EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("AGREEMENT") is entered into as of September
21, 2005, between PowerHouse Technologies Group, Inc., a Delaware corporation
with offices at 000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx Xxxx, Xxxxxxxxxx,
00000 (the "COMPANY"), and each of the parties listed under "Purchasers" hereto
(each individually, the "PURCHASER" and collectively, the "PURCHASERS").
W I T N E S S E T H:
WHEREAS, the Company has entered into those certain Common Stock and
Warrant Purchase Agreements, dated on or about the date hereof, by and between
the Company and certain of the Purchasers (the "PURCHASE AGREEMENT") of shares
(the "COMMON SHARES") of the Company's Common Stock, par value $0.0001 per share
(the "COMMON STOCK"), A Warrants (the "A WARRANTS") to purchase Common Shares,
subject to the terms and conditions set forth therein and B Warrants (the "B
WARRANTS") to purchase Common Shares, subject to the terms and conditions set
forth therein.
WHEREAS, a condition to the issuance of the Common Shares and Warrants to
the Purchasers pursuant the Purchase Agreements is the conversion of the
outstanding shares of the Series A Senior Preferred Stock of the Company (the
"SENIOR PREFERRED STOCK") into Common Shares.
WHEREAS, a condition to the issuance of the Common Shares, A Warrants and
B Warrants to the Purchasers pursuant the Purchase Agreements is the conversion
or redemption of the Company's outstanding Secured Convertible Promissory Notes,
each dated June 9, 2005 (the "NOTES"), into Common Shares, A Warrants and B
Warrant pursuant to the Purchase Agreement and the termination of the Series A
Senior Preferred Equity Security Agreement dated as of April 23, 2004. Whereas
the Notes provide for the issuance of additional A Warrants and B Warrant to the
Note holders upon such conversion (the "ADDITIONAL WARRANTS", together with the
A Warrants and the B Warrants, the "WARRANTS"). The Common Shares and Warrants
are collectively referred to as the "SECURITIES".
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in the Purchase Agreement, the
Warrants and this Agreement, the Company and each Purchaser agree as follows:
1. Certain Definitions. Unless defined herein, capitalized terms
used herein and not otherwise defined shall have the meaning ascribed thereto in
the Purchase Agreement, the Note or Warrant, as the case may be. As used in this
Agreement, the following terms shall have the following respective meanings:
"CLOSING DATE" shall have the meaning ascribed to it in the Purchase
Agreement.
"COMMISSION" or "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"HOLDER" and "HOLDERS" shall include each Purchaser and any permitted
transferee or transferees of Registrable Securities (as defined below) and the
Securities which have not been sold to the public to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement and/or the Purchase Agreement.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"REGISTRABLE SECURITIES" shall mean: (i) the Common Shares (without regard
to any limitations on beneficial ownership contained in the Warrants) or other
securities issued or issuable to each Holder or its permitted transferee or
designee (a) upon conversion of the Warrants, or (b) upon any distribution with
respect to, any exchange for or any replacement of a Warrant, or (c) upon any
conversion, exercise or exchange of any securities issued in connection with any
such distribution, exchange or replacement, (ii) securities issued or issuable
upon any stock split, stock dividend, recapitalization or similar event with
respect to the foregoing; (iii) securities issued or issuable as payment in
accordance with the terms of the Purchase Agreement or this Agreement; and (iv)
any other security issued as a dividend or other distribution with respect to,
in exchange for or in replacement of the securities referred to in the preceding
clauses; provided that all such shares shall cease to be Registrable Securities
at such time as they have been sold under a Registration Statement or pursuant
to Rule 144 under the Securities Act or otherwise or at such time as they are
eligible to be sold pursuant to Rule 144(k). For purposes of this Agreement, the
terms "Registrable Securities" and "Common Shares" shall include any shares of
the Company's Common Stock that are issued pursuant to the terms of that certain
Placement Agent Common Stock Purchase Warrant of even date herewith between the
Company and X.X. Xxxxxxxxx Towbin, LLC.
"REGISTRATION EXPENSES" shall mean all expenses, exclusive of underwriting
discounts and commissions, to be incurred in connection with each Holder's
registration rights under this Agreement not included in Selling Expenses,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company and one counsel for
the Holders, blue sky fees and expenses, and 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).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section 2(a)
herein.
"REGULATION D" shall mean Regulation D as promulgated pursuant to the
Securities Act, and as subsequently amended.
