<PAGE>
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) July 8, 1998
------------
Silicon Gaming, Inc.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
California 000-28294 77-0357939
- ---------------------------------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
2800 W. Bayshore Road, Palo Alto, California 94303
- ---------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (650) 842-9000
--------------
(Former name or former address, if changed since last report)
This Current Report, including exhibits, contains 80 pages.
----
The Exhibit Index is located on page 4 .
-----
1.
<PAGE>
ITEM 5. OTHER EVENTS.
Silicon Gaming, Inc. (the "Company") announced that on July 8, 1998 it added
$17.25 million principal amount (the "Additional Notes") to the $30 million
principal amount Senior Discount Notes due September 30, 2002 that the Company
sold on September 30, 1997. In addition, the purchaser of the Additional Notes
was also issued warrants to purchase a total of 250,000 shares of the Company's
Common Stock at an exercise price of $8.00 per share and had the exercise price
of the warrants to purchase 375,000 shares of the Company's Common Stock
currently held by such purchaser adjusted from $15.4375 to $8.00.
A copy of the press release announcing the Company's July 8, 1998 financing is
attached as Exhibit 99.1 and is incorporated by reference.
------------
ITEM 7. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
- --------------- ---------------------------------------------------------------
<C> <S>
4.1 Amendment No. 1 to Securities Purchase Agreement between the
Company and BIII Capital Partners, L.P., a Delaware limited
partnership ("BIII") dated as of July 8, 1998.
4.2 Registration Rights Agreement between the Company and BIII
dated as of July 8, 1998.
4.3 Amended and Restated Warrant Agreement by and between the
Company and BIII dated as of July 8, 1998.
4.4 Senior Discount Note (Series B) due September 30, 2002 dated
as of July 8, 1998.
4.5 Common Stock Purchase Warrant Certificate No. W-2.
99.1 Press Release dated as of July 13, 1998 announcing the
addition of $17.25 million face amount to the Company's $30
million Senior Discount Notes due September 30, 2002.
</TABLE>
2.
<PAGE>
SIGNATURES
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.
SILICON GAMING, INC.
Date: July 20, 1998 By: /s/ Tom Carlson
-------------------------------------
Tom Carlson
Chief Financial Officer
3.
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- --------------- -------------------------------------------------------- ---------------------
<C> <S> <C>
4.1 Amendment No. 1 to Securities Purchase Agreement 5
between the Company and BIII Capital Partners, L.P., a
Delaware limited partnership ("BIII") dated as of July
8, 1998.
4.2 Registration Rights Agreement between the Company and 25
BIII dated as of July 8, 1998.
4.3 Amended and Restated Warrant Agreement by and between 46
the Company and BIII dated as of July 8, 1998.
4.4 Senior Discount Note (Series B) due September 30, 2002 65
dated as of July 8, 1998.
4.5 Common Stock Purchase Warrant Certificate No. W.2. 71
99.1 Press Release dated as of July 13, 1998 announcing the 80
addition of $17.25 million face amount to the Company's
$30 million Senior Discount Notes due September 30,
2002.
</TABLE>
4.
<PAGE>
EXECUTION COPY
EXHIBIT 4.1
SILICON GAMING, INC.
_________________________
AMENDMENT NO. 1 TO
SECURITIES PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1997
FOR
UNITS CONSISTING OF
SENIOR DISCOUNT NOTES
DUE SEPTEMBER 30, 2002
AND
WARRANTS TO PURCHASE COMMON STOCK,
PAR VALUE $.001 PER SHARE,
OF
SILICON GAMING, INC.
_________________________
JULY 8, 1998
<PAGE>
SILICON GAMING, INC.
AMENDMENT NO. 1 (the "Amendment") dated July 8, 1998, to the Agreement (the
"Agreement") dated as of September 30, 1997 by and between Silicon Gaming, Inc.,
a California corporation (the "Company"), and the purchaser named therein (the
"Purchaser"). Unless otherwise defined, capitalized terms used in this Amendment
have the same meanings as those ascribed to them in the Agreement.
WHEREAS, the Company and the Purchaser entered into the Agreement as of
September 30, 1997 providing for the issuance by the Company and the purchase by
the Purchaser of $30,000,000 aggregate principal amount of Senior Discount Notes
and 375,000 Warrants to Purchase Common Stock; and
WHEREAS, the Company and the Purchaser wish to amend the Agreement to
provide for the issuance by the Company and the purchase by the Purchaser of
$17,250,000 aggregate principal amount of new Senior Discount Notes (Series B)
and 250,000 additional Warrants to Purchase Common Stock; and
WHEREAS, in connection with such new issuance and purchase, the Company and
the Purchaser have agreed to amend the terms of the original Warrants to
Purchase Common Stock and to amend the terms of certain other documents.
NOW THEREFORE, the Company, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, agrees with the
Purchaser as follows:
ARTICLE I
AMENDMENTS
1.1 AMENDMENTS TO ARTICLE I.
-----------------------
(a) Section 1.1 of the Agreement is hereby amended by adding the following
definitions:
"Additional Closing" has the meaning ascribed thereto in Section 2.6
hereof.
"Additional Closing Date" has the meaning ascribed thereto in Section
2.6 hereof.
"Additional Common Stock Purchase Warrants" means the warrants of the
Company issued at the Additional Closing pursuant to the Warrant
Agreement representing the right to purchase shares of Common Stock at
the exercise price set forth therein.
"Additional Units" has the meaning set forth in Section 2.4(c) hereof."
<PAGE>
(b) Section 1.1 of the Agreement is hereby further amended by revising the
definition of "Common Stock Purchase Warrants" to include the Additional Common
Stock Purchase Warrants.
(c) Section 1.1 is hereby further amended by restating each of the
following definitions in its entirety:
"Accreted Value" means, with respect to any Senior Discount Note and
as of any date before September 30, 2002, the sum of (a) the issue
price of such Senior Discount Note (which shall be equal to $730.58
per $1,000 principal amount at maturity of the Senior Discount Notes
(Series A) and $810.43 per $1,000 principal amount at maturity of the
Senior Discount Notes (Series B)) and (b) the amount which has
accreted at such time calculated by applying an accretion rate per
annum to such issue price of 16.64% with respect to the Senior
Discount Notes (Series A) and 18.3% with respect to the Senior
Discount Notes (Series B), in each case compounding semi-annually on
each accretion date as set forth below, from the date of issuance of
the Senior Discount Notes to the date as of which the Accreted Value
is being determined, in proportion to the number of days elapsed (if
calculated on any date other than any semi-annual accretion date) and
based on an annual period of twelve 30-day months. As of the dates
set forth below, each Senior Discount Note will have the Accreted
Value per $1,000 principal amount at maturity appearing opposite such
dates:
SENIOR DISCOUNT NOTES (SERIES A)
<TABLE>
<CAPTION>
Semi-annual Accretion Date Accreted Value
-------------------------- --------------
<S> <C>
Issue Date $ 730.58
March 31, 1998 $ 791.37
September 30, 1998 $ 857.21
March 31, 1999 $ 897.29
September 30, 1999 $ 909.45
March 31, 2000 $ 922.62
September 30, 2000 $ 936.89
March 31, 2001 $ 952.34
September 30, 2001 $ 962.90
March 31, 2002 $ 980.52
September 30, 2002 $1,000.00
</TABLE>
2
<PAGE>
SENIOR DISCOUNT NOTES (SERIES B)
<TABLE>
<CAPTION>
Semi-annual Accretion Date Accreted Value
-------------------------- --------------
<S> <C>
Issue Date $ 810.43
September 30, 1998 $ 847.23
March 31, 1999 $ 862.02
September 30, 1999 $ 878.20
March 31, 2000 $ 895.89
September 30, 2000 $ 915.25
March 31, 2001 $ 936.41
September 30, 2001 $ 959.57
March 31, 2002 $ 974.45
September 30, 2002 $1,000.00
</TABLE>
"Issue Date" means the date of original issuance of the Senior
Discount Notes (Series A) or (Series B), as the case may be.
"Senior Discount Notes" means the Company's Senior Discount Notes
(Series A) and Senior Discount Notes (Series B), due September 30,
2002, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Agreement and each
note delivered in substitution or exchange for any such note.
1.2 AMENDMENTS TO ARTICLE II.
------------------------
(a) Sections 2.1, 2.2 and 2.3 of the Agreement are hereby amended to
replace the phrase "Senior Discount Note(s)" by the phrase "Senior Discount
Note(s)(Series A)."
