UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
(Amendment No. 4)
Silicon Gaming, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.001 Par Value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
827054107
---------------------------------------------------
(CUSIP Number)
Wendy Schnipper Clayton, Esq.
DDJ Capital Management, LLC
141 Linden Street, Suite 4
Wellesley, MA 02482-7910
781-283-8500
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(Name, address and telephone number of person authorized to receive notices and
communications)
July 22, 1999
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(Date of Event which Requires filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b) (3) or (4), check the following box [ ].
(Continued on following pages)
(Page 1 of 8 Pages)
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 2 OF 8 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DDJ Capital Management, LLC
04-3300754
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
SEE ITEM #5 (a) [ X ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Commonwealth of Massachusetts
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,066,460
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,066,460
PERSON WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,066,460
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.2%
14 TYPE OF REPORTING PERSON *
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 3 OF 8 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
B III Capital Partners, L.P.
04-3341099
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
SEE ITEM #5 (a) [ X ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,066,460
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,066,460
PERSON WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,066,460
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.2%
14 TYPE OF REPORTING PERSON *
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 4 OF 8 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
DDJ Capital III, LLC
04-3317544
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
SEE ITEM #5 (a) [ X ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,066,460
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,066,460
PERSON WITH 10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,066,460
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.2%
14 TYPE OF REPORTING PERSON *
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 5 OF 8 PAGES
ITEM 1. SECURITY AND ISSUER:
This Amendment No. 4 to Schedule 13D ("Amendment No. 4") should be read in
conjunction with the Schedule 13D dated May 7, 1998 ("Schedule 13D"), Amendment
No. 1 dated June 11, 1998 ("Amendment No. 1"), Amendment No. 2 dated July 8,
1998 ("Amendment No. 2") and Amendment No. 3 dated November 3, 1998 ("Amendment
No. 3") each as filed with the Securities and Exchange Commission by DDJ Capital
Management, LLC, a Massachusetts limited liability company, and certain
affiliates. This Amendment No. 4 amends the Schedule 13D, Amendment No. 1,
Amendment No. 2 and Amendment No. 3 only with respect to those items listed
below. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto on the Schedule 13D, Amendment No. 1, Amendment No. 2
or Amendment No. 3.
This filing of Amendment is not, and should be deemed to be, an admission
that the Schedule 13D or any Amendment thereto is required to be filed.
This statement relates to shares of the common stock, $.001 par value (the
"Shares") of Silicon Gaming, Inc. (the "Company"). The principal executive
offices of the Company are located at 2800 West Bayshore Road, Palo Alto, CA
94303.
ITEM 4. PURPOSE OF TRANSACTION:
Item 4 is deleted in its entirety and replaced with the following:
The Shares described herein were purchased in pursuit of a specified
investment objective established by the Investors in the Funds. DDJ and the DDJ
Affiliates may continue to have the Funds purchase Shares subject to a number of
factors, including, among other, the availability of Shares for sale at what
they consider to be reasonable prices and other investment opportunities that
may be available to the Funds.
DDJ and the DDJ Affiliates intend to review continuously the equity
position of the Funds in the Company. Depending upon further evaluations of the
business prospects of the Company and upon other developments, including, but
not limited to, general economic and business conditions and money market and
Stock market conditions, DDJ and the DDJ affiliates may determine to cease
making additional purchases of Shares or to increase or decrease the equity
interest in the Company by acquiring additional Shares, or by disposing of all
or a portion of the Shares.
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 6 OF 8 PAGES
On July 22, 1999, DDJ Capital Management, LLC, on behalf of the B III
Capital Partners, L.P. ("B III"), signed a non-binding letter of intent with the
Company to convert a portion of the $47.25 million outstanding Senior Notes held
by B III into equity and make various modifications to the terms of the
remaining Senior Notes.
