WINWIN GAMING, INC. INVESTOR RIGHTS AGREEMENT
WINWIN
GAMING, INC.
TABLE
OF CONTENTS
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Page
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Section
1
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DEFINITIONS
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1
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1.1
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Certain
Definitions
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1
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| Section 2 |
REGISTRATION
RIGHTS; RESTRICTIONS ON TRANSFERABILITY
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2
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2.1
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Restrictions
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2
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2.2
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Restrictive
Legend
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2
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2.3
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Notice
of Proposed Transfers
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3
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2.4
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Required
Registration
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3
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2.5
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Company
Registration
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4
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2.6
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Expenses
of Registration
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5
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2.7
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Registration
Procedures
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5
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2.8
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Indemnification
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7
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2.9
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Information
by Holder
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8
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2.10
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Rule
144 Reporting
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9
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2.11
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Termination
of Rights
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9
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Section
3
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RIGHT
OF PARTICIPATION
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9 |
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3.1
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Right
of Participation
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9
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3.2
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Definition
of New Securities
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9
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3.3
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Notice
of Right
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10
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3.4
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Exercise
of Right
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10
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3.5
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Transfer
of Right of Participation
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10
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3.6
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Rights
of Affiliated Holders
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10
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3.7
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Termination
of Right of Participation
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11
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3.8
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Right
of Participation Subject to Solidus Right
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11
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Section
4
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AFFIRMATIVE
COVENANTS OF THE COMPANY
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11 |
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4.1
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Inspection
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11
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4.2
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Confidentiality
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11
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Section
5
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MISCELLANEOUS
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12
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5.1
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Successors
and Assigns
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12
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5.2
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Third
Parties
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12
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5.3
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Governing
Law
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12
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5.4
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Choice
of Venue; Waiver of Right to Jury Trial
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12
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5.5
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Counterparts
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13
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5.6
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Notices
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13
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5.7
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Severability
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13
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5.8
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Amendment
and Waiver
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14
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5.9
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Rights
of Holders
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14
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5.10
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Delays
or Omissions
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14
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5.11
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Attorneys’
Fees
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14
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5.12
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Headings
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14
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5.13
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Entire
Agreement
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14
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5.14
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Further
Assurances
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15
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5.15
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Transfers
of Stock
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15
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EXECUTIVE
COPY
THIS
INVESTOR RIGHTS AGREEMENT (the “Agreement”)
is
entered into as of April 21, 2006 by WinWin Gaming, Inc., a Delaware
corporation (the “Company”)
and
the “Investors”
set
forth on the signature page hereto.
RECITALS
WHEREAS,
Investors hold warrants (the “Warrants”)
to
purchase shares of common stock, par value $0.01 per share, of the Company
(the
“Common
Stock”)
pursuant to that certain Secured Convertible Note and Warrant Purchase Agreement
dated as of even date herewith (the “Purchase
Agreement”)
and a
right to convert certain secured convertible promissory notes that shall be
executed pursuant to the Purchase Agreement into shares of Common Stock and/or
equity securities of the Company (the “Convertible
Notes”).
WHEREAS,
in connection with the Warrants and Convertible Notes, the Company and Investors
agree to enter into this Agreement as set forth herein.
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises and covenants hereinafter
set
forth, the parties agree as follows:
SECTION
1
DEFINITIONS
1.1 Certain
Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings:
“Affiliate”
shall
mean with respect to any Person, any Person which directly or indirectly through
one or more intermediaries, controls, is controlled by or is under common
control with such Person.
“Commission”
shall
mean the Securities and Exchange Commission or any other federal agency at
the
time administering the Securities Act.
“Conversion
Shares”
shall
mean the Common Stock and/or equity securities of the Company issued or issuable
upon conversion of the Convertible Notes (or Common Stock issuable upon
conversion thereof).
“Holder”
shall
mean any person owning or having the right to acquire Registrable Securities
or
any assignee thereof.
“Person”
shall
mean an individual, a corporation, a partnership, a trust or unincorporated
organization or any other entity or organization.
-1-
The
terms
“register,”
“registered”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
“Registrable
Securities”
means
(a) the Conversion Shares, (b) all shares of Common Stock owned by the
Investors (assuming full exercise of the Warrants) and (c) any Common Stock
issued (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution with respect
to, or in exchange for, or in replacement of, the Common Stock described in
clauses (a) or (b) hereof.