(b) Article II of the Agreement is hereby further amended to add the
following Sections 2.4, 2.5 and 2.6:
2.4 Issuance of Additional Units.
----------------------------
(a) The Company has authorized the issuance and sale of up to
$17,250,000 aggregate principal amount of its Senior Discount
Notes (Series B), to be issued pursuant to and in accordance with
the terms of this Agreement. Each Senior Discount Note (Series B)
will be issued in the principal amount of $100,000, substantially
in the form set forth in Exhibit E hereto, with such changes
---------
thereto, if any, as may be approved by the Purchaser and the
Company.
(b) The Company has authorized the issuance and sale of up to
250,000 Additional Common Stock Purchase Warrants, each
exercisable to purchase one share of the Common Stock of the
Company, to be
3
<PAGE>
acquired by the Purchaser in accordance with the terms of this
Agreement. The Additional Common Stock Purchase Warrants will be
substantially in the form of the Warrant Certificate as set forth
in Exhibit A of the Warrant Agreement, with such changes thereto,
if any, as may be approved by the Purchaser and the Company.
(c) The Senior Discount Notes (Series B) and the Additional
Common Stock Purchase Warrants will be issued in attached units
("Additional Units") each consisting of $100,000 principal amount
of Senior Discount Notes (Series B) and 1,450 Additional Common
Stock Purchase Warrants, subject to detachment of the Additional
Common Stock Purchase Warrants from the Senior Discount Notes
(Series B) upon the terms and subject to the conditions set forth
herein.
(d) The Company and the Purchaser hereby agree that for Federal
income tax purposes, including for purposes of determining
original issue discount and the issue price of the Senior
Discount Notes (Series B) under sections 1271-1275 of the Code
and the regulations issued thereunder, the $86,956.52 issue price
of each Additional Unit shall be allocated $810.43 to each $1,000
of principal amount of the Senior Discount Notes (Series B) and
$4.08 to each Additional Common Stock Purchase Warrant. The
Company and the Purchaser hereby further agree that the
allocation of the issue price pursuant to the preceding sentence
shall be binding on the Company for purposes of any determination
by the Company of the issue price of the Senior Discount Notes
(Series B) pursuant to the first sentence of Treasury Regulations
section 1.1273-2(f)(2).
2.5 Sale and Purchase of Units. At the Additional Closing
--------------------------
provided for in Section 2.6, the Company will issue and sell to
the Purchaser and, subject to the terms and conditions of this
Agreement, the Purchaser will purchase from the Company, the
Additional Units at the purchase price of $86,956.52 per
Additional Unit payable in cash by wire transfer of immediately
available funds.
2.6 Closing of Sale of Additional Units. The purchase and
-----------------------------------
delivery of the Additional Units to be purchased by the Purchaser
shall take place at the offices of Goodwin, Procter & Hoar LLP,
Exchange Place, Boston, Massachusetts 02109, at a closing (the
"Additional Closing") on July 8, 1998, or at such other place or
on such other date as the Purchaser and the Company may agree
upon (such date on which the Additional Closing shall have
actually occurred, the "Additional Closing Date"). At the
Additional Closing, the Company will deliver or cause to be
delivered to the Purchaser the Additional Units to be purchased
by it
4
<PAGE>
against payment of the purchase price therefor. Unless the
Purchaser otherwise notifies the Company at least two Business
Days prior to the Additional Closing Date, the Additional Units
to be purchased hereunder shall be in the form of a single Senior
Discount Note (Series B) and a single Additional Common Stock
Purchase Warrant certificate, in each case dated the date of the
Additional Closing and registered in the Purchaser's name or that
of its nominee as set forth on the signature page hereto. If at
the Additional Closing the Company shall fail to tender to the
Purchaser any of the Additional Units to be purchased by it as
provided in this Article II, or any of the conditions specified
in Article III for the benefit of the Purchaser or the Company,
as the case may be, shall not have been satisfied or waived in
writing by the Purchaser or the Company, as applicable, the
Purchaser or the Company, as the case may be, shall, at its
election, be relieved of all further obligations under this
Agreement, without thereby waiving any other rights it may have
by reason of such failure or such non-fulfillment.
1.3 AMENDMENTS TO ARTICLE III.
-------------------------
Article III of the Agreement is hereby amended to add the following
Sections 3.3 and 3.4:
3.3 Conditions Precedent to Obligations of the Purchaser on the
-----------------------------------------------------------
Additional Closing Date. The Purchaser's obligation to purchase
-----------------------
and pay for the Additional Units to be sold to it at the
Additional Closing is subject (i) to the fulfillment to its
satisfaction, prior to or at the Additional Closing, of the
conditions set forth in Section 3.1 above, with respect to and
after giving effect to, as applicable, the issuance of the
Additional Units, in each case substituting the Additional
Closing for the Closing and, with respect to the certificate
provided for in Section 3.1 (c), referring to the conditions set
forth in this Section 3.3, and also providing for a fee pursuant
to Section 3.1(m)(ii) of $50,000 (and not $625,000), (ii) to the
amendment of the Senior Discount Notes and Warrants issued at the
Closing as provided in Exhibits A and D, as amended, and (iii) to
the execution by the Company of a Registration Rights Agreement
with respect to the Additional Warrants in the form of Exhibit C-
2; provided that any or all of such conditions may be waived, in
whole or in part, by the Purchaser with respect to this Agreement
in its sole and absolute discretion.
3.4 Conditions Precedent to Obligations of the Company on the
---------------------------------------------------------
Additional Closing Date. The Company's obligation to issue the
-----------------------
Additional Units at the Additional Closing is subject to (i) the
fulfillment
5
<PAGE>
to its satisfaction, prior to or at the Additional Closing, of
the conditions set forth in Section 3.2 above, with respect to
and after giving effect to, as applicable, the issuance of the
Additional Units, and in each case substituting the Additional
Closing for the Closing, and (ii) to the amendment of the Senior
Discount Notes and Warrants issued at the Closing as provided in
Exhibits A and D, as amended; provided that any or all of such
conditions may be waived, in whole or in part, by the Company
with respect to this Agreement in its sole and absolute
discretion.
1.4 AMENDMENTS TO ARTICLE IV.
------------------------
The introductory language to Article IV is hereby amended to provide
as follows:
In order to induce the Purchaser to purchase the Units and the
Additional Units, the Company represents and warrants that the
statements contained in this Article IV are correct and complete
as of the date of this Agreement and will be correct and complete
as of the Closing Date or the Additional Closing Date as the case
may be (as though made and as though the Closing Date or
Additional Closing Date were substituted for the date of this
Agreement throughout Article IV):
1.5 AMENDMENTS TO ARTICLE VI.
------------------------
Sections 6.6 and 6.7 of the Agreement are amended and restated in
their entirety as follows:
6.6 Optional and Mandatory Redemption.
---------------------------------
(a) The Senior Discount Notes (Series A) and (Series B) will
be subject to redemption, in whole or from time to time in
part (in multiples of $1,000 of principal amount) at the
option of the Company at the price per $1,000 principal
amount at maturity with respect to any Redemption Date
appearing opposite the period in which such Redemption Date
occurs, plus any accrued and unpaid interest to the
Redemption Date:
6
<PAGE>
<TABLE>
<CAPTION>
SENIOR DISCOUNT NOTES (SERIES A)
Price per $1,000
Period Principal Amount
------ ----------------
<S> <C>
October 1997 $833.33
November 1997 $837.19
December 1997 $848.49
January 1998 $859.78
February 1998 $871.08
March 1998 $882.38
April 1998 $894.61
May 1998 $906.85
June 1998 $919.09
July 1998 $931.32
August 1998 $943.56
September 1998 $955.79
October 1998 $969.05
November 1998 $982.30
December 1998 $995.56
January 1999 $997.20
February 1999 $998.84
After February 28, 1999 $1,000.00
SENIOR DISCOUNT NOTES (SERIES B)
<CAPTION>
Price per $1,000
Period Principal Amount
------ ----------------
<S> <C>
July 1998 $931.32
August 1998 $943.56
September 1998 $955.79
October 1998 $969.05
November 1998 $982.30
December 1998 $995.56
January 1999 $997.20
February 1999 $998.84
After February 28, 1999 $1,000.00
</TABLE>
(b) Notwithstanding any other provision hereof, if any
Gaming Authority requires that the Purchaser or any Holder
or beneficial owner of the Securities must be licensed,
qualified or found suitable under any Gaming Laws in order
to maintain any material gaming license, registration or
approval of the Company, or its Gaming Subsidiaries under
such Gaming Laws, and the Purchaser, Holder or beneficial
owner of the Securities
7
<PAGE>
fails to apply for a license, qualification or finding of
suitability within 30 days after being requested to do so by
any Gaming Authority (or such lesser period that may be
required by such Gaming Authority), or if such Purchaser,
Holder or beneficial owner is not so licensed, qualified or
found suitable, the Purchaser, Holder or beneficial owner of
the Securities shall comply with any order by such Gaming
Authorities that such Person dispose of any Securities held
by it; provided, however, that in the event the Purchaser,
Holder or beneficial owner of the Securities does not comply
with such order within the required period, the Company
shall have the option as its sole remedy with respect to the
Senior Discount Notes to call for redemption of the Senior
Discount Notes of such Purchaser, Holder or beneficial owner
at a price in cash equal to the Accreted Value thereof on
the Redemption Date, plus accrued and unpaid interest to the
Redemption Date, and except as may be required by any Gaming
Authority, the Company shall comply with the procedures
contained in the Senior Discount Notes for redemption of the
Senior Discount Notes. The Company shall pay or reimburse
any Purchaser, Holder or beneficial owner of the Securities
who is required to apply for a license, qualification or
finding of suitability, for the costs or expenses incurred
therewith except with respect to any Purchaser, Holder or
beneficial owner of the Securities whose affirmative actions
have directly caused such Purchaser, Holder or beneficial
owner to so apply.