Under the letter of intent, $39.75 million of Senior Notes would be
exchanged for preferred stock that would initially be convertible into a 57%
common equity interest in the Company. The terms of the remaining $7.5 million
of outstanding Senior Notes would be modified to reduce the interest rate from
12.5% to 10% per annum (effective July 15, 1999) and to provide for interest to
be payable in-kind, at the Company's option and subject to certain coverage
ratio tests, for up to the first 5 years following the effective date of the
restructuring, at which time the Senior Notes would mature.
Pursuant to the letter of intent, accrued and unpaid interest on the Senior
Notes remaining outstanding following the restructuring would be forgiven
through July 15, 1999.
The letter of intent also contemplates an additional investment by the
Funds of up to $5.0 million in the form of convertible senior secured notes (the
"New Notes"). The New Notes would bear interest at the rate of 10% per annum,
payable in cash, with a maturity of 5 years. The $5.0 million of New Notes
would be convertible into a 40% equity interest in the Company (subject to the
issuance of additional employee equity incentives as described below). The New
Notes would be issuable in tranches, with the first $2.0 million issued on the
closing date of the restructuring. To the extent required by the Company, the
remaining $3.0 million of New Notes would be issued upon the achievement of
certain financial and operating hurdles.
As part of the restructuring, the Company would allocate 38% of its equity
as of the effective date to be issued as incentive compensation to employees.
The Company's current equity holders, including all holders of options, warrants
and convertible preferred stock, would own approximately 5% of the outstanding
fully-diluted equity upon the effective date of the restructuring (prior to the
issuance of any New Notes). Certain of the Company's currently outstanding
warrants and convertible preferred stock have anti-dilution rights that may
substantially reduce the portion of such equity interest that would be allocated
to holders of common stock. As discussed above, $39.75 million of existing
Notes would be convertible in the remaining 57% of the Company's outstanding
equity as of the effective date of the restructuring. Upon issuance of any New
Notes, the number of shares of common stock allocated to the employee incentive
compensation pool would be increased so that the incentive pool would remain at
38% of the Company's equity after giving effect to the dilutive effect of
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 7 OF 8 PAGES
the conversion of the New Notes. In addition, upon closing of the
restructuring, the Board of Directors of the Company will be reduced to the
three members, consisting of Andrew Pascal, the President and Chief Executive
Officer of the Company, and two independent directors.
The proposed restructuring is subject to a number of conditions, including
receipt by the Company's board of directors of a "fairness opinion" from an
investment banking firm, the receipt of all necessary gaming and regulatory
approvals and the negotiation and execution of definitive documentation. There
can be no assurance that the restructuring will be successfully implemented or
that there will not be modifications to the restructuring terms.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER:
Item 6 is amended by adding the following paragraph:
On July 22, 1999, DDJ Capital Management, LLC, on behalf of B III, signed a
non-binding letter of intent with the Company to convert a portion of the $47.25
million of outstanding Senior Notes held by B III to equity and make various
modifications to the terms of the remaining Senior Notes. Under the letter of
intent, $39.75 million of the Senior Notes would be exchanged for Preferred
Stock that would initially be convertible into a 57% common equity interest in
the Company. For a description of the terms of the proposed restructuring, see
Item 4 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS:
Exhibit 99 Non-binding Letter of Intent dated July 22, 1999 between Silicon
Gaming, Inc. and DDJ Capital Management, LLC
<PAGE>
SCHEDULE 13D
CUSIP NO. 827054107 PAGE 8 OF 8 PAGES
Signature:
========
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DDJ CAPITAL MANAGEMENT, LLC
By: /s/ Wendy Schnipper Clayton
-----------------------------------------
Wendy Schnipper Clayton
Attorney-in-Fact *
*Limited Power of Attorney filed with the SEC on July 15, 1998.
EXHIBIT 99
July 22, 1999
CONFIDENTIAL
Mr. Andrew Pascal
Chief Executive Officer
Silicon Gaming, Inc.
2800 West Bayshore Road
Palo Alto, CA 94303
Dear Andrew:
We are submitting this letter to you on behalf of funds managed or advised
by DDJ Capital Management (collectively, "DDJ") in connection with a possible
transaction in which DDJ would restructure its current investment in Silicon
Gaming, Inc. (together with its subsidiaries, the "Company"). Attached as
Exhibit A is a term sheet describing the material terms of the proposed
restructuring.
