the acquisition
of
Win Win, Inc.
|
|
2.
|
Amended
and Restated Stock Exchange Agreement dated March 31,
2003.
|
|
3.
|
Agreement,
dated October 8, 2003, between Win Win, Inc. and Xxxxx Xxxxxxx Television,
Inc.
|
|
4.
|
Cooperation
Agreement, dated December 15, 2003, between Win Win Consulting (Shanghai)
Co. Ltd. and Shanghai Welfare Lottery Issuing Center.
|
|
5.
|
TV
Cooperation Agreement, dated December 15, 2003, between Win Win Consulting
(Shanghai) Co. Ltd. and Shanghai Welfare Lottery Issuing
Center.
|
|
6.
|
WinWin
Gaming Inc. 2003 Stock Plan.
|
|
7.
|
Project
Cooperation Agreement, dated April 30, 2004, between Win Win Consulting
(Shanghai) Co. Ltd. and Shanghai VSAT Network Systems Co.
Ltd..
|
|
8.
|
Securities
Purchase Agreement, dated February 25, 2005, among the Company and
the
investors who are parties thereto.
|
|
9.
|
Registration
Rights Agreement, dated February 25, 2005, among the Company and
the
investors who are parties thereto.
|
|
10.
|
Revolving
Credit Note and Agreement, dated March 16, 2005, between the Company
and
Art Xxxxxx.
|
|
11.
|
Revolving
Credit Note and Agreement, dated March 16, 2005, between the Company
and
Xxxx Xxxxxxxx.
|
|
12.
|
Co-Publishing
Agreement, dated September 23, 2005 among Pixiem, Inc. and
ESPN.
|
|
13.
|
Joint
Venture Agreement, dated as of September 30, 2005, by and between
Solidus
Networks, Inc., d/b/a PayByTouch Solutions and WinWin Gaming,
Inc.
|
|
14.
|
Security
Agreement, dated as of September 30, 2005, by WinWin Gaming, Inc.,
in
favor of Solidus Networks, Inc., d/b/a PayByTouch
Solutions.
|
|
15.
|
Secured
Promissory Note, dated September 30, 2005, by WinWin Gaming, Inc.
to
Solidus Networks, Inc., d/b/a PayByTouch
Solutions.
|
i
|
16.
|
Acquisition
Agreement, dated September 27, 2005, by and among WinWin Gaming,
Inc.,
E-Bear Digital Software Co., Ltd. (“E-Bear”) and the Shareholders of
E-Bear.
|
|
17.
|
Employment
Agreement, dated December 20, 2005, between WinWin Gaming, Inc. and
Xxxxx
Xxxx.
|
|
18.
|
Employment
Agreement, dated December 20, 2005, between WinWin Gaming, Inc. and
Xxxxxxx Xxxxxx.
|
|
19.
|
Licensing
Agreement, dated December 15, 2005, among Pixiem, Inc. and Yamaha
Motor
Company.
|
|
20.
|
Licensing
Agreement, dated September 23, 2005 among Pixiem, Inc. and C- Valley
(Beijing) Information Technology Co., Ltd.
|
|
21.
|
Distributorship
Agreement, dated June 20, 2005 among Pixiem, Inc. and Advanced Mobile
Solutions, Ltd.
|
|
22.
|
Agreement,
dated August 3, 2005 among Pixiem, Inc. and Tira Wireless,
Inc.
|
|
23.
|
Distributor
and Revenue Share Agreement, dated November 9, 2005 among Pixiem,
Inc. and
Tele-Mobile Company dba Telus Mobility.
|
|
24.
|
License
Agreement, dated November 21, 2005 among Pixiem, Inc. and Paradox
Studios,
Ltd.
|
|
25.
|
License
Agreement, dated November 7, 2005, among Pixiem, Inc. and iScreen
Corporation.
|
|
26.
|
Wireless
Pass Through Distribution Agreement, dated May 27, 2005 among Pixiem,
Inc
and Wireless Developer, Inc. dba Wireless Developer
Agency.
|
|
|
|
|
27.
|
Service
Agreement, dated July 8, 2005 among Pixiem, Inc. and Cellmania,
Inc.
|
|
28.
|
Partnership
Agreement, dated September 1, 2005 among Pixiem, Inc. and 2ThumbZ
Entertainment.
|
|
29.
|
License
Agreement, dated April 1, 2005, between Pixiem, Inc. and The All
England
Lawn Tennis Club (Wimbledon)
Limited.
|
ii
EXHIBIT
C
(Form
of Investment Option Agreement)
THE
SECURITIES REPRESENTED BY THIS AGREEMENT AND ISSUABLE UPON THE EXERCISE OF
THE
OPTION EVIDENCED HEREBY (COLLECTIVELY, THE “SECURITIES”) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE
STATE SECURITIES LAWS AND THE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND
AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED AND IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION FROM REGISTRATION
UNDER ANY APPLICABLE STATE SECURITIES LAWS WITH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY REGARDING COMPLIANCE WITH AND THE AVAILABILITY
OF
ANY SUCH STATE SECURITIES LAWS.
INVESTMENT
OPTION AGREEMENT
This
INVESTMENT OPTION AGREEMENT, dated as of August 31, 2006, by and between SOLIDUS
NETWORKS, INC., a Delaware corporation (the “Optionee”)
and
WINWIN GAMING, INC., a Delaware corporation (the “Company”).
Capitalized terms used, but not otherwise defined, herein have the meanings
ascribed to those terms in the JV Agreement (as defined below).
BACKGROUND
The
Optionee and the Company are parties to a Second Amended and Restated Joint
Venture Agreement, dated August 31, 2006 (the “JV
Agreement”).
It is
a condition precedent of the Initial Closing that the Company grant to the
Optionee this option to acquire an additional number of shares of the Company’s
Series A-1 Preferred Stock, prior to the Filing Date (as defined below), or
Series A Preferred Stock, from and after the Filing Date, such that upon
exercise of this option, the Optionee will be the beneficial owner of a
percentage of the Company’s outstanding common stock on a Fully Diluted Basis
(as defined below) indicated by the Optionee on the Option Notice (as defined
below) after giving effect to the exercise of this Option (the “Election
Percentage”),
which
Election Percentage may not be greater than eighty percent (80%).
The
Company is issuing shares of its Series A-1 Preferred Stock to the Optionee
at
the Initial Closing and is seeking stockholder approval of the adoption and
filing of the Restated Charter under which, among other things, its Series
A
Preferred Stock will be authorized, each outstanding share of Series A-1
Preferred Stock will be automatically converted into one tenth of a share of
Series A Preferred Stock and additional shares of common stock will be
authorized such that there will be sufficient authorized common stock for
issuance upon the conversion of the Series A Preferred Stock. The date of the
filing of the Restated Charter is referred to herein as the “Filing
Date”.
NOW,
THEREFORE, in consideration of the premises, mutual covenants herein set forth
and other good and valuable consideration, subject to the terms and conditions
herein, the Company and the Optionee hereby agree as follows:
1. Grant
of Option; Term; Exercise Price.
(a) Subject
to the terms and conditions herein, the Company hereby grants to the Optionee
an
option (the “Option”),
prior
to the Filing Date, to acquire a number of shares of the Company’s Series A-1
Preferred Stock, and from and after the Filing Date, to purchase a number of
shares of the Company’s Series A Preferred Stock (such shares of Series A-1
Preferred Stock or Series A Preferred Stock, as applicable, being referred
to
herein as the “Option
Shares”)
that,
together with other securities of the Company held by the Optionee at the time
of exercise, constitute a percentage of the common stock of the Company on
a
Fully Diluted Basis after giving effect to the exercise of the Option equal
to
the Election Percentage. For purposes of this Agreement, “Fully
Diluted Basis”
means
the number of shares of the Company’s Common Stock outstanding assuming, for
such purpose, the exercise, exchange, or conversion into Common Stock of the
Company of all options, warrants and other securities of the Company that are
exercisable or exchangeable for, or convertible into, Common Stock at the time
of the exercise of the Option.
(b) The
Option is exercisable by Optionee’s delivery to the Company of an Exercise
Notice at any time from the date of this Investment Option Agreement until
Midnight Pacific Time on the date that is third anniversary of the date of
this
Investment Option Agreement (the “Exercise
Period”);
provided, however, that the Option shall automatically terminate upon the
closing of the sale of all or substantially all of the assets of the Optionee,
or upon the closing of a merger, consolidation or similar transaction in which
the stockholders of the Optionee as of immediately prior to the transaction
do
not own a majority of the voting power of the surviving company as of
immediately following such transaction.
(c) The
exercise price per Option Share (the “Exercise
Price”)
shall
be equal to the fair market value of a share of the Company’s Series A-1
Preferred Stock or Series A Preferred Stock, as applicable, as of the date
of
exercise as determined by an Appraisal (as defined below). Whenever this Option
calls for an “Appraisal,”
the
fair market value of the Option Shares will be determined on the basis of the
value of the percentage of the entire Company represented by the Option Shares
at the time of determination in accordance with the following mechanism. A
representative of the Optionee and a representative of the Company shall attempt
to negotiate a mutually agreeable fair market value within thirty (30) days
of
the date that the Company receives an Exercise Notice from the Optionee. If
the
representatives are unable to reach an agreement within such time period, each
of the Optionee and the Company will at its own cost appoint a nationally
recognized investment banking firm as an appraiser of the value of the Option
Shares. Each of the investment banking firms shall separately determine, within
forty-five (45) days of the end of such thirty (30) day period, the fair market
value of the shares taking into account the fact that the exercise of the Option
may involve the acquisition of a controlling interest in the Company by the
Optionee to the extent that the Optionee does not already own a controlling
interest in the Company. Each of the investment banking firms shall express
its
valuation as a single number in US dollars. The mid-point of the valuations
(the
“Mid-Point”)
will
then be calculated by dividing the sum of the separate valuations by two (2).
To
the extent that each valuation is within the range which is 10% above or 10%
below the Mid-Point (the “Range”),
the
Mid-Point shall be used. If either or both of the valuations falls outside
of
the Range, then the parties shall jointly choose (or if the parties are unable
to so jointly choose within three (3) business days, the two appraisers shall
choose) a disinterested nationally recognized investment banking firm as a
third
appraiser, at a cost to be shared on an equal basis between the parties, to
complete an appraisal within an additional forty-five (45) days, which appraisal
shall be equal to or somewhere between the two prior appraisals and such third
appraisal shall be the final and binding determination of the fair market value.
2
(d) The
Exercise Price shall be payable in cash; provided, however, that if at the
time
the Option is exercised there is a public trading market for the Optionee’s
common stock, then, at the option of the Optionee, the Optionee may pay the
Exercise Price in cash or registered (“free-trading”)
shares
of the Optionee’s common stock, or a combination thereof. If the Optionee elects
to pay the Exercise Price, in whole or in part, by delivery of registered shares
of the Optionee’s common stock, then such shares shall be valued at the average
closing price of the Optionee’s common stock over a period of twenty (20)
trading days prior to the exercise of the Option.
(e) this
Investment Option Agreement shall terminate and cease to be effective on the
date on which the JV Agreement is validly terminated in accordance with Section
13 thereof.
2. Exercise
Procedure.
(a) Procedure.