(c) On September 30, 2001, the Company shall redeem $5.0
million in principal amount of the Senior Discount Notes
(Series A) and $3.0 million in principal amount of the
Senior Discount Notes (Series B) (without prepayment penalty
or premium) at 100% of the principal amount so redeemed,
plus any accrued and unpaid interest thereon to the
Redemption Date.
(d) Upon any partial prepayment or redemption of the Senior
Discount Notes, the principal amount so prepaid or redeemed
shall be allocated to all Senior Discount Notes (Series A)
or (Series B), as the case may be, at the time outstanding
in proportion to the respective outstanding principal
amounts thereof, and a corresponding pro rata adjustment
shall be made in the minimum denomination of a Senior
Discount Note pursuant to Section 11.1.
8
<PAGE>
6.7 Mandatory Offers.
----------------
(a) Within 10 Business Days after any Change of Control
Trigger Date, any Repayment Trigger Date or any Excess
Proceeds Date, the Company shall mail a notice to each
Holder containing all instructions and materials necessary
to enable such Holders to tender Senior Discount Notes
pursuant to the Offer and stating: (i) that an Offer is
being made pursuant to Section 7.12, 7.13 or 7.18, as the
case may be, the length of time the Offer shall remain open,
and the maximum aggregate principal amount of Senior
Discount Notes that the Company is required to purchase
pursuant to such Offer; (ii) the purchase price for the
Senior Discount Notes (as set forth in Section 7.12, 7.13 or
7.18, as the case may be), the amount of accrued and unpaid
interest on such Senior Discount Notes as of the purchase
date, and the purchase date (which shall be no earlier than
30 days nor later than 40 days from the date such notice is
mailed (the "Purchase Date")); (iii) that any Senior
Discount Note not tendered will continue to accrue interest
if interest is then accruing; (iv) that, unless the Company
defaults in the payment of the purchase price on the
Purchase Date, interest shall cease to accrue on such Senior
Discount Notes on the Purchase Date; (v) that Holders
electing to tender any Senior Discount Note or portion
thereof will be required to surrender their Senior Discount
Note, with a form entitled "Option of Holder to Elect
Purchase" completed, to the Company at the address specified
in Section 13.2 hereof prior to the close of business on the
Business Day preceding the Purchase Date, provided that
--------
Holders electing to tender only a portion of any Senior
Discount Note must tender a principal amount of $1,000 or
integral multiples thereof; (vi) that Holders will be
entitled to withdraw their election to tender Senior
Discount Notes if the Company receives, not later than the
close of business on the second Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal
amount of Senior Discount Notes delivered for purchase, and
a statement that such Holder is withdrawing his election to
have such Senior Discount Notes purchased; (vii) that
Holders whose Senior Discount Notes are accepted for payment
in part will be issued new Senior Discount Notes equal in
principal amount to the unpurchased portion of Senior
Discount Notes surrendered, provided that only Senior
--------
Discount Notes in a principal amount of $1,000 or integral
multiples thereof will be accepted for payment in part and
(viii) if the Offer is made with respect to a Change of
9
<PAGE>
Control, the circumstances and relevant facts regarding such
Change of Control.
(b) On the Purchase Date for any Offer, the Company shall
(i) in the case of an Offer resulting from a Change of
Control, accept for payment all Senior Discount Notes or
portions thereof tendered pursuant to such Offer, (ii) in
the case of an Offer resulting from one or more Securities
Sales or Mezzanine Debt Financings the aggregate Net Cash
Proceeds of which exceed $40,000,000, accept for payment all
Senior Discount Notes or portions thereof tendered pursuant
to such Offer that can be purchased out of such Net Cash
Proceeds, and (iii) in the case of an Offer resulting from
an Asset Disposition pursuant to which the Company or any
Subsidiary has Excess Proceeds, accept for payment the
maximum principal amount of Senior Discount Notes that can
be purchased out of such Excess Proceeds; provided, however,
-------- -------
that the Company will accept pursuant to Offers described in
clauses (ii) and (iii) Senior Discount Notes (Series A) and
(Series B) in proportion to the aggregate principal amount
of such Senior Discount Notes (Series A) and (Series B),
respectively, tendered pursuant to such Offer.
(c) With respect to any Offer, (i) if less than all of the
Senior Discount Notes tendered pursuant to an Offer are to
be accepted for payment by the Company for any reason, the
Company shall select on or prior to the Purchase Date the
Senior Discount Notes or portions thereof to be accepted for
payment pursuant to Section 6.2; and (ii) unless the Company
defaults in the payment of the purchase price for such
Senior Discount Notes on the Purchase Date, interest shall
cease to accrue on such Senior Discount Notes on the
Purchase Date; provided, however, that if the Company fails
-------- -------
to purchase all Senior Discount Notes accepted for payment,
the Company shall purchase on a pro rata basis all Senior
Discount Notes (Series A) and (Series B), respectively,
accepted for payment and interest shall continue to accrue
on all Senior Discount Notes not purchased.
(d) Promptly after the Purchase Date with respect to an
Offer, (i) the Company shall mail to each Holder of Senior
Discount Notes or portions thereof accepted for payment an
amount equal to the purchase price for, plus any accrued and
unpaid interest on, such Senior Discount Notes, (ii) with
respect to any tendered Senior Discount Note not accepted
for payment in whole or in part, the Company shall return
such Senior Discount Note to the
10
<PAGE>
Holder thereof, and (iii) with respect to any Senior
Discount Note accepted for payment in part, the Company
shall authenticate and mail to each such Holder a new Senior
Discount Note equal in principal amount to the unpurchased
portion of the tendered Senior Discount Note.
(e) The Company will (i) publicly announce the results of
the Offer on or as soon as practicable after the Purchase
Date, and (ii) comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent
such laws and regulations are applicable to any Offer.
(f) Notwithstanding Section 7.12 and Section 6.7, upon the
occurrence of a Change in Control Trigger Date, in lieu of
repurchasing Senior Discount Notes as required by Section
7.12, the Company may elect, instead, to call for redemption
all Senior Discount Notes pursuant to Section 6.1 provided
that the related Notice of Redemption is mailed to all
holders not later than the last date that it would be
required to commence a Mandatory Offer pursuant to Section
6.7 in respect of such Change in Control.
1.6 AMENDMENTS TO ARTICLE VII.
Article VII of the Agreement is hereby amended to add the following
Sections 7.19, 7.20 and 7.21:
7.19 Information Requests. The Company acknowledges that the
--------------------
Purchaser may wish, from time to time, to request from the
Company certain information, to review such information, and to
provide the Company with its views with respect to such
information. Accordingly the Company hereby confirms that the
Purchaser may:
(a) discuss the business operations, properties and
financial and other condition of the Company with the
Company's management;
(b) submit proposals or suggestions to the Company's
management from time-to-time and the Company's management
will discuss such proposals or suggestions with the
Purchaser within a reasonable period after such submission
but shall have no obligation to accept such proposals or
suggestions (the management, policies and operations of the
Company being within the sole and absolute discretion of the
Company); and
11
<PAGE>
(c) inspect the Company's books and records, to inspect its
business premises and other properties, to receive financial
statements, operating reports, budgets or other financial
reports of the Company, and to reasonably request
information at reasonable times and intervals concerning the
general status of the Company's financial condition and
operations.