“Registration
Expenses”
shall
mean all reasonable expenses incurred by the Company in complying with
Sections 2.4
and 2.5
hereof,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, the expense of any special audits incident
to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the
Company) and all reasonable fees and disbursements of one special counsel for
all of the Holders who elect to include their Registrable Securities in any
such
registration.
“Restricted
Securities”
shall
mean the securities of the Company required to bear the legend set forth in
Section 2.2
hereof.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended, or any similar or successor federal
statute and the rules and regulations of the Commission thereunder, all as
the
same shall be in effect at the time.
“Selling
Expenses”
shall
mean all underwriting discounts, selling commissions and stock transfer taxes
applicable to the securities registered by the Holders.
“Shares”
shall
mean shares of Common Stock of the Company.
SECTION
2
REGISTRATION
RIGHTS;
RESTRICTIONS
ON TRANSFERABILITY
2.1 Restrictions.
The
Shares and the Conversion Shares shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
The
Investors will cause any proposed purchaser, assignee, transferee or pledgee
of
the Shares and the Conversion Shares to agree to take and hold such securities
subject to the provisions and upon the conditions specified in this
Agreement.
2.2 Restrictive
Legend.
Each
certificate representing (a) the Shares, (b) the Conversion Shares,
and (c) any other securities issued in respect of the securities referenced
in clauses (a) and (b) upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 2.3
below)
be stamped or otherwise imprinted with a legend in substantially the following
form (in addition to any legend required under applicable state securities
laws):
-2-
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT
BE
SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT.”
“THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE
WITH THE TERMS OF AGREEMENTS BETWEEN THE COMPANY AND THE ORIGINAL STOCKHOLDER,
COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.”
Each
Holder consents to the Company making a notation on its records and giving
instructions to any transfer agent of the Restricted Securities in order to
implement the restrictions on transfer established in this Section 2.
2.3 Notice
of Proposed Transfers.
The
holder of each certificate representing Restricted Securities, by acceptance
thereof, agrees to comply in all respects with the provisions of this
Section 2.
Prior
to any proposed sale, assignment, transfer or pledge of any Restricted
Securities, unless there is in effect a registration statement under the
Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder’s intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail, whereupon the holder of such Restricted Securities shall
be
entitled to transfer such Restricted Securities in accordance with the terms
of
the notice delivered by the holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear, except
if
such transfer is made pursuant to Rule 144, the appropriate restrictive legends
set forth in this Section 2,
except
that such certificate shall not bear such restrictive legend if, in the opinion
of counsel for such holder and the Company, such legend is not required in
order
to establish compliance with any provisions of the Securities Act or this
Agreement.
2.4 Required
Registration.
(a) Within
forty-five (45) days following the Closing (as defined in the Purchase
Agreement), the Company shall file a registration statement covering the Shares
underlying the Warrants and the Conversion Shares, and use its commercially
reasonable best efforts to effect such registration, qualification or compliance
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue
sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) and cause such registration statement to be
declared effective within one hundred twenty (120) days thereafter.
-3-
(b) In
the
event that such registration statement is not declared effective within one
hundred eighty (180) days following the Closing, the Warrants’ Exercise Price
(as defined therein) and the Convertible Notes’ Conversion Price (as defined
therein) shall be reduced by $0.025 per share for each thirty (30) day period
that the effectiveness of the registration statement is delayed, but in no
event
shall this provision cause the Exercise Price to be reduced below $0.40 per
share.
2.5 Company
Registration.
(a) Notice
of Registration.
If at
any time or from time to time, the Company shall determine to register any
of
its securities, either for its own account or the account of a security holder
or holders exercising their respective demand registration rights other than
(i)
a registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a merger, acquisition or exchange, or (iii) a registration
relating to convertible debt transaction, the Company will:
(i) promptly
give to each Holder written notice thereof; and
(ii) include
in such registration (and any related qualification under blue sky laws or
other
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests made within twenty (20)
days after receipt of such written notice from the Company by any Holder, but
only to the extent that such inclusion will not diminish the number of
securities included by the Company or by Holders of the Company’s securities who
have demanded such registration and further subject to the underwriter’s right
to limit the number of securities included in the registration as set forth
in
Section 2.5(b) below.