1. Conditions. The proposed restructuring would be subject to the
prior satisfaction of each of the conditions set forth in the attached term
sheet, as well as customary closing conditions for transactions of this nature,
including: (i) the completion to DDJ's satisfaction of its due diligence with
respect to the Company; (ii) the absence of any material change in the business
or financial condition of the Company from such information which has been
provided to DDJ as of the date hereof; (iii) confirmation satisfactory to DDJ
that, in entering into and performing its obligations under the transaction
documents and consummating the proposed restructuring, DDJ will not violate any
federal or state statutes or regulations or regulatory policies to which it may
be subject or any internal policies; (iv) the receipt of approval of the
restructuring by any and all required regulatory authorities, including, without
limitation, state gaming authorities and, if necessary, the expiration or early
termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (v) receipt by DDJ of an opinion of an
investment bank satisfactory to DDJ that the restructuring is inherently fair to
the current stockholders of the Company; and (vi) the negotiation, execution and
delivery of documentation satisfactory to DDJ with respect to the restructuring,
on or before September 30, 1999.
2. Expenses. You have asked that DDJ engage attorneys to advise it
with respect to a possible restructuring of its investment in the Company.
Accordingly, the Company hereby agrees to reimburse DDJ for its expenses,
including its reasonable attorneys' fees, in connection with its legal review
and documentation, whether such
Mr. Andrew Pascal
Silicon Gaming, Inc.
July 22, 1999
Page 2
- --------------------------------
expenses have already been incurred or are incurred in the future, whether or
not DDJ ultimately determines to consummate the proposed restructuring and
whether or not any other transaction is ever consummated between the Company or
its subsidiaries and DDJ. In furtherance of the foregoing, you have hereby
deposited with our counsel a retainer in the amount of $50,000 from which such
counsel may draw its fees and expenses as they are incurred and which you hereby
agree to replenish as such retainer is drawn upon but in any event no less often
than monthly. DDJ's counsel will provide you with an estimate of its fees and
expenses promptly upon execution of this letter.
3. Disclosure. We have discussed the desirability of making a public
announcement of the proposed restructuring at the time of the signing of this
letter or a definitive agreement and we will be guided by this objective in our
work on this project. Should either DDJ or the Company become required, in the
opinion of its counsel, to make a public disclosure of the proposed
restructuring or its terms under the federal securities laws, however, such
disclosing party will be permitted to do so, but before taking this step such
disclosing party shall (i) consult with the non-disclosing party and its counsel
and (ii) provide the non-disclosing party and its counsel for comment drafts of
the proposed disclosure and shall include any additions or changes to such
proposed disclosure reasonably requested by the non-disclosing party or its
counsel.
4. Effect of Letter. It is understood that this letter is intended to be
a summary of certain terms on which the parties propose to proceed and is not
intended to create, and does not create, any legally binding obligations except
as provided in this Section 4 and in Sections 2, 3 and 5 hereof (which shall be
legally binding), and either party is free to terminate discussions at any time
prior to the signing of a definitive agreement for any reason without any
liability other than as expressly provided in this letter. Except as provided
in this Section 4 and in Sections 2, 3 and 5 hereof, the parties intend that
legally binding obligations with respect to the proposed restructuring will
arise only pursuant to the execution of definitive documentation approved by the
board of directors of the Company following the due diligence described herein.
5. Miscellaneous. This letter is issued solely to the Company and may
not be assigned or otherwise transferred to, or enforced by, any other person
without the prior written consent of DDJ. This letter shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts. This letter may be executed in any number of counterparts, each
of which shall be an original, but all of which shall constitute one instrument.
Mr. Andrew Pascal
Silicon Gaming, Inc.