7.20 Confidentiality. The Purchaser agrees that except as may be
---------------
required by law, rule, regulation, legal process or regulatory
authority, any non-public information received from the Company
pursuant hereto (the "Information") will be treated as
confidential and will not be disclosed by the Purchaser or made
available to any third party (other than any of the Purchaser's
partners, employees, advisers, attorneys, accountants or agents
which the Purchaser reasonably believes have a need to know such
information and which agree to be bound by the confidentiality
provisions set forth herein) without the Company's prior written
approval and without safeguards for protecting such information.
The Purchaser agrees that it shall use its reasonable efforts to
maintain the confidence of all Information disclosed to it
pursuant to this letter agreement, except that (i) the Purchaser
may disclose any Information to any Person with whom the Purchaser
is discussing a potential sale of any Securities, provided that
such Person executes a confidentiality agreement substantially
similar to this paragraph in favor of the Company and (ii) to the
extent that the Purchaser is requested or required (by deposition,
interrogatories, subpoena or otherwise) as part of an action,
suit, proceeding or investigation by or before any court or
governmental authority. Notwithstanding the foregoing,
"Information" excludes any of the foregoing that has entered the
public domain through no fault of the Purchaser, that an
authorized executive officer of the Company has authorized for
public dissemination, that was known to or possessed by the
Purchaser prior to its discussion with the Company of the
transactions contemplated in the first paragraph of this letter
agreement and other than through disclosure or delivery by the
Company, or that was learned or obtained by the Purchaser from
sources having no duty of confidentiality to the Company. The
Purchaser may decline to receive Information by providing written
notice to the Company.
7.21 Certification Not a Waiver. The Company acknowledges that
--------------------------
the Purchaser may be required from time to time to give
certifications or make representations to Gaming Authorities with
respect to the Purchaser's intention to influence the Company's
management or operations. The Company hereby agrees that the
submission of such a certification or representation does not
constitute a waiver by the
12
<PAGE>
Purchaser of the provisions of Section 7.19, nor shall any failure
to exercise such provisions of constitute such a waiver.
Notwithstanding the foregoing, however, the Purchaser acknowledges
that it may be subject to Gaming Laws with respect to its ownership
of the Securities or its exercise of the provisions of Section 7.19
or otherwise and the Purchaser shall be responsible for any costs or
expenses it may incur in complying with any Gaming Laws.
1.7 AMENDMENTS TO ARTICLE XI.
------------------------
(a) Section 11.1 of the Agreement is hereby amended and restated in
its entirety as follows:
11.1 Form and Dating. The Senior Discount Notes shall be
---------------
substantially in the form of Exhibits A-1 and A-2 hereto, which
--------------------
exhibits are part of this Agreement. The Senior Discount Notes may
have notations, legends or endorsements required by law, stock
exchange rule or usage. The Company shall approve the form of the
Senior Discount Notes and any notation, legend or endorsement on
them. Subject to adjustment as provided in Section 6.6(c) hereof,
the Senior Discount Notes shall be issued, and may be transferred
only, in denominations of $100,000 and integral multiples thereof.
The terms and provisions contained in the Senior Discount Notes
shall constitute, and are hereby expressly made, a part of this
Agreement and to the extent applicable, the Company, by its
execution and delivery of this Agreement, expressly agrees to such
terms and provisions and to be bound thereby.
(b) The second paragraph of Section 11.2 of the Agreement is hereby
amended and restated in its entirety as follows:
With respect to the sale and issuance of the Senior Discount Notes,
the Company shall authorize for issuance, upon the execution and
delivery of this Agreement, Senior Discount Notes in an aggregate
principal amount up to $47,250,000. In no case shall the aggregate
principal amount of outstanding Senior Discount Notes exceed
$47,250,000 at any time, except as provided in Section 11.5.
(c) Section 11.10 of the Agreement is hereby amended and restated in
its entirety as follows:
11.10 Record Date. If a record date for purposes of determining the
-----------
identity of Holders of Senior Discount Notes entitled to vote or
consent to any action by vote or consent authorized or permitted
under this
13
<PAGE>
Agreement is fixed by the Company, such record date shall be 10 days
prior to the first solicitation of such vote or consent.
(c) Section 11.12 of the Agreement is hereby amended and restated in
its entirety as follows:
11.12 Restrictive Legends. Except as otherwise permitted by
-------------------
this Section 11.12, each Unit, and each constituent Senior Discount
Note and Common Stock Purchase Warrant certificate (or Common Stock
certificate issued on exercise thereof), issued pursuant to this
Agreement shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT,
OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS
FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE
HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN, A SECURITIES PURCHASE AGREEMENT DATED AS
OF_______________, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH
WILL BE FURNISHED BY THE ISSUER
14
<PAGE>
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING
TO ORIGINAL ISSUE DISCOUNT AND TREASURY REGULATIONS PUBLISHED
THEREUNDER, THE FOLLOWING INFORMATION IS PROVIDED: (1) THIS SECURITY
IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT IN THE AMOUNT OF
$___________ PER $1,000 OF FACE AMOUNT; (2) THE ISSUE PRICE OF THIS
SECURITY IS $_______ PER $1,000 FACE AMOUNT; (3) THE ISSUE DATE OF
THIS SECURITY IS _____________; AND (4) THE YIELD TO MATURITY OF
THIS SECURITY IS _____%.
The Company shall maintain a copy of this Agreement and any
amendments thereto on file in its principal office, and will make
such copy available during normal business hours for inspection to
any party thereto or will provide such copy to the Purchaser upon
its request.
Whenever the legend requirement imposed by this Section 11.12 shall
terminate, as hereinabove provided, the respective holders of
Securities for which such legend requirements have terminated shall
be entitled to receive from the Company, at the Company's expense,
Senior Discount Notes or new Common Stock Purchase Warrant
certificates, as applicable, without such legend.
1.8 AMENDMENTS TO ARTICLE XIII
--------------------------
Section 13.12 of the Agreement is hereby amended and restated in its
entirety as follows:
13.12 Merger. This Agreement, as amended from time to time, and
------
the Senior Discount Notes constitute the entire agreement of the
Company and the Holders and express the entire understanding of the
Company and the Holders with respect to the Senior Discount Notes.
1.9 AMENDMENTS TO EXHIBITS.
----------------------
(a) Exhibit A to the Agreement is hereby amended to be designated A-1
and to add a new Exhibit A-2 in the form set forth in Exhibit 1 hereto.
15
<PAGE>
(b) Exhibit C to the Agreement is hereby amended to be designated C-1
and to add a new Exhibit C-2 in the form set forth in Exhibit 2 hereto.
(c) Exhibit D to the Agreement is hereby amended as set forth in
Exhibit 3 hereto.
ARTICLE II
MISCELLANEOUS
2.1. Severability. Any provision of this Agreement that is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
2.2. Successors and Assigns. All covenants, promises and agreements by
----------------------
or on behalf of the respective parties which are contained in this Amendment
shall bind and inure to the benefit of the successors and assigns of all other
parties. The terms and provisions of this Amendment shall inure to the benefit
of and shall be binding upon any assignee or transferee of the Purchaser, and in
the event of such transfer or assignment, the rights and privileges herein
conferred upon the Purchaser shall automatically extend to and be vested in, and
become an obligation of, such transferee or assignee, all subject to the terms
and conditions hereof. In connection therewith, such transferee or assignee may
disclose all documents and information which such transferee or assignee now or
hereafter may have relating to this Amendment, subject to full compliance with
Section 13.9 of the Agreement.
2.3. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAW.
2.4. Service of Process. The Company (a) hereby irrevocably submits
------------------
itself to the jurisdiction of the state courts of the State of New York and to
the jurisdiction of the United States District Court for the Southern District
of New York for the purpose of any suit, action or other proceeding arising out
of or based upon this Amendment or the subject matter hereof or thereof brought
by the Purchaser or its successors or assigns and (b) hereby waives, and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit,
action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Amendment or the subject matter hereof may not be enforced
in or by such court, and (c) hereby waives any offsets or counterclaims in any
such action, suit or proceeding (other than compulsory counterclaims). The
Company hereby consents to service of process by registered mail at the address
to which notices are to be given. The Company agrees that its submission to
jurisdiction and its consent to service of process by mail is made for the
express benefit of the
16
<PAGE>
Purchaser. Final judgment against the Company in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions (a) by
suit, action or proceeding on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any indebtedness
or liability of the Company therein described or (b) in any other manner
provided by or pursuant to the laws of such other jurisdiction; provided,
--------
however, that the Purchaser may at its option bring suit or institute other
- -------
judicial proceedings against the Company or any of the Company's assets in any
state or federal court of the United States or in any country or place where the
Company or such assets may be found.