"SECURITIES ACT" or "ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
2. Registration Requirements. The Company shall use its best efforts
to effect the registration of the Registrable Securities (including, without
limitation, the execution
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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) as would
permit or facilitate the sale or distribution of all the Registrable Securities
in the manner (including manner of sale) and in all states reasonably requested
by the Holder. Such best efforts by the Company shall include, without
limitation, the following:
(a) The Company shall, as expeditiously as possible after the
Closing Date:
(i) But in any event by the later of September [__], 2005, or
thirty (30) calendar days after the Closing Date ("REQUIRED FILING DATE"),
prepare and file a registration statement with the Commission pursuant to
Rule 415 under the Securities Act on Form SB-2 under the Securities Act
(or in the event that the Company is ineligible to use such form, such
other form as the Company is eligible to use under the Securities Act
provided that such other form shall be converted into an SB-2 as soon as
Form SB-2 becomes available to the Company) covering resales by the
Holders as selling stockholders (not underwriters) of the Registrable
Securities ("REGISTRATION STATEMENT"), which Registration Statement, to
the extent allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of
Common Stock as may become issuable upon exercise of the Warrants. The
number of shares of Common Stock initially included in such Registration
Statement shall be no less than the sum of 1.5 times the number of
Registrable Securities as of the Closing Date. Thereafter the Company
shall use its best efforts to cause such Registration Statement and other
filings to be declared effective as soon as possible, and in any event at
5:00 p.m. (New York City time) on the date the Registration Statement is
declared effective and no later than (i) the 90th calendar day following
the Closing Date or (ii) if the Registration Statement receives SEC
review, then the one hundred twentieth (120th) calendar day after the
Closing Date (the "REQUIRED EFFECTIVE DATE"). Without limiting the
foregoing, the Company will promptly respond to all SEC comments,
inquiries and requests, and shall request acceleration of effectiveness at
the earliest possible date.
(ii) 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 Securities Act with respect to the disposition
of all securities covered by such Registration Statement and notify the
Holders of the filing and effectiveness of such Registration Statement and
any amendments or supplements.
(iii) By 9:00 a.m. (New York City time) on the first business
day after the effectiveness of the Registration Statement or the filing
date of any amendments or supplements, as the case may be, furnish, by
email to the
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respective email addresses set forth on the signature pages hereto, to
each Holder that has Common Shares included in the Registration Statement
such numbers of copies of a current prospectus conforming with the
requirements of the Securities Act, copies of the Registration Statement,
any amendment or supplement thereto and any documents incorporated by
reference therein and such other documents as such Holder may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by such Holder.
(iv) Register and qualify the securities covered by such
Registration Statement under the securities or "Blue Sky" laws of all
domestic jurisdictions; 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.
(v) Notify promptly each Holder that has Registrable
Securities included in the Registration Statement of the happening of any
event (but not the substance or details of any such event) of which the
Company has knowledge as a result of which the prospectus (including any
supplements thereto or thereof) 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 (each an "EVENT"), and use its best efforts to promptly
update and/or correct such prospectus. Each Holder will hold in confidence
and will not make any disclosure of any such Event and any related
information disclosed by the Company.
(vi) Notify each Holder of the issuance by the Commission or
any state securities commission or agency of any stop order suspending the
effectiveness of the Registration Statement or the threat or initiation of
any proceedings for that purpose. The Company shall use its best efforts
to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible time.
(vii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or markets on
which the Common Stock is then listed and prepare and file any required
filings with the Over The Counter Bulletin Board (the "OTCBB"), if any, or
any other exchange or market where the Common Shares are traded.
(viii) Take all steps reasonably necessary to enable Holders
to avail themselves of the prospectus delivery mechanism set forth in Rule
153 (or successor thereto) under the Act.
(b) Notwithstanding the obligations under Section 2(a)(v) or any
provision of this Agreement, if (i) in the good faith judgment of the Company,
following consultation with legal counsel, it would be detrimental to the
Company and its stockholders for resales of Registrable Securities to be made
pursuant to the Registration Statement due to the existence of a
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material development or potential material development involving the Company
that the Company would be obligated to disclose in the Registration Statement,
which disclosure would be premature or otherwise inadvisable at such time or
would have a material adverse effect upon the Company and its stockholders, or
(ii) in the good faith judgment of the Company, it would adversely affect or
require premature disclosure of the filing of a Company-initiated registration
of any class of its equity securities, then the Company will have the right to
suspend the use of the Registration Statement for one period of not more than 20
calendar days in any 12 month period, but only if the Company reasonably
concludes, after consultation with outside legal counsel, that the failure to
suspend the use of the Registration Statement as such would create a material
liability or violation under applicable securities laws or regulations.