(i) The
Optionee may exercise the Option, in whole, but not in part, at any time during
the Exercise Period, by delivering to the Company a written notice duly signed
by the Optionee indicating that the Optionee is exercising the Option and the
Election Percentage (the “Exercise
Notice’).
The
Option shall not be deemed exercised, however, until full payment in an amount
equal to the full purchase price for the Option Shares has been made. Optionee
may withdraw the Exercise Notice and elect not to exercise the Option at any
time before making full payment.
(ii) Following
receipt by the Company of such Exercise Notice and full payment of the Exercise
Price, the Company shall issue, as soon as practicable, a stock certificate
for
the Option Shares in the name as designated by the Optionee and deliver the
certificate to the Optionee.
(b) Other
Terms.
Other
than the terms regarding pricing and consideration set forth in Section 1 of
this Investment Option Agreement, the issuance and sale of the Option Shares
shall be subject to the same conditions of and on the same terms as the issuance
and sale of the Second Closing WinWin Shares in the Second Closing.
(c) Legend.
If the
Option Shares are not then covered by a registration statement, each certificate
for the Option Shares shall bear a legend that is substantially similar to
the
following:
3
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS THE REGISTRATION PROVISIONS OF SAID ACT HAVE BEEN COMPLIED WITH OR
UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF ITS COUNSEL THAT SUCH REGISTRATION
IS NOT
REQUIRED.”
3. Rights
of Optionee.
The
Optionee shall not have any rights to dividends or any other rights of a
stockholder with respect to any Option Shares until such Option Shares shall
have been issued to Optionee (as evidenced by the appropriate entry on the
transfer books of the Company).
4. Notices.
Any
notices and other communications required or permitted under this Agreement
shall be in writing and shall be delivered (i) personally by hand or by courier,
(ii) mailed by United States first-class mail, postage prepaid or (iii) sent
by
facsimile, to a Party's address or facsimile number as follows:
|
if
to WinWin:
|
WinWin
Gaming, Inc.
|
0000
Xxxx
Xxxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxxxxxx Xxxxxx
with
a
copy to:
Xxxxxx
Xxxx & Priest LLP
000
Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
X.X. 00000
Tel:
000.000.0000
Fax:
000.000.0000
Attention:
Xxxxx
X.
Xxxxxxxxxx
|
if
to PBT:
|
Solidus
Networks, Inc.
|
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxx Xxxxxx
with
a
copy to:
Cooley
Godward
llp
000
Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000-0000
Tel:
(000) 000-0000
Fax:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxxx
4
or
at
such other address or facsimile number as a Party may designate by giving at
least ten days' advance written notice to the other Party. All such notices
and
other communications shall be deemed given upon (I) receipt or refusal of
receipt, if delivered personally, (II) three days after being placed in the
mail, if mailed, or (III) confirmation of facsimile transfer, if
faxed.
5. Binding;
Assignment.
Optionee shall not assign this Agreement, or any rights hereunder, without
the
Company's prior written consent. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, and their successors and permitted
assigns, if any.
6. Dispute
Resolution.
Any
unresolved controversy or claim arising out of or relating to this Agreement,
except as (i) otherwise provided in this Agreement, or (ii) any such
controversies or claims arising out of either party’s intellectual property
rights for which a provisional remedy or equitable relief is sought, shall
be
submitted to arbitration by one arbitrator mutually agreed upon by the parties,
and if no agreement can be reached within 30 days after names of potential
arbitrators have been proposed by the American Arbitration Association (the
“AAA”),
then
by one arbitrator having reasonable experience in corporate finance transactions
of the type provided for in this Agreement and who is chosen by the AAA. The
arbitration shall take place in San Francisco, California, in accordance with
the AAA rules then in effect, and judgment upon any award rendered in such
arbitration will be binding and may be entered in any court having jurisdiction
thereof. There shall be limited discovery prior to the arbitration hearing
as
follows: (a) exchange of witness lists and copies of documentary evidence and
documents relating to or arising out of the issues to be arbitrated, (b)
depositions of all party witnesses and (c) such other depositions as may be
allowed by the arbitrators upon a showing of good cause. Depositions shall
be
conducted in accordance with the California Code of Civil Procedure, the
arbitrator shall be required to provide in writing to the parties the basis
for
the award or order of such arbitrator, and a court reporter shall record all
hearings, with such record constituting the official transcript of such
proceedings. The prevailing party shall be entitled to reasonable attorney’s
fees, costs, and necessary disbursements in addition to any other relief to
which such party may be entitled.
7. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the matters herein, and cannot be amended, modified or terminated
except by an agreement in writing executed by the parties hereto.
8. Governing
Law.
This
Agreement shall be construed in accordance with and governed by the laws of
the
State of Delaware without regard to the conflicts of law principles
thereof.
[Signature
page follows]
5
IN
WITNESS WHEREOF, the parties hereto have executed this Investment Option
Agreement as of the date first set forth above.
|
SOLIDUS
NETWORKS,
INC.
By:
_________________________________________
Name:
Title:
|
|
|
WINWIN
GAMING,
INC.
By:
_________________________________________
Name:
Title:
|
|
EXHIBIT
D
(China
Sales Representative Term Sheet)
Non-Binding
Term Sheet
This
non-binding Term Sheet, dated as of ________ __, 2006 (this “Term
Sheet”),
is by
and among Solidus Networks, Inc. (“Pay
By Touch”),
a
corporation organized under the laws of Delaware, and
WinWin Gaming, Inc. (“WinWin”),
a
company organized under the laws of the state of Delaware.
Background:
·
Pay By
Touch and WinWin have entered into that certain Amended and Restated Joint
Venture Agreement, dated as of April 14, 2006 (the "JV
Agreement"),
and
are entering into this Term Sheet in connection with the transactions
contemplated by the JV Agreement.
·
Pay
By
Touch desires to engage WinWin to market Pay By Touch’s commercial offerings
(“Pay
By Touch Offerings”)
within
the [People’s
Republic of China, including its special administrative regions of Hong Kong
and
Macao, and in Taiwan].
·
The
parties are entering into this Term Sheet as evidence of their intention to
advance such a relationship.
This
Term
Sheet sets forth the principal terms and conditions upon which the parties
propose to move forward with the relationship. Under this Term Sheet the
purpose set forth above shall be deemed the “Proposed
Transaction.”
The
parties intend that the specific terms of the Proposed Transaction will be
contained in a complete, integrated, mutually agreeable document to be entered
into by the parties on or before the Initial Closing (as defined in the JV
Agreement) (a “Transaction
Agreement”).
The
parties contemplate that they would each be responsible for the following areas
related to the Proposed Transaction as described below:
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|
|
|
Term
& Termination
|
Either
party may terminate this Term Sheet by giving written notice to the
other
party at least thirty (30) days prior to such termination. If neither
party elects to terminate the Term Sheet pursuant to the prior sentence,
this Term Sheet shall terminate on the earliest to occur of (i)
[insert
date]
or
(ii) the termination of the JV Agreement.
The
term of the Transaction Agreement shall be [three
(3) years]
or
as otherwise agreed by the parties. The Transaction Agreement will
be subject to standard termination
provisions.
|
|
Marketing
Appointment
|
Under
the terms of the Transaction Agreement Pay By Touch shall appoint
WinWin
as a non-exclusive marketing partner in [China].
WinWin shall, at its own expense, use best efforts to market Pay
By Touch
Offerings to prospective customers including, without limitation,
by means
of establishing relationships with such prospects, by correspondence
with
them, by participation in trade shows or professional meetings, or
by
publication online or in the print or broadcast media. Without limiting
the foregoing, WinWin shall be permitted to distribute to any such
prospects any marketing materials or information provided Pay By
Touch,
provided that WinWin may not alter or modify any such materials or
information without Pay By Touch’s prior written consent. In no event will
WinWin purport to make representations or warranties on Pay By Touch’s
behalf, or purport to act as an agent of Pay By Touch for any purpose,
and
all marketing and promotional information provided or distributed
by
WinWin to any third party or through any media shall strictly conform
to
such information as Pay By Touch may have provided to WinWin pursuant
to
the Transaction Agreement.
|
|
|
In
the event that a prospect desires to obtain the Pay By Touch Offerings,
WinWin shall provide to such prospect Pay By Touch’s then-current standard
form of customer agreement and shall exercise best efforts to cause
such
prospect to execute such customer agreement. In the event that such
prospect desires to negotiate such agreement, WinWin shall be responsible
for negotiating the terms of such agreement with such prospect in
consultation with, and at Pay By Touch’s direction. WinWin shall have no
authority to execute any such customer agreement on Pay By Touch’s behalf;
such decision shall rest solely with Pay By Touch. WinWin shall forward
to
Pay By Touch any such executed customer agreement promptly upon execution
thereof. Pay By Touch shall retain the right, in its sole and absolute
discretion, to refuse to offer the Pay By Touch Offerings to any
third
party.
|
|
Fees
and Payment
|
In
consideration for the performance of WinWin’s obligations under the
Transaction Agreement, Pay By Touch shall pay to WinWin an amount
to be
agreed upon by the parties. WinWin shall bear all expenses incurred
in the
performance of its obligations under the Transaction Agreement in
marketing and promoting the Pay By Touch Offerings to any prospective
customer.
|
|
Governing
Law; Jurisdiction and Resolution of Disputes
|
The
Transaction Agreement will contain governing law and jurisdiction
provisions for the resolution of disputes substantially similar to
those
set forth in the JV Agreement.
|
|
Confidentiality,
Non-Disclosure
|
The
terms of this Term Sheet and the Transaction Agreement, as well as
any and
all information exchanged between and among the parties in connection
with
the transactions provided for and described herein, shall be held
strictly
confidential by each of the parties and their respective agents,
employees, consultants and advisors. Such obligation of
confidentiality and non-disclosure shall cover, without limitation,
any
and all technical information, market data and research, and other
proprietary information of each of the parties hereto. The Transaction
Agreement will contain standard confidentiality provisions. All
information disclosed hereunder will be used solely to evaluate and
effectuate the transactions described herein and for absolutely no
other
purpose. To preserve each parties’ respective rights and obligations
hereunder, the terms of this section will survive the expiration
or
earlier termination hereof or of any of the Transaction
Agreement.
|
|
Miscellaneous
Provisions
|
Neither
party is subject to any agreement or undertaking that is in conflict
with
or would be violated by, this Term Sheet or any of the Transaction
Agreement.
This
Term Sheet may be executed in any number of counterparts, including
facsimile counterparts, each of which will be deemed an original
and all
of which taken together will constitute one and the same agreement.
Any amendments hereto or waivers hereunder must be in writing and
signed
by both parties.
It
is understood that this Term Sheet is a statement of the intention
of the
parties to proceed as outlined herein and does not create any binding
obligations, other than any provisions with respect to confidentiality,
which the parties acknowledge have been given for good and valuable
consideration and which will be legally binding.
|
ii
|
THIS
INSTRUMENT REPRESENTS ONLY THE EXPRESSION OF OUR CURRENT MUTUAL INTENTIONS
AND IS SUBJECT TO THE PROVISIONS OF THE TRANSACTION AGREEMENT TO
BE
ENTERED INTO BY AND AMONG THE PARTIES HERETO UPON COMPLETION OF LEGAL
AND
BUSINESS DUE DILIGENCE AND THE SATISFACTION OF THE CONDITIONS CONTAINED
THEREIN. THE PARTIES HAVE FURTHER AGREED THAT EACH PARTY WILL BE
BEAR ALL
OF ITS OWN FEES AND EXPENSES INCURRED IN CONNECTION HEREWITH AND
WITH THE
PREPARATION AND NEGOTIATION OF THE TRANSACTION AGREEMENT, WHETHER
OR NOT
THE TRANSACTION CONTEMPLATED HEREBY OR THEREBY IS CONSUMMATED AND
ENTERED
INTO.
|
*****
|
|
SOLIDUS
NETWORKS, INC.