2.5. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
--------------------
IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AMENDMENT, OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, PROVIDED, HOWEVER, THAT WITH
-------- -------
RESPECT TO ANY COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY ONE PARTY AGAINST
ANOTHER PARTY WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN THE PARTY
BRINGING SUCH CLAIM BEING FOREVER BARRED FROM BRINGING SUCH CLAIM), THE PARTY
BRING SUCH CLAIM SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN
ANY SUCH LITIGATION.
2.6. Counterparts. This Amendment may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
17
<PAGE>
AMENDMENT NO. 1 TO
SECURITIES PURCHASE AGREEMENT
UNITS OF SENIOR DISCOUNT NOTES
AND COMMON STOCK PURCHASE WARRANTS
COMPANY SIGNATURE PAGE
If this Amendment is satisfactory, please so indicate by signing the
applicable attached signature page of this Amendment and delivering such
counterpart to the Company whereupon this Amendment will become binding among
the parties hereto in accordance with its terms.
SILICON GAMING, INC.,
a California corporation
By: /s/ Thomas E. Carlson
-----------------------------------------
Name: Thomas E. Carlson
Title: Vice President and Chief Financial Officer
<PAGE>
AMENDMENT NO. 1 TO
SECURITIES PURCHASE AGREEMENT
UNITS OF SENIOR DISCOUNT NOTES
AND COMMON STOCK PURCHASE WARRANTS
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Additional Units
to be Purchased:
B III CAPITAL PARTNERS, L.P., Number of Units: 172.5
a Delaware limited partnership
Comprised of:
By: DDJ Capital III, LLC, Aggregate principal
its General Partner amount of Senior Discount Notes
By: DDJ Capital Management, LLC, to be Purchased: $17,250,000
its Manager
Aggregate Number of
Shares of Common Stock
Purchase Warrants to
By: /s/ Judy K. Mencher be Purchased: 250,000
-------------------------------
Name:
Title: Member Purchase Price: $15,000,000
Address: c/o DDJ Capital Management, LLC
Attn: Wendy Schnipper Clayton
141 Linden Street, Suite 4
Wellesley, MA 02181
Telephone: (617) 283-8500
Telecopy: (617) 283-8555
Nominee (name in which the Units are to be registered,
if different than name of Purchaser):
Goldman Sachs & Company FFC: BIII Capital Partners, L.P.
- --------------------------------------------------------
(Nominee's Name)
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of July 8,
1998, is entered into by and among Silicon Gaming, Inc., a California
corporation (the "Company"), and each Holder (as hereinafter defined) executing
a signature page hereto.
This Agreement is made pursuant to a certain Securities Purchase Agreement,
dated as of September 30, 1997, as amended, by and between the Company and the
Purchaser named therein (the "Purchase Agreement"). In order to induce the
Purchaser to issue certain warrants to purchase common stock of the Company
pursuant to the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing of certain transactions contemplated by
the Purchase Agreement.
In consideration of the foregoing, the parties hereby agree as follows:
SECTION 1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the following
meanings:
"Actual Effective Date" shall have the meaning set forth in Section 2(a).
---------------------
"Advice" shall have the meaning set forth in Section 3.
------
"Affiliate" means, with respect to any specified Person, any other Person
---------
(i) directly or indirectly controlling (including, but not limited to, all
directors and executive officers of such Person), controlled by or under direct
or indirect common control with such specified Person, or (ii) that directly or
indirectly owns more than 10% of the voting securities of such Person. A Person
shall be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Business Day" means a day that is not a Legal Holiday.
------------
"Commission" means the United States Securities and Exchange Commission.
----------
"Common Stock" means the common stock, par value $.001 per share, of the
------------
Company.
"Company" shall have the meaning set forth in the preamble and shall
-------
include the Company's successors by merger, acquisition, reorganization or
otherwise.
1
<PAGE>
"Controlling Persons" shall have the meaning set forth in Section 5(a).
-------------------
"Damages" shall have the meaning set forth in Section 5(a).
-------
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
------------
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Holder" means (i) each Person (other than the Company) executing a
------
signature page hereto and (ii) each Person (other than the Company) to whom a
Holder transfers Warrant Shares if such Person acquires such Warrant Shares as
Registrable Securities.
"Holders' Counsel" means Goodwin, Procter & Hoar LLP, special counsel to
----------------
the Holders, or any successor counsel selected by Holders of a majority in
interest of the Registrable Securities.
"Inspectors" shall have the meaning set forth in Section 3(m).
----------
"Legal Holiday" means a Saturday, Sunday or a day on which banking
-------------
institutions in New York City, New York, or Boston, Massachusetts, or at such
place of payment, are not required to be opened.
"NASD" shall have the meaning set forth in Section 3(q).
----
"Nasdaq" shall have the meaning set forth in Section 3(o).
------
"Objection Notice" shall have the meaning set forth in Section 3(a).
----------------
"Objecting Party" shall have the meaning set forth in Section 3(a).
---------------
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or other agency, or any political
subdivision thereof, or any other entity of whatever nature.
"Prospectus" means the prospectus included in any Registration Statement
----------
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such prospectus.
"Purchase Agreement" means the Securities Purchase Agreement, dated as of
------------------
the date of this Agreement, between the Company and the Holder, pursuant to
which the Warrant Agreement
2
<PAGE>
is being executed and the Warrants are being issued, as amended, modified or
supplemented from time to time, together with any exhibits, schedules or other
attachments thereto.
"Records" shall have the meaning set forth in Section 3(m).
-------
"Registrable Securities" means the Warrant Shares; provided, however, that
---------------------- -------- -------
any Warrant Shares shall cease to be Registrable Securities when (i) a
Registration Statement covering such Registrable Securities has been declared
effective and such Registrable Securities have been disposed of pursuant to such
effective Registration Statement, (ii) such Registrable Securities are
transferred to any Person other than a Holder pursuant to Rule 144 (or any
successor rule or similar provision then in effect, but not Rule 144A) under the
Securities Act, including a sale pursuant to the provisions of Rule 144(k),
(iii) such Warrant Shares shall have ceased to be outstanding, or (iv) such
Warrant Shares may be resold pursuant to Rule 144(k) assuming a Net Cashless
Exercise (as defined in Section 2.3 of the Warrant Agreement) thereof in
accordance with Section 2.3 of the Warrant Agreement.
"Registration Expenses" shall have the meaning set forth in Section 4.
---------------------
"Securities Act" means the Securities Act of 1933, as amended from time to
--------------
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"Shelf Registration Statement" means a registration statement of the
----------------------------
Company on the appropriate form for an offering to be made on a continuous basis
pursuant to Rule 415 under the Securities Act that covers any of the Registrable
Securities pursuant to the provisions of this Agreement, and all amendments and
supplements to any such registration statement, including post-effective
amendments, in each case including the Prospectus, all exhibits, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"Suspension Notice" shall have the meaning set forth in Section 3.
-----------------
"Suspension Period" shall have the meaning set forth in Section 3.
-----------------
"Target Effective Date" means the date which is 30 days after the earlier
---------------------
of (i) the Target Filing Date or (ii) the date on which the Shelf Registration
Statement is filed with the Commission.
"Target Effective Period" shall have the meaning set forth in Section 2(a).
-----------------------
"Target Filing Date" shall mean January 1, 1999, or such other date
------------------
subsequent thereto as the Holders shall request.
3
<PAGE>
"Warrant Agreement" means the Warrant Agreement, dated as of the date of
-----------------
this Agreement, by and between the Company and the Purchaser identified therein,
as amended or supplemented from time to time in accordance with the terms
thereof.
"Warrants" means the warrants to purchase shares of Common Stock issued to
--------
the Holder on the date hereof pursuant to the Warrant Agreement and the Purchase
Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
--------------
the Warrants and all shares of Common Stock directly or indirectly issued or
issuable in respect of the Warrant Shares by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation, or other reorganization. For purposes of this Agreement, all
references to Holders of Warrants exercisable into a majority or other specified
percentage of Warrant Shares shall be read as incorporating the assumption that
all Warrants have been exercised into Warrant Shares.
SECTION 2. SHELF REGISTRATION.
------------------
(a) Filing; Effectiveness. Not later than the Target Filing Date, the
---------------------
Company shall prepare and file with the Commission a Shelf Registration
Statement covering the resale of all of the Registrable Securities. The Company
shall use its best efforts to cause the Shelf Registration Statement to be
declared effective on or before the Target Effective Date and to keep such Shelf
Registration Statement continuously effective for a period (the "Target
Effective Period") following the date on which such Shelf Registration Statement
is declared effective (the "Actual Effective Date"), which Target Effective
Period shall be equal to, with respect to each Holder, the longer of the period
of time between the Actual Effective Date and (i) the date which is 24 months
following the Actual Effective Date, or (ii) if such holder is an Affiliate of
the Company, the date which is three months after the date on which such Holder
ceases to be an Affiliate of the Company, provided that the Company first
provides such Holder with an opinion of counsel to such effect.