(c) Set forth below in this Section 2(c) are (I) events that may
arise that the Purchasers consider will interfere with the full enjoyment of
their rights under this Agreement, the Purchase Agreement and the Warrants (the
"INTERFERING EVENTS"), and (II) certain remedies applicable in each of these
events.
(i) Payments by the Company. If (i) at any time after
effectiveness of the Registration Statement, sales thereunder during the
registration period (as described in Section 5) cannot be made for any
reason, other than by reason of the operation of Section 2(b), for a
period of more than 10 consecutive business days, (ii) at any time after
effectiveness of the Registration Statement, sales thereunder during the
Registration Period cannot be made for a period of time that exceeds the
limitations set forth in Section 2(b), or (iii) at any time the Common
Shares are not listed or included for quotation on the OTCBB or other
exchange or market where shares of the Company's common stock are then
traded for more than 10 consecutive calendar days, then the Company will
thereafter make a payment to each Holder equal to 3% of the purchase price
paid for (1) the Common Shares and Warrants then held by the Holder and
(2) Common Shares obtained upon exercise of the Warrants for each 30
business days that either (i) sales cannot be made under the effective
Registration Statement or (ii) the Common Shares are not listed or
included for quotation on the OTCBB or other exchange or market where
shares of the Company's Common Stock are then traded; provided however,
that any calendar day on which both conditions exist shall count as a
single calendar day and no calendar day taken into account for purposes of
determining whether any payment is due under Section 2 (c)(ii) shall be
taken into account for purposes of determining whether any payment is due
under this Section 2(c)(i) or the amount of such payment). The Company
shall have the option, in its sole discretion, to pay the partial
liquidated damages amount for each of the first three months with
additional shares of Common Stock, with the price of each such additional
share of Common Stock to be deemed equal to average closing price per
share of the Company's Common Stock as quoted on the OTCBB for each such
30 business day period, or portion thereof. The number of shares not
previously sold as specified in the previous sentence shall be determined
as of the end of the respective 30-business day period. In no event shall
payment pursuant to this Section exceed 30% in the aggregate of the
purchase price paid for (i) the Common Shares and Warrants then held by
the Holder and (ii) Common Shares
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obtained upon conversion of the Notes or Preferred Stock or exercise of
the Warrants (including such Holder's predecessors and successors) for the
entire registration period (as described in Section 5). These payments
will be prorated on a daily basis during the 30-business day period and
will be paid to each Holder within ten business days following the end of
each 30- business day period as to which payment is due hereunder provided
that the respective Holder delivered to the Company at least two business
days prior thereto information with respect to the number of Common Shares
and Warrants not previously sold by such Holder (together with reasonable
supporting documentation). The Holders may make a claim for additional
damages as a remedy for the Company's failure to comply with the timelines
set forth in this Section, but acknowledgement of such right in this
Agreement shall not constitute an admission by the Company that any such
damages exist or may exist. Nothing contained in the preceding sentence
shall be read to limit the ability of the Holders to seek specific
performance of this Agreement. Notwithstanding the foregoing, if the
Holders are no longer entitled to receive payments as a result of the
above-described percentage limitation on said payments, then each Holder
shall have the right, at any time upon at least thirty (30) calendar days
written notice, to sell all (but not less than all) of its Common Shares
(including Common Shares issued on exercise of the Warrants) to the
Company for a cash purchase price equal to the purchase price paid for
such Common Shares.