(b) Underwriting.
If the
registration of which the Company gives notice is for a registered public
offering involving an underwriting, the Company shall so advise the Holders
as a
part of the written notice given pursuant to Section 2.5(a)(i).
In such
event, the right of any Holder to registration pursuant to this Section 2.5
shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other Holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company (or by the Holders who have demanded such registration, as the
case may be). Notwithstanding any other provision of this Section 2.5,
if the
managing underwriter determines in its sole discretion that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter may limit the number of Registrable Securities to be included in
the
registration and underwriting, provided that the managing underwriter shall
first limit the number of shares underwritten of all stockholders other than
Holders participating in such registration on a pro rata basis based on the
total number of securities entitled to be included in such registration, and
second limit the shares of any participating Holders. Alternatively, the
managing underwriter may determine that all or certain Registrable Securities
requesting registration must be excluded or limited in order not to impair
the
pricing of the registration and underwriting. Such exclusion or limitation
shall
be in the sole discretion of the managing underwriter and shall be applied
pro
rata to all holders of Registrable Securities requesting registration. To
facilitate the allocation of shares in accordance with the above provisions,
the
Company or the underwriters may round the number of shares allocated to any
Holder or other holder to the nearest one hundred (100) shares. If any Holder
or
other holder disapproves of the terms of any such underwriting, he or she may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration, and shall not be transferred in a public
distribution prior to ninety (90) days after the date of the final prospectus
included in the registration statement relating thereto. Notwithstanding the
foregoing, the Holder’s right to include Registrable Securities in an
underwritten offering shall be subject to the provisions of a registration
rights agreement that is to be entered into between the Company and Solidus
Networks, Inc., in the form attached to that certain Amended and Restated Joint
Venture Agreement, dated as of April 14, 2006 (the “Joint Venture Agreement”),
between Company and Solidus Networks, Inc.
-4-
(c) Right
to Terminate Registration.
The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2.5
prior to
the effectiveness of such registration, whether or not any Holder has elected
to
include securities in such registration.
2.6 Expenses
of Registration.
All
Registration Expenses incurred in connection with registrations pursuant to
Sections 2.4
and 2.5
shall be
borne by the Company. Unless otherwise stated, all Selling Expenses relating
to
securities registered on behalf of the Holders shall be borne by the Holders
of
the registered securities included in such registration pro rata on the basis
of
the number of shares so registered.
2.7 Registration
Procedures.
In the
case of each registration, qualification or compliance effected by the Company
pursuant to this Section 2,
the
Company will keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof.
The
Company will:
(a) Prepare
and file with the Commission a registration statement with respect to the
Registrable Securities and use its commercially reasonable efforts to cause
such
registration statement to become and remain effective for at least one hundred
twenty (120) days or until the distribution described in the registration
statement has been completed; provided, however, that such one hundred twenty
(120) day period shall be extended for a period of time equal to the period
that
the Holder refrains from selling any securities included in such registration
at
the request of the Company or an underwriter of the Common Stock (or any other
securities) of the Company, provided that Rule 415, or any successor rule under
the Securities Act, permits an offering on a continuous or delayed basis, and
provided further that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which includes (A) any prospectus required by
Section 10(a)(3) of the Securities Act or (B) reflects facts or events
representing a material or fundamental change in the information set forth
in
the registration statement, the incorporation by reference of information
required to be included in (a) and (b) above to be contained in
periodic reports filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)
in the
registration statement;
-5-
(b) Furnish
to the Holders participating in such registration and to the underwriters of
the
securities being registered such reasonable number of copies of the registration
statement and amendments and supplements thereto, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities;
(c) Cause
all
such Registrable Securities registered hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then
listed;
(d) Notify
each Holder of Registrable Securities covered by such registration statement
at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing;
(e) Provide
transfer agent and registrar for all Registrable Securities registered pursuant
to such registration statement and a CUSIP number for all such Registrable
Securities, in each case not later than effective date of such registration;
(f) Prepare
and file amendments of or supplements to the registration statement or
prospectus necessary to comply with the Securities Act with respect to
disposition of the Registrable Securities covered by such registration
statement;
(g) Use
all
commercially reasonable efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws
of
such jurisdictions as shall be reasonably requested by the Holders, provided
that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process
in
any such states or jurisdictions unless the Company is already qualified to
do
business or subject to service of process in that jurisdiction;
(h) Use
its
best efforts to furnish, at the request of any Holder requesting registration
of
Registrable Securities pursuant to this Section
2.7,
on the
date that such Registrable Securities are delivered to the underwriters for
sale
in connection with a registration pursuant to this Section 2.7,
if such
securities are being sold through underwriters, (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 and (ii) a
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;
(i) Make
generally available to its security holders, and to deliver to each Holder
participating in the registration statement, an earnings statement of the
Company that will satisfy the provisions of Section 11(a) of the Securities
Act
covering a period of 12 months beginning after the effective date of such
registration statement as soon as reasonably practicable after the termination
of such 12-month period; and
-6-
(j) In
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder and other security holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