(b) Supplements; Amendments. The Company agrees, if necessary, to
-----------------------
supplement or amend the Shelf Registration Statement, as required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or as
requested (which request shall result in the filing of a supplement or
amendment) by any Holder of Registrable Securities to which such Shelf
Registration Statement relates, and the Company agrees to furnish to the
Holders, Holders' Counsel and any managing underwriter copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission.
(c) Liquidated Damages. If the Shelf Registration Statement is not
------------------
filed on or before the Target Filing Date, the Company shall pay liquidated
damages to each Holder in an amount equal to $3.25 per 1,000 Warrant Shares per
week beginning on the Target Filing Date. If the Shelf Registration Statement is
filed but has not become effective on or before the Target Effective Date, the
Company shall pay liquidated damages to each Holder in an amount equal to
4
<PAGE>
$3.25 per 1,000 Warrant Shares per week beginning on the Target Effective Date.
The weekly liquidated damages payable by the Company to each Holder as a result
of a late filing or a late declaration of effectiveness shall increase by an
amount equal to $3.25 per 1,000 Warrant Shares 90 days after the Target Filing
Date or the Target Effective Date, as the case may be. If a stop order is
imposed or if for any other reason the effectiveness of the Shelf Registration
Statement is suspended during the Target Effective Period, then the Company
shall pay liquidated damages to each Holder in an amount equal to $3.25 per
1,000 Warrant Shares per week beginning on the date of such stop order or other
suspension of effectiveness. The weekly liquidated damages payable by the
Company to each Holder as a result of the imposition of a stop order or such
other suspension of the effectiveness of the Shelf Registration Statement during
the Target Effective Period shall increase by an amount equal to $3.25 per 1,000
Warrant Shares 90 days after the stop order was imposed or the effectiveness of
the Shelf Registration Statement was otherwise suspended, and shall thereafter
increase by an amount equal to $3.25 per 1,000 Warrant Shares at the end of each
subsequent 90-day period so long as such stop order or other suspension of the
effectiveness of the Shelf Registration Statement remains in effect. For
purposes of the two preceding sentences, a Holder will not be entitled to
receive liquidated damages under this Agreement during a Suspension Period (as
hereinafter defined) except to the extent permitted by Section 3 of this
Agreement. The Warrant Shares with respect to which liquidated damages shall
accrue and be payable in accordance with this Section 2(c) shall be those
Registrable Securities held by the Holders which are included or proposed to be
included in the Shelf Registration Statement.
The liquidated damages payable by the Company to the Holders pursuant to
this Section 2(c) shall be deemed to commence accruing on the day on which the
event triggering such liquidated damages occurs. Such liquidated damages shall
cease to accrue (i) with respect to the liquidated damages payable as a result
of the Company's failure to file the Shelf Registration Statement on or prior to
the Target Filing Date, on the day after the Shelf Registration Statement is
filed, (ii) with respect to the liquidated damages payable as a result of the
Company's failure to have the Shelf Registration Statement declared effective on
or prior to the Target Effective Date, on the day after the Shelf Registration
Statement is declared effective, or (iii) with respect to the liquidated damages
payable as a result of the imposition of a stop order or the suspension for any
other reason of the effectiveness of the Shelf Registration Statement, on the
day after the stop order is withdrawn or the effectiveness of the Shelf
Registration Statement is otherwise reinstated.
Notwithstanding the foregoing, if the sole reason why (i) the Company has
not filed the Shelf Registration Statement on or before the Target Filing Date
and/or (ii) the Shelf Registration Statement has not become effective on or
before the Target Effective Date is because the Holders did not provide the
Company with information which is required to be disclosed in the Shelf
Registration Statement and which the Company requested the Holders to so provide
in writing at least 15 days prior to the Target Filing Date and/or the Target
Effective Date, as the case may be, the Company's obligation to pay liquidated
damages with respect to such late filing or such late declaration of
effectiveness will not begin to accrue until five days after the Holders have
provided such information to the Company.
5
<PAGE>
The Company shall pay the liquidated damages due with respect to any
Registrable Securities at the end of each week during which such liquidated
damages accrue. Liquidated damages shall be paid to the Holders of Registrable
Securities entitled to receive such liquidated damages by wire transfer in
immediately available funds to the accounts designated by such Holders.
The parties hereto agree that the liquidated damages provided for in this
Section 2(c) and in Section 3 constitute a reasonable estimate as of the date
hereof of the damages that will be suffered by Holders of Registrable Securities
by reason of the failure of the Shelf Registration Statement to be filed, to be
declared effective and/or to remain effective, as the case may be, in accordance
with this Agreement.
(d) Effective Registration. A registration will not be deemed to have
----------------------
been effected as a Shelf Registration Statement unless the Shelf Registration
Statement with respect thereto has been declared effective by the Commission and
the Company has complied in all material respects with its obligations under
this Agreement with respect thereto; provided, however, that if after a Shelf
-------- -------
Registration Statement has been declared effective, the offering of Registrable
Securities pursuant to such Shelf Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the Commission or
any other governmental agency or court, such Shelf Registration Statement will
be deemed not to have become effective during the period of such interference
(and liquidated damages shall accrue and be payable under Section 2(c)) until
the offering of Registrable Securities pursuant to such Shelf Registration
Statement may legally resume. If a registration requested pursuant to this
Section 2 is deemed not to have been effected, then the Company shall continue
to be obligated to effect a registration pursuant to this Section 2.
SECTION 3. REGISTRATION PROCEDURES.
-----------------------
In connection with the obligations of the Company to effect or cause the
registration of any Registrable Securities pursuant to the terms and conditions
of this Agreement, the Company shall use its best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in
connection therewith:
(a) The Company shall prepare and file with the Commission a Shelf
Registration Statement on the appropriate form under the Securities Act,
which Shelf Registration Statement shall comply as to form in all material
respects with the requirements of the applicable form and include all
financial statements required by the Commission to be filed therewith, and
use its best efforts to cause such Shelf Registration Statement to become
effective and remain effective in accordance with the provisions of this
Agreement; provided, however, that, at least ten Business Days prior to
-------- -------
filing a Shelf Registration Statement or Prospectus or any amendments or
supplements thereto, including documents incorporated by reference after
the initial filing of the Shelf Registration
6
<PAGE>
Statement, the Company shall furnish to the Holders of the Registrable
Securities covered by such Shelf Registration Statement, Holders' Counsel
and the underwriters, if any, draft copies of all such documents proposed
to be filed, which documents will be subject to the review of Holders'
Counsel and the underwriters, if any, and the Company will not, unless
required by law or this Agreement, file any Shelf Registration Statement or
amendment thereto or any Prospectus or any supplement thereto to which
Holders holding a majority in interest of the Registrable Securities
covered by such Shelf Registration Statement or the underwriters with
respect to such Securities, if any, shall object; provided, however, that
-------- -------
any such objection to the filing of any Shelf Registration Statement or
amendment thereto or any Prospectus or supplement thereto shall be made by
written notice (the "Objection Notice") delivered to the Company no later
----------------
than five Business Days after the party or parties asserting such objection
or their counsel (the "Objecting Party") receives draft copies of the
---------------
documents that the Company proposes to file. The Objection Notice shall set
forth the objections and the specific areas in the draft documents where
such objections arise. The Company shall have five Business Days after
receipt of the Objection Notice to correct such deficiencies to the
satisfaction of the Objecting Party, and will notify each Holder of any
stop order issued or threatened by the Commission in connection therewith
and shall use its best efforts to prevent the entry of such stop order or,
if entered, to have such stop order withdrawn at the earliest possible
moment.
(b) The Company shall promptly prepare and file with the Commission
such amendments and post-effective amendments to such Shelf Registration
Statement as may be necessary to keep such Shelf Registration Statement
effective for as long as the Company is required to keep such Shelf
Registration Statement effective pursuant to the terms hereof; shall cause
the Prospectus to be supplemented by any required Prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable
Securities covered by such Shelf Registration Statement during the
applicable period in accordance with the intended methods of disposition by
the Holders set forth in such Shelf Registration Statement or amendment
thereto or such Prospectus or supplement thereto;
(c) The Company shall promptly furnish to any Holder of Registrable
Securities included in a Shelf Registration Statement and the underwriters,
if any, without charge, such number of conformed copies of such Shelf
Registration Statement and any post-effective amendment thereto and such
number of copies of the Prospectus (including each preliminary Prospectus)
and any amendments or supplements thereto, any documents incorporated by
reference therein and such other documents as any such Holder or
underwriter may request in order to facilitate the public sale or other
disposition of the Registrable Securities being sold by such Holder (it
being understood that the Company consents to the use of the Prospectus and
any amendment or supplement thereto by each Holder selling Registrable
Securities and each underwriter, if any, in connection with the offering
and sale of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto).