(ii) Effect of Late Registration. If the Registration
Statement related to a Holder's Common Shares has not been filed by the
Required Filing Date or has not been declared effective by the Required
Effective Date related to such Holder, then the Company will make a
payment to such Holder for either such delay (each a "LATE REGISTRATION
PAYMENT"). Each Late Registration Payment will be equal to 3% of the
purchase price paid for (i) the Common Shares and Warrants then held by
the Holder and not sold by the Holder and (ii) Common Shares obtained by
such Holder upon exercise of the Warrants for the first 30 business days
after the Required Filing Date or Required Effective Date, as the case may
be, and 3% of such purchase price for each period of 30 business days
thereafter (but no business day taken into account for purposes of
determining whether any payment is due under Section 2(c)(i) shall be
taken into account for purposes of determining whether any payment is due
under this Section 2(c)(ii) or the amount of such payment). The Company
shall have the option, in its sole discretion, to pay the Late
Registration Payment for each of the first three months with additional
shares of Common Stock, with the price of each such additional share of
Common Stock to be deemed equal to average closing price per share of the
Company's Common Stock as quoted on the OTCBB for each such 30 business
day period, or portion thereof. In no event shall payment pursuant to this
Section exceed 30% in the aggregate of the purchase price paid for (i) the
Common Shares and Warrants then held by the Holder and (ii) Common Shares
obtained upon conversion of the Notes or Preferred Stock or exercise of
the Warrants (including such Holder's predecessors and successors) for the
entire registration period (as described in Section 5). The Late
Registration Payments will be prorated on a daily basis during the
30-business day period and
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will be paid to the initial Holders within ten business days following the
end of each 30-business day period as to which payment is due hereunder,
provided that the respective Holder delivered to the Company at least two
business days prior thereto information with respect to the number of
Common Shares and Warrants not previously sold by such Holder (together
with reasonable supporting documentation). The Holders may make a claim
for additional damages as a remedy for the Company's failure to comply
with the timelines set forth in this Section, but acknowledgement of such
right in this Agreement shall not constitute an admission by the Company
that any such damages exist or may exist. Nothing contained in the
preceding sentence shall be read to limit the ability of the Holders to
seek specific performance of this Agreement. Notwithstanding the
foregoing, if the Holders are no longer entitled to receive Late
Registration Payments as a result of the above-described percentage
limitation on said payments, then each Holder shall have the right, at any
time upon at least thirty (30) calendar days written notice, to sell all
(but not less than all) of its Common Shares (including Common Shares
issued on exercise of the Warrants) to the Company for a cash purchase
price equal to the purchase price paid for such Common Shares.
(d) If at any time subsequent to the date such Registration
Statement is declared effective, the number of shares of Common Stock registered
for resale pursuant to the Registration Agreement is not equal to at least 100%
of the Registrable Securities, the Company shall amend the Registration
Statement to add such additional securities. In the event that the Company is
unable under the securities laws to add such additional securities to the then
effective Registration Statement, the Company shall promptly file, in accordance
with the procedures set forth herein, an additional Registration Statement with
respect to such newly Registrable Securities. The Company shall use its best
efforts to cause any such additional Registration Statement, when filed, to
become effective within 30 calendar days of that date that the need to file the
Registration Statement arose. All of the registration rights and remedies under
this Agreement shall apply to the registration of such newly reserved shares and
such new Registrable Securities.
(e) If at any time during the term of this Agreement, the
registration statement described in Section 2(a) is not effective with respect
to some or all of the Registrable Securities, each Purchaser shall have the
following "piggyback" registration rights. If the Company at any time following
the Closing Date proposes for any reason to register Common Shares under the
Securities Act (other than registrations relating to employee benefit plans,
business combinations or other registrations on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto), it shall promptly give
written notice to each Purchaser of its intention to so register such equity
securities and, upon the written request, given within 20 calendar days after
delivery of such notice by the Company, of such Purchaser to include in such
registration Registrable Securities held by such Purchaser (which request shall
specify the number of Registrable Shares proposed to be included in such
registration by such Purchaser and shall state the intended method of
disposition of such Registrable Securities by such Purchaser), the Company shall
use its best efforts to cause all such Registrable Securities to be included in
such registration on the same terms and conditions as the securities otherwise
being sold in such registration; provided, however, that the Company shall have
the right to delay such a registration under customary circumstances for a
period not in excess of 90 calendar
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days each in any twelve month period and if the managing underwriter advises the
Company in writing that the inclusion of all Registrable Securities proposed to
be included in such registration would interfere materially with the successful
marketing (including pricing) of primary shares (the "PRIMARY SHARES") proposed
to be registered by the Company, then the number of Primary Shares and
Registrable Securities proposed to be included in such registration shall be
included in the following order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Securities requested to be
included in such registration pursuant to this Section 2(e)
provided, that in the case of any such underwritten offering of Common Shares by
the Company that is in satisfaction of a demand registration pursuant to Section
2(f), the order for inclusion of Primary Shares and Registrable Securities shall
be as set forth in that section. In no event shall the number of shares to be
sold by the Purchasers be less than 25% of the total amount of securities
included for securities holders in the registration. No shareholder of the
Company shall be granted piggyback registration rights that would reduce the
number of shares that may be included by the holders of the Registrable
Securities in such registration without the consent of the holders of at least
two-thirds of the Registrable Securities.