2.8 Indemnification.
(a) The
Company will indemnify each Holder, each of its officers and directors and
partners, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 2,
and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment
or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of any rule or regulation promulgated under
the
Securities Act, the Exchange Act or any state securities laws applicable to
the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, as such expenses
are incurred, provided that the Company will not be liable in any such case
to
the extent that any such claim, loss, damage, liability or expense arises out
of
or is based on any untrue statement or omission or alleged untrue statement
or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use
therein.
(b) Each
Holder will, if Registrable Securities held by such Holder are included in
the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company’s securities covered by such a registration
statement, each person who controls the Company or such underwriter within
the
meaning of Section 15 of the Securities Act, and each other such Holder,
each of its officers and directors and each person controlling such Holder
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
and will reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as such expenses are incurred, in each case to
the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon
and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided however that in no event shall any indemnity under this Section 2.8(b) exceed
the net proceeds from the offering received by such Holder.
-7-
(c) If
the
indemnification provided for in this Section 2.8
is held
by a court of competent jurisdiction to be unavailable to a party entitled
to
indemnification under this Section 2.8
(the
“Indemnified
Party”)
with
respect to any loss, liability, claim, damage or expense referred to herein,
then the party required to provide indemnification (the “Indemnifying
Party”),
in
lieu of indemnifying such Indemnified Party hereunder, instead shall contribute
to the amount paid or payable by such Indemnified Party as a result of such
loss, liability, claim, damage or expense in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and
of
the Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage or expense,
as
well as any other relevant equitable considerations. The relative fault of
the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties’
relative intent, knowledge, access to information, and opportunity to correct
or
prevent such statement or omission.
(d) Each
Indemnified Party shall give notice to the Indemnifying Party promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense
of
any such claim or any litigation resulting therefrom, provided that counsel
for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party’s expense; provided, however, that an Indemnified Party
(together with all other Indemnified Parties which may be represented without
conflict by one counsel) shall have the right to retain its own separate counsel
with the reasonable fees and expenses to be paid by the Indemnifying Party
if
the Indemnified Party reasonably determines that representation of such
Indemnified Party would be appropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by
such
counsel in such proceeding. The failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 2
unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party’s ability to defend such action. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which
does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation.
2.9 Information
by Holder.
The
Holder or Holders of Registrable Securities included in any registration shall
furnish to the Company such information regarding such Holder or Holders, the
Registrable Securities held by them and the distribution proposed by such Holder
or Holders as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Section 2.
-8-
2.10 Rule
144 Reporting.
With a
view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Restricted Securities
to
the public without registration, after such time as a public market exists
for
the Common Stock of the Company, the Company agrees to use its commercially
reasonable best efforts to:
(a) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144 under the Securities Act, at all times after the effective date that
the Company becomes subject to the reporting requirements of the Exchange
Act;
(b) File
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Securities Act and the Exchange Act (at any time after
it
has become subject to such reporting requirements); and
(c) So
long
as Investors owns any Restricted Securities, to furnish to the Investors
forthwith upon request a written statement by the Company as to its compliance
with the reporting requirements of said Rule 144 (at any time after ninety
(90)
days after the effective date of the first registration statement filed by
the
Company for an offering of its securities to the general public) and of the
Securities Act and the Exchange Act (at any time after it has become subject
to
such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company
and
other information in the possession of or reasonably obtainable by the Company
as an Investors may reasonably request in availing itself of any rule or
regulation of the Commission allowing an Investors to sell any such securities
without registration.