July 22, 1999
Page 3
- --------------------------------
If the foregoing is an acceptable basis on which to proceed, please so
indicate by signing the enclosed counterpart of this letter in the spaces below
and returning the same to us. If not accepted prior to the close of business on
July 22, 1999 this proposal will lapse. Until we have received an executed
counterpart hereof, this letter may not be copied, disclosed to any party or
otherwise used for any purpose whatsoever. By signing below, you confirm that
this letter has been duly authorized on behalf of Silicon Gaming, Inc. and is
valid and binding on Silicon Gaming, Inc. to the extent contemplated above.
DDJ CAPITAL MANAGEMENT, LLC,
on behalf of funds it manages
By: /s/ Judy K. Mencher
----------------------------------
Judy K. Mencher, Member
ACCEPTED AND AGREED TO:
SILICON GAMING, INC.
By: /s/ Andrew Pascal
--------------------------------------------
Andrew Pascal, Chief Executive Officer
Exhibit A
---------
DDJ Capital Management/Silicon Gaming, Inc.
Terms Sheet
7/22/99
Exchange/Restructuring of Notes
held by funds managed by DDJ
$39.75 million of Senior Discount Notes will be
exchanged for shares of preferred stock (the
"Series A New Preferred Stock") with the terms
as set forth below under "Terms of Series A
New Preferred Stock."
Existing stockholders (including all holders
of options and convertible preferred stock)
will own 5% of the outstanding fully-diluted
common stock post-restructuring (prior to the
issuance of the New Notes described below and
assuming issuance of all management equity
described below, other than issuance
of options discussed below under "New
Investment"), as set forth on Schedule I
attached hereto.
Remainder of Senior Discount Notes to be
amended to reduce the interest
rate from 12.5% to 10% per annum (effective
as of the earlier of the date of
approval of this term sheet by the Board of
Directors of the Company or July 15,
1999) and to provide for interest to be paid in
kind for the 5 years immediately
following the closing of the restructuring at
the option of the Board of Directors. The
Senior Discount Notes will become cash pay if
the Company's trailing 12 months EBITDA/total
debt service ratio exceeds 2.5 to 1.0. Senior
Discount Notes will mature 5 years from the
closing date and will maintain collateral
position junior only to senior bank debt
and pari passu with the New Notes.
Accrued and unpaid interest through the earlier
of the date of approval of this term sheet by
the Board of Directors of the Company or July
15, 1999 would be forgiven.
Terms of Series A New Preferred Stock
$39.75 million liquidation/sale preference
convertible by the holders in whole or in
part into 57% of fully diluted common stock
(prior to the issuance of the New Notes
described below and assuming issuance of all
management equity described below, other than
issuance of options discussed below under
"New Investment"), as set forth on Schedule
I attached hereto, (i) in such amounts or
under such conditions that the holder would
not be required to be licensed, eligible or
found suitable under applicable gaming laws
or (ii) from and after the time the holder
meets the licensing, eligibility and
suitability requirements under applicable
gaming laws or is not required to meet such
eligibility or suitability requirements.
Non-voting except to the extent the holder is
licensed, eligible or found suitable to own
voting common stock of the Company under
applicable gaming laws or is not required
to be licensed, eligible or found suitable
under applicable gaming laws. Such holders
vote on an as converted basis with the
common stock as a single class.
Holders entitled to weighted average
anti-dilution protection.
On a sale, change of control or in
liquidation, prior to the amendment to the
Company's Articles of Incorporation
increasing the number of authorized common
stock, the Series A New Preferred Stock is
redeemable at the election of the holders
for the greater of $39.75 million or the as
converted common equivalent value.
For this purpose, a change in control would
include termination or resignation of Andrew
Pascal as Chief Executive Officer without
the consent of the holders of the Series A
New Preferred Stock.