By:
_________________________
Name:
Title:
|
|
|
|
|
|
WINWIN
GAMING, INC.
By:
_________________________
Name:
Title:
|
iii
EXHIBIT
E
(Form
of Restated Charter)
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
WINWIN
GAMING, INC.
WinWin
Gaming, Inc. (hereinafter referred to as the “Corporation”),
a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify as
follows:
1. The
current name of the Corporation is WinWin Gaming, Inc.
2. The
name
under which the Corporation was originally incorporated is Lone Star Casino
Corporation, and the date of filing of the original Certificate of Incorporation
of the Corporation with the Secretary of State of the State of Delaware is
December 30, 1992.
3. The
provisions of the Certificate of Incorporation of the Corporation as heretofore
amended and/or supplemented, and as herein amended, are hereby restated and
integrated into the single instrument which is hereinafter set forth, and which
is entitled the
Amended and Restated Certificate of Incorporation of WinWin Gaming,
Inc.
4. The
resolution setting forth the amendment and restatement has been duly approved
by
the stockholders
of the Corporation in accordance with the provisions of Sections 228, 242 and
245 of the General Corporation Law of the State of Delaware
and is
as follows:
RESOLVED,
that
the Certificate of Incorporation of the Corporation be, and hereby is, amended
and restated in its entirety as follows:
FIRST: The
name
of the corporation (hereinafter referred to as the “Corporation”)
is
WinWin Gaming, Inc.
SECOND: The
address of the Corporation’s registered office in the State of Delaware is
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of
Xxx
Xxxxxx, 00000; and the name of the registered agent of the Corporation in the
State of Delaware at such address is The Corporation Trust Company.
THIRD: The
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State
of
Delaware (hereinafter, the “DGCL”).
FOURTH: The
total
number of shares of all classes of stock which the Corporation shall have
authority to issue is (i) Seven Hundred Fifty Million (750,000,000) shares
of common stock, $0.01 par value per share (“Common
Stock”)
and
(ii) Sixty Million (60,000,000) shares of preferred stock, $0.01 par value
per share (“Preferred
Stock”).
The
following is a statement of the designations and the powers, privileges and
rights, and the qualifications, limitations or restrictions thereof in respect
of each class of capital stock of the Corporation.
A. Common
Stock.
1. General.
The
voting, dividend and liquidation rights of the holders of Common Stock are
subject to and qualified by the rights of the holders of Preferred Stock of
any
series as may be designated by the Board of Directors upon any issuance of
Preferred Stock of any series.
2. Increase
of Authorized Shares.
Except
as otherwise provided in this Article, the number of authorized shares of Common
Stock may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote, irrespective of the provisions of
Section 242(b)(2) of the DGCL.
3. Voting.
The
holders of Common Stock are entitled to one vote for each share held at all
meetings of stockholders (and written consents in lieu of meetings). There
shall
be no cumulative voting.
4. Dividends.
Dividends may be declared and paid on Common Stock from funds lawfully available
therefor as and when determined by the Board of Directors and subject to any
preferential dividend rights of any then outstanding Preferred
Stock.
5. Liquidation.
Upon
the dissolution or liquidation of the Corporation, whether voluntary or
involuntary, holders of Common Stock will be entitled to receive all assets
of
the Corporation available for distribution to its stockholders, subject to
any
preferential rights of any then outstanding Preferred Stock.
6. No
Redemption by Corporation.
The
Common Stock is not subject to redemption by the Corporation.
B. Preferred
Stock.
Preferred
Stock may be issued from time to time in one or more series, each of such series
to have such terms as stated or expressed herein and in the resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors of the Corporation as hereinafter provided. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority
is hereby expressly granted to the Board of Directors from time to time to
issue
Preferred Stock in one or more series, and in connection with the creation
of
any such series, by resolution or resolutions providing for the issue of the
shares thereof, to determine and fix such voting powers, full or limited, or
no
voting powers, and such designations, preferences and relative participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the DGCL. Without limiting the
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or
rank
equally or be junior to Preferred Stock of any other series to the extent
permitted by law. Except as otherwise specifically provided in this Amended
and
Restated Certificate of Incorporation, the By-laws of the Corporation or any
agreement in existence from time-to-time among the stockholders of the
Corporation and the Corporation, no vote of the holders of Preferred Stock
or
Common Stock shall be a prerequisite to the issuance of any shares of any series
of Preferred Stock authorized by and complying with the conditions of this
Amended and Restated Certificate of Incorporation, the right to have such vote
being expressly waived by all present and future holders of the capital stock
of
the Corporation.
2
C. Series A
Preferred Stock.
A
series
of Preferred Stock consisting of Sixty Million (60,000,000) shares and having
the following voting powers, designations, preferences and relative,
participating, optional or other rights and the following qualifications,
limitations and restrictions is hereby created from the authorized but unissued
shares of the Preferred Stock.
1.
Designation.
The
distinctive designation of such series is “Series A Preferred Stock”
(hereinafter referred to as the “Series
A Preferred Stock”).
2. Rank.
The
Series A Preferred Stock shall, with respect to dividend rights and rights
on
liquidation, winding up and dissolution, rank (a) prior to any other series
of
Preferred Stock hereafter established by the Board of Directors, and (b) prior
to the Common Stock.
3. Dividends.
The
holders of the Series A Preferred Stock shall be entitled to receive, out of
any
funds legally available therefor, noncumulative dividends, payable at a rate
per
annum equal to 8% of the Series A Original Issue Price (as defined below),
when
and if declared by the Corporation’s Board of Directors. No dividends on the
Common Stock shall be paid unless, in addition to the amount set forth in the
previous sentence, the amount of such dividend on the Common Stock is also
paid
on the Series A Preferred Stock on an as-converted to Common Stock
basis.
3
4. Liquidation
Preference.
Upon
a
Liquidation Event (as defined below), the holders of shares of Series A
Preferred Stock are entitled to receive out of assets of the Corporation
available for distribution to stockholders, before any distribution of assets
is
made to holders of Common Stock, liquidating distributions in the amount of
$7.91 per share (as equitably adjusted for any stock dividends, combinations,
splits, recapitalizations or similar events with respect to such shares) (the
“Series
A Original Issue Price”),
plus
(a) an additional amount equal to eight percent (8%) of the Series A Original
Issue Price per year, calculated based on the number of days elapsed prior
to
the Liquidation Event and (b) any declared but unpaid dividends (the amount
payable to a holder of Series A Preferred Stock upon a Liquidation Event as
aforesaid being referred to herein as the “Liquidation
Preference”).
If
upon a
Liquidation Event, the Liquidation Preference and any amounts payable upon
a
Liquidation Event to other shares of stock of the Corporation ranking as to
any
such distribution on a parity with the Series A Preferred Stock are not paid
in
full, the holders of the Series A Preferred Stock and of such other shares
will
share ratably in any such distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled.
For
purposes of this Article FOURTH, a “Liquidation
Event”
is
any
liquidation, dissolution or winding up of the Corporation, either voluntary
or
involuntary, and unless otherwise determined by the election of the holders
of a
majority of the then outstanding Series A Preferred Stock, shall be deemed
to be
occasioned by, or to include, (a) the acquisition of the Corporation by another
entity by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger, consolidation, or other
transaction in which control of the Corporation is transferred, but, excluding
any merger effected exclusively for the purpose of changing the domicile of
the
Corporation) unless the Corporation’s capital stock of record as constituted
immediately prior to such acquisition will, immediately after such acquisition,
represent at least 50% of the voting power of the surviving or acquiring entity
or (b) a sale, lease, transfer or other disposition, in a single transaction
or
series of related transactions, of all or substantially all of the assets and/or
the intellectual property of the Corporation and its subsidiaries, taken as
a
whole.
5. Voting
Rights.
5.1 General.
Except
as may be otherwise provided herein or by law, the Series A Preferred Stock
shall vote together with all other classes and series of stock of the
Corporation as a single class on all actions to be taken by the stockholders
of
the Corporation. Each share of Series A Preferred Stock shall entitle the holder
thereof to such number of votes per share on each such action as shall equal
the
number of shares of Common Stock (including fractions of a share) into which
each share of Series A Preferred Stock is then convertible.
5.2 Board
of Directors.
The
holders of the Series A Preferred Stock, voting as a separate series, shall
be
entitled to elect two directors of the Corporation (the “Series
A Directors”).
A
vacancy in any directorship elected by the holders of the Series A Preferred
Stock shall be filled only by vote or written consent of the holders of the
Series A Preferred Stock. Any Series A Director may be removed without cause
by,
and only by, the affirmative vote of the holders of a majority of the Series
A
Preferred Stock, given either at a special meeting of such stockholders duly
called for that purpose or pursuant to a written consent of stockholders. At
any
meeting held for the purpose of electing a Series A Director, the presence
in
person or by proxy of the holders of a majority of the outstanding shares of
Series A Preferred Stock shall constitute a quorum for the purpose of electing
such Series A Director.
4
5.3 Protective
Provisions.
So long
as at least 85% of the shares of Series A Preferred Stock first issued to the
original holders thereof remain outstanding (as adjusted for stock splits,
distributions, combinations and similar events), except where the vote or
written consent of the holders of a greater number of shares of the Corporation
is required by law or the Certificate of Incorporation of the Corporation,
and
in addition to any other vote required by law or the Certificate of
Incorporation of the Corporation, without the approval of the holders of a
majority of the then outstanding Series A Preferred Stock, given in writing
or
by vote at a meeting, the Corporation will not, either directly or by amendment,
merger, consolidation or otherwise:
(a) Alter
or
change the rights, preferences or privileges of the Series A Preferred
Stock;
(b) Create
(by reclassification or otherwise) any new class or series of shares having
rights, preferences or privileges senior to or on a parity with the Series
A
Preferred Stock with respect to redemption, voting, dividends or distribution
of
assets upon a Liquidation Event;
(c) Create
(by reclassification or otherwise) any new class or series of shares unless
such
shares are subject to purchase by Solidus Networks, Inc. and repurchase by
the
Corporation pursuant to purchase and redemption options satisfactory to the
holders of a majority of the outstanding shares of Series A Preferred
Stock;
(d) Repurchase
or redeem any shares of Common Stock (other than the repurchase of unvested
shares at cost upon the termination of employment or the provision of services
pursuant to equity incentive agreements with employees or service providers
giving the Corporation the right to repurchase such shares);
(e) Effect,
or consent to, a merger, other corporate reorganization, sale of controlling
interest by the Corporation or any of its material subsidiaries, or any
transaction in which all or substantially all of the assets of the Corporation
or any of its material subsidiaries are sold;
(f) Effect,
or consent to, a voluntary dissolution or liquidation of the Corporation or
any
of its material subsidiaries;
(g) Amend
or
waive any provision of the Corporation's Amended and Restated Certificate of
Incorporation or Bylaws (i) relative to the Series A Preferred Stock or (ii)
to
increase the authorized number of shares of Common Stock;
5
(h) Pay
or
declare any dividend or make any other distribution on any shares of Common
Stock or Preferred Stock; or
(i) Authorize
or issue any additional shares of Series A Preferred Stock or any equity
securities convertible, directly or indirectly, into additional shares of Series
A Preferred Stock.
