SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 12, 1996
July 16, 1996
SPINTEK GAMING TECHNOLOGIES, INC.
California
(State or other jurisdiction of incorporation)
O-27226 33-0134823
(Commission (IRS Employer
File Number) Identification No.)
901 B Grier Drive , Las Vegas, Nevada 89119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702)263-3660
Suite 609, Tallan Building, Two Union Square, Chattanooga, TN 37402
(Former name or former address if changed since last report)
Item 5. Other events
On July 16, 1996, Spintek Gaming Technologies, Inc. (the
"Company") completed the issuance of its 4% Convertible Debenture due
December 31, 1997 in the aggregate amount of $7,143,000 (the
"Debenture"). This Debenture was issued to RBB Bank Aktiengesellschaft
("RBB") offshore investors pursuant to Regulation S promulgated under
the Act at a discount of 30%. The net proceeds to the Company after the
discount and before expenses was $5,000,000.
The Debenture, plus any accrued interest, automatically converts
into Common Stock of the Company on December 31, 1997; or, at any time
after August 30, 1996 at the option of the holder. The conversion price
ranges from a minimum of $1 to a maximum of $3 per share, subject to
certain conditions described in detail in the Debenture. In the event
the Company fails to become listed on the NASDAQ National Market by
November 13, 1996; or, if the Company's actual profits are not at least
eighty percent ( 80%) of the projected quarterly profits for either of
the quarters ending September 30, 1996 or December 31, 1996, the minimum
conversion price of $1 shall terminate and shall no longer be included
as part of the terms of the Debenture thereby allowing the conversion
price to fall below $1 per share. In addition, in the event the five
day average bid price for the Company's Common Stock does not reach $3
per share within the ninety (90) days ended October 14, 1996, the
Company must effect a reverse stock split sufficient to raise the bid
price to $3.25 per share based upon the five day average bid price.
Expenses incurred in conjunction with the placement of the
Debenture totaled $600,000, which consisted solely of commissions. In
addition, the Company issued to Third World Investments, Ltd. Warrants
to acquire 250,000 shares of Common Stock of the Company at an exercise
price that ranges from a minimum of $1 to a maximum of $2 per share,
described in detail in the Warrant Agreement. The Warrants may be
exercised in whole at any time or in part from time to time, commencing
October 1, 1996 and ending with the close of business on September 30,
2001. The Common Stock issued upon exercise of the Warrant or upon
conversion of the Debenture is subject to a Registration Rights
Agreement.
Copies of the Debenture and related documents are attached
herewith as Exhibits as set forth in the table below:
Exhibits.
1. REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
2. MODIFICATION AGREEMENT
3. ATTORNEY'S OPINION
4. ESCROW AGREEMENT
5. IRREVOCABLE INSTRUCTIONS TO COMPANY AS
TRANSFER AGENT
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Dated: August 12, 1996
SPINTEK GAMING TECHNOLOGIES, INC.
By: /s/Robert E. Huggins
Robert E. Huggins
Its: Chief Financial Officer
REGULATION S SECURITIES SUBSCRIPTION AGREEMENT
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES COMMISSION OF ANY STATE
UNDER ANY STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER REGULATION S ("REGULATION S")
PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS.
THIS SUBSCRIPTION AGREEMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES
OFFERED HEREBY BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OF SOLICITATION WOULD BE UNLAWFUL. INVESTMENT IN THESE
SECURITIES INVOLVES A HIGH DEGREE OF RISK. IN MAKING AN INVESTMENT
DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND THE RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE,
THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED OR DETERMINED THE
ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Regulation S Securities Subscription Agreement (the
"Agreement" or the "Subscription Agreement") is executed by the
undersigned (the "Subscriber") in connection with the offer and
subscription by the Subscriber for Convertible Debentures (the
"Convertible Debentures") of SPINTEK GAMING TECHNOLOGIES, INC., a
California corporation (the "Company"). The Company is offering an
aggregate principal amount of $7,143,000 (U.S.) of Convertible
Debentures at an aggregate purchase price of $5,000,000 (U.S.), the
purchase price representing a 30% discount to (or 70% of) the total
face amount of the Convertible Debentures purchased. The terms of
the Convertible Debentures, including the terms on which the
Convertible Debentures may be converted into Common Stock, $.002 par
value per share of the Company ("Shares"), are set forth in the form
of Convertible Debentures attached hereto as Exhibit A. The
solicitation of this Subscription and, if accepted by the Company,
the offer and sale of Convertible Debentures, are being made in
reliance upon the provisions of Regulation S ("Regulation S")
promulgated under the United States Securities Act of 1933, as
amended (the "Act"). The Convertible Debentures and the Shares
issuable upon conversion thereof are sometimes referred to herein as
the "Securities." The Subscriber wishes to subscribe for the amount
of Convertible Debentures set forth in Section 15 in accordance with
the terms and conditions of this Agreement. It is agreed as follows:
1. Offer to Subscribe; Purchase Price
The Subscriber hereby offers to purchase and subscribe for the
principal amount of Convertible Debentures, and at the price, set out
in Section 15 of this Agreement. The Closing shall be deemed to
occur when this Agreement has been executed by both the Subscriber
and the Company (the "Closing") and payment shall have been made by
the Subscriber, by wire transfer, as directed in writing by the
Company on the day so directed, to an escrow agent, against the
Company's delivery of Convertible Debentures subscribed for under the
terms of this Agreement. If the Closing does not occur, the funds of
the Subscriber shall be returned from escrow. The payment shall be
made by delivering same day funds in United States Dollars as
designated above.
2. Representations; Access to Information; Independent
Information; Independent Investigation
The Subscriber represents and warrants to and covenants with
the Company, on its own behalf and on behalf of each person or entity
for which the Subscriber is acting as a fiduciary, as follows:
2.1 Offshore Transaction. The Subscriber represents and
warrants to the Company that (i) neither the Subscriber nor any of
the investors on whose behalf the Subscriber may purchase and hold
Convertible Debentures or Shares (the "Investors") is a "U.S. person"
as that term is defined in Rule 902(o) of Regulation S (a copy of
which definition is attached as Exhibit B), and neither the
Subscriber nor any Investor is an entity organized or incorporated
under the laws of any foreign jurisdiction by any "U.S person"
principally for the purpose of investing in securities not registered
under the Act, unless the Subscriber is or was organized or
incorporated by "U.S. persons" who are accredited investors (as
defined in Rule 501(a) under the Act) and who are not natural
persons, estates or trusts ("Institutional Investors"), and all
owners of interests in such entity who are "U.S. persons" are
Institutional Investors, and not natural persons, estates or trusts;
(ii) the Convertible Debentures were not offered to the Subscriber or
to any Investor in the United States and at the time of execution of
this Subscription Agreement and of any offer to the Subscriber or to
the Investors to purchase the Convertible Debentures hereunder, the
Subscriber and each such Investor was physically outside the United
States; (iii) the Subscriber is purchasing the Securities for its own
account and not on behalf of or for the benefit of any U.S. person
and the sale and resale of the Securities have not been prearranged
with any buyer in the United States; (iv) the Subscriber and to the
best knowledge of the Subscriber each distributor, if any,
participating in the offering of the Securities, has agreed and the
Subscriber hereby agrees that all offers and sales of the Securities
prior to the expiration of a period commencing on the Closing of all
Convertible Debentures offered and ending forty (40) days thereafter
(the "Restricted Period") shall not be made to U.S. persons or for
the account or benefit of U.S. persons and shall otherwise be made in
compliance with the provisions of Regulation S. Subscriber has not
been engaged or acted as or on behalf of a distributor or dealer (and
is not an affiliate of a distributor or dealer) with respect to this
transaction.
2.2 Independent Investigation. The Subscriber, in offering
to subscribe for the Securities hereunder, has relied upon an
independent investigation made by it and has, prior to the date
hereof, been given access to and the opportunity to examine all books
and records of the Company, and all material contracts and documents
of the Company. The Subscriber will keep confidential all non-public
information regarding the Company that the Subscriber receives from
the Company. In making its investment decision to purchase the
Convertible Debentures, the Subscriber is not relying on any oral or
written representations or assurances from the Company or any other
person or any representation of the Company or any other person other
than as set forth in this Agreement, public filings of the Company or
in a document executed by a duly authorized representative of the
Company making reference to this Agreement. The Subscriber has such
experience in business and financial matters that it is capable of
evaluating the risk of its investment and determining the suitability
of its investment. The Subscriber is a sophisticated investor, as
defined in Rule 506(b)(2)(ii) of Regulation D, and an accredited
investor as defined in Rule 501 of Regulation D, a copy of which
definition is attached hereto as Exhibit C.
2.3 Economic Risk. The Subscriber understands and
acknowledges that an investment in the Convertible Debentures
involves a high degree of risk, including a possible total loss of
investment. The Subscriber represents that the Subscriber is able to
bear the economic risk of an investment in the Convertible
Debentures. In making this statement the Subscriber hereby
represents and warrants that the Subscriber has adequate means of
providing for the Subscriber's current needs and contingencies; the
Subscriber is able to afford to hold the Convertible Debentures for
an indefinite period and the Subscriber further represents that the
Subscriber has such knowledge and experience in financial and
business matters that the Subscriber is capable of evaluating the
merits and risks of the investment in the Convertible Debentures to
be received by the Subscriber. Further, the Subscriber represents
that the Subscriber is able to bear the economic risks of an
investment in the Convertible Debentures; the Subscriber has no
present need for liquidity in such Convertible Debentures; the
Subscriber can afford a complete loss of such investment in the
Convertible Debentures; and the Subscriber is willing to accept such
investment risks.
2.4 No Government Recommendation or Approval. The Subscriber
understands that no United States federal or state agency or similar
agency of any other country has passed upon or made any
recommendation or endorsement of the Company, this transaction or the
subscription of the Securities.
2.5 No Directed Selling Efforts in Regard to this
Transaction. The Subscriber has not, and to the best of the
Subscriber's knowledge, neither the Company nor any distributor, if
any, participating in the offering of the Securities nor any person
acting for the Company or any such distributor has conducted any
"directed selling efforts" as that term is defined in Rule 902 of
Regulation S. Such activity includes, without limitation, the
mailing of printed material to investors residing in the United
States, the holding of promotional seminars in the United States, the
placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a general
circulation in the United States, which discuss the offering of the
Securities.
2.6 Reliance on Representation. This Agreement is made by
the Company with the Subscriber in reliance upon such Subscriber's
representations and covenants made in this Section 2, which by his
execution of this Agreement the Subscriber hereby confirms. If the
Subscriber includes or consists of more than one person or entity,
the obligations of the Subscriber shall be joint and several and the
representations and warranties herein contained shall be deemed to be
made by and be binding upon each such person or entity and their
respective heirs, executors, administrators, successors and assigns.
2.7 No Registration. Subscriber understands that the
Convertible Debentures and the Common Stock issuable upon conversion
of the Convertible Debentures have not been registered under the Act
and are being offered and sold pursuant to an exemption from
registration contained in the Act based in part upon the
representations of Subscriber contained herein. The Common Stock
does, however, carry certain registration rights as set forth in the
Registration Rights Agreement executed by the parties hereto (the
"Registration Rights Agreement").
2.8 No Public Solicitation. Subscriber knows of no public
solicitation or advertisement of an offer in connection with the
proposed issuance and sale of the Convertible Debentures.
2.9 Investment Intent. Subscriber is acquiring the
Convertible Debentures to be issued and sold hereunder (and the
Shares issuable upon conversion of the Convertible Debentures) for
the Subscriber's own account (or for beneficiaries' accounts over
which the Subscriber has investment discretion but no discretionary
voting or dispositive authority). Subscriber and each other party
acquiring Convertible Debentures and the shares issuable upon
conversion of the Convertible Debentures pursuant to this Agreement
are acquiring such securities for investment and not with a view to
the distribution thereof. Subscriber understands that Subscriber
must bear the economic risk of this investment indefinitely unless
the sale of such Convertible Debentures or such Shares is registered
pursuant to the Act, or an exemption from such registration is
available, and that except as set forth in the Registration Rights
Agreement, the Company has no present intention of registering any
such sale of the Convertible Debentures or such Shares. Subscriber
represents and warrants to the Company that it has no present plan or
intention of selling the Convertible Debentures or the Shares in the
United States, has made no predetermined arrangements to sell the
Convertible Debentures or the Shares other than as provided in the
Registration Rights Agreement and that the offering by the Company of
its securities to the Subscriber, as contemplated in this
Subscription Agreement (the "Offering"), together with any subsequent
resale of the Convertible Debentures or the Shares, is not part of a
plan or scheme to evade the registration provisions of the Act.
Subscriber currently has no short position in the Shares, including
any short call position or any long put position or any contract or
arrangement that has the effect of eliminating or substantially
diminishing the risk of ownership of the Convertible Debentures or
the Shares, nor has engaged in any hedging transaction with respect
to the Convertible Debentures or the Shares. Subscriber covenants
that neither Subscriber nor its affiliates nor any person acting on
its or their behalf has the intention of entering, or will enter
during the Restricted Period, into any put option, short position or
any hedging transaction or other similar instrument or position with
respect to the Shares or securities of the same class as the Shares
and neither Subscriber nor any of its affiliates nor any person
acting on its or their behalf will use at any time Shares acquired
pursuant to this Agreement to settle any put option, short position
or other similar instrument or position that may have been entered
into prior to the execution of this Agreement.
2.10 No Sale in Violation of the Act. Subscriber further
covenants that Subscriber will not make any sale, transfer or other
disposition of the Convertible Debentures or the Shares in violation
of the Act (including Regulation S), the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the rules and regulations of
the Securities and Exchange Commission (the "Commission") promulgated
thereunder.
2.11 Incorporation and Authority. Subscriber has the full
power and authority to execute, deliver and perform this Agreement
and to perform its obligations hereunder. This Agreement has been
duly approved by all necessary action of Subscriber, including any
necessary shareholder approval, has been executed by persons duly
authorized by Subscriber, and constitutes a valid and legally binding
obligation of Subscriber, enforceable in accordance with its terms.
2.12 No Reliance on Tax Advice. Subscriber has reviewed with
his, her or its own tax advisors the foreign, federal, state and
local tax consequences of this investment, where applicable, and the
transactions contemplated by this Agreement. Subscriber is relying
solely on such advisors and not on any statements or representations
of the Company or any of its agents and understands that Subscriber
(and not the Company) shall be responsible for the Subscriber's own
tax liability that may arise as a result of this investment or the
transactions contemplated by this Agreement.
2.13 Independent Legal Advice. Subscriber acknowledges that
Subscriber has had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or her own legal
counsel. Subscriber is relying solely on such counsel and not on any
statements or representations of the Company or any of its agents for
legal advice with respect to this investment or the transactions
contemplated by this Agreement, except for the representations,
warranties and covenants set forth herein and in the opinion provided
for in Section 7.5 herein. Subscriber acknowledges that the law firm
of Nelson Mullins Riley & Scarborough, L.L.P., which is acting as
escrow agent in connection with this transaction, is not legal
counsel to Subscriber and has not provided legal advice to
Subscriber.
2.14 Compliance. If Subscriber becomes subject to Section
13(d) of the Exchange Act, Subscriber will duly file the required
Schedule thereunder.
2.15 Not an Affiliate. Subscriber is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Act) of
the Company.
2.16 No Pledges. Subscriber has not pledged the Securities,
and will not pledge the Securities during the Restricted Period (as
defined below), as collateral in a margin account or otherwise with a
U.S. person.
2.17 No Inquiries. Subscriber has not been the subject of a
regulatory inquiry by the Commission.
2.18 Warranties of Other Parties. If Subscriber is purchasing
the Convertible Debentures for the accounts of parties other than
Subscriber (as contemplated by Section 2.9 above), Subscriber has
full power and authority to make the representations, warranties and
agreements made pursuant to this Agreement on behalf of the owners of
such accounts, and agrees that each representation, warranty and
agreement made by Subscriber herein is also made by and on behalf of
each owner of each such account.
3. Resales
Subscriber acknowledges and agrees that the Securities may and
will only be resold (a) in compliance with Regulation S; (b) pursuant
to a Registration Statement under the Act; or (c) pursuant to an
exemption from registration under the Act.
4. Legends; Subsequent Transfer of Securities
4.1 Legends. The certificate(s) representing the Convertible
Debentures shall bear the legend set forth below and any other
legend, if such legend or legends are reasonably required by the
Company to comply with state, federal or foreign law. Assuming that
there are no changes in the material facts set forth in Section 2 of
this Agreement or applicable law from the date hereof until the date
of conversion, and subject to the Company's transfer agent's receipt
of a legal opinion from legal counsel to the Company, the certificate
representing the Shares into which the Convertible Debentures are
converted after the Restricted Period shall not bear a legend.
"The Convertible Debentures of Spintek Gaming
Technologies, Inc. (the "Issuer") represented by this
certificate have been issued pursuant to Regulation S,
promulgated under the Securities Act of 1933, as amended
(the "Act"), and have not been registered under the Act
or any applicable state securities laws. These shares
may not be offered or sold within the United States or to
or for the account of a "U.S. Person" (as that term is
defined in Regulation S) during the period commencing on
the sale of these securities and ending on the fortieth
(40th) day following completion of the Regulation S
offering of the Issuer pursuant to which these shares
have been issued, which day is ______________, 1996 (the
"Restricted Period"). The Convertible Debentures
represented by this certificate may first be converted
into common stock of the issuer on that date which is 45
days after the date of issuance. The Issuer will notify
the transfer agent of the date of completion of such
offering and of the expiration of such Restricted Period.
Following expiration of the Restricted Period, these
shares may not be offered or sold unless such offer or
sale is registered or exempt from registration under the
Act."