2.11 Termination
of Rights.
The
rights of any particular Holder to cause the Company to register securities
under Sections 2.4
and 2.5
shall
terminate with respect to such Holder on the date when such Holder can sell
all
of its Registrable Securities in a single transaction pursuant to Rule 144
of
the Securities Act.
SECTION
3
RIGHT
OF PARTICIPATION
3.1 Right
of Participation.
Subject
to the terms and conditions contained in this Section 3,
the
Company hereby grants to each Investor the right of participation (the
“Right
of Participation”)
to
purchase its Participation Amount (as defined below) of any New Securities
(as
defined in Section 3.2)
which
the Company may, from time to time, propose to sell and issue. Investor’s
“Participation
Amount”
for
purposes of this Section 3
is equal
to (x) the face value of the Convertible Notes originally purchased by such
Investor, divided by (y) the price per share paid or proposed to be paid for
the
New Securities.
3.2 Definition
of New Securities.
Except
as set forth below, “New
Securities”
shall
mean any equity or equity-linked securities of the Company, including Common
Stock, whether authorized or not, and rights, options or warrants to purchase
said shares of Common Stock, and securities of any type whatsoever that are,
or
may become, convertible into said shares of Common Stock. Notwithstanding the
foregoing, “New Securities” does not include:
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(a) the
Conversion Shares,
(b) all
shares of Common Stock issued or deemed issued to officers, directors,
consultants, advisors or employees of this Company, pursuant to a stock option
plan approved by the Board of Directors of the Company,
(c) stock
issued in connection with any stock split, stock dividend or recapitalization
by
the Company,
(d) stock
issued upon any Investor’s exercise of the Warrants,
(e) equity
or
equity-linked securities issued in connection with a strategic transaction
approved by the Board of Directors of the Company;
(f) equity
or
equity-linked securities issued pursuant to a loan arrangement or debt financing
from a bank, equipment lessor or similar financial institution approved by
the
Board of Directors of the Company;
(g) upon
the
written consent of all of the holders of outstanding shares of Registrable
Securities that expressly states that the right of right of participation in
this Section 3 shall not apply to such New Securities;
(h) upon
the
exercise, exchange or conversion of any options or other convertible securities
outstanding as of the date hereof; and
(i) pursuant
to the terms of, or contemplated by, the Joint Venture Agreement or any exhibit
or schedule thereto.
3.3 Notice
of Right.
In the
event the Company proposes to undertake an issuance of New Securities, it shall
give each Investor written notice of its intention, describing the type of
New
Securities and the price and terms upon which the Company proposes to issue
the
same. The Investors shall have thirty (30) days from the date of receipt of
any
such notice to agree to purchase shares of such New Securities (up to the amount
referred to in Section
3.1),
for
the price and upon the terms specified in the notice, by giving written notice
to the Company and stating therein the quantity of New Securities to be
purchased.
3.4 Exercise
of Right.
If any
Investor exercises its Right of Participation hereunder, the closing of the
purchase of the New Securities with respect to which such right has been
exercised shall take place as soon as practicable after the Investor gives
notice of such interest.
3.5 Transfer
of Right of Participation.
The
Right of Participation granted under Section 3
of this
Agreement may not be assigned or transferred.
3.6 Rights
of Affiliated Holders.
For
purposes of this Section 3,
Holders
who are Affiliates of one or more other Holders shall, at the election of a
Holder and one or more such Affiliates, be treated as a group (a “Holder
Group”).
Members of a Holder Group shall have the right to reallocate the rights granted
by this Section 3
among
themselves as they determine.
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3.7 Termination
of Right of Participation.
The
Right of Participation granted under this Section 3
of this
Agreement shall terminate on and be of no further force or effect upon the
first
anniversary of the date hereof.
3.8 Right
of Participation Subject to Solidus Right
.