6. Conversion
Rights.
The
holders of the Series A Preferred Stock shall have conversion rights as follows
(the “Conversion
Rights”):
6.1 Right
to Convert.
Each
share of Series A Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance at the office of the
Corporation or any transfer agent for such stock, into such number of fully
paid
and nonassessable shares of Common Stock as is determined by dividing the Series
A Original Issue Price by the Series A Conversion Price applicable to such
share, determined as hereafter provided, in effect on the date the certificate
is surrendered for conversion. The initial conversion price per share for shares
of Series A Preferred Stock (“Series
A Conversion Price”
)
shall
be $0.791; provided, however, that the Series A Conversion Price shall be
subject to adjustment as set forth in this Section 6.
6.2 Automatic
Conversion.
Each
share of Series A Preferred Stock shall automatically be converted into shares
of Common Stock at the Series A Conversion Price at the time in effect for
such
stock immediately upon the date specified by written consent or agreement of
the
holders of a majority of the then outstanding shares of the Series A Preferred
Stock, voting as a separate class.
6.3 Mechanics
of Conversion.
Before
any holder of Series A Preferred Stock shall be entitled to convert the same
into shares of Common Stock, the holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of
any
transfer agent for such Series A Preferred Stock, and shall give written notice
to the Corporation at its principal corporate office, of the election to convert
the same and shall state therein the name or names in which the certificate
or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series A Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall
be
deemed to have been made immediately prior to the close of business on the
date
of such surrender of the shares of Series A Preferred Stock to be converted,
and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder
or
holders of such shares of Common Stock as of such date.
6.4 Fractional
Shares.
In lieu
of any fractional shares to which the holder of Series A Preferred Stock would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the Series A Conversion Price as then in effect. Whether or not
fractional shares would be issuable upon such conversion shall be determined
on
the basis of the total number of shares of Series A Preferred Stock of each
holder at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
6
6.5 Adjustment
of Conversion Price.
The
Series A Conversion Price shall be subject to adjustment from time to time
as
follows:
(a) Special
Definitions.
For
purposes of this Section 6, the following definitions shall apply:
(1) “Options”
shall mean rights, options or warrants to subscribe for, purchase or otherwise
acquire either Common Stock or Convertible Securities.
(ii) “Original
Issue Date” shall mean the date on which the first share of Series A Preferred
Stock was first issued.
(iii) “Convertible
Securities” shall mean any evidences of indebtedness, shares or other securities
convertible into or exercisable or exchangeable, directly or indirectly, for
Common Stock.
(iv) “Additional
Shares of Common Stock” shall mean all shares of Common Stock issued (or,
pursuant to Section 6.6, deemed to be issued) by the Corporation after the
Original Issue Date, other than shares of Common Stock issued or
issuable:
(A) upon
conversion of shares of Preferred Stock;
(B) to
officers, directors, employees and consultants of the Corporation pursuant
to
stock incentive plans, or other stock arrangements that have been approved
by
the Board of Directors of the Corporation including the Series A
Directors;
(C) pursuant
to any event for which adjustment has already been made pursuant to Section
6.7;
(D) as
a
dividend or distribution on the Corporation’s Common Stock or Preferred Stock,
where an adjustment is made pursuant to Sections 6.9, 6.10 or 6.11;
(E) upon
the
written consent of the holders of a majority of the Series A Preferred Stock
that expressly states that such shares shall not constitute Additional Shares
of
Common Stock;
7
(F) upon
the
exercise of Options or conversion of any Convertible Securities outstanding
as
of the date hereof;
(G) pursuant
to a loan arrangement or debt financing from a bank, equipment lessor or similar
financial institution approved by the Board of Directors, including the Series
A
Directors;
(H) in
connection with strategic transactions (but excluding any merger, consolidation,
acquisition or similar business combination) that have been approved by the
Board of Directors of the Corporation including the Series A Directors;
or
(I) pursuant
to the provisions of Section 6.12 hereof.
6.6 Deemed
Issue of Additional Shares of Common Stock.
Except
as provided in Section 6.5(a)(iv) above, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any Options
or Convertible Securities or shall fix a record date for the determination
of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in
the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall
be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close
of
business on such record date, provided that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
(a) no
further adjustment in the Series A Conversion Price shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(b) if
such
Options or Convertible Securities by their terms provide, with the passage
of
time or otherwise, for any increase or decrease in the consideration payable
to
the Corporation, or increase or decrease in the number of shares of Common
Stock
issuable, upon the exercise, conversion or exchange thereof, the Series A
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities; and
8
(c) upon
the
expiration of any such Options or any rights of conversion or exchange under
such Convertible Securities which shall not have been exercised, the Series
A
Conversion Price computed upon the Original Issue Date, and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as
if:
(i) in
the
case of Convertible Securities or Options for Common Stock, the only Additional
Shares of Common Stock issued were shares of Common Stock, if any, actually
issued upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration actually received
by
the Corporation upon such exercise, or for the issue of all such Convertible
Securities which were actually converted or exchanged; and
(ii) in
the
case of Options for Convertible Securities, only the Convertible Securities,
if
any, actually issued upon the exercise thereof were issued at the time of issue
of such Options and the consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to have been
received by the Corporation upon the issue of the Convertible Securities with
respect to which such Options were actually exercised.
6.7 Adjustment
of Conversion Price Upon Issuance of Additional Shares of Common
Stock.
In the
event this Corporation shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 6.6)
without consideration or for a consideration per share less than the Series
A
Conversion Price applicable on and immediately prior to such issue, then and
in
such event, the Series A Conversion Price shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying the Series A Conversion Price in effect on the date of and
immediately prior to such issue by a fraction, the numerator of which shall
be
the number of shares of Common Stock outstanding immediately prior to such
issue, including any Common Stock issuable pursuant to any then outstanding
options, rights or warrants for Common Stock or any class or series of stock
convertible into Common Stock (including but not limited to Preferred Stock),
plus the number of shares of Common Stock which the aggregate consideration
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at the Series A Conversion Price in effect on
the
date of and immediately prior to such issue; and the denominator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issue, including any Common Stock issuable pursuant to any then outstanding
options, rights or warrants for Common Stock or any class or series of stock
convertible into Common Stock (including but not limited to Preferred Stock)
outstanding immediately prior to such issue, plus the number of such Additional
Shares of Common Stock so issued.
9
6.8 Determination
of Consideration.
For
purposes of this Section 6, the consideration received by the Corporation for
the issue of any Additional Shares of Common Stock shall be computed as
follows:
(a) Cash
and Property.
Such
consideration shall:
(i) insofar
as it consists of cash, be computed at the aggregate amount of cash received
by
the Corporation excluding amounts paid or payable for accrued interest or
accrued dividends;
(ii) insofar
as it consists of property other than cash, be computed at the fair value
thereof at the time of such issue, as determined in good faith by the Board
of
Directors; and
(iii) in
the
event Additional Shares of Common Stock are issued together with other shares
or
securities or other assets of the Corporation for consideration which covers
both, be the proportion of such consideration so received, computed as provided
in clauses (i) and (ii) above, as determined in good faith by the Board of
Directors.
(b) Options
and Convertible Securities.
The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 6.6, relating to
Options and Convertible Securities, shall be determined by dividing
(i) the
total
amount, if any, received or receivable by the Corporation as consideration
for
the issue of such Options or Convertible Securities, plus the minimum aggregate
amount of additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a subsequent
adjustment of such consideration) payable to the Corporation upon the exercise
of such Options or the conversion or exchange of such Convertible Securities,
or
in the case of Options for Convertible Securities, the exercise of such options
for Convertible Securities and the conversion or exchange of such Convertible
Securities by
(ii) the
maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
6.9 Adjustments
for Stock Dividends, Subdivisions, or Split-ups of Common Stock.
If the
number of shares of Common Stock outstanding at any time after the filing of
this Amended and Restated Certificate of Incorporation is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of
shares of Common Stock without a corresponding increase in the number of shares
of Series A Preferred Stock outstanding, then, effective at the close of
business upon the record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or split-up, the
Series A Conversion Price shall be appropriately decreased so that the number
of
shares of Common Stock issuable on conversion of each share of Series A
Preferred Stock shall be increased in proportion to such increase in outstanding
shares of Common Stock.
10
6.10 Adjustments
for Combinations of Common Stock.
If the
number of shares of Common Stock outstanding at any time after the filing of
this Amended and Restated Certificate of Incorporation is decreased by a
combination of the outstanding shares of Common Stock without a corresponding
decrease in the number of shares of Series A Preferred Stock outstanding, then,
effective at the close of business upon the record date of such combination,
the
Series A Conversion Price shall be appropriately increased so that the number
of
shares of Common Stock issuable on conversion of each share of Series A
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares of Common Stock.
6.11 Adjustments
for Reorganizations, Reclassifications, etc.
If the
Common Stock issuable upon conversion of the Series A Preferred Stock shall
be
changed into the same or a different number of shares of any other class or
classes of stock or other securities or property, whether by reclassification,
a
merger or consolidation of this Corporation with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of this
Corporation (but only if such change is not in connection with an event that
is
deemed to be a Liquidation Event), or otherwise (other than a subdivision or
combination of shares provided for in Section 6.9 or 6.10 above), the Series
A
Conversion Price then in effect shall, concurrently with the effectiveness
of
such reorganization or reclassification, be proportionately adjusted such that
the Series A Preferred Stock shall be convertible into, in lieu of the number
of
shares of Common Stock which the holders would otherwise have been entitled
to
receive, a number of shares of such other class or classes of stock or
securities or other property equivalent to the number of shares of Common Stock
that would have been subject to receipt by the holders upon conversion of the
Series A Preferred Stock immediately before such event; and, in any such case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of the Series A Preferred Stock, to
the
end that the provisions set forth herein (including provisions with respect
to
changes in and other adjustments of the Series A Conversion Price) shall
thereafter be applicable, as nearly as may be reasonable, in relation to any
shares of stock or other property thereafter deliverable upon the conversion
of
the Series A Preferred Stock.
6.12 Special
Adjustment for Issuance of Excluded Warrant Shares.
Notwithstanding the provisions of Section 6.5(a)(iv)(F) hereof, if the
Corporation issues shares of its Common Stock (“Excluded
Warrant Shares”)
upon
the exercise of Excluded Warrants (as defined below), then for each Excluded
Warrant Share issued, the Corporation shall issue to the holder of a share
of
Series A Preferred Stock upon conversion of such share, in addition to any
other
shares of Common Stock issuable hereunder as a result of such conversion, a
number of shares of Common Stock equal to the number obtained by application
of
the following formula: (M x WS)/ OP, where,
M
= the
multiple, which is 66%,
11
WS
= the
total number of Excluded Warrant Shares issued, and
OP
= the
total number of shares of Series A Preferred Stock outstanding.