4.2 Transfers. Subject to receipt of a legal opinion from
legal counsel to the Company, the Company agrees, and shall instruct
its agents, that the Securities may be transferred to any person or
entity who is not an affiliate of the Company if such transfer occurs
after the Restricted Period, without (a) any further restriction on
transfer (provided the transfer is made in compliance with the Act)
or (b) the entry of a "stop transfer" order against such Securities,
and the Securities delivered to the transferee shall not bear a
legend. The Company may place a stop transfer order on any Common
Stock issued upon conversion of the Convertible Debentures during the
Restricted Period for the duration of the Restricted Period. Upon
election by the Subscriber to convert the Convertible Debentures into
Shares, the Subscriber shall deliver to the Company a duly completed
Notice of Conversion (a "Notice of Conversion") in the form attached
to this Agreement.
5. Issuance of Further Securities
5.1 Restrictions on Additional Issuances. The Company will
not issue any debt or equity securities for cash in public or private
capital raising transactions for a period of ninety (90) days after
the Closing, without the prior written consent of the Subscriber;
provided, however, the requirement for Subscriber's prior written
consent shall not apply to: (i) the issuance of securities pursuant
to the exercise of options or warrants issued and outstanding on July
10, 1996; (ii) any transaction involving the Company's arrangements,
now or in the future, with commercial banks or other lending
institutions; (iii) issuances of securities pursuant to the
acquisition of another corporation by the Company by merger, purchase
of substantially all of the assets or other reorganization whereby
the Company owns more than fifty percent (50%) of the voting power of
such corporation following such transaction; (iv) any acquisition or
disposition of a product or a license by the Company on the condition
that such issuance is approved by the Board of Directors of the
Company; or (v) the issuance of securities upon exercise or
conversion of the Company's Convertible Debentures outstanding on the
date of the Closing (collectively, the "Permitted Issuances").
5.2 Right of First Refusal. The Company hereby grants to the
Subscriber the right of first refusal to purchase all (or any part)
of New Securities (as defined in this Section) that the Company may,
from time to time, propose to sell and issue prior to June 30, 1998.
"New Securities" shall mean any capital stock of the Company, whether
now authorized or not, and rights, options or warrants to purchase
said capital stock, and debt or equity securities of any type
whatsoever that are, or may become, convertible into said capital
stock; provided, however, that the term "New Securities" does not
include Permitted Issuances or stock options granted to full-time
employees or directors of the Company. In the event that the Company
proposes to undertake an issuance of New Securities, it shall give
the Subscriber written notice of its intention, describing the type
of New Securities, the price and the general terms upon which the
Company proposes to issue the same. The Subscriber shall have
fifteen (15) days from the date of receipt of any such notice to
agree to purchase all or less than all of the New Securities for the
price and upon the general terms specified in the notice by giving
written notice to the Company and stating therein the quantity of New
Securities to be purchased. If the Subscriber fails to exercise in
full the right of first refusal within such fifteen (15) day period,
the Company shall have sixty (60) days thereafter to sell the New
Securities respecting which the Subscriber's rights were not
exercised, at a price and upon general terms no more favorable to the
purchasers thereof than specified in the Company's notice. In the
event that the Company has not sold the New Securities within such
sixty (60) day period, the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the
Subscriber in the manner provided above. The right of first refusal
granted under this Section shall terminate upon the earlier of: (i)
July 5, 1999; or (ii) the date upon which the Subscriber ceases to
own any securities: (a) purchased in the Offering; (b) issued with
respect to or upon conversion of securities purchased in the
Offering; or (c) purchased pursuant to the right of first refusal
granted under this Section.
6. Representations, Warranties and Covenants of Company
The Company represents and warrants to and covenants with the
Subscriber as follows:
6.1 Organization, Good Standing, and Qualification. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all
requisite corporate power and authority to carry on its business as
now conducted and as proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material
adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company to its knowledge is not
the subject of any pending or threatened investigation or
administrative or legal proceeding by the Internal Revenue Service,
the taxing authorities of any state or local jurisdiction, or the
Securities and Exchange Commission which have not been disclosed in
the reports referred to in Section 6.5 below.
6.2 Corporate Condition. None of the Company's filings made
pursuant to the Exchange Act, including, but not limited to, those
reports referenced in Section 6.5 below, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. There have
been no material adverse changes in the Company's financial condition
or business since the date of those reports which have not been
disclosed to Subscriber in writing.
6.3 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the
performance of all obligations of the Company hereunder and the
authorization, issuance (or reservation for issuance) and delivery of
the Convertible Debentures being sold hereunder and the Common Stock
issuable upon conversion of the Convertible Debentures have been
taken, and this Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms.
6.4 Valid Issuance of Convertible Debenture and Common Stock.
The Convertible Debentures, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed
herein, will have been issued in compliance with all applicable U.S.
federal and state securities laws. The Common Stock issuable upon
conversion of the Convertible Debentures when issued in accordance
with the terms thereof shall be duly and validly issued and
outstanding, fully paid and nonassessable, and based in part on the
representations and warranties of Subscriber and any transferee of
the Convertible Debentures, will be issued in compliance with all
applicable U.S. federal and state securities laws.
6.5 Current Public Information. The Company represents and
warrants to the Subscriber that the Company is a "reporting issuer"
as defined in Rule 902(l) of Regulation S and it has a class of
securities registered under Section 12(g) of the Exchange Act and has
filed all the materials required to be filed as reports pursuant to
the Exchange Act for a period of at least twelve months preceding the
date hereof (or for such shorter period as the Company was required
by law to file such material). The Subscriber has obtained copies of
the Company's Form 10-SB as of November 9, 1995, as amended January
19, 1996 and Form 10-QSB for the fiscal quarter ended March 31, 1996.
The Company undertakes to furnish the Subscriber with copies of such
other information as may be reasonably requested by the Subscriber
prior to consummation of this Offering.
6.6 No Directed Selling Efforts in Regard to this
Transaction. The Company has not, and to the best of the Company's
knowledge neither the Subscriber nor any distributor, if any,
participating in the offering of the Securities nor any person acting
for the Company or any such distributor has conducted any "directed
selling efforts" as that term is defined in Rule 902 of Regulation S.
Such activity includes, without limitation, the mailing of printed
material to investors residing in the United States, the holding of
promotional seminars in the United States, the placement of
advertisements with radio or television stations broadcasting in the
United States or in publications with a general circulation in the
United States, which discuss the offering of Shares. The Company
represents and warrants that the Offering is not part of a plan or
scheme to evade the registration provisions of the Act.
6.7 No Conflicts. The execution and delivery of this
Agreement and the consummation of the issuance of the Securities and
the transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default under, the
Certificate of Incorporation or bylaws of the Company, or any
indenture, mortgage, deed of trust or other material payment or
instrument to which the Company is a party or by which it or any of
its properties or assets are bound, or any existing applicable
decree, judgment or order of any court, Federal or State regulatory
body, administrative agency or other governmental body having
jurisdiction over the Company or any of its properties or assets.
6.8 Issuance of Securities. The Company will issue one or
more certificates representing the Convertible Debentures in the name
of Subscriber in such denominations of $10,000 or greater to be
specified by the Company prior to Closing. Upon conversion of the
Convertible Debentures in accordance with their terms, the Company
will issue one or more certificates representing Shares in the name
of Subscriber and in such denominations to be specified by Subscriber
prior to conversion. Subject to the Company's transfer agent's
receipt of a legal opinion from legal counsel to the Company, the
shares to be issued upon conversion of the Convertible Debentures
shall not bear any restrictive legends. The Company further warrants
that no instructions other than these instructions, and instructions
for a "stop transfer" until the end of the Restricted Period, have
been given to the transfer agent and also warrants that the Shares
shall otherwise be freely transferable by Subscriber on the books and
records of the Company subject to compliance with Federal and State
securities laws, the receipt of a legal opinion from legal counsel to
the Company and the terms of the Convertible Debentures. The Company
will notify the transfer agent of the date of completion of the
Offering and of the date of expiration of the Restricted Period.
Nothing in this section shall affect in any way Subscriber's
obligations and agreement to comply with all applicable securities
laws upon resale of the Securities.
6.9 No Action. The Company has not taken and will not take
any action that will affect in any way the running of the Restricted
Period or the ability of Subscriber to resell freely the Securities
in accordance with applicable securities laws and the Agreement.
6.10 Compliance with Laws. As of the date hereof, the conduct
of the business of the Company complies in all material respects with
all material statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable thereto. The Company has not
received notice of any alleged violation of any statute, law,
regulations, ordinance, rule, judgement, order or decree from any
governmental authority. The Company shall comply with all applicable
securities laws with respect to the sale of the Securities, including
but not limited to the filing of all reports required to be filed in
connection therewith with the Securities and Exchange Commission or
any stock exchange or the NASDAQ Stock Market or any other regulatory
authority.
6.11 Litigation. Except as disclosed in the Company's Annual
Report on Form 10-KSB, there is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign,
now pending or, to the knowledge of the Company, threatened, against
or affecting the Company, or any of its properties, which could
reasonably be expected to result in any material adverse change in
the business, financial condition or results of operations of the
Company, or which could reasonably be expected to materially and
adversely affect the properties or assets of the Company.
6.12 No U.S. Offering. The Company represents that it has not
offered the Securities to the Subscriber or any Investor in the U.S.
or to any person in the United States or any U.S. person.
6.13 Disclosures. There is no fact known to the Company
(other than general economic conditions known to the public
generally) that has not been disclosed in writing to the Subscriber
that (a) could reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations
of the Company, or which could reasonably be expected to materially
and adversely affect the properties or assets of the Company or (b)
could reasonably be expected to materially and adversely affect the
ability of the Company to perform its obligations pursuant to this
Subscription Agreement and the issuance of the Convertible Debentures
hereunder.
6.14 Commissions. Except for a fee which is payable by the
Company to J.P. Carey Enterprises, Inc., no other person, firm or
corporation will be entitled to receive any brokerage fee, commission
or other similar payment from the Company in connection with the
consummation of the transactions contemplated hereby and the Company
shall not make any such payment to any person, firm or corporation
other than J.P. Carey Enterprises, Inc.
6.15 Capitalization. The Company, as of the date of the
Closing, will have outstanding the number of shares of Common Stock,
Convertible Debentures, Options and Warrants as set forth on Exhibit
D.
7. Additional Covenants of Company
7.1 Accountants. The Company shall, until at least the
second anniversary of the date of the Closing (the "Closing Date"),
maintain as its independent auditors an accounting firm that is
authorized to practice before the SEC.
7.2 Corporate Existence and Taxes. The Company shall, until
at least the second anniversary of the Closing Date, maintain its
corporate existence in good standing, and shall pay all its taxes
when due except for taxes which the Company disputes.
7.3 Reserved Shares and Listings. For so long as any
Convertible Debentures held by the Subscriber remain outstanding:
(a) the Company will reserve from its authorized but
unissued shares of Common Stock ("Common Stock") a
sufficient number of Shares to permit the
conversion in full of the outstanding principal
amount of Convertible Debentures; and
(b) the Company will maintain the listing of its Shares
on the NASDAQ Bulletin Board Market System.
7.4 Liquidated Damages for Late Conversion. As set forth in
the Convertible Debenture, the Company shall use all reasonable
efforts to issue and deliver, within three business days after the
Subscriber has fulfilled all conditions and submitted all necessary
documents duly executed and in proper form required for conversion
(the "Deadline"), to the Subscriber or any party receiving the
Convertible Debentures by transfer from the Subscriber (together with
the Subscriber, a "Holder"), at the address of the Holder on the
books of the Company, a certificate or certificates for the number of
Shares of Common Stock to which the Holder shall be entitled. The
Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Deadline could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Company
agrees to pay liquidated damages to the Holder for late issuance of
Shares upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business
days beyond three business days from the date of receipt by the
Company of a Notice of Conversion and the transfer agent of all
necessary documentation duly executed and in proper form required for
conversion, including the original certificate representing the
Convertible Debentures to be converted, all in accordance with this
Agreement, the Convertible Debentures and the requirements of the
transfer agent):
No. Business Days Late Liquidated Damages
1 $500
2 $1,000
3 $1,500
4 $2,000
5 $2,500
6 $3,000
7 $3,500
8 $4,000
9 $4,500
10 $5,000
>10 $5,000 + $1,000 for
each
Business Day Late
beyond 10 days
The Company shall pay the Holder any liquidated damages incurred
under this Section by check upon the earlier to occur of (i) issuance
of the Shares to the Holder or (ii) each monthly anniversary of the
receipt by the Company of such Holder's Notice of Conversion.
Nothing herein shall limit the Subscriber's right to pursue actual
damages for the Company's failure to issue and deliver shares of
Common Stock to the Subscriber in accordance with the terms of the
Certificate of Designation.
7.5 Conversion Notice. The Company agrees that, in addition
to any other remedies which may be available to the Subscriber,
including, but not limited to, remedies available under Section 7.4
of this Agreement, in the event the Company fails for any reason,
other than an act of God, to effect delivery to the Subscriber of
certificates representing Shares within three (3) business days
following receipt by the Company of a Notice of Conversion, the
Investor will be entitled to revoke the Notice of Conversion by
delivering a notice to such effect to the Company whereupon the
Company and the Subscriber shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
7.6 Opinion of Counsel. Subscriber shall, upon purchase of
the Convertible Debentures, receive an opinion letter from Coulter &
Davenport, counsel to the Company, to the effect that (i) the Company
is duly incorporated and validly existing; (ii) this Agreement, the
issuance of the Convertible Debentures, and the issuance of the
Common Stock upon conversion of the Convertible Debentures have been
duly approved by all required corporate action, and that all such
securities, upon due issuance, shall be validly issued and
outstanding, fully paid and nonassessable; (iii) this Agreement and
the Registration Rights Agreement are valid and binding obligations
of the Company, enforceable in accordance with their terms, except as
enforceability of any indemnification provisions may be limited by
principles of public policy, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of
debtors and rules of laws governing specific performance and other
equitable remedies; and (iv) based upon the representations and
warranties of the Company and each Subscriber in the Offering, the
offer and sale of the Convertible Debentures to the Subscriber is
exempt from the registration requirements of the Securities Act;
except that with respect to the foregoing opinions counsel may add
such qualifications as are consistent with firm practice, including
an assumption that the transaction does not constitute a plan or
scheme to evade the registration provisions of the Act.
7.7 Consultation with Legal Counsel. The Company shall
consult with its legal counsel regarding its Exchange Act filing
requirements including, but not limited to, the possible obligation
of the Company to file Forms 10-C and Form 8-K in connection with the
Offering, and will timely make any and all such filings deemed
necessary by such counsel.
7.8 Registration Rights. The Company will grant the
Subscriber the registration rights covering the Shares issuable on
conversion of the Convertible Debentures on substantially the terms
of the Registration Rights Agreement attached hereto as Exhibit E on
the Closing Date.
8. Option to Exchange for Equity Instrument
The parties hereto agree that, upon compliance with Section 21
of the Convertible Debentures, the Company shall have the option to
exchange the Convertible Debentures issued in accordance with this
Agreement (to the extent that such Convertible Debentures have not
been converted into Shares), into certificates of preferred stock
(the "Exchange Preferred Stock") duly authorized by the Company's
shareholders which Exchange Preferred Stock shall have the same terms
and conversion rights as are found in Exhibit B to the Convertible
Debentures.
9. Governing Law
This Agreement shall be governed by and construed in accordance
with the laws of the State of Georgia, U.S.A., applicable to
agreements made in and wholly to be performed in that jurisdiction,
except for matters arising under the Act or the Exchange Act which
matters shall be construed and interpreted in accordance with such
laws. Any action brought to enforce, or otherwise arising out of,
this Agreement shall be heard and determined in either a federal or
state court sitting in the State of Georgia, U.S.A.
10. Entire Agreement; Amendment
This Agreement, the Convertible Debentures, the Registration
Rights Agreement and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof and thereof, and no
party shall be liable or bound to any other party in any manner by
any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by
the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.
11. Notices, Etc.
Any notice, demand or request required or permitted to be given
by either the Company or the Subscriber pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when
delivered personally or by facsimile, with a hard copy to follow by
two day courier addressed to the parties at the addresses or
facsimile numbers of the parties set forth at the end of this
Agreement or such other address or facsimile number as a party may
request by notifying the other in writing.
12. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall
constitute one instrument.
13. Severability
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force
and effect without said provision; provided that no such severability
shall be effective if it materially changes the economic benefit of
this Agreement to any party.
14. Titles and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
15. Amount
The undersigned Subscriber hereby subscribes for Convertible
Debentures with a face value of Seven Million One Hundred Forty-Three
Thousand Dollars ($7,143,000.00) (U.S.) and pays herewith funds in
the amount of Five Million Dollars ($5,000,000.00) (U.S.).
<PAGE>
The undersigned Subscriber acknowledges that this subscription
shall not be effective unless accepted by the Company as indicated
below.
Dated this _____ day of July, 1996.
____________________________________
(Name) (Please Print)
____________________________________
(Signature)
____________________________________
(Mailing Address)
____________________________________
(Telephone Number)
____________________________________
(Facsimile Number)
____________________________________
(Place of Execution)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE ____ DAY OF
JULY, 1996.
SPINTEK GAMING TECHNOLOGIES, INC.
By:________________________________
Print Name:________________________
Title:______________________________
Address: 901 Grier Drive, Suite B
Las Vegas, Nevada 89119
Telephone: (702) 263-3660
Facsimile: (702) 263-3680<PAGE>
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Debentures or Exchange Preferred
Stock)
The undersigned hereby irrevocably elects to convert $________ U.S.
in principal amount of Convertible Debentures ("Convertible
Debentures"), represented by Debenture No(s). ____ (the "Convertible
Debenture Certificate(s)") or _____ shares of Exchange Preferred
Stock ("Preferred Stock"), represented by Certificate No(s). _____
(the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of Spintek Gaming Technologies, Inc. (the "Company")
according to the conditions of the Convertible Debentures or
Preferred Stock, as the case may be, as of the date written below.
If shares are to be issued in the name of a person other than
undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee
will be charged to the undersigned for any conversion, except for
transfer taxes, if any.
