RIGHTS AGREEMENT
RIGHTS AGREEMENT (the "Agreement") dated as of the 2nd day of June
1995, by and among International Sports Wagering Inc., a Delaware corporation
(the "Company") and certain purchasers of the Company's Common Stock and
Warrants listed on Schedule A hereto (the "Investors"):
W I T N E S S E T H:
WHEREAS, the parties entered into a Stock and Warrant Purchase
Agreement of even date herewith (the "Purchase Agreement") pursuant to which
the Company sold and the Investors purchased certain shares of the Company's
Common Stock and warrants to purchase shares of the Company's Common Stock
(the "Warrants"). (The shares of Common Stock purchased by the Investors and
any shares of Common Stock issuable or issued upon exercise of the Warrants
are herein referred to as the "Shares").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
1. Restrictions on Transferability. The Shares shall not be sold,
assigned, transferred or pledged except upon conditions specified in this
Agreement, which conditions are intended to assure compliance with the
provisions of the Securities Act. Subject to the provisions of Section 2.13 each
Investor will cause any proposed purchaser, assignee, transferee or pledgee of
the Shares to agree to take and hold such securities subject to the provisions
specified in this Agreement. The parties agree that the Warrants shall not be
transferrable other than to other Investors and pursuant to the terms of the
Warrants.
2. Registration Rights.
2.1 Definitions. As used in this Agreement:
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act") and the subsequent declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means (i) the Shares,
and (ii) any other shares of Common Stock of the Company issued as or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as a divi-
dend or other distribution with respect to, or in exchange for or in
replacement of, the Shares or the Warrants, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned; provided, however, that Shares or
other securities shall only be treated as Registrable Securities if and so long
as they have not been (A) sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions,
and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any holder of outstanding
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering.
(e) The term "Form S-3" means such form under the Securities
Act of 1933, as amended (the "Act") as in effect on the date hereof or any
registration form under the Act subsequently adopted by the Securities and
Exchange Commission ("SEC") which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
2.2 Demand Registration.
(a) If the Company shall receive at any time after the earlier
of (i) May 31, 1998 or (ii) 180 days after the closing of the Company's initial
registered public offering of Common Stock under the Securities Act of 1933, a
written request from the Holders of a majority of the Registrable Securities
then outstanding that the Company file a registration statement under the Act
covering the registration of at least fifty percent (50%) of the Registrable
Securities then outstanding (or a lesser percent if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would equal or
exceed $5,000,000), then the Company shall, within thirty (30) days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 2.2(b), effect as soon as practicable,
and in any event within 120 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request
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to be registered within twenty (20) days of the mailing of such notice by the
Company in accordance with Section 4.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting they shall so advise the
Company as a part of their request made pursuant to this Section 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
2.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2.2, if the underwriter advises the Initiating Holders in writing that
it requires a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders and any
other holders of Common Stock entitled to registration rights whose shares of
Common Stock were to be included in such registration statement, in proportion
(as nearly as practicable) to the amount of Common Stock of the Company owned by
each such person.
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 2.2.
(d) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
2.2, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore reasonable to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
(e) If within thirty (30) days after the request to register
Registerable Securities the Company gives notice that
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it intends to initiate an initial firmly underwritten registered public offering
within forty-five (45) days of the time of the request, then the Company shall
have the right to defer such filing, provided that it initiates such public
offering such filing within such forty-five (45) day period.
2.3 "Piggyback" Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
Common Stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
either to the sale of securities to participants in a Company stock option,
stock purchase or similar plan or to an SEC Rule 145 transaction), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20)
days after mailing of such notice by the Company in accordance with Section 4.5,
the Company shall, subject to the provisions of Section 2.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
2.4 Obligations of the Company. Whenever required under this Section
2 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder keep
such registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best 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
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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.
(e) 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
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) 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 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 a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 2, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 2, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters on the date that the registration statement with respect to
such securities becomes effective, 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,
if any, and to the Holders requesting registration of Registrable Securities.
2.5 Furnish Information. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
2.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, the fees and disbursements of counsel for the Company and
the reasonable fees and expenses of one special counsel all of the selling
stockholders (provided, however that the maximum expense of such
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special counsel which the Company shall be obligated to pay shall be $10,000)
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Holders participating therein shall bear such
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 2.2.