The
right of participation granted hereunder is subject to the right of first offer
that will be granted to Solidus Networks, Inc. upon the execution of the
proposed registration rights agreement, a form of which is attached to the
Joint
Venture Agreement.
SECTION
4
AFFIRMATIVE
COVENANTS OF THE COMPANY
The
Company hereby covenants and agrees as follows:
4.1 Inspection.
The
Company shall permit each Holder, at such Holder’s expense, to visit and inspect
the Company’s properties, to examine its books of account and records and to
discuss the Company’s affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by the Holder.
4.2 Confidentiality.
Each
Holder agrees and will cause any representative of such Holder to hold in
confidence and trust and not use or disclose any information provided to or
learned by it in connection with its rights under this Section
4
that is
identified in writing as confidential (the “Confidential
Information”),
except that such Holder may disclose such information to any partner, member,
subsidiary or parent of such Holder for the purpose of evaluating its investment
in the Company as long as (a) such partner, member, subsidiary or parent is
advised of the confidentiality provisions of this Section
4.2
and (b)
such Holder uses its commercially reasonable best efforts to ensure that such
partner, member, subsidiary or parent holds such information in confidence
and
trust and will not use or disclose any information provided to or learned by
it
except as required by law. Notwithstanding the above, this Section
4.2
shall
not apply to any information which any such Holder can prove:
(a)
was in
the public domain at the time it was disclosed or has entered the public domain
through no fault of such Holder;
(b)
was
known
to such Holder, without restriction, at the time of disclosure, as demonstrated
by files in existence at the time of disclosure;
(c)
is
disclosed with the prior written approval of the Company;
(d)
was
independently developed by such Holder without any use of the Confidential
Information and by employees of such Holder who have not had access to the
Confidential Information, as demonstrated by files created at the time of such
independent development;
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(e)
becomes
known to such Holder, without restriction, from a source other than the Company
without breach of this Section
4.2
by such
Holder and otherwise not in violation of the Company’s rights;
(f)
is
disclosed generally to third parties by the Company without restrictions similar
to those contained in this Section
4.2;
or
(g)
is
disclosed pursuant to the order or requirement of a court, administrative
agency, or other governmental body; provided, however, that such Holder shall
provide prompt notice of such court order or requirement to the Company to
enable the Company to seek a protective order or otherwise prevent or restrict
such disclosure.
SECTION
5
MISCELLANEOUS
5.1 Successors
and Assigns.
Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors, assigns,
heirs, executors and administrators and permitted transferees of the parties
hereto.
5.2 Third
Parties.
Nothing
in this Agreement, express or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors and assigns,
any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
5.3 Governing
Law.
This
Agreement shall be governed by and construed under the laws of the State of
New
York as
applied to agreements entered into and performed in the State of New York solely
by residents thereof without reference to principles of conflicts of laws or
choice of laws.
5.4 Choice
of Venue; Waiver of Right to Jury Trial.
(a)THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
DEEMED MADE, EXECUTED, PERFORMED AND CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN THE COUNTY OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH
PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM IN
ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT
BROUGHT IN ANY OF THE AFORESAID COURTS THAT ANY SUCH COURT LACKS PERSONAL
JURISDICTION OVER SUCH PARTY. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION
OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ANY SUCH PARTY AT ITS ADDRESS FOR NOTICES AS PROVIDED
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING
COMMENCED HEREUNDER OR UNDER ANY OTHER DOCUMENT THAT SUCH SERVICE OF PROCESS
WAS
IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE
PARTY UNDER THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN
ANY
OTHER JURISDICTION.
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(b)EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE
TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER DOCUMENT BROUGHT IN
THE
COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES
AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(c)EACH
OF
THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR
THEREBY.
5.5 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
5.6 Notices.
Any
notice required or permitted by this Agreement shall be in writing and shall
be
deemed effectively given the earlier of (i) when received, (ii) when delivered
personally, (iii) one (1) business day after being delivered by facsimile (with
receipt of appropriate confirmation), (iv) one (1) business day after being
deposited with an overnight courier service or (v) four (4) days after being
deposited in the U.S. mail, First Class with postage prepaid, and addressed
to
the parties at the addresses provided to the Company (which the Company agrees
to disclose to the other parties upon request) or such other address as a party
may request by notifying the other in writing.