The undersigned represents that it and each person or entity on whose
behalf it holds Convertible Debentures or Preferred Stock, as the
case may be, to be converted into Common Stock (each an "Investor"):
(i) is familiar with and understands the terms, conditions and
requirements contained in Regulation S ("Regulation S") and Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act");
(ii) is not a "U.S. Person" or "distributor" as defined in Regulation
S; (iii) purchased the Convertible Debenture or Preferred Stock for
which conversion is being elected, and is purchasing the Common Stock
referenced herein, for its own account and for the account of each
Investor and not for the account or benefit of any U.S. Person; (iv)
will comply with the transfer restrictions contained in Section 4(1)
of the Act and Rule 144 promulgated thereunder to the extent they are
applicable; (v) has not had a "short" position in the Company's
securities at any time since the purchase of the Convertible
Debentures or Preferred Stock (including any short call position or
any long put position or any contract or arrangement that had the
effect of eliminating or substantially diminishing the risk of
ownership of the Convertible Debentures or Preferred Stock) nor has
it engaged in any hedging transaction with respect to the Convertible
Debentures or Preferred Stock or the Common Stock; (vi) has no prior
understanding with respect to the sale of the Common Stock to any
third party; (vii) has not engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the
Convertible Debentures or Preferred Stock or the Common Stock
issuable upon conversion of the Convertible Debentures or Preferred
Stock; (viii) purchased the Convertible Debentures or Preferred Stock
with investment intent, is purchasing the Common Stock with
investment intent and presently has no intent to sell, dispose of or
otherwise transfer the Common Stock; (ix) will make any sale,
transfer or other disposition of the Common Stock in full compliance
with the Act, the Exchange Act, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder; and (x) received the offer to purchase the Convertible
Debentures or Preferred Stock outside the United States and, at the
time the Subscription Agreement pursuant to which the Convertible
Debentures or Preferred Stock was executed was, and upon execution of
this Notice of Conversion is, outside the United States. The
undersigned has obtained representations from each Investor with
respect to compliance with paragraphs (i) - (x) of this Notice.
Conversion Formula: ______________________________
Date of Conversion
______________________________
Applicable Conversion Price
______________________________
Signature
______________________________
Name
Address:
______________________________
______________________________
* No shares of Common Stock will be issued until the original
Convertible Debenture Certificate(s) or Preferred Stock
Certificate(s), as the case may be, to be converted and the Notice of
Conversion are received by the Company's Attorney or Transfer Agent.
The original Convertible Debenture Certificate(s) or Preferred Stock
Certificate(s) to be converted and the Notice of Conversion must be
received by the Company's Attorney or Transfer Agent by the third
business day following the Date of Conversion, or such Notice of
Conversion shall become null and void in the discretion of the
Company. <PAGE>
EXHIBIT A
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY ARE
BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION S ("REGULATION S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
UNITED STATES OR TO U.S. PERSONS (AS SUCH TERM IS DEFINED IN
REGULATION S) UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY
ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
No. ___
$7,143,000 U.S.
SPINTEK GAMING TECHNOLOGIES, INC.
4% CONVERTIBLE DEBENTURE DUE DECEMBER 31, 1997
THIS DEBENTURE, issued this ____ day of July, 1996, is
one of a duly authorized issue of Debentures of Spintek Gaming
Technologies, Inc., a corporation duly organized and existing under the
laws of the State of California (the "Company"), designated as its 4%
Convertible Debentures Due December 31, 1997, in the aggregate principal
amount of $7,143,000 U.S. (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
______________, the registered holder hereof (the "Holder"), the
principal sum of Seven Million One Hundred Forty-Three Thousand Dollars
($7,143,000 U.S.), on or prior to December 31, 1997 (the "Maturity
Date"). This instrument shall accrue interest on the principal sum
outstanding at the rate of 4% per annum. Accrual of interest on this
(continued on reverse)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Spintek Gaming Technologies, Inc.
Dated: ______, 19__ By:_____________________________
Its:<PAGE>
(page 2 of 7 of 4% Convertible Debenture due December 31, 1997)
Debenture shall commence on the date of this Debenture and shall
continue to accrue until payment in full of the principal sum has been
made or duly provided for. The principal of, and interest on, this
Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public
and private debts, at the address of the Holder last appearing on the
Debenture Register of the Company as designated in writing by the Holder
from time to time. The Debenture Register shall represent the record
of ownership and right to receive principal and interest on this
Debenture. Interest and principal shall be payable only to the
registered Holder as reflected in the Debenture Register. The right to
receive principal and interest under this Debenture shall be
transferable only through an appropriate entry in the Debenture Register
as provided herein. The forwarding of such payment shall constitute a
payment of interest hereunder and shall satisfy and discharge the
liability for principal and interest on this Debenture to the extent of
the sum represented by such payment.
This Debenture is subject to the following additional provisions:
1. Debentures. The Debentures are issuable in denominations of at
least Ten Thousand Dollars ($10,000 U.S.). The Debentures are
exchangeable for an equal aggregate principal amount of Debentures of
different authorized denominations, as requested by the Holders
surrendering the same, but shall not be issuable in denominations less
than integral multiples of Ten Thousand Dollars ($10,000 U.S.). No
service charge will be made for such registration of transfer or
exchange.
2. Withholding. The Company shall be entitled to withhold from all
payments of principal of, and interest on, this Debenture any amounts
required to be withheld under the applicable provisions of the United
States income tax laws or other applicable laws at the time of such
payments. The Holder shall pay any other taxes, charges, or levies in
connection with the issuance or transfer thereof.
3. Transfer. This Debenture has been issued subject to investment
representations of the original purchaser hereof and may be transferred
or exchanged only in compliance with the Securities Act of 1933, as
amended (the "Act"), including Regulation S promulgated under the Act.
Any Holder of this Debenture, by acceptance hereof, agrees to the
representations, warranties and covenants herein. Prior to due
presentment to the Company for transfer of this Debenture, the Company
and any agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Debenture be overdue, and
neither the Company nor any such agent shall be affected by notice to
the contrary.
4. Conversion. The record Holders of this Debenture shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. The record Holder of this Debenture shall
be entitled, at the option of the Holder, to convert any or all of the
aggregate principal amount of Debentures held by such Holder, at any
time beginning forty-five (45) days after the date of issuance of this
Debenture, at the office of the Company or any transfer agent for the
Debentures, into that number of fully-paid and non-assessable shares of
Common Stock of the Company calculated in accordance with the following
formula:
Number of shares issued upon conversion = (Principal +
Interest)/Conversion Price, where
Principal = The principal amount of the Debenture(s) to be
converted,
Interest = Principal x (N/365) x .04, where N = the number of days
between (i) the date of issuance of this Debenture, and (ii) the date
of conversion of this Debenture, and
Conversion Price = the lesser of (x) $2.00 (the "Fixed Conversion
Price"), or (y) the average Closing Bid Price, as that term is defined
below, of the Company's Common Stock for the five (5) trading days
immediately preceding the Date of Conversion, as defined below (the
"Floating Conversion Price"); provided, however, that on the first
anniversary after the issuance of this Debenture, the Fixed Conversion
Price shall be $3.00; and provided further, that in no event shall the
Conversion Price be less than $1.00 per share. For purposes hereof, the
term "Closing Bid Price" shall mean the closing bid price of the
Company's Common Stock as reported by NASDAQ (or, if not reported by
NASDAQ, as reported by such other exchange or market where traded).
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of this Debenture. In lieu of any
fractional share to which the Holder would otherwise be entitled, the
Company shall pay cash to such Holder in an amount equal to such
fraction multiplied by the Conversion Price then in effect. In the case
of a dispute as to the calculation of the Conversion Rate, the Company's
calculation shall be deemed conclusive absent manifest error. In order
to convert Debentures into full shares of Common Stock, the Holder shall
surrender the certificate or certificates therefor, duly endorsed, by
either overnight courier or 2-day courier, to the office of the Company
or of any transfer agent for the Debentures, and shall give written
notice to the Company, on the form attached as Exhibit "A" hereto, at
such office that he elects to convert the same, the number of Debentures
so converted and a calculation of the Conversion Rate (with an advance
copy of the certificate(s) and the notice by facsimile); provided,
however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion
unless either the certificates evidencing such Debentures are delivered
to the Company or its transfer agent as provided above, or the Holder
notifies the Company or its transfer agent that such certificates have
been lost, stolen or destroyed and executes
<PAGE>
(page 3 of 7 of 4% Convertible Debenture due December 31, 1997)
an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
The Company shall use reasonable efforts to issue and deliver
within three (3) business days after delivery to the Company of such
certificates, or after such agreement and indemnification, to such
Holder of Debentures at the address of the Holder on the books of the
Company, a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid. The
date on which notice of conversion is given (the "Date of Conversion")
shall be deemed to be the date set forth in such notice of conversion,
provided that the original Debentures to be converted are received by
the transfer agent or the Company within five business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
If the original Debentures to be converted are not received by the
transfer agent or the Company within five business days after the Date
of Conversion, the notice of conversion shall become null and void.
Following conversion of a Debenture, or a portion thereof, the
principal and interest owed on that Debenture or portion of the
Debenture so converted will be deemed paid in full and satisfied, and
such Debenture or portion thereof will no longer be outstanding.
(c) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Debentures, such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
then outstanding Debentures; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding Debentures, the Company
will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares
as shall be sufficient for such purpose.
(d) Automatic Conversion on Maturity Date. Each outstanding
Debenture shall automatically be converted into Common Stock on December
31, 1997 at the Conversion Price for each share of Common Stock
calculated in accordance with the formula in Section 4(a) above, and
December 31, 1997 shall be deemed the Date of Conversion with respect
to such conversion.
(e) Adjustment to Conversion Price.
(i) If, prior to the conversion of all of the Debentures,
the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion
Price shall be proportionately reduced, or if the number of outstanding
shares of Common Stock is decreased by a combination or reclassification
of shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased.
(ii) If, prior to the conversion of all of the Debentures at
a time when conversion would be at the Floating Conversion Price, there
is a stock split, stock dividend or other similar event which occurs
during the five-day period utilized to compute the Conversion Price,
then the Closing Bid Price used to compute the Conversion Price shall
be appropriately adjusted to reflect, as deemed equitable and
appropriate by the Company, such stock split, stock dividend or other
similar event.
(iii) If, prior to the conversion of all Debentures, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result
of which shares of Common Stock of the Company shall be changed into the
same or a different number of shares of the same or another class or
classes of stock or securities of the Company or another entity, then
the Holders of Debentures shall thereafter have the right to purchase
and receive upon conversion of Debentures, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
shares of stock and/or securities as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock
immediately theretofore purchasable and receivable upon the conversion
of Debentures held by such Holders had such merger, consolidation,
exchange of shares, recapitalization or reorganization not taken place,
and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holders of the Debentures to the end
that the provisions hereof (including, without limitation, provisions
for adjustment of the Fixed Conversion Price and of the number of shares
issuable upon conversion of the Debentures) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares
of stock or securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this
subsection 4(e) unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver
to the Holders of the Debentures such shares of stock and/or securities
as, in accordance with the foregoing provisions, the Holders of the
Debentures may be entitled to purchase.
(iv) If any adjustment under this Section 4(e) would create
a fractional share of Common Stock or a right to acquire a fractional
share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon conversion shall be
the next higher number of shares.
<PAGE>
(page 4 of 7 of 4% Convertible Debenture due December 31, 1997)
5. Redemption.
(a) Right to Redeem on Conversion. The Company shall have the
right, in its sole discretion, upon receipt of a notice of conversion
pursuant to Section 4, to redeem in whole or in part any Debentures
submitted for conversion, immediately prior to conversion. If the
Company elects to
redeem some, but not all, of the Debentures submitted for conversion,
the Company shall redeem from among the Debentures submitted by the
various shareholders for conversion on the applicable date, a pro-rata
amount from each shareholder so submitting Debentures for conversion.
(b) Mechanics of Redemption on Conversion. The Company shall
effect each such redemption by giving notice of its election to redeem,
by facsimile within 1 business day following receipt of a notice of
conversion from a Holder, with a copy by 2-day courier, to the Holder
of Debentures submitted for conversion at the address and facsimile
number of such Holder appearing in the Company's register for the
Debentures. Such redemption notice shall indicate whether the Company
will redeem all or part of the Debentures submitted for conversion and
the applicable redemption price. The Company shall not be entitled to
send any notice of redemption and begin the redemption procedure unless
it has the full amount of the redemption price, in cash, available in
a demand or other immediately available account in a bank or similar
financial institution on the date the redemption notice is sent to
shareholders.
The redemption price per Debenture shall be calculated in
accordance with the following formula:
Principal + Interest x Closing Bid Price
Conversion Price
For the purposes of the above formula, "Principal", "Interest",
"Closing Bid Price" and "Conversion Price" shall have the meanings set
forth in Section 4(a).
The redemption price shall be paid to the Holder of Debentures
redeemed within 10 business days of the delivery of the notice of such
redemption to such Holder; provided, however, that the Company shall not
be obligated to deliver any portion of such redemption price unless
either the certificates evidencing the Debentures redeemed are delivered
to the Company or its transfer agent as provided in Section 4(b), or the
Holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with such certificates.
(c) Redemption on Asset Sale. In the event the Company enters
into a transaction or series of transactions to sell all or
substantially all of its assets, the Company shall, within seven days
after the closing of such transaction and after giving at least 15 days
advance written notice of such transaction (which notice shall specify
the date that such redemption is to be effected, which date is referred
to hereinafter as the "Effective Date of Redemption"), redeem the
Debentures for cash. The redemption price in such event ("Redemption
Price on Asset Sale") shall be calculated in accordance with the formula
set forth in Section 5(b) above.
Upon the close of the transaction causing redemption under this
Section 5(c), the Company shall deposit the Redemption Price on Asset
Sale for all outstanding Debentures with a bank or trust company having
aggregate capital and surplus in excess of $50,000,000 as a trust fund
for the benefit of the respective holders of the Debentures designated
for redemption and not yet redeemed. Simultaneously, the Company shall
deposit irrevocable instruction and authority to such bank or trust
company to publish the notice of redemption thereof (or to complete such
publication if theretofore commenced) and to pay, on and after the date
fixed for redemption or prior thereto, the Redemption Price on Asset
Sale to the holders of the Debentures upon surrender of their
Debentures.
(d) Redemption on Change of Control. In the event of a Change
of Control (as hereinafter defined), the Debentures shall be redeemed
by the Company for cash at a redemption price calculated in accordance
with the formula set forth in Section 5(b) above.<PAGE>
(page 5 of 7 of 4% Convertible Debenture due December 31, 1997)
For purposes of this Section 5(d), Change of Control shall be
deemed to have occurred at such time as:
(i) any person (other than the Company, any Subsidiary of the
Company or any employee benefit plan of the Company)("Person") is
or becomes the beneficial owner, directly or indirectly, through
a purchase, merger or other acquisition or transaction or series
of transactions, of shares of capital stock of the Company
entitling such Person to exercise 50% or more of the total voting
power of all shares of capital stock of the Company entitled to
vote generally in the election of directors (any shares of voting
stock of which such person or group is the beneficial owners that
are not then outstanding for purposes of calculating such
percentage); or
(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into
the Company (other than a merger (x) which does not result in any
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock or (y) which is effected
solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of Common
Stock); or
(iii) a change in the Board of Directors of the Company in which
the individuals who constituted the Board of Directors of the
Company as of July 10, 1996 cease for any reason to constitute a
majority of the directors then in office.
(e) No Other Redemption. The Company shall have no right to
redeem the Debentures except as provided in Section 5 hereof.
6. No Right to Force Conversion Prior to Maturity Date. The Company
shall have no right to force conversion of any outstanding Debentures
prior to the Maturity Date.
7. Direct Obligations. This Debenture and all other Debentures now
or hereafter issued of similar terms are direct obligations of the
Company.
8. Termination. After this Debenture shall have been surrendered
for conversion as herein provided or notice of conversion shall have
been given by the Company pursuant to Section 4(d) herein, this
Debenture shall no longer be deemed to be outstanding and all rights
with respect to this Debenture, including, without limitation, the right
to receive interest hereon and the principal hereof, shall forthwith
terminate as of the Date of Conversion, except only the right of the
Holder hereof to receive shares of Common Stock in exchange herefor.
9. Protective Provisions. This Debenture may not be amended without
the prior written consent of the Holder hereof.
10. Events of Default; Remedies. If one or more of the following
described "Events of Default" shall occur:
(a) The Company shall default in the payment of principal or
interest on these Debentures; or
(b) Any of the representations or warranties made by the
Company herein, in the Regulation S Securities Subscription Agreement,
dated as of the date hereof relating to these Debentures (the
"Subscription Agreement") or in any certificate or financial or other
written statements heretofore or hereafter furnished by or on behalf of
the Company in connection with the execution and delivery of this
Debenture or the Subscription Agreement shall be false or misleading in
any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any
material respect, any other covenant term, provision, condition,
agreement or obligation of the Company under this Debenture and such
failure shall continue uncured for a period of five (5) days after
notice from Holder of such failure; or
(d) The Company shall (1) become insolvent; (2) admit in
writing its inability to pay its debts generally as they mature; (3)
make an assignment for the benefit of creditors or commence proceedings
for its dissolution; or (4) apply for or consent to the appointment of
a trustee, liquidator or receiver for its or for a substantial part of
its property or business; or
(e) A trustee, liquidator or receiver shall be appointed for
the Company or for a substantial part of its property or business
without its consent and shall not be discharged within thirty (30) days
after such appointment; or
(f) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of the
properties or assets of the Company and shall not be dismissed within
thirty (30) days thereafter; or
(g) Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand ($100,000) Dollars in
the aggregate shall be entered or filed against the Company or any of
its properties or other assets and shall remain unpaid, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any event
later than five (5) days prior to the date of any proposed sale
thereunder; or
<PAGE>
(page 6 of 7 of 4% Convertible Debenture due December 31, 1997)
(h) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the
Company and, if instituted against the Company shall not be dismissed
within thirty (30) days after such institution or if the Company shall
by any action or answer approve of, consent to, or acquiesce in any such
proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
(i) The Common Stock shall no longer be traded on any U.S.
securities exchanges or on any U.S. over-the-counter securities market.