For
purposes of this Section 6.12, “Excluded
Warrants”
means
(i) those warrants outstanding as of the filing date of this Amended and
Restated Certificate to purchase an aggregate of [8,691,181] 2
shares
of Common Stock (as equitably adjusted for any stock dividends, combinations,
splits, recapitalizations or similar events with respect to such shares), as
they may be amended or exchanged from time to time, the majority of which have
an exercise price of at least $0.25 per share (as equitably adjusted for any
stock dividends, combinations, splits, recapitalizations or similar events
with
respect to such shares), (ii) that certain warrant issued by the Corporation
pursuant to that certain Securities Purchase Agreement, dated as of February
25,
2005, by and between the Corporation and the Xxx Xxxxxxx Private Opportunities
Fund L.P., as it may be amended or exchanged from time to time, and (iii) those
certain warrants issued by the Corporation pursuant to that certain Secured
Convertible Note and Warrant Purchase Agreement, dated as of April 21, 2006,
by
and among the Corporation and each of the purchasers signatory thereto, as
they
may be amended or exchanged from time to time.
6.13 Minimal
Adjustments.
No
adjustment in the Series A Conversion Price need be made if such adjustment
would result in a change in the Series A Conversion Price of less than $0.01.
Any adjustment of less than $0.01 which is not made shall be carried forward
and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $0.01 or more in the Series
A
Conversion Price, or upon conversion, whichever first occurs.
6.14 No
Impairment.
The
Corporation will not through any reorganization, recapitalization, transfer
of
assets, consolidation, merger, dissolution, issue or sale of securities or
any
other voluntary action, avoid or seek to avoid the observance or performance
of
any of the terms to be observed or performed by the Corporation pursuant to
this
Section 6, but will at all times in good faith assist in the carrying out of
all
the provisions of this Section 6 and in the taking of all such action as may
be
necessary or appropriate in order to protect the conversion rights of the
holders of Series A Preferred Stock against impairment. This provision shall
not
restrict the Corporation’s right to amend this Amended and Restated Certificate
of Incorporation with the requisite stockholder consent or
approval.
6.15 Notices
of Record Date.
In the
event that the Corporation shall propose at any time:
(a) to
declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock or other securities, whether or not a regular cash dividend
and
whether or not out of earnings or earned surplus;
(b) to
offer
for subscription pro rata to the holders of any class or series of its stock
any
additional shares of stock of any class or series or other rights;
2
[To be
updated at time of filing]
12
(c) to
effect
any reclassification or recapitalization of its Common Stock outstanding
involving a change in the Common Stock; or
(d) to
merge
or consolidate with or into any other corporation, or sell all or substantially
all its property or business, or to liquidate, dissolve or wind up;
then,
in
connection with each such event, the Corporation shall send to the holders
of
the Series A Preferred Stock:
(i) at
least
20 days’ prior written notice of the date on which a record shall be taken for
such dividend, distribution or subscription rights (and specifying the date
on
which the holders of Common Stock shall be entitled thereto and the amount
and
character of such dividend, distribution or right) or for determining rights
to
vote in respect of the matters referred to in clause (c) or (d) above;
and
(ii) in
the
case of the matters referred to in clauses (c) or (d) above, at least 20 days’
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon the
occurrence of such event or the record date for the determination of such
holders if such record date is earlier).
Each
such
written notice shall be delivered personally or given by first class mail,
postage prepaid, addressed to each holder of Series A Preferred Stock at the
address for each such holder as shown on the books of the
Corporation.
6.16 Reservation
of Stock Issuable Upon Conversion.
The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock such number of shares
of
its Common Stock as shall from time to time be sufficient to effect the
conversion of all authorized shares of Series A Preferred Stock, whether or
not
such shares are then outstanding; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the authorized shares of Series A Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, whether or not such shares are then outstanding, be necessary to
increase its authorized but unissued shares of Common Stock to such number
of
shares as shall be sufficient for such purpose.
6.17 Status
of Converted or Contributed Shares.
In case
any shares of Series A Preferred Stock are converted into Common Stock pursuant
to Section 6 hereof or contributed back to the Corporation (through repurchase
or otherwise) after the date such shares of Series A Preferred Stock were first
issued, all such shares so converted or contributed shall, upon such conversion
or contribution, be cancelled and shall not be issuable by the
Corporation. The
Corporation may from time to time take such appropriate corporate action as
may
be necessary to reduce accordingly the number of authorized shares of the
Company’s Series A Preferred Stock.
13
6.18 No
Redemption by Corporation.
The
Series A Preferred Stock is not subject to redemption by the
Corporation.
7.
Excluded
Opportunities.
The
Corporation renounces any interest or expectancy of the Corporation in, or
in
being offered an opportunity to participate in, any Excluded Opportunity. An
“Excluded
Opportunity”
is
any
matter, transaction or interest that is presented to, or acquired, created
or
developed by, or which otherwise comes into the possession of, (a) any Series
A
Director who is not an employee of the Corporation or any of its subsidiaries,
or (b) any holder of Series A Preferred Stock or any partner, member, director,
stockholder, employee or agent of any such holder, other than someone who is
an
employee of the Corporation or any of its subsidiaries (collectively,
“Covered
Persons”),
unless such matter, transaction or interest is presented to, or acquired,
created or developed by, or otherwise comes into the possession of, a Covered
Person expressly and solely in such Covered Person’s capacity as a director of
the Corporation.
FIFTH: All
powers of the Corporation, insofar as the same may be lawfully vested by this
Amended and Restated Certificate of Incorporation in the Board of Directors,
are
hereby conferred upon the Board of Directors of the Corporation. In furtherance
and not in limitation of that power, the Board of Directors shall have the
power
to make, adopt, alter, amend and repeal from time to time By-Laws of the
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to adopt, alter, amend and repeal By-Laws made by the Board
of
Directors.
SIXTH: A
director of the Corporation shall not be personally liable to the Corporation
or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director’s duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not
in good faith or which involve intentional misconduct or a knowing violation
of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which
the director derived any improper personal benefit. If the DGCL is amended
to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the DGCL,
as
so amended. Any repeal or modification of this Article by the stockholders
of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or
modification.
SEVENTH: In
connection with the exercise of its judgment in determining what is in the
best
interest of the Corporation and of the stockholders, when evaluating a Business
Combination or a proposal by another person or persons to make a Business
Combination or a tender or exchange offer, the Board of Directors of the
Corporation hereby is expressly authorized to consider, in addition to the
adequacy of the consideration to be paid in connection with such transaction,
the following factors and any other factors which it deems relevant, including,
without limitation: (i) the long term interests of the Corporation’s
stockholders, including among other factors, the consideration being offered
in
relation to (a) the then current market price of the Corporation’s equity
securities and the historical range of such prices, (b) the then current value
of the Corporation in a freely negotiated transaction, and (c) the Board of
Directors’ then estimate of the future value of the Corporation as an
independent entity; (ii) the economic, social and legal effects on the
Corporation and its subsidiaries, including among other factors, such effects
on
the Corporation’s employees, customers, creditors, suppliers and the communities
in which they operate or are located; (iii) the business and financial condition
and earnings prospects of the acquiring person or persons, including, but not
limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition, and other likely
financial obligations of the acquiring person or persons, and the possible
effect of such conditions upon the Corporation, its subsidiaries, and the other
elements of the communities in which the Corporation and its subsidiaries
operate or are located; and (iv) the competence, experience and integrity of
the
acquiring person or persons, and its or their management. For the purposes
of
this Article, “Business
Combination”
is
defined as (a) a tender or exchange offer for any equity securities of the
Corporation, (b) a proposal to merge or consolidate the Corporation with or
into
another company, (c) a proposal to purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, or (d) a
proposal to engage in any other form of business combination with the
Corporation.
[Signature
Page Follows]
14
IN
WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its [_______________], this ____
day of _________________, 2006.
|
WINWIN
GAMING,
INC.
|
|
|
By:
/s/
|
|
|
[Name]
|
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[Title]
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15
EXHIBIT
F
(Form
of Opinion of WinWin Delaware Counsel)
Direct
Dial: (000) 000-0000
August
________, 2006
Solidus
Networks, Inc.
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx XX 00000
Re:
WinWin Gaming, Inc.
Ladies
and Gentlemen:
We
have
been retained as special Delaware counsel to WinWin Gaming, Inc., a Delaware
corporation (the “Company”),
to
furnish this opinion to you in connection with certain specific matters arising
under the General Corporation Law of the State of Delaware (“DGCL”) and relating
to that certain Second Amended and Restated Joint Venture Agreement, dated
as of
August ______, 2006 (the “Agreement”),
between the Company and Solidus Networks, Inc.,
a
Delaware corporation (“PBT”).
This
opinion is furnished to PBT pursuant to Section 7(i) of the Agreement. All
capitalized terms not otherwise defined herein shall have the meanings given
to
them in the Agreement. Items (a) and (b) below are hereinafter referred to
collectively as the “Transaction Documents.”
For
purposes of the opinions expressed herein, we have examined only the following
documents:
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(a)
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the
Agreement;
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(b)
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that
certain Investment Option Agreement, of even date herewith (the
“Investment
Option Agreement”),
by and between the Company and PBT;
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(c)
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the
Bylaws of the Company, as certified on the date hereof by an officer
of
the Company (the “Bylaws”);
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(d)
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the
Certificate of Incorporation of the Company, as amended to date,
as
certified on the date hereof by an officer of the Company (the
“Original
Certificate”);
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(e)
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the
Certificate of Designation of Powers Designations, Preferences and
Relative Participating, Optional or Other Special Rights and
Qualifications, Limitations and Restrictions of the Series A-1 Preferred
Stock of the Company (the “Certificate
of Designation”);
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(f)
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a
draft, dated August 28, 2006, of the proposed Amended and Restated
Certificate of Incorporation of the Company (the “Proposed
Restated Certificate”
and, together with the Original Certificate, the Bylaws and the
Certificate of Designation, the “Governing
Documents”);
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(g)
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a
Good Standing Certificate issued by the Secretary of State of the
State of
Delaware on [_____], 2006 certifying as to the good standing of the
Company in Delaware; and
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(h)
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the
Secretary’s Certificate of the Company, of even date herewith, as executed
by the Secretary of the Company, certifying as to certain factual
matters,
corporate documents and actions (the “Secretary’s
Certificate”).
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In
addition, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of such corporate records, agreements, documents
and other instruments, and of certificates or comparable documents of public
officials and of officers and representatives of the Company, and have made
such
inquiries of such officers and representatives as we have deemed relevant and
necessary as the basis for the opinions hereinafter set forth. We have not
searched any computer databases or the dockets of any court, governmental or
administrative body, agency or other filing office in any jurisdiction or
conducted any other independent investigation. As to all questions of fact
material to the opinions set forth herein, we have relied solely upon the
Secretary’s Certificate and upon the representations and warranties of the
Company contained in the Transaction Documents. While we have not conducted
any
independent investigation to determine facts upon which our opinions are based
or to obtain information about which this letter advises you, we confirm that
we
do not have any knowledge which has caused us to conclude that our reliance
and
assumptions cited in this paragraph are unwarranted. The term “knowledge,”
whenever it is used in this letter with respect to our firm, means the current,
actual knowledge of the Xxxxxxx Xxxxxx LLP attorneys who have represented the
Company in connection with the transactions contemplated by the Transaction
Documents.