7
<PAGE>
(d) The Company shall, on or prior to the date on which a Shelf
Registration Statement is declared effective, (i) use its best efforts to
register or qualify the Registrable Securities covered by such Shelf
Registration Statement under the securities or "blue sky" laws of each of
the 50 states of the United States or obtain appropriate exemptions
therefrom; (ii) do any and all other acts and things which may be necessary
or advisable to enable the Holders of Registrable Securities included in
such Shelf Registration Statement to consummate the disposition of such
Registrable Securities in accordance with their intended method of
disposition thereof; (iii) use its best efforts to keep each such state
securities or "blue sky" registration or qualification (or exemption
therefrom) effective during the period in which the Company is required to
keep such Shelf Registration Statement effective; and (iv) do any and all
other acts or things which may be necessary or advisable to enable the
Holders of Registrable Securities included in such Shelf Registration
Statement to complete the disposition in such jurisdictions of such
Registrable Securities in accordance with their intended method of
disposition thereof; provided, however, that the Company shall not be
-------- -------
required (x) to qualify to do business in any jurisdiction where it would
not otherwise be required to so qualify but for this Section 3(d) or (y) to
file any general consent to service of process.
(e) The Company shall use its best efforts to cause the Registrable
Securities covered by a Shelf Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable
the Holders to consummate the disposition of such Registrable Securities in
accordance with their intended method of disposition thereof.
(f) The Company shall promptly notify each Holder of Registrable
Securities included in a Shelf Registration Statement, Holders' Counsel and
any underwriter and (if requested by any such Person) confirm such notice
in writing (i) when such Shelf Registration Statement or a Prospectus or
any post-effective amendment or any Prospectus supplement has been filed
and, with respect to such Shelf Registration Statement or any post-
effective amendment, when the same has become effective, (ii) of any
request by the Commission or any state securities authority for amendments
and supplements to such Shelf Registration Statement and Prospectus or for
additional information after such Shelf Registration Statement has become
effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such Shelf Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iv) of the
issuance by any state securities commission or other regulatory authority
of any order suspending the registration or qualification or exemption from
registration or qualification of any of the Registrable Securities under
state securities or "blue sky" laws or the initiation of any proceedings
for that purpose, (v) if, between the effective date of such Shelf
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales agreement
or other similar agreement, if any, relating to the offering of such
Registrable Securities cease to be true and correct in all material
respects, and (vi) of the happening of any event which makes any statement
of a material fact made in such
8
<PAGE>
Shelf Registration Statement or related Prospectus untrue or which requires
the making of any changes in such Shelf Registration Statement or
Prospectus so that such Shelf Registration Statement or Prospectus will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and, as promptly as practicable thereafter, prepare
and file an amendment to such Shelf Registration Statement with the
Commission and furnish to any such Holders and any underwriter a supplement
or amendment to such Prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such Prospectus will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(g) The Company shall make generally available to the Holders of
Registrable Securities included in a Shelf Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Securities Act no later than 30 days after the end of the 12-month period
beginning with the first day of the Company's first fiscal quarter
commencing after the effective date of such Shelf Registration Statement,
which earnings statement shall cover said 12-month period, and which
requirement will be deemed to be satisfied if the Company timely files
complete and accurate information on Forms 10-Q, 10-K and 8-K under the
Exchange Act and otherwise complies with Rule 158 under the Securities Act.
(h) The Company shall promptly use its best efforts to prevent the
issuance of any order suspending the effectiveness of a Shelf Registration
Statement, and, if any such order suspending the effectiveness of a Shelf
Registration Statement is issued, shall promptly use its best efforts to
obtain the withdrawal of such order at the earliest possible moment.
(i) The Company shall, if requested by the managing underwriter or
underwriters, if any, Holder's Counsel or any Holder of Registrable
Securities included in a Shelf Registration Statement, promptly incorporate
in a Prospectus supplement or post-effective amendment such information as
such managing underwriter or underwriters, Holder or Holders' Counsel
requests to be included therein, including, without limitation, with
respect to the Registrable Securities being sold by such Holder to such
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and any other terms of an underwritten offering
of the Registrable Securities to be sold in such offering, and the Company
shall promptly make all required filings of such Prospectus supplement or
post-effective amendment.
(j) After the filing with the Commission of any document which is
incorporated by reference into a Shelf Registration Statement (in the form
in which it was incorporated), the Company shall, upon request, promptly
deliver a copy of each such document to each
9
<PAGE>
of the Holders of Registrable Securities included in such Shelf
Registration Statement so requesting and to Holders' Counsel.
(k) The Company shall cooperate with the Holders of Registrable
Securities included in a Shelf Registration Statement and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates (which shall not bear any restrictive legends
unless required under applicable law) representing Registrable Securities
sold under such Shelf Registration Statement to the purchasers thereof, and
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if
any, or such Holders may request and keep available and make available to
the Company's transfer agent prior to the effectiveness of such Shelf
Registration Statement a supply of such certificates.
(l) The Company shall enter into such customary agreements (including,
if applicable, an underwriting agreement in customary form) and take such
other actions as the Holders of Registrable Securities included in a Shelf
Registration Statement or the underwriters, if any, may reasonably request
in order to expedite or facilitate the disposition of Registrable
Securities (any such Holders may, at their option, require that any or all
of the representations, warranties and covenants of the Company to or for
the benefit of any underwriters also be made to and for the benefit of such
Holders).
(m) The Company shall promptly make available to each Holder of
Registrable Securities included in a Shelf Registration Statement, any
underwriter and any attorney, accountant or other agent or representative
retained by any such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate
----------
documents and properties of the Company (collectively, the "Records"), as
-------
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all Records and other information requested by any such
Inspector in connection with such Shelf Registration Statement.
(n) The Company shall furnish to each Holder of Registrable Securities
included in a Shelf Registration Statement and to any underwriter, upon
request, a signed counterpart, addressed to such Holder or underwriter, of
(i) an opinion or opinions of counsel to the Company, and (ii) a comfort
letter or comfort letters from the Company's independent public
accountants, each in customary form and covering matters of the type
customarily covered by opinions or comfort letters, as the case may be.
(o) The Company shall use its best efforts to cause the Registrable
Securities included in a Shelf Registration Statement (if the Company and
the Registrable Securities so qualify) (i) to be listed on each national
securities exchange, if any, on which similar securities issued by the
Company are then listed, or (ii) if similar securities issued by the
Company are not then listed, to be authorized for listing or quotation, as
applicable, on
10
<PAGE>
the New York Stock Exchange or The Nasdaq Stock Market, Inc.'s ("Nasdaq")
National Market.
(p) The Company shall provide a CUSIP number for all Registrable
Securities covered by a Shelf Registration Statement not later than the
effective date of such Shelf Registration Statement.
(q) The Company shall cooperate with each Holder of Registrable
Securities included in a Shelf Registration Statement and each underwriter
and their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc. ("NASD").
----
(r) The Company shall, during the period when the Prospectus is
required to be delivered under the Securities Act, promptly file all
documents required to be filed with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act.
(s) The Company shall appoint a transfer agent and registrar for all
Registrable Securities covered by a Shelf Registration Statement not later
than the effective date of such Shelf Registration Statement.
(t) In connection with an underwritten offering, the Company shall
participate, to the extent reasonably requested by the managing underwriter
for the offering or the Holders of Registrable Securities included in such
offering, in customary efforts to sell the securities being offered,
including without limitation, participating in "road shows."
(u) If the Registrable Securities are of a class of securities that is
listed on a national securities exchange or Nasdaq, the Company will file
copies of any Prospectus with such exchange or Nasdaq, as applicable, in
compliance with Rule 153 under the Securities Act so that the Holders shall
benefit from the prospectus delivery procedures described therein.