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent
default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Debenture immediately due and
payable, without presentment, demand protest or notice of any kind, all
of which are hereby expressly waived, anything herein or in any note or
other instruments contained to the contrary notwithstanding, and the
Holder may immediately, and with expiration of any period of grace,
enforce any and all of the Holder's rights and remedies provided herein
or any other rights or remedies afforded by law.
11. Mergers, Consolidations, etc. The Company shall not consolidate
or merge into, or transfer all or substantially all of its assets to,
any person, unless such person assumes the obligations of the Company
under this Debenture and immediately after such transaction no Event of
Default exists. Any reference of the Company shall refer to such
surviving or transferee corporation and the obligations of the Company
shall terminate upon such assumption. If the Company merges or
consolidates with another corporation or sells or transfers all or
substantially all of its assets to another person and the holders of the
Common Shares are entitled to receive stock, securities or property in
respect of or in exchange for Common Shares, then as a condition of such
merger, consolidation, sale or transfer, either (i) the Company and any
such successor, purchaser or transferee shall amend this Debenture to
provide that it may thereafter be converted on the terms and subject to
the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into
which this Debenture might have been converted immediately before such
merger, consolidation, sale or transfer, or (ii) if the Company is not
the surviving entity in such merger, consolidation, sale or transfer,
the Company shall give the Holder at least 30 days prior written notice
of the expected closing date of such transaction, and if any portion of
this Debenture has not been converted into Common Stock at the election
of the Holder prior to such closing, then the remaining principal amount
of this Debenture may, at the option of the Holder, be converted into
shares of Common Stock at the closing of such transaction. The
Conversion Price shall be the same as the applicable Conversion Price
defined in Section 4 above.
12. No Voting Rights. This Debenture shall not entitle the Holder
hereof to any of the rights of a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Company.
13. No Dividends. For so long as the Debentures remain outstanding,
the Company will not, without the prior consent of a majority of the
Holders, make any distribution, either in stock or cash, to its holders
of Common Stock.
14. Lost or Destroyed Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of a
mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this
Debenture so mutilated, lost, stolen or destroyed but only upon receipt
of evidence of such loss, theft or destruction of such Debenture, and
of the ownership thereof, and indemnity, if requested, all reasonably
satisfactory to the Company.
15. Sales in Compliance with Applicable Law. Any Holder of this
Debenture, by acceptance hereof, agrees that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common
Stock issuable upon exercise thereof except under circumstances which
will not result in a violation of the Act, including Regulation S
promulgated under the Act, or any applicable state Blue Sky law or
similar laws relating to the sale of securities and the Holder agrees
to provide the Company with documentation executed by the original
Holder hereof to demonstrate that such offer, sale or disposition
complies with applicable securities laws.
16. Governing Law. This Debenture shall be governed by and construed
in accordance with the laws of the State of Georgia, without giving
effect to the principles of conflicts of laws.
17. Business Day Definition. For purposes hereof, the term "business
day" shall mean any day on which banks are generally open for business
in the State of Georgia, USA and excluding any Saturday and Sunday.
18. Notices. Any notice, demand or request required or permitted to
be given by either the Company or the Subscriber pursuant to the terms
of this Agreement shall be in writing and shall be deemed given when
delivered personally, or by facsimile (with a hard copy to follow by two
day courier), addressed to the Company at 901 Grier Drive, Suite B, Las
Vegas, Nevada 89119, Telecopy No. (702) 263-3680, or to the Subscriber
at ________________________________________, Telecopy No.
(___)___________, or such other addresses as a party may request by
notifying the other in writing.
(page 7 of 7 of 4% Convertible Debenture due December 31, 1997)
19. Waiver. Any waiver by the Company or the Holder hereof of a
breach of any provision of this Debenture shall not operate as or be
construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Debenture. The failure of the
Company or the Holder hereof to insist upon strict adherence to any term
of this Debenture on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any
waiver must be in writing.
20. Unenforceable Provisions. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall
remain in effect, and if any provision is inapplicable to any person or
circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
21. Right to Exchange for Equity Instrument. The Company shall have
the right to cause the Holder to exchange this Debenture for shares of
convertible preferred stock (the "Exchange Preferred Stock") which
Exchange Preferred Stock shall be issued in accordance with the
Certificate of Designation, in substantially the form set forth in
Exhibit B attached hereto, and having cumulative dividends at the rate
of 4% per annum and containing terms equivalent in all material respects
to the terms of this Debenture. Upon approval by the Company's
shareholders and evidence of filing of the Certificate of Designation
with the appropriate official in the Company's state of incorporation,
this Debenture shall be deemed to have been exchanged into that number
of shares of Exchange Preferred Stock that is economically equivalent
to the Holder's interest in the Debenture. At such time, the Company
shall use reasonable efforts to coordinate with Holder the delivery of
certificates for the number of shares of Exchange Preferred Stock to
which Holder shall be entitled upon the exchange of this Debenture.
[remainder of page intentionally left blank]<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture or Exchange Preferred Stock Stock,
as the case may be)
The undersigned hereby irrevocably elects to convert the above
Debenture/Preferred Stock Certificate No. ___________ into shares
of Common Stock, $.002 par value (the "Common Stock"), of Spintek
Gaming Technology (the "Company") according to the conditions
hereof, as of the date written below. If shares are to be issued in
the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering
herewith such certificates, opinions, and signature guarantees as
reasonably requested by the Company or its Transfer Agent. No fee
will be charged to the Holder for any conversion, except for transfer
taxes, if any.
If this Debenture or Exchange Preferred Stock Certificate, as the
case may be, is being converted during the Restricted Period (as that
term is defined in the subscription agreement executed by the
original purchaser of this Debenture/Exchange Preferred Stock), the
undersigned represents that it is not a U.S. Person as defined in
Regulation S promulgated under the United States Securities Act of
1933, as amended (the "Act") and is not converting the Debenture or
Exchange Preferred Stock on behalf of any U.S. Person. The
undersigned also represents and warrants that all offers and sales by
the undersigned of the shares of Common Stock issuable to the
undersigned upon conversion of the Debenture or Exchange Preferred
Stock shall be made in compliance with Regulation S, pursuant to
registration of the Common Stock under the Act or pursuant to an
exemption from registration under the Act.
Conversion calculations: _____________________________________
Date of Conversion
_____________________________________
Applicable Conversion Price
_____________________________________
Signature
_____________________________________
Name
Address:
_____________________________________
_____________________________________
* The original Debenture (or Exchange Preferred Stock Certificate,
as the case may be) and Notice of Conversion must be received by the
Company's Transfer Agent before any shares of Common Stock will be
issued. If the original of this Debenture (or Exchange Preferred
Stock Certificate) is not received by the Transfer Agent (or such
other person as the Company may specify) within five business days
after the date of conversion specified above, this notice of
conversion shall become null and void.<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION, NUMBER, POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL, AND OTHER SPECIAL RIGHTS AND THE
QUALIFICATIONS, LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUISHING CHARACTERISTICS OF
SERIES A PREFERRED STOCK
OF
SPINTEK GAMING TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is SPINTEK GAMING TECHNOLOGIES, INC.
2. The certificate of incorporation of the Corporation
authorizes the issuance of 100,000 shares of Preferred Stock, no par
value per share, and expressly vests in the Board of Directors of the
Corporation the authority provided therein to issue any or all of
said shares in one or more series and by resolution or resolutions to
establish the designation, number, full or limited voting powers, or
the denial of voting powers, preferences and relative, participating,
optional, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics
of each series to be issued.
3. The Board of Directors of the Corporation, pursuant
to the authority expressly vested in it as aforesaid, has adopted the
following resolutions creating a Series A issue of Preferred Stock:
RESOLVED, that 7,143 of the 100,000 authorized shares
of Preferred Stock of the Corporation shall be designated Series A
Preferred Stock (the "Series A Preferred Stock") and shall possess
the rights and privileges set forth below:
A. Dividends.
(i) The holder of each issued and outstanding
share of Series A Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors of the Corporation, out of
the assets at the time legally available for such purpose, dividends
at a rate of 4% per annum, payable in cash or in stock. Such
dividends shall not be cumulative and no right to such dividends
shall accrue to holders of Series A Preferred Stock unless declared
by the Corporation's Board of Directors. No dividends shall be
declared or paid with respect to the Corporation's Common Stock
(other than a dividend payable solely in Common Stock of the
Corporation), or upon any other class of Preferred Stock of the
Corporation with a dividend preference subordinate to the dividend
preference of the Series A Preferred Stock, unless a dividend of
equal or greater amount per share (on an as-if-converted to Common
Stock basis) is first declared and paid with respect to the Series A
Preferred Stock.
(ii) No dividends shall be paid on the Series
A Preferred Stock at such time as:
(a) such payment would violate
California law; or
(b) such payment would impair the net
capital or other financial requirements applicable to the Corporation
established by the National Association of Securities Dealers, Inc.,
the Securities and Exchange Commission, or any other state or federal
securities authority or agency, any state or federal commodities
authority or agency, or any commodities or securities exchange.
B. Liquidation Preference.
(i) In the event of any liquidation,
dissolution or winding-up of the Corporation, either voluntary or
involuntary (a "Liquidation"), the holders of shares of the Series A
Preferred Stock then issued and outstanding shall be entitled to be
paid out of the assets of the Corporation available for distribution
to its shareholders, whether from capital, surplus or earnings,
before any payment shall be made to the holders of shares of the
Common Stock or upon any other series of Preferred Stock of the
Corporation with a liquidation preference subordinate to the
liquidation preference of the Series A Preferred Stock, an amount
equal to one thousand dollars ($1,000) per share. If, upon any
Liquidation of the Corporation, the assets of the Corporation
available for distribution to its shareholders shall be insufficient
to pay the holders of shares of the Series A Preferred Stock and the
holders of any other series of Preferred Stock with a liquidation
preference equal to the liquidation preference of the Series A
Preferred Stock the full amounts to which they shall respectively be
entitled, the holders of shares of the Series A Preferred Stock and
the holders of any other series of Preferred Stock with liquidation
preference equal to the liquidation preference of the Series A
Preferred Stock shall receive all of the assets of the Corporation
available for distribution and each such holder of shares of the
Series A Preferred Stock and the holders of any other series of
Preferred Stock with a liquidation preference equal to the
liquidation preference of the Series A Preferred Stock shall share
ratably in any distribution in accordance with the amounts due such
shareholders. After payment shall have been made to the holders of
shares of the Series A Preferred Stock of the full amount to which
they shall be entitled, as aforesaid, the holders of shares of the
Series A Preferred Stock shall be entitled to no further
distributions thereon and the holders of shares of the Common Stock
and of shares of any other series of stock of the Corporation shall
be entitled to share, according to their respective rights and
preferences, in all remaining assets of the Corporation available for
distribution to its shareholders.
(ii) A merger or consolidation of the
Corporation with or into any other corporation, or a sale, lease,
exchange, or transfer of all or any part of the assets of the
Corporation which shall not in fact result in the liquidation (in
whole or in part) of the Corporation and the distribution of its
assets to its shareholders shall not be deemed to be a voluntary or
involuntary liquidation (in whole or in part), dissolution, or
winding-up of the Corporation.
<PAGE>
C. Conversion of Series A Preferred Stock.
The holders of Series A Preferred Stock
shall have the following conversion rights:
(i) Right to Convert. Each share of Series A
Preferred Stock shall be convertible, on the Conversion Dates and at
the Conversion Prices set forth below, into fully paid and
nonassessable shares of Common Stock.
(ii) Mechanics of Conversion. Each holder of
Series A Preferred Stock who desires to convert the same into shares
of Common Stock shall provide notice ("Conversion Notice") via
telecopy to the Corporation. The original Conversion Notice and the
certificate or certificates representing the Series A Preferred Stock
for which conversion is elected, shall be delivered to the
Corporation by international courier, duly endorsed. The date upon
which a Conversion Notice is properly received by the Corporation
shall be a "Notice Date."
The Corporation shall use all reasonable efforts to
issue and deliver within three (3) business days after the Notice
Date, to such holder of Series A Preferred Stock at the address of
the holder on the stock books of the Corporation, a certificate or
certificates for the number of shares of Common Stock to which the
holder shall be entitled as aforesaid; provided that the original
shares of Series A Preferred Stock to be converted are received by
the transfer agent or the Corporation within three business days
after the Notice Date and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock on such date. If the original shares of
Series A Preferred Stock to be converted are not received by the
transfer agent or the Corporation within three business days after
the Notice Date, the Conversion Notice shall become null and void.
(iii) Conversion Dates. The Series A Preferred
Stock shall become convertible into shares of Common Stock at any
time commencing forty-five (45) days after the last day on which
there is an original issuance of the Series A Preferred Stock (the
"Conversion Date").
(iv) Conversion Price. Each share of Series A
Preferred Stock shall be convertible into the number of shares of
Common Stock according to the following formula:
[(.04) (N/365) (1,000)] + 1,000
/Conversion Price
N = the number of days between (i) the
date of issuance of the Series A
Preferred Stock and (ii) the
applicable date of conversion for
the Series A Preferred Stock for
which conversion is being elected.
<PAGE>
Conversion
Price = the lesser of (x) $2.00 (the "Fixed
Conversion Price"), or (y) the
average closing bid price of the
Corporation's Common Stock for the
five (5) trading days immediately
preceding the Notice Date (the
"Floating Conversion Price");
provided, however, that on the
first anniversary after the
issuance of the Series A Preferred
Stock, the Fixed Conversion Price
shall be $3.00; and provided
further, that in no event shall the
Conversion Price be less than
$1.00.
(v) Automatic Conversion. Each share of
Series A Preferred Stock outstanding on December 31, 1997
automatically shall be converted into Common Stock on such date at
the Conversion Price then in effect, and December 31, 1997 shall be
deemed to be the Notice Date with respect to such conversion. The
Company shall have no right to force conversion of any outstanding
shares of Series A Preferred Stock prior to December 31, 1997.
(vi) Fractional Shares. No fractional share
shall be issued upon the conversion of any shares, share or
fractional share of Series A Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of
shares (or fractions thereof) of Series A Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would result
in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the
closing bid price of the Corporation's Common Stock on the Notice
Date multiplied by such fraction.
(vii) Reservation of Stock Issuable Upon
Conversion. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares of
the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred
Stock, the Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such
purpose.
(viii) Adjustment to Conversion Price.
(a) If, prior to the conversion
of all shares of Series A Preferred Stock, the number of outstanding
shares of Common Stock is increased by a stock split, stock dividend,
or other similar event, the Fixed Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of
Common Stock is decreased by a combination or reclassification of
shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased.
(b) If, prior to the conversion
of all shares of Series A Preferred Stock at a time when conversion
would be at the Floating Conversion Price, there is a stock split,
stock dividend, or other similar event which occurs during the five-day
period utilized to compute the Conversion Price, then the Closing
Bid Price used to compute the Conversion Price shall be appropriately
adjusted to reflect, as deemed equitable and appropriate by the
Company, such stock split, stock dividend or other similar event.
(c) If, prior to the conversion of
all shares of Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization,
or other similar event, as a result of which shares of Common Stock
of the Corporation shall be changed into the same or a different
number of shares of the same or another class or classes of stock or
securities of the Corporation or another entity, then the holders of
Series A Preferred Stock shall thereafter have the right to purchase
and receive upon conversion of shares of Series A Preferred Stock,
upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such shares of stock and/or securities as
may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore purchasable
and receivable upon the conversion of shares of Series A Preferred
Stock held by such holders had such merger, consolidation, exchange
of shares, recapitalization or reorganization not taken place, and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the holders of the Series A Preferred
Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of
the number of shares issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The Corporation
shall not effect any transaction described in this subsection unless
the resulting successor or acquiring entity (if not the Corporation)
assumes by written instrument the obligation to deliver to the
holders of the Series A Preferred Stock such shares of stock and/or
securities as, in accordance with the foregoing provisions, the
holders of the Series A Preferred Stock may be entitled to purchase.
(d) If any adjustment under this
subsection would create a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, such fractional share
shall be disregarded and the number of shares of Common Stock
issuable upon conversion shall be the next higher number of shares.
D. Redemption.
(i) Right to Redeem on Conversion. The
Corporation shall have the right, in its sole discretion, upon
receipt of a notice of conversion pursuant to Section C, to redeem in
whole or in part any shares of Series A Preferred Stock submitted for
conversion, immediately prior to conversion. If the Corporation
elects to redeem some, but not all, of the shares of Series A
Preferred Stock submitted for conversion, the Company shall redeem
from among the shares of Series A Preferred Stock submitted by the
various shareholders for conversion on the applicable date, a pro-rata
amount from each shareholder so submitting shares of Series A
Preferred Stock for conversion.
(ii) Mechanics of Redemption on
Conversion. The Corporation shall effect each such redemption by
giving notice of its election to redeem, by facsimile within 1
business day following receipt of a notice of conversion from a
Holder, with a copy by 2-day courier, to the Holder of shares of
Series A Preferred Stock submitted for conversion at the address and
facsimile number of such Holder appearing in the Corporation's
register for the Series A Preferred Stock. Such redemption notice
shall indicate whether the Corporation will redeem all or part of the
shares of Series A Preferred Stock submitted for conversion and the
applicable redemption price. The Corporation shall not be entitled
to send any notice of redemption and begin the redemption procedure
unless it has the full amount of the redemption price, in cash,
available in a demand or other immediately available account in a
bank or similar financial institution on the date the redemption
notice is sent to shareholders.
The redemption price per shares of Series A Preferred
Stock shall be calculated in accordance with the following formula:
Principal + Interest x Closing Bid Price
Conversion Price
For the purposes of the above formula, "Principal",
"Interest", "Closing Bid Price" and "Conversion Price" shall have the
meanings set forth in Section C.