2.7 Expenses of "Piggyback" Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 2.3 for each Holder (which right may be assigned as provided
in Section 2.13), including (without limitation) all registration, filing, and
qualification fees, printers, accounting fees relating or apportionable thereto
and the reasonable fees and expenses of one special counsel of the selling
stockholders (provided, however that the maximum expense of such special counsel
which the Company shall be obligated to pay shall be $10,000), but excluding
underwriting discounts and commissions relating to Registrable Securities.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 2.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities that the underwriters
reasonably believe is compatible with the success of the Offering, then the
Company shall be required to include in the offering only that number of such
securities including Registrable Securities, which the underwriters believe will
not jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder; provided, however, that if such offering is the initial public
offering of the Company's securities, in which case the selling stockholders may
be excluded if the underwriters make the determination described above and no
other stockholder's securities are included. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder which is a
holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any
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such partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling stockholder," and any
pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
2.9 Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.10 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplement thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay as
incurred to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 2.10(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 Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use
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in connection with such registration by any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 2.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
2.10(b) 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; provided that
in no event shall any indemnity under this subsection 2.10(b) exceed the gross
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this
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Section 2.10, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 2.10.
(d) The obligations of the Company and Holders under this
Section 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 2, and otherwise.
2.11 Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to use its reasonable
efforts to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
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2.12 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of the Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2.12, (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $500,000; (3) if the
Company shall furnish to the Holders a certificate signed by the president of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be detrimental to the Company and its stockholders for
such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than 120 days after receipt of the request of
the Holder or Holders under this Section 2.12; provided, however, that the
Company shall not utilize this right more than twice in any twelve month period;
(4) if the Company has, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 2.12; (5) if the Holders can sell Registrable
Securities pursuant to Rule 144 or otherwise free of the registration
requirements of the Securities Act; (6) if the Company has effected another S-3
registration within 12 months prior to receipt of a request pursuant to this
Section 2.12; or (7) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practi-
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cable after receipt of the request or requests of the Holders. All expenses
incurred in connection with a registration requested pursuant to Section 2.12,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees and disbursements of
counsel for the Company, shall be borne by the Company. Registrations effected
pursuant to this Section 2.12 shall not be counted as demands for registration
or registrations effected pursuant to Section 2.2 or 2.3.
2.13 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may only
be assigned by a Holder to a transferee or assignee of the Shares provided that
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act.
2.14 "Market Stand-still" Agreement. Holders holding Registrable
Securities exceeding one percent (1%) of the outstanding stock of the Company
hereby agree that during the 180- day period following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and its underwriter, sell or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period except Common
Stock included in such registration; provided, however, that: all officers and
directors of the Company and all other Holders holding Registrable Securities
exceeding one percent (1%) of the outstanding stock of the Company whether or
not pursuant to this Agreement) enter into similar agreements. To enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registrable Securities of the Investors (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
2.15 Termination of Registration Rights. No Holder shall be entitled
to exercise any right provided for in this Section 2 after three (3) years
following the consummation of the Company's initial sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
on Form S-1 under the Securities Act of 1933, as amended, which results in
aggregate gross cash proceeds to the Company of at least $5,000,000 (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 a
SEC Rule 145 transaction) or at and after such time following the
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Company's initial public offering as such Holder holds Registrable Securities
equal to 5% or less of the outstanding stock of the Company.
3. Additional Rights.
3.1 Pre-emptive Right. Subject to the terms and conditions specified
in this Section 3.1, the Company hereby grants to each Investor, a pre-emptive
right with respect to future sales by the Company of its New Securities (as
hereinafter defined).
(a) If at any time during the term of this Agreement the
Company proposes to offer, issue, sell or otherwise dispose of shares of the
Common Stock or any other class or series of common stock or preferred stock of
the Company, or options, rights, warrants, conversion rights or appreciation
rights relating thereto, or any other type of equity security that the
Corporation may lawfully issue (collectively, the "New Securities") to any
person or entity other than the Investors or any affiliates thereof:
(b) The Company shall, prior to any such issuance or sale,
give notice in accordance with Section 4.5 (a "Preemptive Notice") to the
Investors setting forth the purchase price of such New Securities, the type and
aggregate number of New Securities to be so offered, issued, sold or otherwise
disposed of, the terms, price and conditions of such offer, issuance, sale or
other disposition and the rights, powers and duties inhering in such additional
New Securities.