Following the contemplated amendment to the
Company's Articles of Incorporation, the
redemption price on a sale or change of
control will be adjusted such that if the
total transaction value, including all cash
and non-cash consideration in the applicable
transaction and following repayment of all
indebtedness of the Company other than the
Senior Discount Notes and the New Notes
(the "Aggregate Transaction Proceeds"), is
in excess of the amounts set forth below,
the holders of Series A New Preferred Stock
and common stock will share in the portion
of such Aggregate Transaction Proceeds
available to equity holders following
repayment in full of the Senior Discount
Notes and the New Notes (such proceeds the
"Available Transaction Proceeds") as follows:
(i) if Aggregate Transaction Proceeds are less
than $20.0 million, the holders of the Series
A New Preferred Stock shall receive 100% of
Available Transaction Proceeds;
(ii) if the Aggregate Transaction Proceeds are in
excess of $20.0 million but not more than
$30.0 million, (x) the holders of common
stock (including, if the New Notes have been
converted, the separate series of new
preferred stock described below on an as
converted basis) shall receive a percentage
of Available Transaction Proceeds determined
by multiplying (A) the fully diluted
percentage common equity interest held by the
holders of common stock (including, if the
New Notes have been converted, the separate
series of new preferred stock described below
on an as converted basis) by (B) a fraction
the numerator of which is the Aggregate
Transaction Proceeds less $20.0 million and
the denominator of which is $10.0 million,
and (y) the holders of the Series A New
Preferred Stock shall receive the remainder
of Available Transaction Proceeds; and
(iii) if the Aggregate Transaction Proceeds
are in excess of $30.0 million, (x) the
holders of common stock (including, if the
New Notes have been converted, the separate
series of new preferred stock described below
on an as converted basis) shall receive a
portion of Available Transaction Proceeds
equal to the fully diluted percentage common
equity interest held by the holders of common
stock, and (y) the holders of the Series A
New Preferred Stock shall receive the
remainder of Available Transaction Proceeds.
Restrictive covenants to be negotiated but will
include limitations on the Company's ability to do
the following without the consent of the holders
of Series A New Preferred Stock:
* pay dividends or make other restricted
payments (such as redemptions);
* issue additional capital stock or other
equity securities (including options,
warrants or any other securities convertible
or exchangeable for equity securities) or
incur additional indebtedness;
* sell, lease or otherwise dispose of assets
exceeding agreed upon levels;
* acquire assets exceeding agreed upon levels,
or make an investment in another business
entity exceeding agreed upon levels;
* enter into any agreement or arrangement
outside the ordinary course of business
where the Company's commitments would exceed
agreed upon levels;
* enter into any transactions with affiliates
of the Company;
* make any capital expenditures in excess of
agreed upon levels;
* amend the Company's charter or bylaws;
* merge or consolidate with another entity or
enter into any transaction which would
constitute or have the effect of a change on
control; or
* liquidate, dissolve or wind-up operations,
effect a recapitalization or reorganization,
or take steps to file for bankruptcy.
Shareholder rights will include drag along
rights (but exercisable only after the date
that is 30 months following the initial
closing date) and tag along rights with
respect to Management Equity as well as other
rights typical for investments of this nature.
Management Equity
Up to 38% of the fully diluted common stock
(prior to the issuance of the New Notes and
the issuance of Management options discussed
below under "New Investment") as set forth on
Schedule I attached hereto available for grant
to management in the form of options or
restricted stock, with a sufficient amount to
be issued at closing to represent a majority
of the outstanding common stock
[Note - subject to review of tax consequences
to recipients].
20% vested immediately with the remainder
vesting ratably over 48 months.
Management and Board Structure
3 Directors.
Andrew Pascal to remain CEO.
Rob Reis will be designated as a director
provided he purchases New Notes as provided below.
New Investment
$5.0 million in 10% convertible senior secured
notes ("New Notes") with a maturity of 5 years.
Interest on New Notes payable in cash monthly
in advance based upon a 360 day year.
New Notes to be purchased by funds managed by
DDJ as follows: (i) $2.0 million at closing;
(ii) $1.0 million upon entering into a joint
venture with a casino operator having at least
$1.0 billion in market capitalization, which
joint venture provides for the casino operator
to pay no less than 50% of the costs of
development of an exclusive new game, such
casino operator to purchase a minimum of 100
units, and the casino operator or JV
successfully securing a branded exclusive
license for the development of such game; and
(iii) $2.0 million upon achievement of certain
financial hurdles to be determined by DDJ in
its sole discretion.