The redemption price shall be paid to the Holder of
shares of Series A Preferred Stock redeemed within 10 business days
of the delivery of the notice of such redemption to such Holder;
provided, however, that the Corporation shall not be obligated to
deliver any portion of such redemption price unless either the
certificates evidencing the shares of Series A Preferred Stock
redeemed are delivered to the Corporation or its transfer agent as
provided in Section C, or the Holder notifies the Corporation or its
transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in
connection with such certificates.
(iii) Redemption on Asset Sale. In the
event the Corporation enters into a transaction or series of
transactions to sell all or substantially all of its assets, the
Corporation shall, within seven days after the closing of such
transaction and after giving at least 15 days advance written notice
of such transaction (which notice shall specify the date that such
redemption is to be effected, which date is referred to hereinafter
as the "Effective Date of Redemption"), redeem the shares of Series A
Preferred Stock for cash. The redemption price in such event
("Redemption Price on Asset Sale") shall be calculated in accordance
with the formula set forth in Section D(ii) above.
Upon the close of the transaction causing redemption
under this Section D(iii), the Corporation shall deposit the
Redemption Price on Asset Sale for all outstanding shares of Series A
Preferred Stock with a bank or trust company having aggregate capital
and surplus in excess of $50,000,000 as a trust fund for the benefit
of the respective holders of the Series A Preferred Stock designated
for redemption and not yet redeemed. Simultaneously, the Corporation
shall deposit irrevocable instruction and authority to such bank or
trust company to publish the notice of redemption thereof (or to
complete such publication if theretofore commenced) and to pay, on
and after the date fixed for redemption or prior thereto, the
Redemption Price on Asset Sale to the holders of the Series A
Preferred Stock upon surrender of their certificates.
(iv) Redemption on Change of Control.
In the event of a Change of Control (as hereinafter defined), the
shares of Series A Preferred Stock shall be redeemed by the
Corporation for cash at a redemption price calculated in accordance
with the formula set forth in Section D(ii) above.
For purposes of this Section D(iv), Change of Control
shall be deemed to have occurred at such time as:
(a) any person (other than the
Corporation, any Subsidiary of the Corporation or any employee
benefit plan of the Corporation)("Person") is or becomes the
beneficial owner, directly or indirectly, through a purchase, merger
or other acquisition or transaction or series of transactions, of
shares of capital stock of the Corporation entitling such Person to
exercise 50% or more of the total voting power of all shares of
capital stock of the Corporation entitled to vote generally in the
election of directors (any shares of voting stock of which such
person or group is the beneficial owners that are not then
outstanding for purposes of calculating such percentage); or
(b) any consolidation of the
Corporation with, or merger of the Corporation into, any other
Person, any merger of another Person into the Corporation (other than
a merger (x) which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock or (y) which is effected solely to change the jurisdiction of
incorporation of the Corporation and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock into
solely shares of Common Stock); or
(c) a change in the Board of
Directors of the Corporation in which the individuals who constituted
the Board of Directors of the Corporation as of July 10, 1996 cease
for any reason to constitute a majority of the directors then in
office.
(v) No Other Redemption. The Company
shall have no right to redeem the Series A Preferred Stock except as
provided in Section D hereof.
E Voting. Except as otherwise provided by
the General Corporation Law of the State of California, the holders
of the Series A Preferred Stock shall have no voting power
whatsoever, and no holder of Series A Preferred Stock shall vote or
otherwise participate in any proceeding in which actions shall be
taken by the Corporation or the shareholders thereof or be entitled
to notification as to any meeting of the Board of Directors or the
shareholders.
F. Protective Provisions. So long as shares of
Series A Preferred Stock are outstanding, the Corporation shall not
without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock:
(i) alter or change the rights,
preferences or privileges of the shares of Series A Preferred Stock
so as to affect adversely the Series A Preferred Stock;
(ii) create any new class or series of
stock being on a parity with or having a preference over the Series A
Preferred Stock with respect to dividends, to payments upon
Liquidation (as provided for in Section B of this Designation) or to
redemption; or
(iii) do any act or thing not authorized
or contemplated by this Designation which would result in taxation of
the holders of shares of the Series A Preferred Stock under Section
305 of the Internal Revenue Code of 1986, as amended (or any
comparable provision of the Internal Revenue Code as hereafter from
time to time amended).
G. Status of Converted Stock. In the event
any shares of Series A Preferred Stock shall be converted as
contemplated by this Designation, the shares so converted shall be
canceled, shall return to the status of authorized but unissued
Preferred Stock of no designated class or series, and shall not be
issuable by the Corporation as Series A Preferred Stock.
FURTHER RESOLVED, that the statements contained in
the foregoing resolutions creating and designating the said Series A
Preferred Stock and fixing the number, powers, preferences and
relative, optional, participating, and other special rights and the
qualifications, limitations, restrictions, and other distinguishing
characteristics thereof shall, upon the effective date of said
series, be deemed to be included in and be a part of the certificate
of incorporation of the Corporation pursuant to the provisions of the
California Corporations Code
Signed on _July 16, 1996.
By:/s/ Lanier M.
Davenport
Its:Chairman and
Chief Executive Officer
Attest
/s/ Gary L. Coulte
Assistant Secretary
<PAGE>
EXHIBIT B
Definition of "U.S. Person"
Pursuant to Rule 902 (c), (o) and (p) of Regulation S, the terms
"U.S. person" and "United States" are defined as follows:
(o) U.S. Person.
(1) "U.S. person" means:
(i) Any natural person resident in the
United States;
(ii) Any partnership or corporation
organized or incorporated under the laws of the United States;
(iii) Any estate of which any executor or
administrator is a U.S. person;
(iv) Any trust of which any trustee is a
U.S. person;
(v) Any agency or branch of a foreign
entity located in the United States;
(vi) Any non-discretionary account or
similar account (other than an estate or trust) held by a dealer or
other fiduciary for the benefit or account of a U.S. person;
(vii) Any discretionary account or
similar account (other than an estate or trust) held by a dealer or
other fiduciary organized incorporated, or (if an individual)
resident in the United States; and
(viii) Any partnership or
corporation if: (A) organized or incorporated under the laws of any
foreign jurisdiction; and (B) formed by a U.S. person principally for
the purpose of investing in securities not registered under the
Securities Act of 1933, as amended (the "Act") unless it is organized
or incorporated, and owned, by accredited investors (as defined in
Rule 501(a) of the Act) who are not natural persons, estates or
trusts.
(2) Notwithstanding paragraph (o)(1) of this
rule, any discretionary account or similar account (other than an
estate or trust) held for the benefit or account of a non-U.S. person
by a dealer or other professional fiduciary organized, incorporated,
or (if an individual) resident in the United States shall not be
deemed a "U.S. person".
(3) Notwithstanding paragraph (o)(1), any
estate of which any professional fiduciary acting as executor or
administrator is a U.S. person shall not be deemed a U.S. person if:
(i) An executor or administrator of the
estate who is not a U.S. person has sole or shared investment
discretion with respect to the assets of the estate; and
(ii) The estate is governed by foreign
law.
(4) Notwithstanding paragraph (o)(1), any
trust of which any professional fiduciary acting as trustee is a U.S.
person shall not be deemed a U.S. person if a trustee who is not a
U.S. person has sole or shared investment discretion with respect to
the trust assets, and no beneficiary of the trust (and no settlor if
the trust is revocable) is a U.S. person.
(5) Notwithstanding paragraph (o)(1), an
employee benefit plan established and administered in accordance with
the law of a country other than the United States and customary
practices and documentation of such country shall not be deemed a
U.S. person.
(6) Notwithstanding paragraph (o)(1), any
agency or branch of a U.S. person located outside the United States
shall not be deemed a "U.S. person" if:
(i) The agency or branch operates for
valid business reasons; and
(ii) The agency or branch is engaged in
the business of insurance or banking and is subject to substantive
insurance or banking regulation, respectively, in the jurisdiction
where located.
(7) The International Monetary Fund, the
International Bank for Reconstruction and Development, the Inter-American
Development Bank, the Asian Development Bank, the African
Development Bank, the United Nations, and their agencies, affiliates
and pension plans, and any other similar international organizations,
their agencies, affiliates and pension plans shall not be deemed
"U.S. persons".
(p) United States. "United States" means the
United States of America, its territories and possessions, any State
of the United States, and the District of Columbia.
<PAGE>
EXHIBIT C
Definition of "Accredited Investor"
Pursuant to Rule 501 (a) of Regulation D, the term "Accredited
Investor" is defined as follows:
1. Any bank as defined in section 3(a)(2) of the
Securities Act of 1933 (the "Act"), or any savings
and loan association or other institution as defined
in section 3(a)(5)(A) of the Act whether acting in
its individual or fiduciary capacity; any broker or
dealer registered pursuant to section 15 of the
Securities Exchange Act of 1934; any insurance
company as defined in section 2(13) of the Act; any
investment company registered under the Investment
Company Act of 1940 or a business development company
as defined in section 2(a)(48) of that Act; Small
Business Investment Company licensed by the U.S.
Small Business Administration under section 301(c) or
(d) of the Small Business Investment Act of 1958; any
plan established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions for the benefit of its employees, if
such plan has total assets in excess of $5,000,000;
employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if
the investment decision is made by a plan fiduciary,
as defined in section 3(21) of such Act, which is
either a bank, savings and loan association,
insurance company, or registered investment adviser,
or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan,
with investment decisions made solely by persons that
are accredited investors.
2. Any private business development company as defined
in section 202(a)(22) of the Investment Advisers Act
of 1940.
3. Any organization described in section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts
or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
4. Any director, executive officer, or general partner
of the issuer of the securities being offered or
sold, or any director, executive officer, or general
partner of a general partner of that issuer.
5. Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the
time of his purchase exceeds $1,000,000.
6. Any natural person who had an individual income in
excess of $200,000 in each of the two most recent
years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income
level in the current year.
7. Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in section
(b)(2)(ii) of Rule 506.
8. Any entity in which all of the equity owners are
accredited investors.
<PAGE>
EXHIBIT D
Outstanding Common Stock, Convertible Debentures
and Warrants
Spintek Gaming Technologies, Inc.
As of July 16, 1996
11,052,803 Shares of Common Stock
0 Convertible Debentures
7,143,000 After This Offering
1,480,000 Options
250,000 Warrants
<PAGE>
EXHIBIT E
Spintek Gaming Technologies, Inc.
Registration Rights Agreement
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is entered into as of July 16, 1996, by and among SPINTEK GAMING
TECHNOLOGIES, INC., a California corporation (the "Company"), and the
persons and entities listed on Exhibit A attached hereto (the
"Investors").
Recitals
WHEREAS, pursuant to Subscription Agreements (the
"Agreements"), by and among the Company and the Investors, the
Company has agreed to sell and the Investors have agreed to purchase
an aggregate of up to $7,143,000 (U.S.) in principal amount of 4%
Convertible Debentures of the Company for a purchase price of
$5,000,000 (U.S.) (the "Convertible Debentures"); and
WHEREAS, the Company has an option to exchange the
Convertible Debentures into equivalent shares of preferred stock upon
approval by the Company's shareholders (the "Exchange Preferred
Stock"); and
WHEREAS, the Convertible Debentures (or the Exchange
Preferred Stock, as the case may be) are convertible into shares of
the Company's Common Stock, $.002 par value per share (the "Shares");
and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investors' agreement to enter into the
Agreements, the Company has agreed to provide the Investors with
certain registration rights with respect to the Shares;
NOW THEREFORE, in consideration of the mutual
promises, representations, warranties, covenants and conditions set
forth in the Agreements and this Registration Rights Agreement, the
Company and the Investors agree as follows:
Agreement:
I Certain Definitions. As used in this
Agreement, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act.
"Common Stock" shall mean the Company's Common Stock,
par value $.002 per share.
"Initiating Holders" shall mean holders of the
Company's Convertible Debentures (or the holders of the Exchange
Preferred Stock, as the case may be) having an aggregate initial
purchase price from the Company of $1,000,000 or more.
"Other Registrable Securities" shall mean those
shares of Common Stock heretofore or hereafter issued pursuant to one
or more agreements granting the purchasers of such securities the
right to have the Company register such securities or include such
securities in any other registration of the Company's equity
securities.
"Registrable Shares" shall means (i) the Shares, and
(ii) any Common Stock of the Company issued or issuable in respect of
the Shares or upon any stock split, stock dividend, recapitalization
or similar event; provided, however, that Registrable Shares or other
securities shall no longer be treated as Registrable Shares if (A)
they have been sold to or through a broker or dealer or underwriter
in a public distribution or a public securities transaction, (B) they
have been sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all
transfer restrictions and restrictive legends with respect thereto
are removed upon consummation of such sale or (C) the Shares are
available for sale under the Securities Act (including Rule 144), in
the opinion of counsel to the Company, without compliance with the
registration and prospectus delivery requirements of the Securities
Act so that all transfer restrictions and restrictive legends with
respect thereto may be removed upon the consummation of such sale.
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.
"Registration Expenses" shall mean all expense
incurred by the Company in compliance with Section 2 hereof,
including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, reasonable fees and disbursements (not to
exceed $20,000) of one counsel for all the selling holders of
Registrable Shares for a limited "due diligence" examination of the
Company, and the reasonable expenses of any special audits incident
to or required by any such registration (but excluding the
compensation of regular employees of the Company, which shall be paid
in any event by the Company, and excluding all underwriting discounts
and selling commissions applicable to the sale of the Registrable
Shares).
"Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in
effect at the time.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Shares and all fees and disbursements of one counsel for
the selling holders of Registrable Shares (other than the fees
disbursements of such counsel included in Registration Expenses).
II. Requested Registration.
The following registration rights will apply if, and
only if, at any time prior to the termination of this Agreement,
Regulation S promulgated under the Securities Act is rescinded or
modified so as to preclude Initiating Holders from reselling in
United States public securities markets Shares received from the
Company pursuant to the Agreements following expiration of the
Restricted Period (as defined in the Agreements), or if, for any
other reason, the Company refuses to issue Shares at the times
required by the Agreements bearing no restrictive legend to
Initiating Holders after expiration of the Restricted Period;
provided, however, that no Investor shall be entitled to request
registration pursuant to this Agreement (and such Investor shall not
be considered an Initiating Holder pursuant to this Agreement, and
the securities held by such Investor shall not be considered
Registrable Shares pursuant to this Agreement) if a representation or
warranty of such Investor in the Agreements between the Investor and
the Company is inaccurate or was inaccurate when made, or the
Investor has failed to comply with the covenants and agreements of
the Investor set forth in the Agreements between the Investor and the
Company:
(a) Request for Registration. If the Company
shall receive from Initiating Holders, at any time after two (2) and
prior to thirty-six (36) months following the final closing of the
sale of Convertible Debentures pursuant to the Agreements, a written
request that the Company effect a registration with respect to all,
but not less than all, of the Registrable Shares held by such
Initiating Holders (which notice shall specify the intended method of
disposition), the Company shall:
i) promptly give written notice of the
proposed registration to all other holders of Registrable Shares; and
ii) as soon as practicable use its best
efforts to effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested
and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Shares as are specified in such
request, together with all or such portion of the Registrable Shares
of any holder or holders of Registrable Shares joining in such
request as are specified in a written request given within fifteen
(15) days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to effect, or to
take any action to effect, any such registration pursuant to this
Section 2:
a) after the Company has
effected one such registration pursuant to this
Section 2(a) and such registration has been declared
or ordered effective by the Commission and the sale
of such Registrable Shares shall have closed; or
b) within the period starting
with the date thirty (30) days prior to the Company's
good faith estimated date of filing of, and ending
ninety (90) days following the effective date of, any
registered offering of the Company's securities to
the general public; or
c) more often than once in each
eighteen (18) month period during the term of this
agreement.
Subject to the foregoing limitations in
clauses (A) and (B) above, the Company shall file a registration
statement covering the Registrable Shares so requested to be
registered as soon as practicable after receipt of the request or
requests of the Initiating Holders, but no later than forty-five (45)
days following receipt of such request or requests, except in the
event audited financial statements not previously prepared are
required to be prepared prior to the filing of such registration
statement, in which case such registration statement must be filed as
soon as practicable, but in any event within ninety (90) days
following receipt of such request or requests.
The registration statement filed pursuant to
the request of the Initiating Holders may, subject to the provision
of Section 2(b) below, include Other Registrable Securities, other
securities of the Company which are held by officers or directors of
the Company or which are held by other holders of registration
rights, and may include securities of the Company being sold for the
account of the Company.