(f) If at any time during the period beginning 120 calendar
days after the Closing Date and ending two years after the Closing Date, the
registration statement described in Section 2(a) is not effective with respect
to some or all of the Registrable Securities, Purchasers who collectively hold
more than $500,000 in value of the Registrable Securities shall have the
following demand registration rights. If the Company shall be requested in
writing by an eligible Purchaser, or eligible Purchasers, to effect a
registration on Form S-1, or on Form SB-1 if the Company is so eligible, under
the Securities Act of Registrable Securities, then the Company shall promptly
use its best efforts to effect such registration under the Securities Act of
such Registrable Securities which the Company has been so requested to register
in the manner described in Section 2(a); provided, however, that the Company
shall not be obligated to effect any registration under this Section 2(f) except
in accordance with the following provisions:
(i) The Company shall not be obligated to use its best efforts
to file and cause to become effective (x) more than two registration
statements on Form S-1 with respect to Registrable Securities initiated by
Purchasers pursuant to this Section 2(f); (y) any registration statement
covering less than $500,000 in value of Registrable Securities; or (z) any
registration statement during any period in which any other registration
statement pursuant to which Common Shares are to be or were sold has been
filed and not withdrawn or has been declared effective within the prior 60
calendar days;
(ii) The Company may delay the filing or effectiveness of any
registration statement for a period of up to 60 calendar days after the
date of a request for registration pursuant to this Section 2(f) if the
Company determines in good faith that (A) it is in possession of material,
non-public information concerning an acquisition, merger,
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recapitalization, consolidation, reorganization or other material
transaction by or of the Company or concerning pending or threatened
litigation and (B) disclosure of such information would jeopardize any
such transaction or litigation or otherwise materially harm the Company;
provided, however, that the Company may not exercise such deferral right
more than once in any twelve month-period.
(g) At such time as the Company shall have qualified for the
use of Form S-3 promulgated under the Securities Act or any successor form
thereto, the Purchasers shall have the right to request in writing registrations
on Form S-3 or such successor form of Registrable Shares held by Purchasers in
the manner described in Section 2(a), which request or requests shall (i)
specify the number of Registrable Shares held by the requesting Purchasers
intended to be sold or disposed of, (ii) state the intended method of
disposition of such Registrable Shares held by Purchasers and (iii) relate to
Registrable Shares having an anticipated aggregate offering price of at least
$500,000. A requested registration on Form S-3 or any such successor form in
compliance with Section 4 shall not count as a registration statement initiated
pursuant to Section 2(f) but shall otherwise be treated as a registration
statement initiated pursuant to, and shall, except as otherwise expressly
provided in Section 4, be subject to Section 2. In no event will any Purchaser
be entitled to demand any registration on Form S-3 if the registration would
require filing under Blue Sky or similar state securities laws in any
jurisdiction in which the Company would be required to qualify to do business or
execute a general consent to service of process to effect such registration and
filing.
3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.
4. Registration on Form SB-2. The Company shall use its reasonable
best efforts to continue to meet the "registrant eligibility" requirements for a
secondary offering set forth in the general instructions to Form SB-2 or any
comparable or successor form or forms, or in the event that the Company is
ineligible to use such form, such form as the Company is eligible to use under
the Securities Act, provided that if such other form is used, the Company shall
convert such other form to a Form SB-2 as soon as the Company becomes so
eligible.