In
such
examination, we have assumed, with your permission and without independent
investigation, (i) the genuineness of all signatures; (ii) the legal
capacity of each individual signatory to the Transaction Documents and the
Governing Documents; (iii) the authenticity of all documents submitted to
us as originals; (iv) the conformity to originals of all documents
submitted to us as certified, facsimile or photostatic copies; (v) the
authenticity of the originals of such copies; (vi) the due incorporation
and organization, valid existence and good standing of PBT and the Company
under
the laws of the State of Delaware; (vii) the due execution and delivery of
the Transaction Documents by PBT and the Company; (viii) the corporate
power and authority of PBT to conduct its business and own its properties and
to
enter into the Transaction Documents and perform its obligations thereunder;
(ix) that each of the Transaction Documents has been duly authorized by all
necessary corporate action of PBT and is the legal, valid and binding obligation
of PBT, enforceable against PBT in accordance with its terms; (x) that each
of the Company and PBT has obtained all necessary governmental permits and
approvals for conducting its operations; and (xi) the identity and capacity
of all individuals acting or purporting to act as public officials.
Based
solely upon the examination described above, and subject to the comments,
assumptions, qualifications, limitations and exceptions stated herein and in
the
Disclosure Schedule to the Agreement, and in reliance thereon, we are of the
opinion that:
The
Investment Option Agreement has been duly and validly authorized by the Company
and, assuming the respective prior filing and effectiveness of the Certificate
of Designation and the Proposed Restated Certificate in the form presented
to us
for review, will constitute a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
arrangement, moratorium or other similar laws affecting creditors’ rights
generally, and subject to general equity principles and to limitations on
availability of equitable relief, including specific performance.
2
With
respect to the opinions set forth above, we assume that the Option identified
in
the Investment Option Agreement will be exercised in a commercially reasonable
manner. We have assumed further that, for purposes of any exercise of that
Option, the Company will reserve a sufficient number of authorized but unissued
shares of Common Stock of the Company, and that in no event will the Exercise
Price (as defined in the Investment Option Agreement) be lower than the par
value of the Company’s Common Stock.
We
are
members of the bar of the State of Delaware, and we express no opinion on the
laws of any other jurisdiction or on any Delaware law other than the DGCL.
We
also express no opinion as to (i) any governmental rule or other legal
requirement relating to labor, employee rights and benefits, including without
limitation the Employee Retirement Income Security Act of 1974, as amended,
and
taxation, (ii) any choice-of-law or conflict of laws matters,
(iii) any patent, trademark or copyright statute, rules or regulations,
(iv) any provision appointing one party as an attorney-in-fact of an
adverse party, (v) the effect of any state or federal antitrust laws,
including, without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act
of 1976, as currently in effect, (vi) any state or federal securities laws,
rules or regulations, or (vii) the Company’s rights in or title to any
property or assets.
The
opinions expressed herein are solely for your benefit in connection with the
above transactions and may not be relied upon in any manner or for any purpose
by any other person. This opinion speaks only as of the date hereof, and we
assume no obligation to advise you of any changes to this opinion that may
come
to our attention after the date hereof. This opinion is limited to the matters
expressly stated herein and no opinion or other statement may be inferred or
implied beyond the matters expressly stated herein.
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Very
truly yours
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3
EXHIBIT
G
(Form
of Certificate of Designation)
WINWIN
GAMING, INC.
CERTIFICATE
OF DESIGNATION OF POWERS,
DESIGNATIONS,
PREFERENCES AND RELATIVE PARTICIPATING,
OPTIONAL
OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS
AND RESTRICTIONS OF THE
SERIES
A-1
PREFERRED STOCK
_____________________________
Pursuant
to Section 151 of the General
Corporation
Law of the State of Delaware
_____________________________
WINWIN
GAMING, INC., a Delaware corporation (the “Corporation”),
certifies as follows:
FIRST: Under
the
authority contained in Article FOURTH, Section (b) of the Certificate of
Incorporation of the Corporation (the “Certificate
of Incorporation”),
the
Board of Directors of the Corporation has classified 6,000,000 of the 10,000,000
authorized but unissued shares of Preferred Stock of the Corporation, par value
$0.01 per share (“Preferred
Stock”),
as
shares of “Series A-1
Preferred Stock.”
SECOND: The
following resolution was duly adopted by the Board of Directors of the
Corporation on August 31, 2006, and such resolution has not been modified and
is
in full force and effect on the date hereof:
RESOLVED,
that
the Board of Directors hereby creates, from the authorized but unissued shares
of Preferred Stock of the Corporation, a series of Preferred Stock consisting
of
SIX MILLION (6,000,000) shares
and having the voting powers, designations, preferences and relative,
participating, optional or other rights of the Preferred Stock and the
qualifications, limitations and restrictions thereof that are set forth in
Article FOURTH of the Certificate of Incorporation and this resolution as
follows:
1. Designation.
The
distinctive designation of such series is “Series A-1 Preferred Stock”
(hereinafter referred to as the “Series
A-1 Preferred Stock”).
2. Rank.
The
Series A-1 Preferred Stock shall, with respect to dividend rights and rights
on
liquidation, winding up and dissolution, rank (a) prior to any other series
of
Preferred Stock hereafter established by the Board of Directors, and (b) prior
to the Common Stock, par value $0.01 per share, of the Corporation (the
“Common
Stock”).
3. Dividends.
The
holders of the Series A-1 Preferred Stock shall be entitled to receive, out
of
any funds legally available therefor, noncumulative dividends, payable at a
rate
per annum equal to 8% of the Series A-1 Original Issue Price (as defined below),
when and if declared by the Corporation’s Board of Directors. No dividends on
the Common Stock shall be paid unless, in addition to the amount set forth
in
the previous sentence, the amount of such dividend on the Common Stock is also
paid on the Series A-1 Preferred Stock on an as-converted to Common Stock
basis.
4. Liquidation
Preference.
Upon
a
Liquidation Event (as defined below), the holders of shares of Series A-1
Preferred Stock are entitled to receive out of assets of the Corporation
available for distribution to stockholders, before any distribution of assets
is
made to holders of Common Stock, liquidating distributions in the amount of
$79.10 per share (as equitably adjusted for any stock dividends, combinations,
splits, recapitalizations or similar events with respect to such shares) (the
“Series
A-1 Original Issue Price”),
plus
(a) an additional amount equal to eight percent (8%) of the Series A-1 Original
Issue Price per year, calculated based on the number of days elapsed prior
to
the Liquidation Event and (b) any declared, but unpaid dividends (the amount
payable to a holder of Series A-1 Preferred Stock upon a Liquidation Event
as
aforesaid being referred to herein as the “Liquidation
Preference”).
If
upon a
Liquidation Event, the Liquidation Preference and any amounts payable upon
a
Liquidation Event to other shares of stock of the Corporation ranking as to
any
such distribution on a parity with the Series A-1 Preferred Stock are not paid
in full, the holders of the Series A-1 Preferred Stock and of such other shares
will share ratably in any such distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled.
For
purposes of these resolutions, a “Liquidation
Event”
is
any
liquidation, dissolution or winding up of the Corporation, either voluntary
or
involuntary, and unless otherwise determined by the election of the holders
of a
majority of the then outstanding Series A-1 Preferred Stock, shall be deemed
to
be occasioned by, or to include, (a) the acquisition of the Corporation by
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger, consolidation,
or
other transaction in which control of the Corporation is transferred, but,
excluding any merger effected exclusively for the purpose of changing the
domicile of the Corporation) unless the Corporation’s capital stock of record as
constituted immediately prior to such acquisition will, immediately after such
acquisition represent at least 50% of the voting power of the surviving or
acquiring entity or (b) a sale, lease, transfer or other disposition, in a
single transaction or series of related transactions of all or substantially
all
of the assets and/or the intellectual property of the Corporation and its
subsidiaries, taken as a whole.
2
5. Voting
Rights.
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5.1.
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General.
Except as may be otherwise provided herein or by law,
the Series A-1 Preferred Stock shall vote together with all other
classes
and series of stock of the Corporation as a single class on all actions
to
be taken by the stockholders of the Corporation. Each share of Series
A-1
Preferred Stock shall entitle the holder thereof to such number of
votes
per share on each such action as shall equal the number of shares
of
Common Stock (including fractions of a share) into which each share
of
Series A-1 Preferred Stock is then
convertible.
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5.2.
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Board
of Directors.
The holders of the Series A-1 Preferred Stock, voting as a separate
series, shall be entitled to elect two directors of the Corporation
(the
“Series
A-1 Directors”).
A vacancy in any directorship elected by the holders of the Series
A-1
Preferred Stock shall be filled only by vote or written consent of
the
holders of the Series A-1 Preferred Stock. Any Series A-1 Director
may be
removed without cause by, and only by, the affirmative vote of the
holders
of a majority of the Series A-1 Preferred Stock, given either at
a special
meeting of such stockholders duly called for that purpose or pursuant
to a
written consent of stockholders. At any meeting held for the purpose
of
electing a Series A-1 Director, the presence in person or by proxy
of the
holders of a majority of the outstanding shares of Series A-1 Preferred
Stock shall constitute a quorum for the purpose of electing such
Series
A-1 Director.
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5.3.
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Protective
Provisions.
So long as at least 85% of the shares of Series A-1 Preferred Stock
first
issued to the original holders thereof remain outstanding (as adjusted
for
stock splits, distributions, combinations and similar events), except
where the vote or written consent of the holders of a greater number
of
shares of the Corporation is required by law or the Certificate of
Incorporation of the Corporation, and in addition to any other vote
required by law or the Certificate of Incorporation of the Corporation,
without the approval of the holders of a majority of the then outstanding
Series A-1 Preferred Stock, given in writing or by vote at a meeting,
the
Corporation will not, either directly or by amendment, merger,
consolidation or otherwise, except pursuant to the Certificate of
Incorporation:
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(a)
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Alter
or change the rights, preferences or privileges of the Series A-1
Preferred Stock;
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(b)
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Create
(by reclassification or otherwise) any new class or series of shares
having rights, preferences or privileges senior to or on a parity
with the
Series A-1 Preferred Stock with respect to redemption, voting, dividends
or distribution of assets upon a Liquidation
Event;
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(c)
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Create
(by reclassification or otherwise) any new class or series of shares
unless such shares are subject to purchase by Solidus Networks, Inc.
and
repurchase by the Corporation pursuant to purchase and redemption
options
satisfactory to the holders of a majority of the outstanding shares
of
Series X-0 Xxxxxxxxx Xxxxx;
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0
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(x)
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Xxxxxxxxxx
or redeem any shares of Common Stock (other than the repurchase of
unvested shares at cost upon the termination of employment or the
provision of services pursuant to equity incentive agreements with
employees or service providers giving the Corporation the right to
repurchase such shares);
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(e)
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Effect,
or consent to, a merger, other corporate reorganization, sale of
controlling interest by the Corporation or any of its material
subsidiaries, or any transaction in which all or substantially all
of the
assets of the Corporation or any of its material subsidiaries are
sold;
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(f)
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Effect,
or consent to, a voluntary dissolution or liquidation of the Corporation
or any of its material subsidiaries;
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(g)
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Amend
or waive any provision of the Corporation’s Certificate of Incorporation
or Bylaws (i) relative to the Series A-1 Preferred Stock or (ii)
to
increase the authorized number of shares of Common
Stock;
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(h)
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Pay
or declare any dividend or make any other distribution on any shares
of
Common Stock or Preferred Stock; or
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(i)
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Authorize
or issue any additional shares of Series A-1 Preferred Stock or any
equity
securities convertible, directly or indirectly, into additional shares
of
Series A-1 Preferred Stock.