(b) Underwriting. If the Initiating Holders
intend to distribute the Registrable Shares covered by their request
by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to Section 2 and the Company
shall include such information in the written notice referred to in
Section 2(a)(i) above. The right of any holder of Registrable Shares
to registration pursuant to Section 2 shall be conditioned upon such
holder's participation in such underwriting and the inclusion of such
holder's Registrable Shares in such underwriting (unless otherwise
mutually agreed by a majority in interest of the Initiating Holders
and such holder with respect to such participation and inclusion) to
the extent provided herein. A holder of Registrable Shares may elect
to include in such underwriting all or a part of the Registrable
Shares it holds.
i) If the Company shall request
inclusion in any registration pursuant to Section 2 of securities
being sold for its own account, or if officers or directors of the
Company holding other securities of the Company or other holders of
registration rights, shall request inclusion in any registration
pursuant to Section 2, the Initiating Holders shall, on behalf of all
holders of Registrable Shares, offer to include Other Registrable
Securities and the securities of the Company, such officers and
directors and such other holders of registration rights in the
underwriting and may condition such offer on their acceptance of the
further applicable provisions of this Agreement. The Company shall
(together with all holders of Registrable Shares, officers and
directors, other holders of registration rights and holders of Other
Registrable Securities proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or representative of the
underwriters selected for such underwriting by the Company, which
underwriter(s) shall be reasonably acceptable to a majority in
interest of the Initiating Holders.
ii) Notwithstanding any other provision
of this Section 2, if the representative of the underwriters advises
the Company in writing that marketing factors require a limitation on
the number of shares to be underwritten, the Company shall so advise
all holders of Registrable Shares and other shareholders whose
securities would otherwise be underwritten pursuant hereto, and the
number of Registrable Shares and other securities that may be
included in the registration and underwriting shall be allocated in
the following manner: the securities of the Company held by officers
and directors of the Company (other than Registrable Shares) shall be
excluded from such registration and underwriting to the extent
required by such limitation, and, if a limitation on the number of
shares is still required, the Other Registrable Securities shall be
excluded pro rata with Registrable Shares, unless another method of
determining such exclusion is specified in the agreements governing
the Other Registrable Securities, according to the relative number of
Other Registrable Securities requested to be included in such
registration and underwriting, from such registration and
underwriting to the extent required by such limitation, and, if a
limitation on the number of shares is still required, the number of
Registrable Shares that may be included in the registration and
underwriting shall be allocated among all holders of Registrable
Shares in proportion, as nearly as practicable, to the respective
amounts of Registrable Shares which they had requested to be included
in such registration at the time of filing the registration
statement. No Registrable Shares or any other securities excluded
from the underwriting by reason of the underwriter's marketing
limitation shall also be included in such registration.
iii) If the Company or any officer,
director or holder of Registrable Shares or Other Registrable
Securities who has requested inclusion in such registration and
underwriting as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written
notice to the Company, the underwriter and the Initiating Holders.
The securities so withdrawn shall also be withdrawn from
registration.
III. Expenses of Registration. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification or compliance of the Registrable Shares pursuant to
this Agreement. All Selling Expenses shall be borne by the holders
of the securities so registered pro rata on the basis of the number
of their shares so registered.
IV. Registration Procedures. Pursuant to this
Agreement, the Company will keep each holder of Registrable Shares
advised in writing as to the initiation of a registration under this
Agreement and as to the completion thereof. At its expense, the
Company will:
(a) Use reasonable efforts to keep such
registration effective for a period of one hundred eighty (180) days
or until the holder or holders of Registrable Shares have completed
the distribution described in the registration statement relating
thereto or until the securities registered cease to be Registerable
Shares, whichever first occurs;
(b) Prepare and file with the Commission 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 securities covered by such registration
statement; and
(c) Furnish such number of prospectuses and
other documents incidental thereto, including any amendment of or
supplement to the prospectus, as a holder of Registrable Shares from
time to time may reasonably request.
V. Indemnification.
(a) The Company will indemnify each holder of
Registrable Shares, each of its officers, directors and partners, and
each person controlling such holder of Registrable Shares, with
respect to which registration has been effected pursuant to this
Agreement, and each underwriter, if any and each person who controls
any underwriter, and their respective counsel against all claims,
losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any prospectus, or other document incident to any such
registration, 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, or any violation by the
Company of the Securities Act or any rule or regulation thereunder
applicable to the Company in connection with any such registration
and will reimburse each such holder of Registrable Shares, each of
its officers, directors and partners, and each person controlling
such holder of Registrable Shares, each such underwriter and each
person who controls any such underwriter, for any legal and any other
expenses as they are reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability
or action, provided, however, that the indemnity contained in this
Section 5(a) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such Settlement is
effected without the consent of the Company; and provided further
that the Company shall not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of
or is based on any untrue statement or omission based upon written
information furnished to the Company by such holder of Registrable
Shares or underwriter and stated to be specifically for use therein.
The foregoing indemnity agreement is further subject to the condition
that insofar as it relates to any untrue statement, alleged untrue
statement, omission or alleged omission made in a preliminary
prospectus, such indemnity agreement shall not inure to the benefit
of the foregoing indemnified parties if copies of a final prospectus
correcting the misstatement, or alleged misstatement, omission or
alleged omission upon which such loss, liability, claim or damage is
based is timely delivered to such indemnified party and a copy
thereof was not furnished to the person asserting the loss,
liability, claim or damage.
(b) Each holder of Registrable Shares will,
if Registrable Shares held by it are included in the securities as to
which such registration is being effected, indemnify the Company,
each of its directors and officers 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 the Securities Act and the rules and regulations
thereunder, each other such holder of Registrable Shares and each of
its officers, directors and partners, and each person controlling
such holder of Registrable Shares, and their respective counsel
(collectively, the "Company, Underwriters and Counsel") against all
claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact relating
to such Holder contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein relating to such holder or necessary to make the
statements therein relating to such holder not misleading or any
violation by such holder of any rule or regulation promulgated under
the Securities Act applicable to such holder and relating to action
or inaction required of such holder in connection with any such
registration; and will reimburse the Company, such holders of
Registrable Shares, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expense
reasonably incurred in connection with investigating or 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) relating
to such holder is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such
holder of Registrable Shares and stated to be specifically for use
therein; provided, however, that such indemnification obligations
shall not apply if the Company modifies or changes to a material
extent written information furnished by such Holder. Each holder of
Registrable Shares will, if Registrable Shares held by it are
included in the securities as to which such registration is being
effected, indemnify the Company, Underwriters and Counsel against all
claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof), arising out of or based on any sale
of Registrable Shares made by such holder following receipt by such
holder of written notice from the Company, Underwriters or Counsel
that the registration statement filed with respect to such
Registrable Shares contains an untrue statement of material fact or
omits to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading.
(c) Each party entitled to indemnification
under this Section 5 (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 or 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 unreasonably be withheld
or delayed), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense. 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
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 defense of such claim and
litigation resulting therefrom.
VI. Information by Holder of Registrable Shares.
Each holder of Registrable Shares shall furnish to the Company such
information regarding such holder of Registrable Shares and the
distribution proposed by such holder of Registrable Shares as the
Company may reasonably request in writing and as shall be reasonably
required in connection with any registration referred to in this
Agreement.
VII. Miscellaneous.
A. Governing Law. This agreement shall be
governed by and construed in accordance with the laws of the State of
California without giving effect to conflict of laws.
B. Successors and Assigns. Except as
otherwise provided herein, the provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
C. Entire Agreement. This Agreement
constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter hereof.
D. Notices, etc. All notices and other
communications required or permitted hereunder shall be in writing
and shall be mailed by first-class mail, postage prepaid, or
delivered by hand or by messenger or courier delivery service,
addressed (a) if to an Investor, at such Investor's address set forth
on Exhibit A hereof, or at such other address as such Investor shall
have furnished to the Company in writing, or (b) if to the Company at
901 Grier Drive, Suite B, Las Vegas, Nevada 89129, Attn: President,
or at such other address as the Company shall have furnished to each
Investor and each such other holder in writing.
E. Delays or Omissions. No delay or
omission to exercise any right, power or remedy accruing to any
holder of any Registrable Shares, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or
remedy of such holder 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 thereunder occurring, nor shall any waiver
of any single breach or default be deemed a waiver of any other
breach or default thereafter occurring. Any waiver, permit, consent
or approval of any kind or character on the part of any holder of any
breach or default under this Agreement, or any waiver on the part of
any party of any provisions of conditions of this Agreement, must be
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.
F. Counterparts. This agreement may be
executed in any number of counterparts, each of which may be executed
by less than all of the Investors, each of which shall be enforceable
against the parties actually executing such counterparts, and all of
which together shall constitute one instrument.
G. Severability. In the case any provision
of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
H. Amendments. The provisions of this
Agreement may be amended at any time and from time to time, and
particular provisions of this Agreement may be waived, with and only
with an agreement or consent in writing signed by the Company and by
the Investors currently holding fifty percent (50%) of the
Registrable Shares as of the date of such amendment or waiver.
I. Termination of Registration Rights. This
Agreement shall terminate at such time as there ceases to be at
least $2,000,000 in principal amount of outstanding Convertible
Debentures (or Exchange Preferred Stock, as the case may be) which
constitute Registrable Shares as defined herein.
The foregoing Registration Rights Agreement is hereby executed as of
the date first above written.
SPINTEK GAMING TECHNOLOGIES, INC. INVESTOR
RBB Bank Aktiengesellschaft
By:/s/ Gary L. Coulter By:/s/Herbert Straus
Name: Name
Title:Vice Chairman Title:Head Trader
MODIFICATION AGREEMENT
This agreement made and entered into this 16 th day of July 1996,
by and between, SPINTEK GAMING TECHNOLOGIES, INC., a California corporation
(herein after referred to as "Spintek"), and the persons and entities
listed in Exhibit A attached hereto (herein after referred to as "the
Investors");
WITNESSETH THAT
WHEREAS, Spintek has agreed to issue an unregistered 4% Convertible
Debenture due December 31, 1997 under Regulation S ("Convertible
Debenture");
WHEREAS, Spintek and the Investors have agreed to modify and amend
the terms of the Convertible Debenture in certain respects and desire to
reduce their agreement to writing;
NOW, THEREFORE, in consideration of the Investors' agreement to
purchase the Convertible Debenture as modified and amended and the mutual
covenants herein contained, the receipt and sufficiency of which is
hereby acknowledged, the parties agree to modify and amend the
Convertible Debenture as follows:
1. In the event the five-day average bid price for Spintek's
common stock does not reach $3.00 per share within ninety (90) days from
the date on which the Convertible Debenture is issued, Spintek agrees to
take immediate steps to effect a reverse stock split sufficient to raise
the bid price to $3.25 per share based upon the five-day average bid
price.
2. Spintek agrees to use its best efforts to cause its common
stock to become listed on the NASDAQ National Market as soon as possible
after the issuance of the Convertible Debenture. Spintek agrees that if
its common stock does not become eligible for listing on the NASDAQ
National Market within one hundred twenty (120) days from the date on
which the Convertible Debenture is issued, the floor exercise price of
$1 stated in Convertible Debenture shall lapse and a floor exercise price
shall no longer be included as a term of the Convertible Debenture.
3. Spintek also agrees to provide the Investors with projected
quarterly profit and loss statements on a quarterly basis for two
quarters immediately following the issuance of the Convertible Debenture.
The profit and loss projections are to be prepared internally by
Spintek's management. Spintek agrees that, in the event its actual
profits are not at least eighty percent (80%) of the projected quarterly
profit stated in the projected profit and loss statement for either
quarter, the $1.00 floor exercise price stated in the Convertible
Debenture shall lapse and a floor exercise price shall no longer be
included as a term of the Convertible Debenture.
4. The Convertible Debenture shall continue in full force and
effect, as modified and amended by this agreement, and the parties ratify
and confirm their Agreement as modified. This agreement shall be binding
on and inure to the benefit of the parties and their heirs, successors,
and assigns.
5. To the extent it is necessary to modify any other documents
executed in connection with Spintek's unregistered offering of the
Convertible Debenture pursuant to Regulation S to make them comply with
the terms of this Modification Agreement for the Convertible Debenture,
Spintek and the Investors also agree to modify them.
IN WITNESS WHEREOF, the parties have signed, sealed and delivered
this agreement on the date given above.
SPINTEK GAMING TECHNOLOGIES, INC.
By: /s/ Gary L. Coulter
Gary L. Coulter
Vice Chairman and COO
ON BEHALF OF THE INVESTORS:
By: /s/ Herbert Strauss
Herbert Strauss
An authorized agent of Investors
RBB Bank Aktiengesellschaft
COULTER & DAVENPORT
ATTORNEYS AT LAW
409 WEST TENTH STREET
WEST POINT, GEORGIA 31833
GARY L. COULTER TELEPHONE: (706)
643-4567
MALCOLM C. DAVENPORT FACSIMILE: (706) 643-4568
[FORM OPINION OF COUNSEL FOR
SPINTEK GAMING TECHNOLOGIES, INC.]
July 15, 1996
TO THOSE PURCHASERS OF
CONVERTIBLE DEBENTURES OF
SPINTEK GAMING TECHNOLOGIES, INC.
LISTED ON EXHIBIT A HERETO ("PURCHASERS")
RE: Spintek Gaming Technologies, Inc.
Dear Purchasers:
We are counsel to Spintek Gaming Technologies, Inc., a California
corporation (the "Company"). This opinion is being rendered to you at
the Company's request.
In the capacity described above, we have considered such matters
of law and of fact, including the examination of originals or copies,
certified or otherwise identified to our satisfaction, of such records
and documents of the Company, certificates of officers and
representatives of the Company, certificates of public officials and such
other documents as we have deemed appropriate as a basis for the opinions
hereinafter set forth.
In conducting our examination, we have assumed, without
investigation, the genuineness of all signatures, the correctness of all
certificates, the authenticity of all documents and instruments submitted
to us as originals, the conformity to original documents and instruments
of all such documents and instruments submitted to us as certified or
photostatic copies and the authenticity of the originals of such copies,
and the accuracy and completeness of all records made available to us by
the Company. We have assumed, without investigation, the accuracy of the
statements as to factual matters made by officers and employees of the
Company and public officials. In conducting our examination of documents
and instruments, we have assumed, without investigation, that each party
to such documents and instruments has: (i) the power and capacity to
enter into and perform all of its obligations under such documents and
instruments; (ii) duly authorized all requisite action with respect to
such documents and instruments; and (iii) duly executed and delivered
such documents and instruments.
<PAGE>
The opinions hereinafter expressed are subject to the following
general assumptions, which we have made without undertaking to verify
such matters by independent investigation:
A. All terms, provisions, and conditions of or relating to the
Subscription Agreements between the Purchasers and the Company (the
"Subscription Agreements") and the Registration Rights Agreement between
the Purchasers and the Company (the "Registration Rights Agreement") are
correctly and completely reflected therein.
B. All offers, sales and issuances of the outstanding securities
of the Company and the Convertible Debentures sold to the Purchasers (the
"Convertible Debentures") have complied, and will comply, with the laws
and regulations of the countries and political entities (other than the
United States) having jurisdiction over such offers, sales and issuances,
and all offers, sales and issuances of the outstanding securities of the
Company (except for the Convertible Debentures) have complied, and will
comply, with the securities laws and regulations of the United States.
C. Other than the Company, no party to the transactions
contemplated by the Subscription Agreements or the Registration Rights
Agreement, or any document or oral agreement relating thereto, is subject
to any statute, rule or regulation or to any impediment to which
contracting parties are generally not subject that require the Company
or such party to obtain the consent, approval, authorization or other
order, or to make a declaration or filing with, any governmental
authority.
D. The certificates representing the Convertible Debentures will
be duly delivered upon sale or issuance of the securities relating to
such certificates.
E. As to factual matters, we have relied upon the truth and
accuracy of the representations and warranties of the Company and the
Purchasers, and have assumed compliance with the agreements and covenants
of the Company and the Purchasers, all as set forth in the Subscription
Agreements, without undertaking to verify such matters by independent
investigation. We have additionally relied upon statements and
representations of officers of the Company in certificates furnished to
us, without undertaking to verify such matters by independent
investigation.
Our opinions set forth herein are also subject to the following
exceptions, limitations and qualifications:
A. With your permission, we have assumed (i) the genuineness of
all signatures appearing on documents furnished to us, whether furnished
to us as originals, copies or facsimiles; (ii) the capacity of each
individual signing any of the documentation on which this opinion is
based; and (iii) the authenticity of all documents submitted to us as
originals and the conformity to originals of all copies and facsimiles
of documents made available to us.
B. Except as described herein, we have made no special
investigation or review of any judgments, decrees, franchises,
certificates, or the like, and have made no independent search of the
records of any judicial authority or governmental agency. In addition,
we have made no examination or investigation to verify the accuracy or
completeness of any financial, accounting, statistical or other
disclosure information furnished to you with respect to any accounting,
financial or disclosure matters, and express no opinion with respect
thereto.
C. We are members of the State Bar of Georgia, and we express
no opinion as to the laws of any jurisdiction other than the laws of the
State of Georgia, the General Corporation Law of the State of Georgia and
the federal laws of the United States.
D. Our opinions below are limited strictly to the opinions
expressly set forth herein, and no opinion is to be implied or may be
inferred beyond the matters expressly so stated. Without the limiting
the foregoing, we express no opinion as to the anti-fraud provisions of
federal or state securities laws.
Based on the assumptions, limitations, exceptions and
qualifications set forth herein, this is to advise you that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of California.
2. The Subscription Agreements and the Registration Rights
Agreement have been duly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the
Company enforceable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general
applicability relating to or affecting the enforcement of creditors'
rights and by the effect of general principles of equity or public policy
(regardless of whether enforceability is considered in a proceeding in
equity or at law).
3. The Convertible Debentures and the Common Stock issuable upon
conversion of the Convertible Debentures, when issued in accordance with
the Subscription Agreements and the Articles of Incorporation, will be
duly authorized, validly issued, fully paid and nonassessable.
4. The offer and sale to the Purchasers of the Convertible
Debentures and the Common Stock underlying the Convertible Debentures
pursuant to the Subscription Agreements is exempt from the registration
requirements of the U.S. Securities Act of 1933, as amended.
This opinion is based on our review of the law as it now stands and
we undertake no obligation to update this opinion for future events or
developments. This opinion represents the judgment of this law firm and
is not a warranty or guaranty and shall not be construed as such.
Upon presentation of certificates representing the Convertible
Debentures, or upon the election by the Purchasers to convert the
Convertible Debentures into Shares of the Common Stock of the Company,
the undersigned undertakes to render additional legal opinions to the
Company's Transfer Agent stating that the restrictive legend on the
certificates representing the Convertible Debentures may be removed, or,
in the case of a conversion, that the certificates representing the
Common Stock into which the Convertible Debentures may be converted may
be issued without restrictive legend; provided, however, that such
opinions shall only be issued following the expiration of the Restricted
Period and upon the receipt by the undersigned of such Purchaser's
properly executed Notice of Conversion certifying that the Purchaser has
complied with all provisions of Regulation S during the Restricted
Period.
This opinion letter is delivered to you solely for your benefit and
may not be utilized or quoted by you for any other purpose whatsoever.
This opinion letter may not be delivered to, and may not be utilized,
quoted by or relied upon, by any other person for any purpose whatsoever
without our prior written consent.