5.7 Severability.
If one
or more provisions of this Agreement are held to be unenforceable under
applicable law, portions of such provisions, or such provisions in their
entirety, to the extent necessary, shall be severed from this Agreement, and
the
balance of this Agreement shall be enforceable in accordance with its
terms.
-13-
5.8 Amendment
and Waiver.
Any
provision of this Agreement may be amended with the written consent of the
Company and the Holders of a majority of the outstanding shares of the
Registrable Securities. Any amendment or waiver effected in accordance with
this
paragraph shall be binding upon each Holder of Registrable Securities and
the Company but in no event shall any amendment or waiver materially alter
the
obligations or rights of any Holder, except upon the written consent of such
Holder. In the event that an underwriting agreement is entered into between
the
Company and any Holder, and such underwriting agreement contains terms differing
from this Agreement, as to any such Holder the terms of such underwriting
agreement shall govern.
5.9 Rights
of Holders.
Each
Holder of Registrable Securities shall have the right to exercise or refrain
from exercising any right or rights that such Holder may have by reason of
this
Agreement, including, without limitation, the right to consent to the waiver
or
modification of any obligation under this Agreement, and such Holder shall
not
incur any liability to any other holder of any securities of the Company as
a
result of exercising or refraining from exercising any such right or
rights.
5.10 Delays
or Omissions.
No
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement, upon any breach or default of the other party, shall impair
any such right, power or remedy of such non-breaching party nor shall it be
construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any
other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be made in writing
and
shall be effective only to the extent specifically set forth in such
writing.
5.11 Attorneys’
Fees.
If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to
which
such party may be entitled.
5.12 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
shall, unless otherwise provided, refer to sections and paragraphs hereof
and exhibits and schedules attached hereto, all of which are incorporated herein
by this reference.
5.13 Entire
Agreement.
This
Agreement constitutes the entire understanding and agreement of the parties
with
respect to the subject matter hereof and supersedes all prior negotiations,
correspondence, agreements, understandings, duties or obligations among the
parties with respect to the subject matter hereof.
-14-
5.14 Further
Assurances.
From
and after the date of this Agreement, upon the request of a party, the other
parties shall execute and deliver such instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
5.15 Transfers
of Stock.
Investor may transfer any or all of its Common Stock, provided that such
transferee or transferees are (i) “accredited investors” as defined in
Section
1.11(a)(ii)
hereof,
(ii) are financial institutions or have a similar level of experience as
Investor in investing in private debt and equity securities, subject to
compliance with applicable securities laws, and (iii) such transfer is effected
in compliance with all applicable state and federal securities
laws.
THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
|
COMPANY:
|
||
| WINWIN GAMING, INC. | ||
| |
|
|
| By: | /s/ Xxxxxxx Xxxxxx | |
|
Name: Xxxxxxx Xxxxxx |
||
| Title: President & CEO | ||
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
INVESTORS:
| By: | /s/ Xxxxxxx Xxxxxxx | Address: |
000
Xxxx Xxxxxx
0xx
Xxxxx Xxxx.
Xxx
Xxxx, XX 00000
|
|
|
|
|
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| Print Name: | Calico Capital Group | |||
|
|
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
INVESTORS:
| By: | /s/ Xxxxxx Xxxxx | Address: |
0000
Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
|
|
|
|
|
|||
| Print Name: | Xxxxxx Xxxxx | |||
|
|
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
INVESTORS:
| By: | /s/ Xxxxxxx Xxxxx | |||
|
|
||||
| Print Name: | Patriot Capital Limited | Address: |
12/E
Novel Industrial Xxxxxxxx
000-000 Xxx Xxx Xxx Xxxx
Xxxxxx Sha Wan, Kowloon
Hong Kong
|
|
|
|
|
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date
first
above written.
INVESTORS:
| By: | /s/ Xxxx Tunnery | Address: |
00000
Xxxxx Xxxxxx Xxxx.
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
|
|
|
|
|
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| Print Name: | MLA Capital, Inc. | |||
|
|
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date
first
above written.
INVESTORS:
| By: | /s/ N.J. Xxxxx | Address: |
000 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
|
|
|
|
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| Print Name: | Ridgewood Ltd. | |||
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