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6. Conversion
Rights.
Subject
to the provisions of Section 8 below, the holders of the Series A-1 Preferred
Stock shall have conversion rights as follows (the “Conversion
Rights”):
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6.1.
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Right
to Convert.
Each share of Series A-1 Preferred Stock shall be convertible, at
the
option of the holder thereof, at any time after the date of issuance
at
the office of the Corporation or any transfer agent for such stock,
into
such number of fully paid and nonassessable shares of Common Stock
as is
determined by dividing the Series A-1 Original Issue Price by the
Series
A-1 Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for
conversion. The initial conversion price per share for shares of
Series
A-1 Preferred Stock (“Series
A-1 Conversion Price”
)
shall be $0.791; provided, however, that the Series A-1 Conversion
Price
shall be subject to adjustment as set forth in this Section
6.
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6.2.
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Automatic
Conversion.
Each share of Series A-1 Preferred Stock shall automatically be converted
into shares of Common Stock at the Series A-1 Conversion Price at
the time
in effect for such stock immediately upon the date specified by written
consent or agreement of the holders of a majority of the then outstanding
shares of the Series A-1 Preferred Stock, voting as a separate
class.
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4
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6.3.
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Mechanics
of Conversion.
Before any holder of Series A-1 Preferred Stock shall be entitled
to
convert the same into shares of Common Stock, the holder shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of
the Corporation or of any transfer agent for such Series A-1 Preferred
Stock, and shall give written notice to the Corporation at its principal
corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates
for
shares of Common Stock are to be issued. The Corporation shall, as
soon as
practicable thereafter, issue and deliver at such office to such
holder of
Series A-1 Preferred Stock, or to the nominee or nominees of such
holder,
a certificate or certificates for the number of shares of Common
Stock to
which such holder shall be entitled as aforesaid. Such conversion
shall be
deemed to have been made immediately prior to the close of business
on the
date of such surrender of the shares of Series A-1 Preferred Stock
to be
converted, and the person or persons entitled to receive the shares
of
Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common
Stock as
of such date.
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6.4.
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Fractional
Shares.
In lieu of any fractional shares to which the holder of Series A-1
Preferred Stock would otherwise be entitled, the Corporation shall
pay
cash equal to such fraction multiplied by the Series A-1 Conversion
Price
as then in effect. Whether or not fractional shares would be issuable
upon
such conversion shall be determined on the basis of the total number
of
shares of Series A-1 Preferred Stock of each holder at the time converting
into Common Stock and the number of shares of Common Stock issuable
upon
such aggregate conversion.
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6.5.
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Adjustment
of Conversion Price.
The Series A-1 Conversion Price shall be subject to adjustment from
time
to time as follows:
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(a)
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Special
Definitions.
For purposes of this Section 6, the following definitions shall
apply:
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(i)
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“Options”
shall mean rights, options or warrants to subscribe for, purchase
or
otherwise acquire either Common Stock or Convertible
Securities.
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(ii)
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“Original
Issue Date”
shall mean the date on which the first share of Series A-1 Preferred
Stock
was first issued.
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(iii)
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“Convertible
Securities”
shall mean any evidences of indebtedness, shares or other securities
convertible into or exercisable or exchangeable, directly or indirectly,
for Common Stock.
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(iv)
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“Additional
Shares of Common Stock”
shall mean all shares of Common Stock issued (or, pursuant to Section
6.6,
deemed to be issued) by the Corporation after the Original Issue
Date,
other than shares of Common Stock issued or
issuable:
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5
| (A) |
upon
conversion of shares of Preferred
Stock;
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(B)
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to
officers, directors, employees and consultants of the Corporation
pursuant
to stock incentive plans, or other stock arrangements that have been
approved by the Board of Directors of the Corporation including the
Series
A-1 Directors;
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(C)
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pursuant
to any event for which adjustment has already been made pursuant
to
Section 6.7;
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(D)
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as
a dividend or distribution on the Corporation’s Common Stock or Preferred
Stock, where an adjustment is made pursuant to Sections 6.9, 6.10
or
6.11;
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(E)
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upon
the written consent of the holders of a majority of the Series A-1
Preferred Stock that expressly states that such shares shall not
constitute Additional Shares of Common
Stock;
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(F)
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upon
the exercise of Options or conversion of any Convertible Securities
outstanding as of the date hereof;
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(G)
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pursuant
to a loan arrangement or debt financing from a bank, equipment lessor
or
similar financial institution approved by the Board of Directors,
including the Series A-1 Directors;
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(H)
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in
connection with strategic transactions (but excluding any merger,
consolidation, acquisition or similar business combination) that
have been
approved by the Board of Directors of the Corporation including the
Series
A-1 Directors; or
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(I)
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pursuant
to the provisions of Section 6.12
hereof.
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6.6.
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Deemed
Issue of Additional Shares of Common Stock.
Except as provided in Section 6.5(a)(iv) above, in the event the
Corporation at any time or from time to time after the Original Issue
Date
shall issue any Options or Convertible Securities or shall fix a
record
date for the determination of holders of any class of securities
entitled
to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto
without
regard to any provisions contained therein for a subsequent adjustment
of
such number) of Common Stock issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed
to
be Additional Shares of Common Stock issued as of the time of such
issue
or, in case such a record date shall have been fixed, as of the close
of
business on such record date, provided that in any such case in which
Additional Shares of Common Stock are deemed to be
issued:
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6
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(a)
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no
further adjustment in the Series A-1 Conversion Price shall be made
upon
the subsequent issue of Convertible Securities or shares of Common
Stock
upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
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(b)
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if
such Options or Convertible Securities by their terms provide, with
the
passage of time or otherwise, for any increase or decrease in the
consideration payable to the Corporation, or increase or decrease
in the
number of shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof, the Series A-1 Conversion Price computed upon
the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed
to
reflect such increase or decrease insofar as it affects such Options
or
the rights of conversion or exchange under such Convertible Securities;
and
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(c)
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upon
the expiration of any such Options or any rights of conversion or
exchange
under such Convertible Securities which shall not have been exercised,
the
Series A-1 Conversion Price computed upon the Original Issue Date,
and any
subsequent adjustments based thereon, shall, upon such expiration,
be
recomputed as if:
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(i)
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in
the case of Convertible Securities or Options for Common Stock, the
only
Additional Shares of Common Stock issued were shares of Common Stock,
if
any, actually issued upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, and the consideration
received
therefor was the consideration actually received by the Corporation
for
the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such exercise,
or
for the issue of all such Convertible Securities which were actually
converted or exchanged; and
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(ii)
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in
the case of Options for Convertible Securities, only the Convertible
Securities, if any, actually issued upon the exercise thereof were
issued
at the time of issue of such Options and the consideration received
by the
Corporation for the Additional Shares of Common Stock deemed to have
been
then issued was the consideration actually received by the Corporation
for
the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation upon
the
issue of the Convertible Securities with respect to which such Options
were actually exercised.
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7
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6.7.
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Adjustment
of Conversion Price Upon Issuance of Additional Shares of Common
Stock.
In the event this Corporation shall issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 6.6) without consideration or for a consideration
per
share less than the Series A-1 Conversion Price applicable on and
immediately prior to such issue, then and in such event, the Series
A-1
Conversion Price shall be reduced, concurrently with such issue,
to a
price (calculated to the nearest cent) determined by multiplying
the
Series A-1 Conversion Price in effect on the date of and immediately
prior
to such issue by a fraction, the numerator of which shall be the
number of
shares of Common Stock outstanding immediately prior to such issue,
including any Common Stock issuable pursuant to any then outstanding
options, rights or warrants for Common Stock or any class or series
of
stock convertible into Common Stock (including but not limited to
Preferred Stock), plus the number of shares of Common Stock which
the
aggregate consideration received by the Corporation for the total
number
of Additional Shares of Common Stock so issued would purchase at
the
Series A-1 Conversion Price in effect on the date of and immediately
prior
to such issue; and the denominator of which shall be the number of
shares
of Common Stock outstanding immediately prior to such issue, including
any
Common Stock issuable pursuant to any then outstanding options, rights
or
warrants for Common Stock or any class or series of stock convertible
into
Common Stock (including but not limited to Preferred Stock) outstanding
immediately prior to such issue, plus the number of such Additional
Shares
of Common Stock so issued.
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6.8.
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Determination
of Consideration.
For purposes of this Section 6, the consideration received by the
Corporation for the issue of any Additional Shares of Common Stock
shall
be computed as follows:
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(a)
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Cash
and Property.
Such consideration shall:
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(i)
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insofar
as it consists of cash, be computed at the aggregate amount of
cash
received by the Corporation excluding amounts paid or payable for
accrued
interest or accrued dividends;
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(ii)
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insofar
as it consists of property other than cash, be computed at the
fair value
thereof at the time of such issue, as determined in good faith
by the
Board of Directors; and
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(iii)
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in
the event Additional Shares of Common Stock are issued together
with other
shares or securities or other assets of the Corporation for consideration
which covers both, be the proportion of such consideration so received,
computed as provided in clauses (i) and (ii) above, as determined
in good
faith by the Board of Directors.
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(b)
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Options
and Convertible Securities.
The consideration per share received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Section
6.6,
relating to Options and Convertible Securities, shall be determined
by
dividing
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8
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(i)
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the
total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional consideration (as
set
forth in the instruments relating thereto, without regard to any
provision
contained therein for a subsequent adjustment of such consideration)
payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of
Options for Convertible Securities, the exercise of such options
for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
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(ii)
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the
maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein
for a
subsequent adjustment of such number) issuable upon the exercise
of such
Options or the conversion or exchange of such Convertible
Securities.
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6.9.
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Adjustments
for Stock Dividends, Subdivisions, or Split-ups of Common
Stock.
If the number of shares of Common Stock outstanding at any time after
the
filing of this Certificate of Designation is increased by a stock
dividend
payable in shares of Common Stock or by a subdivision or split-up
of
shares of Common Stock without a corresponding increase in the number
of
shares of Series A-1 Preferred Stock outstanding, then, effective
at the
close of business upon the record date fixed for the determination
of
holders of Common Stock entitled to receive such stock dividend,
subdivision or split-up, the Series A-1 Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series A-1 Preferred Stock
shall
be increased in proportion to such increase in outstanding shares
of
Common Stock.
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6.10.
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Adjustments
for Combinations of Common Stock.
If the number of shares of Common Stock outstanding at any time after
the
filing of this Certificate of Designation is decreased by a combination
of
the outstanding shares of Common Stock without a corresponding decrease
in
the number of shares of Series A-1 Preferred Stock outstanding, then,
effective at the close of business upon the record date of such
combination, the Series A-1 Conversion Price shall be appropriately
increased so that the number of shares of Common Stock issuable on
conversion of each share of Series A-1 Preferred Stock shall be decreased
in proportion to such decrease in outstanding shares of Common
Stock.