Very truly yours,
/s/Gary L. Coulter
COULTER & DAVENPORT
by Gary L. Coulter
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of July 16, 1996 ("Escrow
Agreement") is by and among J.P. CAREY ENTERPRISES, INC., a Georgia
corporation ("Consultant"); SPINTEK GAMING TECHNOLOGIES, INC., a
California corporation ("Issuer"), the subscribers listed on Exhibit A
attached hereto (each a "Subscriber" and collectively the
"Subscribers"); and NELSON MULLINS RILEY & SCARBOROUGH, L.L.P., a
limited liability partnership, as Escrow Agent hereunder ("Escrow
Agent" or "NMRS").
BACKGROUND
A. Issuer has engaged Consultant to assist it in locating
offshore persons to purchase $7,143,000.00 (U.S.) in aggregate
principal amount of 4% Convertible Debentures for a purchase price of
$5,000,000 (U.S.) (the "Debentures") convertible into shares of
preferred stock and/or common stock of the Issuer, pursuant to the
Regulation S Securities Subscription Agreements attached hereto as
Exhibit B (collectively the "Subscription Agreements" and individually
a "Subscription Agreement").
B. In accordance with the Subscription Agreements,
Subscribers for the Shares will be required to submit full payment for
their respective investments at the time they execute the Subscription
Agreements.
C. All payments received by Consultant in connection with
subscriptions for Shares shall be promptly forwarded to Escrow Agent,
and Escrow Agent has agreed to accept, hold, and disburse such funds
deposited with it and the earnings thereon in accordance with the
terms of this Escrow Agreement.
D. In order to establish the escrow of funds and to effect
the consummation of the transaction contemplated by the Subscription
Agreements, the parties hereto have entered into this Escrow
Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto,
for themselves, their successors and assigns, hereby agree as follows:
1. Definitions. The following terms shall have the following
meanings when used herein:
"Cash Investment" shall mean the purchase price of the
Debentures to be purchased by any Subscriber as set forth in the
Subscription Agreements.
"Cash Investment Instrument" shall mean a wire transfer or
other immediately available funds paid to the "Nelson Mullins Riley &
Scarborough-Escrow Account," in full payment for the Shares to be
purchased by any Subscriber.
"Escrow Funds" shall mean the funds deposited with the
Escrow Agent pursuant to this Agreement, together with any interest
and other income thereon.
"Entire Offering" shall mean the sale of $7,143,000.00 in
principal amount of Debentures.
"Offering Notice" shall mean a written notification,
signed by Consultant, which shall specify that subscriptions for the
Entire Offering have been received; that, to the best of Consultant's
knowledge after due inquiry and review of its records, Cash Investment
Instruments in full payment for that number of Shares equal to the
Entire Offering have been received, deposited with and collected by
Escrow Agent; and that such subscriptions have not been withdrawn,
rejected or otherwise terminated.
"Subscription Accounting" shall mean an accounting of all
subscriptions for Debentures received and accepted by Consultant as of
the date of such accounting, indicating for each subscription the
Subscriber's name and address, the number and total purchase price of
subscribed Debentures, the date of receipt by Consultant of the Cash
Investment Instrument, and notations of any nonpayment of the Cash
Investment Instrument submitted with such subscription, any withdrawal
of such subscription by the Subscriber, any rejection of such
subscription by Consultant, or other termination, for whatever reason,
of such subscription.
2. Appointment of and Acceptance by Escrow Agent.
Issuer, Consultant and Subscribers hereby appoint Escrow Agent to
serve as escrow agent hereunder, and Escrow Agent hereby accepts such
appointment in accordance with the terms of this Escrow Agreement.
3. Deposits into Escrow. a. Upon receipt by
Consultant of any Cash Investment Instrument for the purchase of
Debentures, Consultant shall forward to Escrow Agent, by 12:00 noon of
the next business day, the Cash Investment Instrument for deposit into
the following escrow account:
NationsBank of Georgia
Credit to the account of:
Nelson Mullins Riley & Scarborough IOLTA Account
ABA #061000052
ACCT #0105504113
ATTN: Debbie Powell
Re: J.P. Carey Enterprises, Inc.
Notify (404) 332-2669
Each such deposit shall be accompanied by the following documents:
(1) a report containing such Subscriber's name, taxpayer
identification number, address and other information
required for withholding purposes; and
(2) a Subscription Accounting.
ALL FUNDS SO DEPOSITED SHALL REMAIN THE PROPERTY OF THE
SUBSCRIBERS ACCORDING TO THEIR RESPECTIVE INTERESTS AND SHALL NOT BE
SUBJECT TO ANY LIEN OR CHARGE BY ESCROW AGENT OR BY JUDGMENT OR
CREDITORS' CLAIMS AGAINST ISSUER UNTIL RELEASED TO ISSUER IN
ACCORDANCE WITH SECTION 4(a) HEREOF.
b. Consultant and Issuer understand and agree that all checks
and similar instruments received by Escrow Agent hereunder are subject
to collection requirements of presentment and final payment, and that
the funds represented thereby cannot be drawn upon or disbursed until
such time as final payment has been made and is no longer subject to
dishonor. Upon receipt, Escrow Agent shall process each Cash
Investment Instrument for collection, and the proceeds thereof shall
be held as part of the Escrow Funds until disbursed in accordance with
Section 4 hereof. If, upon presentment for payment, any Cash
Investment Instrument is dishonored, Escrow Agent's sole obligation
shall be to notify Consultant of such dishonor and to return such Cash
Investment Instrument to Consultant to take whatever action it deems
necessary. Notwithstanding the foregoing, if for any reason any Cash
Investment Instrument is uncollectible after payment of the funds
represented thereby has been made by Escrow Agent, Issuer shall
immediately reimburse Escrow Agent upon receipt from Escrow Agent of
written notice thereof.
Upon receipt of any Cash Investment Instrument that
represents payment less than or greater than the Cash Investment,
Escrow Agent's sole obligation shall be to notify Issuer and
Consultant of such fact and to return such Cash Investment Instrument
to Consultant.
c. All Cash Investment Instruments shall be made payable to
the order of, or endorsed to the order of, "Nelson Mullins Riley &
Scarborough-Escrow Account," and Escrow Agent shall not be obligated
to accept, or present for payment, any Cash Investment Instrument that
is not payable or endorsed in that manner.
4. Disbursements of Escrow Funds.
a. Completion of Offering. Subject to the provisions of
Section 10 hereof, Escrow Agent shall pay to Issuer the liquidated
value of the Escrow Funds, by certified or bank check or by wire
transfer, no later than two (2) business days following receipt of the
following documents:
(1) An Offering Notice;
(2) Subscription Accounting, substantiating the sale of the
Entire Offering;
(3) Subscription Agreement signed by all parties;
(4) Debenture Certificates for each Subscriber; and
(5) Such other certificates, notices or other documents as
Escrow Agent, in its discretion, shall reasonably require.
Notwithstanding the foregoing, Escrow Agent shall not be
obligated to disburse the Escrow Funds to Issuer if Escrow Agent has
grounds to believe that (a) Cash Investment Instruments in full
payment for that number of Debentures equal to or greater than the
Entire Offering have not been received, deposited with and collected
by the Escrow Agent, subject to the right of Issuer and Consultant, as
agent for the Subscribers, to consummate the sale of some, but not
all, of the Debentures or (b) any of the certifications and opinions
set forth in the documents are incorrect or incomplete. Prior to
disbursing any Escrow Funds or stock certificates, Escrow Agent shall
be entitled, in its reasonable discretion, to require any additional
written certificates or authorizations that it deems necessary or
desirable.
b. Rejection of any Subscription or termination of the
Offering. No later than fifteen (15) business days after receipt by
Escrow Agent of written notice (i) from Issuer or Consultant that
Issuer intends to reject a Subscriber's subscription, or (ii) from
Issuer or Consultant that there will be no closing of the sale of
Debentures to Subscribers, Escrow Agent shall pay to the applicable
Subscribers, by certified or bank check and by first class mail, the
amount of the Cash Investment paid by each Subscriber, without
interest or deduction.
c. Expiration of Offering Period. Notwithstanding anything
to the contrary contained herein, if Escrow Agent shall not have
received an Offering Notice on or before July 31, 1996, Escrow Agent
shall, within fifteen (15) business days after such date and without
any further instruction or direction from Consultant or Issuer, return
to each Subscriber, by certified or bank check and by first class
mail, the Cash Investment made by such Subscriber, without interest or
deduction.
5. Suspension of Performance or Disbursement Into Court. If,
at any time, there shall exist any dispute between Consultant, Issuer,
Escrow Agent, any Subscriber or any other person with respect to the
holding or disposition of any portion of the Escrow Funds or any other
obligations of Escrow Agent hereunder, or if at any time Escrow Agent
is unable to determine, to Escrow Agent's sole satisfaction, the
proper disposition of any portion of the Escrow Funds or Escrow
Agent's proper actions with respect to its obligations hereunder, or
if Consultant and Issuer have not within 30 days of the furnishing by
Escrow Agent of a notice of resignation pursuant to Section 7 hereof
appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following
actions:
a. suspend the performance of any of its obligations under
this Escrow Agreement until such dispute or uncertainty shall be
resolved to the sole satisfaction of Escrow Agent or until a successor
Escrow Agent shall have been appointed (as the case may be); and/or
b. petition (by means of an interpleader action or any other
appropriate method) any court of competent jurisdiction in Atlanta,
Georgia, for instructions with respect to such dispute or uncertainty,
and pay into such court all funds held by it for holding and
disposition in accordance with the instructions of such court.
Escrow Agent shall have no liability to Consultant, Issuer, any
Subscriber or any other person with respect to any such suspension of
performance or disbursement into court, specifically including any
liability or claimed liability that may arise, or be alleged to have
arisen, out of or as a result of any delay in the disbursement of
funds held in the Escrow Funds or any delay in or with respect to any
other action required or requested of Escrow Agent.
6. Investment of Funds. Escrow Agent shall not invest or
reinvest the Escrow Funds. The parties to this Escrow Agreement
acknowledge that no interest shall accrue or be paid with respect to
the Escrow Funds.
7. Resignation and Removal of Escrow Agent. Escrow Agent may
resign from the performance of its duties hereunder at any time by
giving ten (10) days' prior written notice to Consultant and Issuer or
may be removed, with or without cause, by Consultant and Issuer,
acting jointly in writing, at any time by the give of ten (10) days'
prior written notice to Escrow Agent. Such resignation or removal
shall take effect upon the appointment of a successor Escrow Agent as
provided hereinbelow. Upon any such notice of resignation or removal,
Consultant and Issuer jointly shall appoint a successor Escrow Agent
hereunder, which shall be a commercial bank, trust company or other
financial institution with a combined capital and surplus in excess of
$10,000,000. Upon the acceptance in writing of any appointment as
Escrow Agent hereunder by a successor Escrow Agent, such successor
Escrow Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Escrow Agent,
and the retiring Escrow Agent shall be discharged from its duties and
obligations under this Escrow Agreement, but shall not be discharged
from any liability for actions taken as escrow agent hereunder prior
to such succession. After any retiring Escrow Agent's resignation or
removal, the provisions of this Escrow Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it while it
was Escrow Agent under this Escrow Agreement.
8. Liability of Escrow Agent.
a. Escrow Agent shall have no liability or obligation with
respect to the Escrow Funds except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility
shall be for the safekeeping and disbursement of the Escrow Funds in
accordance with the terms of this Escrow Agreement. Escrow Agent
shall have no implied duties or obligations and shall not be charged
with knowledge or notice of any fact or circumstance not specifically
set forth herein. Escrow Agent may rely upon any instrument, whether
bearing original, conformed or facsimile signatures, not only as to
its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein which Escrow
Agent shall in good faith believe to be genuine, to have been signed
or presented by the person or parties purporting to sign the same and
to conform to the provisions of this Escrow Agreement. In no event
shall Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. Escrow Agent shall not be
obligated to take any legal action or commence any proceeding in
connection with the Escrow Funds or any account in which Escrow Funds
are deposited or this Escrow Agreement, or to appear in, prosecute or
defend any such legal action or proceeding. Without limiting the
generality of the foregoing, Escrow Agent shall not be responsible for
or required to enforce any of the terms or conditions of any
subscription agreement with any Subscriber or any other agreement
between Issuer, Consultant and/or any Subscriber. Escrow Agent shall
not be responsible or liable in any manner for the performance by
Issuer or any Subscriber of their respective obligations under any
subscription agreement nor shall Escrow Agent be responsible or liable
in any manner for the failure of Issuer, Consultant or any third party
(including any Subscriber) to honor any of the provisions of this
Escrow Agreement. Escrow Agent may consult legal counsel selected by
it in the event of any dispute or question as to the construction of
any of the provisions hereof or of any other agreement or of its
duties hereunder, and shall incur no liability and shall be fully
indemnified from any liability whatsoever in acting in accordance with
the opinion or instruction of such counsel. Issuer shall promptly
pay, upon demand, the reasonable fees and expenses of any such
counsel.
b. The Escrow Agent is authorized, in its sole discretion, to
comply with orders issued or process entered by any court with respect
to the Escrow Funds, without determination by the Escrow Agent of such
court's jurisdiction in the matter. If any portion of the Escrow
Funds is at any time attached, garnished or levied upon under any
court order, or in case the payment, assignment, transfer, conveyance
or delivery of any such property shall be stayed or enjoined by any
court order, or in case any order, judgment or decree shall be made or
entered by any court affecting such property or any part thereof, then
and in any such event, the Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel selected by it
is binding upon it without the need for appeal or other action; and if
the Escrow Agent complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any
other person or entity by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
9. Indemnification of Escrow Agent. From and at all times
after the date of this Escrow Agreement, Issuer and each Subscriber
(each an "Indemnifying Party") shall, severally and not jointly, to
the fullest extent permitted by law, indemnify and hold harmless the
Escrow Agent and each director, officer, employee, attorney, agent and
affiliate of Escrow Agent (collectively, the "Indemnified Parties")
against any and all actions, claims (whether or not valid), losses,
damages, liabilities, costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees,
costs and expenses) incurred by or asserted against any of the
Indemnified Parties from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any
way relating to any claim, demand, suit, action or proceeding
(including any inquiry or investigation) by any person, including
without limitation Issuer or Consultant, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against
any person under any statute or regulation, including, but not limited
to, any federal or state securities laws, or under any common law or
equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure of
performance of this Escrow Agreement or any transactions contemplated
herein, whether or not any such Indemnified Party is a party to any
such action, proceeding, suit or the target of any such inquiry or
investigation; provided, however, that no Indemnified Party shall have
the right to be indemnified hereunder for any liability finally
determined by a court of competent jurisdiction, subject to no further
appeal, to have resulted solely from the gross negligence or willful
misconduct of such Indemnified Party. If any such action or claim
shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel and the payment of all expenses.
Such Indemnified Party shall, in its sole discretion, have the right
to employ separate counsel (who may be selected by such Indemnified
Party in its sole discretion) in any such action and to participate in
the defense thereof, and the fees and expenses of such counsel shall
be paid by such Indemnified Party, except that the Indemnifying Party
shall be required to pay such fees and expenses if (a) the
Indemnifying Party agrees to pay such fees and expenses, (b) the
Indemnifying Party shall fail to assume the defense of such action or
proceeding or shall fail, in the reasonable discretion of such
Indemnified Party, to employ counsel satisfactory to the Indemnified
Party in any such action or proceeding, (c) the Indemnifying Party is
the plaintiff in any such action or proceeding, or (d) the named
parties to any such action or proceeding (including any impleaded
parties) include both Indemnified Party and the Indemnifying Party,
and Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different
from or additional to those available to Issuer. Issuer shall be
liable to pay fees and expenses of counsel pursuant to the preceding
sentence. All such fees and expenses payable by the Indemnifying
Party pursuant to the foregoing sentence shall be paid from time to
time as incurred, both in advance of and after the final disposition
of such action or claim. The obligations of each Indemnifying Party
under this Section 9 shall survive any termination of this Escrow
Agreement and the resignation or removal of Escrow Agent.
10. Compensation to Escrow Agent.
a. Fees and Expenses. Consultant shall compensate Escrow
Agent for its services hereunder by making the payment set forth on
Exhibit C attached hereto. The obligations of Consultant under this
Section 10 shall survive any termination of this Escrow Agreement and
the resignation or removal of Escrow Agent.
b. Disbursements from Escrow Funds to Pay Escrow Agent. The
Escrow Agent is authorized to and may disburse from time to time, to
itself or to any Indemnified Party from the Escrow Funds (to the
extent of Consultant's rights thereto), the amount of any compensation
and reimbursement of out-of-pocket expenses due and payable hereunder
(including the amount set forth on Exhibit C and any amount to which
Escrow Agent or any Indemnified Party is entitled to seek
indemnification pursuant to Section 9 hereof). Escrow Agent shall
notify Issuer of any disbursement from the Escrow Funds to itself or
to any Indemnified Party in respect of any compensation or
reimbursement hereunder and shall furnish to Issuer copies of all
related invoices and other statements.
c. Security and Offset. Consultant hereby grants to Escrow
Agent and the Indemnified Parties a security interest in and lien upon
the Escrow Funds (to the extent of Consultant's rights thereto) to
secure all obligations hereunder, and Escrow Agent and the Indemnified
Parties shall have the right to offset the amount of any compensation
or reimbursement due any of them hereunder (including any claim for
indemnification pursuant to Section 9 hereof) against the Escrow Funds
(to the extent of Issuer's rights thereto). If for any reason the
Escrow Funds available to Escrow Agent and the Indemnified Parties
pursuant to such security interest or right of offset are insufficient
to cover such compensation and reimbursement, Consultant shall
promptly pay such amounts to Escrow Agent and the Indemnified Parties
upon receipt of an itemized invoice.
d. Payment of J.P. Carey Enterprises, Inc. Monies. It is
understood that Consultant is due a fee, calculated as a percentage of
the Cash Investment (the "Fee"). The parties hereto agree that, upon
completion of the Offering, Escrow Agent shall remit via wire transfer
to the parties designated by Consultant the sums so designated by
Consultant after first retaining and disbursing to itself from the Fee
legal fees and expenses previously billed to Consultant by NMRS.