(c) The Investors shall have the right (the "Preemptive
Right") to acquire the percentage of such New Securities proposed to be so
offered, issued, sold or otherwise disposed of equal to the number of shares of
Common Stock then held by the Investors divided by the aggregate number of
shares of the Company's Common Stock and stock options outstanding (assuming all
such stock options were exercised) immediately prior to such offer, issuance,
sale or other disposition of New Securities; provided, however, that the terms
and conditions of this Section 3.1 shall not apply to any offer, issuance, sale
or other disposition of (i) New Securities issuable upon exercise of the
Warrants, (ii) New Securities issued in connection with any stock split, stock
dividend, or recapitalization of the Company, (iii) New Securities issuable upon
exercise of any warrant, option or convertible securities if the issuance
thereof was subject to the pre-emptive right granted in this Section 3.1, (iv)
New Securities or rights to acquire New Securities to any person or entity
pursuant to a stock option plan established by the Company for the benefit of
its employees, officers, directors, agents or consultants, or otherwise granted
to an employee of, or consultant to, the Company in connection with such person
or entity's
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employment or retention by the Company; (v) New Securities or rights to acquire
New Securities to a person or entity in connection with the acquisition by the
Company of all or a substantial portion of the stock, assets or business of such
person or entity; (vi) New Securities or rights to acquire New Securities to a
financial institution in connection with the making of, or the agreement to
make, loans to, or other financial arrangements with, the Company by such
financial institution; (vii) New Securities or rights to acquire New Securities
to a person or entity in connection with license arrangements of the Company;
(viii) New Securities or rights to acquire New Securities to strategic corporate
investors as determined by not less than 80% of the Board of Directors; and (ix)
New Securities or rights to acquire New Securities pursuant to any underwritten
public offering of New Securities of the Company pursuant to an effective
registration statement under the Securities Act.
(d) The Investors may exercise such Preemptive Right, in whole
or in part, on the terms and conditions and for the purchase price set forth in
the Preemptive Notice, by giving to the Company notice to such effect, within 10
days after the giving of the Preemptive Notice. The closing of the sale of New
Securities by the Company to those exercising their Preemptive Right shall take
place simultaneously with the closing of the sale of New Securities to third
parties. After the expiration of such 10-day period, the Company shall have the
power to offer, issue, sell and otherwise dispose of any or all of the New
Securities referred to in the applicable Preemptive Notice as to which no
Preemptive Right has been exercised but only upon the terms and conditions, and
for a purchase price not lower than the purchase price, set forth in the
Preemptive Notice. If the Company does not offer, issue, sell or otherwise
dispose of the New Securities referred to in the applicable Preemptive Notice on
the terms and conditions set forth in such Preemptive Notice within 90 days
after the expiration of such 10-day period, then any subsequent proposal by the
Company to offer, issue, sell or otherwise dispose of Equity Securities shall be
subject to this Section 3.1.
3.2 Tag Along Rights.
(a) ▇▇▇▇▇ ▇▇▇▇▇▇ (the "Founder") shall not, during the term of
this Agreement, sell, transfer or otherwise dispose of any of the shares of
Common Stock that he beneficially owns or controls in the Company to any party
unless the Founder shall first notify the Investors in writing of the terms and
conditions of such proposed sale, transfer or other disposition and shall obtain
for the Investors prior to any such sale, transfer or other disposition, a put
option for a period of at least 15 days to sell, transfer or otherwise dispose
to such person on the same per share terms and at the same per share price as
the proposed sale, transfer or other disposition by the Founder, up
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to that number of shares of Common Stock then owned by the Investor that bears
the same proportion to the total number of shares of Common Stock at the time
owned by the Investor as the number of shares of Common Stock being sold,
transferred or otherwise disposed of by the Founder bears to the total number of
shares of Common Stock at the time owned by the Founder.