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6.11.
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Adjustments
for Reorganizations, Reclassifications, etc.
If the Common Stock issuable upon conversion of the Series A-1 Preferred
Stock shall be changed into the same or a different number of shares
of
any other class or classes of stock or other securities or property,
whether by reclassification, a merger or consolidation of this Corporation
with or into any other corporation or corporations, or a sale of
all or
substantially all of the assets of this Corporation (but only if
such
change is not in connection with an event that is deemed to be a
Liquidation Event), or otherwise (other than a subdivision or combination
of shares provided for in Section 6.9 or 6.10 above), the Series
A-1
Conversion Price then in effect shall, concurrently with the effectiveness
of such reorganization or reclassification, be proportionately adjusted
such that the Series A-1 Preferred Stock shall be convertible into,
in
lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such
other
class or classes of stock or securities or other property equivalent
to
the number of shares of Common Stock that would have been subject
to
receipt by the holders upon conversion of the Series A-1 Preferred
Stock
immediately before such event; and, in any such case, appropriate
adjustment (as determined by the Board of Directors) shall be made
in the
application of the provisions herein set forth with respect to the
rights
and interests thereafter of the holders of the Series A-1 Preferred
Stock,
to the end that the provisions set forth herein (including provisions
with
respect to changes in and other adjustments of the Series A-1 Conversion
Price) shall thereafter be applicable, as nearly as may be reasonable,
in
relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Series A-1 Preferred
Stock.
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9
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6.12.
|
Special
Adjustment for Issuance of Excluded Warrant Shares.
Notwithstanding the provisions of Section 6.5(a)(iv)(F) hereof, if
the
Corporation issues, directly or indirectly, shares of its Common
Stock
(“Excluded
Warrant Shares”)
upon the exercise of Excluded Warrants (as defined below), then for
each
Excluded Warrant Share issued, the Corporation shall issue to the
holder
of a share of Series A-1 Preferred Stock upon conversion of such
share, in
addition to any other shares of Common Stock issuable hereunder as
a
result of such conversion, a number of shares of Common Stock equal
to the
number obtained by application of the following formula: (M x WS)/
OP,
where,
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M
= the
multiple, which is 66%,
WS
= the
total number of Excluded Warrant Shares issued, and
OP
= the
total number of shares of Series A-1 Preferred Stock outstanding.
For
purposes of this Section 6.12, “Excluded
Warrants”
means
(i) those warrants outstanding as of the filing date of this Certificate of
Designation to purchase an aggregate of 8,691,181 shares of Common Stock (as
equitably adjusted for any stock dividends, combinations, splits,
recapitalizations or similar events with respect to such shares), as they may
be
amended or exchanged from time to time, the majority of which have an exercise
price of at least $0.25 per share (as equitably adjusted for any stock
dividends, combinations, splits, recapitalizations or similar events with
respect to such shares), (ii) that certain warrant issued by the Corporation
pursuant to that certain Securities Purchase Agreement, dated as of February
25,
2005, by and between the Corporation and the Xxx Xxxxxxx Private Opportunities
Fund L.P., as it may be amended or exchanged from time to time, and (iii) those
certain warrants issued by the Corporation pursuant to that certain Secured
Convertible Note and Warrant Purchase Agreement, dated as of April 21, 2006,
by
and among the Corporation and each of the purchasers signatory thereto, as
they
may be amended or exchanged from time to time.
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6.13.
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Minimal
Adjustments.
No adjustment in the Series A-1 Conversion Price need be made if
such
adjustment would result in a change in the Series A-1 Conversion
Price of
less than $0.01. Any adjustment of less than $0.01 which is not made
shall
be carried forward and shall be made at the time of and together
with any
subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Series A-1 Conversion Price, or
upon
conversion, whichever first occurs.
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6.14.
|
No
Impairment.
The Corporation will not through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or
sale of
securities or any other voluntary action, avoid or seek to avoid
the
observance or performance of any of the terms to be observed or performed
by the Corporation pursuant to this Section 6, but will at all times
in
good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary
or
appropriate in order to protect the conversion rights of the holders
of
Series A-1 Preferred Stock against impairment. This provision shall
not
restrict the Corporation’s right to amend this Certificate of Designation
with the requisite stockholder consent or
approval.
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6.15.
|
Notices
of Record Date.
In the event that the Corporation shall propose at any
time:
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(a)
|
to
declare any dividend or distribution upon its Common Stock, whether
in
cash, property, stock or other securities, whether or not a regular
cash
dividend and whether or not out of earnings or earned surplus;
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(b)
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to
offer for subscription pro rata to the holders of any class or series
of
its stock any additional shares of stock of any class or series or
other
rights;
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(c)
|
to
effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock;
or
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(d)
|
to
merge or consolidate with or into any other corporation, or sell
all or
substantially all its property or business, or to liquidate, dissolve
or
wind up;
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then,
in
connection with each such event, the Corporation shall send to the holders
of
the Series A-1 Preferred Stock:
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(i)
|
at
least 20 days’ prior written notice of the date on which a record shall be
taken for such dividend, distribution or subscription rights (and
specifying the date on which the holders of Common Stock shall be
entitled
thereto and the amount and character of such dividend, distribution
or
right) or for determining rights to vote in respect of the matters
referred to in clause (c) or (d) above;
and
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(ii)
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in
the case of the matters referred to in clauses (c) or (d) above,
at least
20 days’ prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Common Stock shall
be
entitled to exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event or the record date
for the
determination of such holders if such record date is
earlier).
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11
Each
such
written notice shall be delivered personally or given by first class mail,
postage prepaid, addressed to each holder of Series A-1 Preferred Stock at
the
address for each such holder as shown on the books of the
Corporation.
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6.16.
|
Reservation
of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out
of its
authorized but unissued shares of Common Stock solely for the purpose
of
effecting the conversion of the shares of Series A-1 Preferred
Stock such number of shares of its Common Stock as shall from time
to time
be sufficient to effect the conversion of all authorized shares of
Series
A-1 Preferred Stock, whether or not such shares are then outstanding;
and
if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all the
authorized shares of Series A-1 Preferred Stock, the Corporation
will take
such corporate action as may, in the opinion of its counsel, whether
or
not such shares are then outstanding, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as
shall be sufficient for such purpose. Notwithstanding the foregoing,
from
the date of the initial issuance of shares of Series A-1 Preferred
Stock
until the date of a subsequent issuance of shares of Series A-1 Preferred
Stock, if any, the Corporation shall only be required to reserve
twenty
million (20,000,000) shares of its authorized but unissued Common
Stock
for the purpose of effecting the conversion of shares of Series A-1
Preferred Stock.
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6.17.
|
Status
of Converted or Contributed Shares.
In case any shares of Series A-1 Preferred Stock are converted into
Common
Stock pursuant to Section 6 hereof or contributed back to the Corporation
(through repurchase or otherwise) after the date such shares of Series
A-1
Preferred Stock were first issued, all such shares so converted or
contributed shall, upon such conversion or contribution, be cancelled
and
shall not be issuable by the Corporation. The Corporation may from
time to
time take such appropriate corporate action as may be necessary to
reduce
accordingly the number of authorized shares of the Company’s Series A-1
Preferred Stock.
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6.18.
|
No
Redemption by Corporation.
The Series A-1 Preferred Stock is not subject to redemption by the
Corporation.
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| 6.19. |
Limitation
on Ability to Convert.
No shares of Series A-1
Preferred Stock may be converted hereunder into Common Stock unless
and
until the Corporation has available sufficient authorized but unissued
shares of Common Stock for the purpose of effecting such a conversion.
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12
7. Excluded
Opportunities.
The
Corporation renounces any interest or expectancy of the Corporation in, or
in
being offered an opportunity to participate in, any Excluded Opportunity. An
“Excluded
Opportunity”
is
any
matter, transaction or interest that is presented to, or acquired, created
or
developed by, or which otherwise comes into the possession of, (a) any Series
A-1 Director who is not an employee of the Corporation or any of its
subsidiaries, or (b) any holder of Series A-1 Preferred Stock or any partner,
member, director, stockholder, employee or agent of any such holder, other
than
someone who is an employee of the Corporation or any of its subsidiaries
(collectively, “Covered
Persons”),
unless such matter, transaction or interest is presented to, or acquired,
created or developed by, or otherwise comes into the possession of, a Covered
Person expressly and solely in such Covered Person’s capacity as a director of
the Corporation.
8. Automatic
Conversion upon Filing of Restated Charter.
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8.1.
|
Rate
of Conversion to Series A Preferred Stock.
Notwithstanding the provisions of Section 6 above, on the Restated
Charter
Effective Date (as hereinafter defined), each outstanding share of
Series
A-1 Preferred Stock shall be automatically converted into a number
of
shares of Series A Preferred Stock (as hereinafter defined) equal
to
one-tenth of the number of shares of Common Stock into which such
share of
Series A-1 Preferred Stock could then be converted pursuant to Section
6.1
above. As used herein, the term “Restated
Charter Effective Date”
means the date on which an Amended and Restated Certificate of
Incorporation of the Corporation (the “Restated
Charter”)
is filed and becomes effective that increases the authorized capital
stock
of the Corporation to Seven Hundred Fifty Million (750,000,000) shares
of
Common Stock and Sixty Million (60,000,000) shares of Preferred Stock,
of
which all shares are designated “Series A Preferred Stock” having
substantially identical rights to the Series A-1 Preferred Stock
created
hereby, subject to the exception set forth in the next sentence of
this
Section 8.1 (the “Series
A Preferred Stock”).
For purposes of the Series A Preferred Stock to be created pursuant
to the
Restated Charter, references herein to the Series A-1 Original Issue
Price
shall mean $7.91
per share (as equitably adjusted for any stock dividends, combinations,
splits, recapitalizations or similar events with respect to such
shares),
and references herein to the Series
A-1 Conversion Price shall mean the Series A-1 Conversion Price reflecting
any adjustments thereto through the Restated Charter Effective
Date.
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|
8.2.
|
Mechanics
of Conversion.
On the Restated Charter Effective Date, all certificates theretofore
representing shares of Series A-1 Preferred Stock shall be deemed
to
represent the number of shares of Series A Preferred Stock provided
in
Section 8.1 above. On or after the Restated Charter Effective Date,
each
holder or holders of such certificates shall deliver such certificates,
duly endorsed, to the office of the Corporation for reissuance in
accordance with the provisions of this Section 8. The Corporation
shall,
as soon as practicable thereafter, issue and deliver at such office
to
such holder, a certificate or certificates for the number of shares
of
Series A Preferred Stock to which such holder shall then be entitled
as
aforesaid. Such conversion shall be deemed to have occurred effective
as
of the Restated Charter Effective
Date.
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[Signature
Page Follows]
13
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Designation
to
be signed in its name and on its behalf this ____ day of August, 2006 by an
officer of the Corporation who acknowledges that this Certificate of Designation
is the act of the Corporation and that to the best of his or her knowledge,
information and belief and under penalties for perjury, all matters and facts
contained in this Certificate of Designation are true in all material
respects.
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/s/Xxxxxxx
X. Xxxxxx
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|
|
Name:
Xxxxxxx X. Xxxxxx
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Title:
President and CEO
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14