Issuer shall have no obligation or liability for any fees due to NMRS.
11. Representations and Warranties; Legal Opinions.
a. Issuer makes the following representations and warranties to
Escrow Agent:
(1) Issuer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
California, and has full power and authority to execute and deliver
this Escrow Agreement and to perform its obligations hereunder.
(2) This Escrow Agreement has been duly approved by all
necessary corporate action of Issuer, including any necessary
shareholder approval, has been executed by duly authorized officers of
Issuer, and constitutes a valid and binding agreement of Issuer,
enforceable in accordance with its terms.
(3) The execution, delivery, and performance by Issuer
of this Escrow Agreement will not violate, conflict with, or cause a
default under the certificate of incorporation or bylaws of Issuer,
any applicable law or regulation, any court order or administrative
ruling or decree to which Issuer is a party or any of its property is
subject, or any agreement, contract, indenture, or other binding
arrangement to which Issuer is a party or any of its property is
subject.
(4) No party other than the parties hereto and the
prospective Subscribers have, or shall have, any lien, claim or
security interest in the Escrow Funds or any part thereof. No
financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing
(whether specifically or generally) the Escrow Funds or any part
thereof.
(5) Issuer hereby acknowledges that the status of Escrow
Agent is that of agent only for the limited purposes set forth herein,
and hereby represents and covenants that no representation or
implication shall be made that the Escrow Agent has investigated the
desirability or advisability of investment in the Debentures or has
approved, endorsed or passed upon the merits of the investment therein
and that the name of the Escrow Agent has not and shall not be used in
any manner in connection with the offer or sale of the Debentures
other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
(6) All of the representations and warranties of Issuer
contained herein are true and complete as of the date hereof and will
be true and complete at the time of any deposit to or disbursement
from the Escrow Funds.
b. Each Subscriber makes the following representations and
warranties to Escrow Agent:
(1) Subscriber has full power and authority to execute
and deliver this Escrow Agreement and to perform its obligations
hereunder.
(2) This Escrow Agreement has been duly approved by all
necessary action of Subscriber, including any necessary shareholder
approval, has been executed by persons duly authorized by Subscriber,
and constitutes a valid and binding agreement of Subscriber,
enforceable in accordance with its terms.
(3) The execution, delivery, and performance by
Subscriber of this Escrow Agreement will not violate, conflict with,
or cause a default under the organizational or governing documents of
Subscriber, any applicable law or regulation, any court order or
administrative ruling or decree to which Subscriber is a party or any
of its property is subject, or any agreement, contract, indenture, or
other binding arrangement to which Subscriber is a party or any of its
property is subject.
(4) Subscriber hereby acknowledges that the status of
Escrow Agent is that of agent only for the limited purposes set forth
herein, and hereby represents and covenants that no representation or
implication shall be made that the Escrow Agent has investigated the
desirability or advisability of investment in the Debentures or has
approved, endorsed or passed upon the merits of the investment therein
and that the name of the Escrow Agent has not and shall not be used in
any manner in connection with the offer or sale of the Debentures
other than to state that the Escrow Agent has agreed to serve as
escrow agent for the limited purposes set forth herein.
(5) All of the representations and warranties of
Subscriber contained herein are true and complete as of the date
hereof and will be true and complete at the time of any deposit to or
disbursement from the Escrow Funds.
c. Consultant makes the following representations and
warranties to Escrow Agent:
(1) Consultant is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Georgia,
and has full power and authority to execute and deliver this Escrow
Agreement and to perform its obligations hereunder;
(2) This Escrow Agreement has been duly approved by all
necessary corporate action of Consultant, has been executed by duly
authorized officers of Consultant, and constitutes a valid and binding
agreement of Consultant, enforceable in accordance with its terms.
(3) The execution, delivery, and performance by
Consultant of this Escrow Agreement will not violate, conflict with,
or cause a default under the articles of incorporation or bylaws of
Consultant, any applicable law, regulation or license, any court order
or administrative ruling or decree to which Consultant is a party or
any of its property is subject, party or any of its property is
subject.
(4) The deposit with Escrow Agent by Consultant of Cash
Investment Instruments pursuant to Section 3 hereof shall be deemed a
representation and warranty by Consultant that such Cash Investment
Instrument represents a bona fide sale to the Subscriber described
therein of the amount of Debentures set forth therein, subject to and
in accordance with the terms of the Offering Document.
(5) Consultant hereby acknowledges that the status of
Escrow Agent hereunder is that of agent only for the limited purposes
set forth herein, and hereby represents and covenants that no
representation or implication shall be made that the Escrow Agent has
investigated the desirability or advisability of investment in the
Debentures or has approved, endorsed or passed upon the merits of the
investment therein and that the name of the Escrow Agent has not and
shall not be used in any manner in connection with the offer or sale
of the Debentures other than to state that the Escrow Agent has agreed
to serve as escrow agent for the limited purposes set forth herein.
(6) All of the representations and warranties of
Consultant contained herein are true and complete as of the date
hereof and will be true and complete at the time of any deposit to or
disbursement from the Escrow Funds.
12. Consent to Jurisdiction and Venue. In the event that any
party hereto commences a lawsuit or other proceeding relating to or
arising from this Agreement, the parties hereto agree that the United
States District Court for the Northern District of Georgia shall have
the sole and exclusive jurisdiction over any such proceeding. If all
such courts lack federal subject matter jurisdiction, the parties
agree that the Superior Court Division of Fulton County shall have
sole and exclusive jurisdiction. Any of these courts shall be proper
venue for any such lawsuit or judicial proceeding and the parties
hereto waive any objection to such venue. The parties hereto consent
to and agree to submit to the jurisdiction of any of the courts
specified herein and agree to accept service or process to vest
personal jurisdiction over them in any of these courts.
13. Notice. All notices and other communications hereunder
shall be in writing and shall be deemed to have been validly served,
given or delivered five (5) days after deposit in the United States
mails, by certified mail with return receipt requested and postage
prepaid, when delivered personally, one (1) day after delivery to any
overnight courier, or when transmitted by facsimile transmission
facilities, and addressed to the party to be notified as follows:
If to Issuer at: Spintek Gaming Technologies, Inc.
901 Grier Drive, Suite B
Las Vegas, Nevada 89129
ATTN: President
Facsimile Number: (702) 263-3680
If to Consultant at: J.P. Carey Enterprises, Inc.
Atlanta Financial Center, Suite 500
3343 Peachtree Rd., N.E.
Atlanta, Georgia 30326
ATTN: Mr. Joseph Canouse
Facsimile Number: (404) 816-6268
If to the Escrow
Agent at: Nelson Mullins Riley &
Scarborough, Escrow Agent
400 Colony Square
1201 Peachtree Street, N.E., Suite 2200
Atlanta, Georgia 30361
ATTN: Steven A. Cunningham, Esq.
Facsimile Number: (404) 817-6050
or to such other address as each party may designate for itself by
like notice.
14. Amendment or Waiver. This Escrow Agreement may be
changed, waived, discharged or terminated only by a writing signed by
Consultant, Issuer, Subscribers and Escrow Agent. No delay or
omission by any party in exercising any right with respect hereto
shall operate as a waiver. A waiver on any one occasion shall not be
construed as a bar to, or waiver of, any right or remedy on any future
occasion.
15. Severability. To the extent any provision of this Escrow
Agreement is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or
the remaining provisions of this Escrow Agreement.
16. Governing Law. This Escrow Agreement shall be construed
and interpreted in accordance with the internal laws of the State of
Georgia without giving effect to the principles or rules governing
conflict of laws.
17. Entire Agreement. This Escrow Agreement constitutes the
entire agreement among the parties relating to the acceptance,
collection, holding, investment and disbursement of the Escrow Funds
and sets forth in their entirety the obligations and duties of the
Escrow Agent with respect to the Escrow Funds.
18. Binding Effect. All of the terms of this Escrow
Agreement, as amended from time to time, shall be binding upon, inure
to the benefit of and be enforceable by the respective successors and
assigns of Consultant, Issuer, Subscribers and Escrow Agent.
19. Execution in Counterparts. This Escrow Agreement may be
executed in two or more counterparts, which when so executed shall
constitute one and the same agreement.
20. Termination. Upon the first to occur of the disbursement
of all amounts in the Escrow funds or deposit of all amounts in the
Escrow Funds into court pursuant to Section 5 hereof, this Escrow
Agreement shall terminate and Escrow Agent shall have no further
obligation or liability whatsoever with respect to this Escrow
Agreement or the Escrow Funds.
21. Dealings. The Escrow Agent and any stockholder, director,
officer or employee of the Escrow Agent may buy, sell, and deal in any
of the securities of the Issuer and become pecuniarily interested in
any transaction in which the Issuer may be interested, and contract
and lend money to the Issuer and otherwise act as fully and freely as
though it were not Escrow Agent under this Agreement. Nothing herein
shall preclude the Escrow Agent from acting in any other capacity for
the Consultant or any other person or entity.
[signature pages follow]<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed under seal as of the date first above
written.
ISSUER: SPINTEK GAMING TECHNOLOGIES, INC.
By:
Title:
CONSULTANT: J.P. CAREY ENTERPRISES, INC.
By:
Title:
SUBSCRIBERS: [Each Subscriber Must Execute a Separate Signature Page]
ESCROW AGENT: NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
as Escrow Agent
By:
Title:
<PAGE>
SUBSCRIBER'S SIGNATURE PAGE
Name of Subscriber:
Address of Subscriber:
By:
Title: <PAGE>
EXHIBIT A
List of Subscribers
<PAGE>
EXHIBIT B
Subscription Agreements<PAGE>
EXHIBIT C
Fees Payable to Escrow Agent
$2,500
IRREVOCABLE INSTRUCTIONS TO COMPANY AS TRANSFER AGENT
These irrevocable instructions ("Irrevocable Instructions"), dated
as of July 16, 1996, are given to Spintek Gaming Technologies, Inc., a
California corporation (the "Company") by the undersigned Purchasers
(the "Purchasers") of the Company's 4% Convertible Debentures and are
accepted by the Company, with respect to the following:
Recitals
WHEREAS, the Company has sold $7,143,000 (U.S.) in aggregate
principal amount of its 4% Convertible Debentures for an aggregate
purchase price of $5,000,000 (U.S.) under the terms set forth in the
Debentures, copies of each of which are annexed hereto, and the
Regulation S Subscription Agreements ("Subscription Agreements")
executed by the Company and the Purchasers, copies of each of which are
annexed hereto; and
WHEREAS, the Company has the option to exchange the 4% Convertible
Debentures into shares of Preferred Stock with comparable features upon
approval by the Company's Common Stockholders (the "Exchange Preferred
Stock") (the "Exchange Preferred Stock and the 4% Convertible Debentures
are hereinafter collectively referred to as the "Debentures"); and
WHEREAS, in addition to such other conversion rights which the
Purchasers might have pursuant to the Subscription Agreements and the
Debentures, each of the Purchasers that is issued Debentures pursuant
to a Subscription Agreement is entitled to convert its Shares into
unrestricted shares of Common Stock of the Company, $.002 per share (the
"Converted Stock") at any time on or after the 45th day after the date
of the last closing of the sale of the Debentures, (the date that each
of the Debentures is convertible into Converted Stock is referred to
herein as the "Unrestricted Conversion Dates" as to such Debentures),
the certificates for which shall bear no restrictive legend, assuming
the truth and correctness of the representations and warranties made by
the Purchasers upon presentation of the Debentures for transfer pursuant
to the legend set forth on the Debentures at the conversion prices
specified in the Debentures, by delivering the Debentures to be
converted along with the notice required by the Subscription Agreements
("Notice of Conversion") to the Company; and
WHEREAS, Company and Purchasers have agreed that the Purchasers
will provide the Company with irrevocable instructions to convert one
or more of any Purchaser's Debentures into shares of Converted Stock
upon receipt, within the Unrestricted Conversion Dates, of the
Debentures to be converted along with a valid Notice of Conversion, as
defined herein, from a Purchaser and shall direct its (the Company's)
counsel to issue an opinion letter; and
WHEREAS, the Company has agreed to act as conversion transfer
agent on behalf of the Company and the Purchasers on the terms and
conditions set forth in these Irrevocable Instructions;
NOW, THEREFORE, in consideration of the premises, the Company and
the Purchasers agree and the Purchasers irrevocably instruct the Company
as follows:
1. ISSUANCE OF CONVERTED SHARES. Unless the Debentures have been
redeemed, upon receipt, within the Unrestricted Conversion Dates of a
Notice of Conversion and one or more Shares to be converted from a
Purchaser, the Purchasers hereby irrevocably direct the Company, and the
Company hereby agrees to a) calculate the number of shares of Converted
Stock to which that Subscriber is entitled (which number is determined
by the formula in the Debentures; b) notify the Purchasers in writing,
by facsimile, within two business days after receipt of a facsimile of
the Notice of Conversion, of the number of shares of Converted Stock to
be issued; and c) subject to the terms of the Subscription Agreement,
use its reasonable efforts to cause the transfer agent for the Company's
common stock (the "Transfer Agent") to issue the appropriate number of
shares of Converted Stock directly to the Purchaser within three
business days of the date of receipt by the Company of the Notice of
Conversion and the original Debentures to be converted in accordance
with the terms of the Debentures. The certificates representing the
Converted Stock issued in the name of Purchaser shall bear no
restrictive legend.
2. DISPUTE AS TO NUMBER OF CONVERTED SHARES TO BE ISSUED. In the
event that the number of shares that the Company reasonably calculates
to be due a particular Purchaser upon conversion is different from the
number of shares claimed by the Purchaser, by virtue of the conversion
price or other information set forth in its Notice of Conversion, the
Company shall nevertheless use its reasonable efforts to issue to the
Purchaser a number of shares equal to the lesser of the two numbers
within three business days, and, as to the issuability of the remaining
disputed number of shares, shall submit the dispute within two business
days to the Company's usual legal counsel and usual legal counsel for
J.P. Carey Enterprises, Inc., a Georgia corporation ("Carey")
(collectively, "Counsel") for determination. In the event of such a
dispute, the Company and Carey agree to instruct Counsel to resolve any
such dispute and notify the parties of the result within three business
days after receipt of notice of such dispute. Within two business days
of its receipt of the Counsel's results, the Company shall cause the
Transfer Agent to issue to the Purchaser any additional shares to which
the Purchaser is entitled, based upon the Counsel's determination. The
Company's Transfer Agent is authorized and is hereby directed to rely
upon Counsel's determination.
3. REQUIRED CONVERSION. On December 31, 1997, all Debentures convert
into shares of common stock of the Company at the conversion prices
described in Section 4 of the Debentures. At such time, Transfer Agent
shall issue a certificate or certificates for the shares of Converted
Stock, in accordance with Sections 1 and 2 above, registered in the name
of the person in whose name the Debentures are registered on the records
of the Company regarding registration and transfers of the Debentures
or otherwise as Transfer Agent may be notified by Counsel on the third
business day following said date, and shall deliver the shares of
Converted Stock to the Subscriber upon receipt of the surrendered
Debentures from the Subscriber.
4. FEES. The Company hereby agrees to pay the Transfer Agent for all
services rendered hereunder.
5. NOTICES. Any notice or demand to be given or that may be given
under this Agreement shall be in writing and shall be (a) delivered by
hand, or (b) delivered through or by expedited mail or package service,
or (c) transmitted by telecopy, in each case with personal delivery
acknowledged, addressed to the parties as follows:
As to the Company:
Spintek Gaming Technologies, Inc.
901 Grier Drive, Suite B
Las Vegas, Nevada 89129
Telephone: (702) 263-3660
Facsimile: (702) 263-3680
As to the Transfer Agent:
American Securities & Transfer, Inc.
938 Quail Street
Suite 101
Lakewood, Colorado 80215
Telephone: (303) 234-5300
Facsimile: (303) 234-5340
6. CANCELLATION OF STOCK CERTIFICATES. Upon issuance of any
Converted Stock or redemption by the Company of Shares pursuant to the
Certificate of Designation, the Company shall mark on the face of the
Stock Certificates so converted or redeemed the word "cancelled".
7. NONCONTRAVENTION. The Company undertakes that it will not at any
time take any action or undertake any activity that would in any way
impede, restrict or limit the right and ability of any holder of
Debentures to convert its/his/her Debenture into shares of Converted
Stock pursuant to the terms and provisions of this Agreement.
Accordingly, the Company agrees that (i) the instructions and
procedures set forth above in this Agreement constitute irrevocable
instructions, directions and authorizations to the Transfer Agent that
shall be faithfully complied with by the Transfer Agent, and (ii) should
the Transfer Agent at any time receive or have received any written or
oral communication from the Company or otherwise that could in any way
be construed to constitute an authorization or direction for the
Transfer Agent to act contrary to, or to not faithfully comply with, the
irrevocable instruction, direction and authorization set forth in this
Section 7, the Transfer Agent shall totally disregard such communication
and instead unqualifyingly and promptly comply with the terms hereof.
The Transfer Agent's execution of this Agreement shall constitute
the Transfer Agent's acknowledgement and agreement of its obligation to
unqualifyingly and promptly comply with the foregoing. Each of the
Subscribers is an intended third party beneficiary of these Irrevocable
Instructions.
8. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Georgia, without giving
effect to conflicts of law provisions.
9. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits hereto, constitute the full and entire understanding of the
parties with respect to the subject matter hereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged, or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge, or
termination is sought.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of July 16, 1996.
COMPANY:
Spintek Gaming Technologies,Inc.
By:/s/Gary L. Coulter
Name (Print):Gary L.Coulter
Title: Vice Chairman
PURCHASER:
By:/s/Herbert Strauss
Name (Print):Herbrt strauss
Title: Headtrader