(b) In order to exercise such put option, the Investor must,
within 15 days after the giving of the notice of a proposed sale, transfer or
other disposition of the Common Stock by the Founder referred to in Section
3.2(a) hereof, deliver to the Founder written notice that the Investor has
elected to sell, transfer or otherwise dispose of the Investor's shares of
Common Stock pursuant to this Section 3 upon the same terms and at the same per
share price as the proposed sale, transfer or other disposition by the Founder,
whereupon such sale, transfer or other disposition by the Investor shall be
completed contemporaneously with the proposed sale, transfer or other
disposition by the Founder.
(c) Notwithstanding anything to the contrary contained in this
Section 3, the Founder or any Founder's Affiliate (as hereinafter defined),
shall have the right at any time during the term of this Agreement to transfer,
whether by sale, by gift inter vivos, by will, or by laws of descent and
distribution, or otherwise, all or any portion of the shares of Common Stock of
the Corporation then owned by it to (i) any such party's spouse, children or
grandchildren, (ii) a trust for the benefit of any such party or such party's
spouse, children or grand-children, or (iii) a partnership the general partner
of whom is the Founder or a corporation all of whose outstanding shares are
owned of record and beneficially, by the Founder (each of the foregoing parties
described in clauses (i)-(iii) above being a "Founder's Affiliate" and being
deemed to be included in the definition of the Founder for all purposes of this
Agreement) and the provisions of Section 3.2 and 3.3 hereof shall not apply to
any such transfer. Any permitted assignee or designee of the Founder or any
Founder Affiliate thereof pursuant to this Section 3 shall, as a condition to
such transfer, be required to execute and deliver a counterpart of this
Agreement, whereby such party agrees to be subject to and bound by all of the
terms and provisions of this Agreement to the same extent as the Founder, and
unless such an agreement is so executed and delivered, such transfer shall be
null and void.
(d) Notwithstanding the foregoing, the rights granted to the
Investors in this Section 3.2 shall not apply to any transfer by the Founder in
one or more transactions of up to a total of 5% of the shares of Common Stock
held by him as of the date of the Initial Closing as defined in the Purchase
Agreement, as adjusted to reflect any stock dividends, splits, contributions,
recapitalizations or other similar events; provided that
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if the Founder proposes to sell or transfer pursuant to this Section 3.2(d) more
than 5% of the shares of Common Stock held by him as of the date of the Initial
Closing in a single transaction or series of related transactions then the
rights granted to the Investors in Section 3.2 (a) shall be applicable.
3.3 Right of First Refusal.
(a) At any time after the date hereof and prior to 18 months
after the date hereof (the "First Refusal Period"), the Founder shall not,
without the prior written consent of the Investors sell, assign, transfer, or
grant a proxy to any person to vote or otherwise act in respect of, (any of the
foregoing being referred to hereafter as a "Disposition") any share of Common
Stock now owned or hereafter acquired by the Founder, effect a Disposition of
any shares of Common Stock, now owned or hereafter acquired by the Founder,
except upon the following terms and conditions. If the Founder desires to sell
all or any portion of the shares of Common Stock held by him during the First
Refusal Period (the "Offered Shares"), and the Founder shall have received an
irrevocable bona fide, arm's-length, written offer (the "Bona Fide Offer") for
the purchase of the Offered Shares, for cash, notes or other consideration, or
any combination thereof, from a prospective purchaser (the "Prospective
Purchaser"), the Founder shall give a notice in writing (the "Option Notice") to
the Investors setting forth the price and terms and conditions of the proposed
sale, the name and address of the Prospective Purchaser, and the effective date
of such Option Notice. For a period of 10 days following the effective date of
such Option Notice (the "Investors' Option Period"), the Investors shall have an
option, on the terms and conditions set forth in this Section 3.3, to purchase
all, but not less than all, of the Offered Shares. The Investors option may be
exercised by giving a written counter-notice (a "Notice of Exercise") to the
Founder within the Investors' Option Period, setting forth the number of the
Offered Shares with respect to which the Investors' option is exercised.