5. Registration Period. In the case of the registration effected by
the Company pursuant to this Agreement, the Company shall keep such registration
effective and current until the later of (a) the date on which all the Holders
have completed the sales or distribution described in the Registration Statement
relating thereto or, if earlier until such Registrable Securities may be sold by
the Holders under Rule 144(k) (provided that the Company's transfer agent has
accepted an instruction from the Company to such effect) or (b) the second (2nd)
anniversary of the Closing Date.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing, within the meaning of Section 15 of the
Securities Act and the rules and regulations thereunder with respect to which
registration, qualification or compliance has been effected pursuant to this
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Agreement, and each underwriter, if any, and each person who controls, within
the meaning of Section 15 of the Securities Act and the rules and regulations
thereunder, any underwriter, 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 final
prospectus (as amended or supplemented if the Company files any amendment or
supplement thereto with the SEC), Registration Statement filed pursuant to this
Agreement or any post-effective amendment thereof 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 not misleading in light of the
circumstances under which they were made, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors, agents and partners, and each person controlling each of
the foregoing, for any reasonable legal fees of a single counsel and any other
expenses reasonably incurred in connection with investigating and defending any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to a Holder to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on (i) any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter (if any) therefor and stated to be specifically for
use therein, (ii) any failure by any Holder to comply with prospectus delivery
requirements or the Securities Act or Exchange Act or any other law or legal
requirement applicable to them or any covenant or agreement contained in the
Purchase Agreement or this Agreement or (iii) an offer of sale of Common Shares
occurring during a period in which sales under the Registration Statement are
suspended as permitted by this Agreement. The indemnity agreement contained in
this Section 6(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 will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally but not
jointly, if Registrable Securities held by it are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, agents and partners, and
any other stockholder selling securities pursuant to the Registration Statement
and any of its directors, officers, agents, partners, and any person who
controls such stockholder within the meaning of the Securities Act or Exchange
Act and 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 the rules and
regulations thereunder, each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) 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 final prospectus (as amended or
supplemented if the Company files any amendment or supplement thereto with the
SEC), Registration Statement filed pursuant to this Agreement or any
post-effective amendment thereof or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading in light of the circumstances under
which they were made, and will reimburse the Company and such other Holder(s)
and their directors, officers and partners, underwriters or control persons for
any reasonable legal fees or any other expenses reasonably incurred in
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connection with investigating and defending any such claim, loss, damage,
liability or action, 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 final prospectus (as amended or supplemented if the
Company files any amendment or supplement thereto with the SEC), Registration
Statement filed pursuant to this Agreement or any post-effective amendment
thereof in reliance upon and in conformity with written information furnished to
the Company by such Holder and stated to be specifically for use therein, and
provided that the maximum amount for which such Holder shall be liable under
this indemnity shall not exceed the net proceeds received by such Holder from
the sale of the Registrable Securities pursuant to the registration statement in
question. The indemnity agreement contained in this Section 6(b) shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
if such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 6 (the "INDEMNIFIED PARTY") shall give notice to the party required
to provide indemnification (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 in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 6 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. 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
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
7. Contribution. If the indemnification provided for in Section 6
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder(s) on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder(s) in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of any Holder(s) on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by such Holder(s).
In no event shall the obligation of any Indemnifying Party to contribute
under this
11
Section 7 exceed the amount that such Indemnifying Party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 6(a) or 6(b) hereof had been available under the circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraphs. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section, no Holder shall be required to
contribute any amount in excess of the amount by which in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the registration statement in question. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
Sections 6 and 7 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement, and (ii) the
consummation of the sale or successive resales of the Registrable Securities.
9. Information by Holders. As a condition to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of each Holder, such Holder will furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended methods of disposition of the Registrable Securities held by it
as is reasonably required by the Company to effect the registration of the
Registrable Securities. At least five business days prior to the first
anticipated filing date of a Registration Statement for any registration under
this Agreement, the Company will notify each Holder of the information the
Company requires from that Holder whether or not such Holder has elected to have
any of its Registrable Securities included in the Registration Statement.
10. Further Assurances. Each Holder will cooperate with the Company,
as reasonably requested by the Company, in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder's irrevocable election to exclude all of
such Holder's Registrable Securities from such Registration Statement.
11. Suspension of Sales. Upon receipt of any notice from the Company
under Section 2(a)(v) or 2(b), each Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until (i) it receives copies of a
supplemented or amended prospectus contemplated by Sections 2(a)(v) or (ii) the
Company advises the Holder that a suspension of sales under Section 2(b) has
terminated. If so directed by the Company, each Holder will deliver to the
Company (at the expense of the Company)
12
or destroy all copies in the Holder's possession (other than a limited number of
file copies) of the prospectus covering such Registrable Securities that is
current at the time of receipt of such notice.