New Notes convert into an additional
approximately 40% of the fully diluted
outstanding equity of the Company (prior to
the issuance of management options
described below) as set forth on Schedule I,
with Management holders receiving
upon conversion Common Stock and funds managed
by DDJ receiving upon conversion a separate
series of non-voting new preferred stock,
except and to the extent that such holders are
exempt from, or meet, the eligibility
requirements under applicable gaming laws (in
which case they would receive common stock).
Options to be issued to management at the
conversion price of the New Notes
to preserve management's ownership percentage
as set forth on Schedule I.
New Notes subordinated only to Silicon Valley
Bank senior debt and will rank pari passu with
the Senior Discount Notes that remain
outstanding.
New Notes will be redeemable at the Company's
option at a price equal to a 25% annualized
internal rate of return to the holder.
Management Investment
Andrew Pascal to purchase $40,000 New Notes in
the tranche to be made available at Closing,
with $15,000 of purchase price paid in cash
and $25,000 paid in the form of reduced
compensation over the 12 months following the
Closing.
Rob Reis to purchase New Notes in the tranche
to be made available at Closing equal to
one-half of his aggregate consulting fee
through the Closing, such amount equal to
$4,000 for each month he has been retained.
SILICON GAMING EQUITY OWNERSHIP
7/22/99 - *** ASSUMES NO EFFECT OF ANTI-DILUTION PROVISIONS OF OUTSTANDING
WARRANTS AND B1 PREFERRED, WHICH ARE EXPECTED TO PROVIDE SUBSTANTIAL FURTHER
DILUTION TO THE OUTSTANDING COMMON STOCK. PLEASE NOTE THAT THESE ARE
ASSUMPTIONS MADE SOLELY FOR THE PURPOSES OF THE ATTACHED SPREADSHEET***
Existing Shares 14,287,795
All options 2,207,000
B1 Preferred Conversion 741,106
Fully Diluted Total 17,235,901 **Assumes all outstanding options,
warrants and B1 Preferred are
converted
New Shares Issued 327,482,119 **Assumes old common keeps 5.0% of
fully diluted equity
Ownership Pre New Money
DDJ 196,489,271 57.00%
Management 130,992,848 38.00%
Existing Equity 17,235,901 5.00%
Total 344,718,020 100.00%
Amount Ownership %
New Money $3,000,000 24%
Ownership Post New Money
DDJ 196,489,271 40.71% Total New Shares assuming $5mm=
229,811,600
Management 130,992,848 27.14% Total Make-Whole Options=
140,851,212
Existing Equity 17,235,901 3.57%
Convert 137,886,960 28.57%
Total 482,604,980 100.00%
Ownership After Make Whole
DDJ 196,489,271 34.65% # of Make Whole Options
Management + Options 215,503,575 38.00% 84,510,727 (60% of Total)
Existing Equity 17,235,901 3.04%
Convert 137,886,960 24.31%
Total 567,115,707 100.00%
Mgt. Restricted Stock% 23.10%
Mgt. Make Whole % 14.90%
Amount Ownership %
2nd Round New Money $2,000,000 16%
Ownership Post New Money
DDJ 196,489,271 29.81%
Management + Options 215,503,575 32.70%
Existing Equity 17,235,901 2.62%
Old Convert 137,886,960 20.92%
New Convert 91,924,640 13.95%
Total 659,040,347 100.00%
Ownership After Make Whole
DDJ 196,489,271 27.47% # of Make Whole Options
Management + Options 271,844,060 38.00% 56,340,485 (40% of Total)
Existing Equity 17,235,901 2.41%
Old Convert 137,886,960 19.27%
New Convert 91,924,640 12.85%
Total 715,380,832 100.00%
Mgt. Restricted Stock % 18.31%
Mgt. Make Whole % 19.69%
Make Whole Strike Price $0.022