(b) Upon the timely giving of the Notice of Exercise by the
Investors, the Investors shall be obligated to purchase from the Founder, and
the Founder shall be obligated to sell to the Investors the number of the
Offered Shares with respect to which the option has been exercised, at the price
and on the terms and conditions specified in the Bona Fide Offer; provided,
however, that if the Investors do not give Notice(s) of Exercise setting forth
their intention to purchase all of the Offered Shares, then in such event any
Notice(s) of Exercise shall be null and void. If the Bona Fide Offer was for
consideration consisting of other than cash or for consideration consisting in
part of other than cash, then the consideration to be paid by the Investors for
the Offered Shares shall consist of cash, to the extent that the consideration
in the Bona Fide Offer
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consisted of cash, and, to the extent such consideration consisted of other than
cash, a cash consideration equal to the fair market value of such non-cash
consideration set forth in the Bona Fide Offer, which fair market value shall
promptly be determined by an investment banker mutually acceptable to the
Founder and the Investors. If such parties are unable to agree within 20 days
after the expiration of the Investors' Option Period, the appraisal shall be
conducted by an investment banker designated, upon the application of the
Founder or the Investors, by the American Arbitration Association in New York,
New York. The cost of the appraisal shall be borne by the Investors. The
decision of such investment banker shall be final and binding upon the Founder
and the Investors, and each of their respective heirs, legatees, administrators,
executors, successors and assigns.
(c) If the Notice(s) of Exercise shall not have been duly
given as to all of the Offered Shares as aforesaid by the Investors, the Founder
may, within a period of 120 days after the expiration of the Investors' Option
Period, sell the Offered Shares to the Prospective Purchaser upon the terms and
conditions, and for a price not lower than the price, set forth in the Bona Fide
Offer; provided, however, that if the sale to the Prospective Purchaser is not
completed within such 120-day period, the Offered Shares shall continue to
remain subject to all the provisions of this Section 3.3.
(d) The closing of any purchase by the Investors under this
Section 3.3 shall take place at the office of the Company or at such other place
designated by the Founder on a date designated by the Founder, which date shall
not be more than 10 days following the expiration of the Investors' Option
Period.
3.4 Termination. The rights granted in Section 3.1, 3.2 and 3.3
shall terminate and be of no further force or effect upon the first to occur of
(a) any merger or sale of the Company in which the Company is not the surviving
corporation (other than a merger with or into a wholly-owned subsidiary) or any
transaction in which more than 50% of the voting power of the Company is
disposed of; (b) the consummation of the Company's sale of its Common Stock or
other securities pursuant to a registration statement under the Securities Act
of 1933, as amended, (other than a registration statement relating either to
sale of securities to employees of the Company pursuant to its stock option,
stock purchase or similar plan or a SEC Rule 145 transaction); (c) if the
Investors and their affiliates cease to own at least twenty-five percent (25%)
of the outstanding voting securities of the Company; or (d) the Investors
failure to timely exercise the Warrants dated as of the date hereof to purchase
400,000 shares of Common Stock.
3.5 Assignment of Rights. Subject to compliance with all applicable
securities laws, the rights granted under Sections
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3.1, 3.2 and 3.3 may be assigned by an Investor to a transferee or assignee of
such party's shares of the Company's stock. In the event that the Investor shall
assign its rights pursuant to Section 3.1, 3.2 or 3.3 in connection with the
transfer of less than all of its shares of the Company's stock, the Investor
shall also retain its rights as to the proportion of shares not transferred.
4. Miscellaneous.
4.1 Assignment. Subject to the provisions of Section 2.13 and 3.4
hereof, 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 hereto.
This Agreement shall be binding upon any person to whom shares of Common Stock
are transferred in violation of the provisions hereof and the successors,
assigns, heirs, legatees, distributees, executors and administrators of such
transferee and the Corporation may refuse to permit the transfer of such stock
on its books.
4.2 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.
4.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflict of laws.
4.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but which shall together constitute a
single instrument.