12. Replacement Certificates. The certificate(s) representing the
Registrable Securities held by a Purchaser (or then Holder) may be exchanged by
such Purchaser (or such Holder) at any time and from time to time for
certificates with different denominations representing an equal aggregate number
of Common Shares, as reasonably requested by such Purchaser (or such Holder)
upon surrendering the same. No service charge will be made for such registration
or transfer or exchange. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note or
certificates for the underlying Common Shares of any of the foregoing, and, in
the case of loss, theft or destruction, of indemnity reasonably satisfactory to
it, or upon surrender and cancellation of such certificate if mutilated, the
Company will make and deliver a new Note or certificate of like tenor and dated
as of such cancellation at no charge to the holder.
13. Transfer or Assignment. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to each Purchaser by
the Company under this Agreement to cause the Company to register Registrable
Securities, and all other rights granted to any Purchaser by the Company
hereunder, may be transferred or assigned (in whole or in part) by such
Purchaser to (i) any partner or retired partner of such Purchaser, if such
Purchaser is a partnership, (ii) any family member of such Purchaser or trust
for the benefit thereof or of such Purchaser; or (iii) any transferee from such
Purchaser of at least 5,000 shares of Registrable Securities; provided in each
case that (i) the Company is given written notice by the Purchaser at the time
of or within a reasonable time after such transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned; and provided further that the transferee or assignee of such rights
agrees in writing to be bound by the registration provisions of this Agreement,
(ii) such transfer or assignment is not made under the Registration Statement or
Rule 144, (iii) such transfer is made according to the applicable requirements
of the Purchase Agreement, (iv) the transferee has provided to the Company an
investor questionnaire (or equivalent document) evidencing that the transferee
is a "qualified institutional buyer" or an "accredited investor" defined in Rule
501(a)(1),(2),(3), or (7) of Regulation D, and (v) no transfer is made to any
former director or officer of Agate or any competitor of the Company, as listed
on Schedule A attached hereto.
14. Miscellaneous.
(a) Remedies. The Company and each Purchaser acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be
13
effective upon actual receipt of such notice. The addresses for such
communications shall be:
to the Company:
PowerHouse Technologies Group, Inc.
PowerHouse Technologies Group, Inc.
000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxx, Xxxxxxxxxx, 00000
Facsimile: (000) 000-0000
Attn: Xxx Xxxxxx, CEO
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
If to the Purchasers, to the respective addresses set forth on Schedule I
to the applicable Purchase Agreement
with a copy to:
X.X. Xxxxxxxxx, Towbin
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Facsimile: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxx
and
Pillsbury Xxxxxxxx Xxxx Xxxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxxxxx
Any party hereto may from time to time change its address for notices by giving
at least five calendar days' written notice of such changed address to the other
parties hereto.
(c) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the
14
exercise of any such right accruing to it thereafter. The representations and
warranties and the agreements and covenants of the Company and each Purchaser
contained herein shall survive the Closing.
(d) Execution in Counterpart. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(e) Signatures. Facsimile signatures shall be valid and
binding on each party submitting the same.
(f) Entire Agreement; Amendment. This Agreement, together with
the Purchase Agreement, the Warrants and the agreements and documents
contemplated hereby and thereby, contains the entire understanding and agreement
of the parties, and may not be amended, modified or terminated except by a
written agreement signed by the Company plus the Holders of 67% of the
Registrable Securities (determined on a fully-diluted, as converted basis).
(g) Governing Law. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.
(h) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
(i) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(j) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
15
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the date first written above.
COMPANY:
POWERHOUSE TECHNOLOGIES GROUP, INC.
By: ___________________________________
Xxx Xxxxxx
Chief Executive Officer
16
COUNTERPART SIGNATURE PAGE
TO REGISTRATION RIGHTS AGREEMENT,
DATED SEPTEMBER ___, 2005,
AMONG POWERHOUSE TECHNOLOGIES GROUP, INC. AND
THE "PURCHASERS" IDENTIFIED THEREIN
The undersigned hereby executes and delivers the Registration Rights Agreement
to which this Signature Page is attached, which, together with all counterparts
of the Registration Rights Agreement and Signature Pages of the Company and
other "Purchasers" under the Registration Rights Agreement, shall constitute one
and the same document in accordance with the terms of the Registration Rights
Agreement.
PURCHASER: __________________________________________
By: ___________________________________________
Name:
Title:
Address: __________________________
Telephone: ___________________________
Telecopier: __________________________
Email Address: __________________________
17
SCHEDULE A
FORMER DIRECTOR OR OFFICER OF AGATE
Xxxxxxx Xxxx
Xxxxxxx Xxx
18