4.5 Notices. All notices ("Notices") hereunder shall be in writing,
signed by the party giving or making the same, and shall be delivered personally
or sent by internationally recognized courier service or by telex or facsimile
transmission to each party entitled to receive the same, at such party's last
known address on the books of the Corporation, unless such party shall have
previously notified in writing the party sending such Notice of a change of
address, in which case it shall be sent to the new address. A copy of each such
Notice to the Corporation or the Founder shall also be sent in similar fashion
to ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Constant & ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. A copy of each such
Notice to the Investors shall also be sent in similar fashion to Mr. ▇▇▇▇▇▇▇
▇▇▇▇▇, c/o Geo Capital, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
All Notices shall be deemed given when delivered, sent or transmitted in
accordance herewith.
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4.6 Amendment and Waiver. Any provision of this Agreement may be
amended with the written consent of the Company and the Holders of at least a
majority 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.
4.7 Effect of Amendment or Waiver. Investors and their respective
successors and assigns acknowledge that by the operation of Section 4.7 hereof
the holders of a majority of the Registrable Securities, acting in conjunction
with the Company, will have the right and power to diminish or eliminate all
rights pursuant to this Agreement.
4.8 Rights of Holders. Each holder of Registrable Securities shall
have the absolute 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.
4.9 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. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
4.10 Stock Splits, Stock Dividends, etc. In the event of any
additional issuance of securities to the Founder or Investors, including but not
limited to, any securities issued on a stock split, stock dividend,
recapitalization, reorganization or combination, or upon exercise of any stock
option or warrant, the securities issued to the Investors or the Founder shall
be subject to this Agreement.
4.11 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be
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effective and valid under applicable law, but if any provision of this Agreement
shall be held to be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
4.12 Captions. The captions and headings contained in this agreement
are for the convenience of the parties only and shall not effect the
interpretation or construction of this Agreement.
4.13 Early Termination. Notwithstanding anything to the contrary
provided herein this Agreement and all rights granted to the Investors herein
shall terminate automatically if the Investors fail to purchase a minimum of
400,000 shares of Common Stock of the Company at the "Initial Closing" and
"Second Closing" (as defined in the Stock and Warrant Purchase Agreement of even
date herewith).
4.14 Miscellaneous.
(a) This Agreement contains the entire understanding of the
parties hereto concerning the subject matter hereof and supersedes any and all
prior agreements made by the parties with respect thereto and may not be
amended, terminated or discharged, except by an instrument in writing, signed by
the party to be charged.
(b) Each of the parties agrees to execute and deliver any and
all documents or other instruments and shall do or cause to be done all such
acts or things as may reasonably be necessary or proper to carry out the
purposes of this Agreement.
(c) The parties hereto irrevocably consent that any suit,
legal action or proceeding with respect to any of the rights or obligations
arising directly or indirectly under or relating to this Agreement may be
brought in any New York State or United States federal court located in the
Borough of Manhattan, City and State of New York, and by execution and delivery
of this Agreement each party hereby irrevocably submits to and accepts with
regard to any such suit, legal action or proceeding, for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each party irrevocably consents to the service of process in
any such suit, legal action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, return receipt requested, to it
at its address set forth herein. The foregoing shall not limit the right of any
party to serve process in any other manner permitted by law. Each party hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any suit, legal action or proceeding aris-
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ing directly or indirectly under or relating to this Agreement in any court
located in the Borough of Manhattan, City and State of New York and hereby
further irrevocably waives any claim that a court located in the Borough of
Manhattan, City and State of New York is not a convenient forum for any such
suit, legal action or proceeding. Each party hereby (i) irrevocably waives any
right it may have under the laws of any jurisdiction to commence by publication
any suit, legal action or proceeding with respect to this Agreement, and (ii)
irrevocably agrees that any suit, legal action or proceeding commenced by it
with respect to any rights or obligations arising directly or indirectly under
or relating to this Agreement shall be brought exclusively in any New York State
or United States federal court located in the Borough of Manhattan, City and
State of New York.
The parties hereto have executed this Agreement as of the day and year
first above written.
COMPANY:
INTERNATIONAL SPORTS WAGERING INC.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, individually with
respect only to Sections 3.2 and 3.3
Address: ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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Schedule A
Investors
Seneca Ventures
Woodland Partners
Woodland Venture Fund
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇
DISS Partners
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