Each Holder of Registrable Securities included in a Shelf Registration
Statement, upon receipt of any notice (a "Suspension Notice") from the Company
-----------------
of the happening of any event of the kind described in Section 3(f), shall
forthwith discontinue disposition of the Registrable Securities pursuant to such
Shelf Registration Statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(f) or until such Holder is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and such
- -------
Holder has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the Company,
such Holder will, or will request the managing underwriter or underwriters, if
any, to, deliver to the Company (at the Company's expense) all copies, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice; provided, however, that the Company shall not give a Suspension Notice
-------- -------
until after the Shelf Registration Statement has been declared effective and
11
<PAGE>
shall not give more than three Suspension Notices during any period of twelve
consecutive months and in no event shall the period from the date on which any
such Holder receives a Suspension Notice to the date on which any such Holder
receives either the Advice or copies of the supplemented or amended Prospectus
contemplated by Section 3(f) (the "Suspension Period") exceed 30 days. In the
-----------------
event that the Company shall give any Suspension Notice, (i) the Company shall
use its best efforts and take such actions as are reasonably necessary to render
the Advice and end the Suspension Period as promptly as practicable and (ii) the
time periods for which a Shelf Registration Statement is required to be kept
effective pursuant to Section 2 hereof shall be extended by the number of days
during the Suspension Period.
If the Suspension Period exceeds 30 days, the Company shall pay liquidated
damages to each Holder in the amount of $3.25 per 1,000 Warrant Shares included
in the Shelf Registration Statement for each week during which the Suspension
Period is in effect. The weekly liquidated damages payable by the Company to
each Holder as a result of the continuance of a Suspension Period shall increase
by an amount equal to $3.25 per 1,000 Warrant Shares 60 days after receipt of
the Suspension Notice. The Company shall pay the liquidated damages due with
respect to any Registrable Securities at the end of each week during which such
damages accrue. Liquidated damages shall be paid to the Holders of Registrable
Securities entitled to receive such liquidated damages by wire transfer in
immediately available funds to the accounts designated by such Holders.
If any Shelf Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act or any similar Federal or state securities or "blue sky" statute
and the rules and regulations thereunder then in force, the deletion of the
reference to such Holder.
SECTION 4. REGISTRATION EXPENSES. Any and all expenses incident to the
---------------------
Company's performance of or compliance with this Agreement, including without
limitation, all Commission and securities exchange, Nasdaq or NASD registration
and filing fees, all fees and expenses incurred in connection with compliance
with state securities or "blue sky" laws (including reasonable fees and
disbursements of one counsel for the Holders or underwriters in connection with
"blue sky" qualifications of the Registrable Securities), printing expenses,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), all expenses for word processing,
printing and distributing any Shelf Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, the fees and expenses of the Company incurred in connection
with the listing of the Registrable Securities, the
12
<PAGE>
fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company (including the expenses of any
comfort letters or costs associated with the delivery by independent certified
public accountants of a comfort letter or comfort letters requested pursuant to
Section 3(n)), Securities Act liability insurance (if the Company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
or other Persons retained by the Company in connection with any registration,
and the reasonable fees and disbursements of Holders' Counsel incurred in
connection with each registration hereunder (up to a maximum of $10,000) and any
reasonable out-of-pocket expenses of the Holders and their agents, including any
reasonable travel costs (but excluding underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of Registrable
Securities) (all such expenses being herein called "Registration Expenses"),
------------ --------
will be borne by the Company whether or not the Shelf Registration Statement to
which such expenses relate becomes effective.
SECTION 5. INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless, to the full extent permitted by law, each Holder, its
partners, members, officers, directors, trustees, stockholders, employees,
agents and investment advisers, and each Person who controls such Holder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, or is under common control with, or is controlled by, such Holder,
together with the partners, members, officers, directors, trustees,
stockholders, employees, agents and investment advisors of such controlling
Person (collectively, the "Controlling Persons"), from and against all losses,
----------- -------
claims, damages, liabilities and expenses (including, without limitation, any
legal or other fees and expenses incurred by any Holder or any such Controlling
Person in connection with defending or investigating any action or claim in
respect thereof) (collectively, the "Damages") to which such Holder, its
-------
partners, officers, directors, trustees, stockholders, employees, agents and
investment advisers, and any such Controlling Person, may become subject under
the Securities Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in any Shelf Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, including all documents incorporated therein by
reference, or are caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or are caused by any
omission or alleged omission to state therein a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company shall not be liable
-------- -------
for Damages to any Holder under this Section 5(a) to the extent that any such
Damages (i) arise out of or are based upon any such untrue statement or omission
which is based upon information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any such Shelf Registration
Statement (or any amendment thereto) or Prospectus (or amendment or supplement
thereto); or (ii) were caused by the fact that such Holder sold Securities to a
Person as to whom it shall be established that there
13
<PAGE>
was not sent or given, or deemed sent or given pursuant to Rule 153 under the
Securities Act, at the time of or prior to the written confirmation of such
sale, a copy of the Prospectus as then amended or supplemented if, and only if,
(a) the Company has previously furnished copies of such amended or supplemented
Prospectus to such Holder and (b) such Damages were caused by any untrue
statement or omission or alleged untrue statement or omission contained in the
Prospectus so delivered which was corrected in such amended or supplemented
Prospectus. In connection with an underwritten offering, the Company will
indemnify the underwriters thereof, their officers and directors and each Person
who controls such underwriters (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as provided
above with respect to the indemnification of the Holders of Registrable
Securities except with respect to information provided by the underwriter
specifically for inclusion therein.
(b) Indemnification by the Holders. In connection with any Shelf
------------------------------
Registration Statement in which a Holder is participating, each such Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
its directors and officers and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against all Damages to the same extent as the
foregoing indemnity from the Company to such Holder, but only to the extent such
Damages arise out of or are based upon any untrue statement of a material fact
contained in any Shelf Registration Statement (or any amendment thereto) or
Prospectus (or any amendment or supplement thereto) or are caused by any
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, which untrue statement or omission is based upon information
relating to such Holder furnished in writing to the Company by such Holder
expressly for use in any such Shelf Registration Statement (or any amendment
thereto) or any such Prospectus (or any amendment or supplement thereto);
provided, however, that such Holder shall not be obligated to provide such
- -------- -------
indemnity to the extent that such Damages result from the failure of the Company
to promptly amend or take action to correct or supplement any such Shelf
Registration Statement or Prospectus on the basis of corrected or supplemental
information furnished in writing to the Company by such Holder expressly for
such purpose. In no event shall the liability of any Holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Indemnification Procedures. In case any proceeding (including any
--------------------------
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceedings
and shall pay the fees and disbursements of such counsel relating to such
proceeding. The failure of an indemnified party to notify the indemnifying
party with respect to a particular proceeding shall not relieve the indemnifying
party from any obligation or liability (i) which it may have pursuant to this
Agreement if the indemnifying party is not substantially prejudiced by such
failure to so
14
<PAGE>
notify it or (ii) which it may have otherwise than pursuant to this Agreement.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, or (ii) the
indemnifying party fails promptly to assume the defense of such proceeding or
fails to employ counsel reasonably satisfactory to such indemnified party, or
(iii) (A) the named parties to any such proceeding (including any impleaded
parties) include both such indemnified party or an Affiliate of such indemnified
party and any indemnifying party or an Affiliate of such indemnifying party, (B)
there may be one or more defenses available to such indemnified party or such
Affiliate of such indemnified party that are different from or additional to
those available to any indemnifying party or such Affiliate of any indemnifying
party and (C) such indemnified party shall have been advised by such counsel
that there may exist a conflict of interest between or among such indemnified
party or such Affiliate of such indemnified party and any indemnifying party or
such Affiliate of any indemnifying party, in which case, if such indemnified
party notifies the indemnifying party in writing that it elects to employ
separate counsel of its choice at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the indemnifying party, it being
understood, however, that unless there exists a conflict among indemnified
parties, the indemnifying parties shall not, in connection with any one such
proceeding or separate but substantially similar or related proceedings in the
same jurisdiction, arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified
parties. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent (which consent shall not be
unreasonably withheld) but, if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify each
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior written
consent of any indemnified party (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which such indemnified party is a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on all claims
that are the subject matter of such proceeding with no payment by such
indemnified party of consideration.
(d) Contribution. If the indemnification from the indemnifying party
------------
provided for in this Section 5 is found, pursuant to a final judicial
determination not subject to appeal, to be unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities, or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities, or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and the indemnified parties in connection with the
actions that resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or the
15
<PAGE>
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities, and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 5(c), any legal or other expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission, and no selling Holder shall be required to
contribute any amount in excess of the amount by which the total net proceeds
received by such selling Holder with respect to Registrable Securities sold by
such selling Holder exceeds the amount of any damages which such selling Holder
has otherwise been required to pay by reason of such untrue statement or alleged
untrue statement or omission or alleged omission. Each Holder's obligation to
contribute pursuant to this Section 5(d) is several and not joint and shall be
determined by reference to the proportion that the net proceeds of the offering
received by such Holder bears to the total net proceeds of the offering received
by all the Holders. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies that may otherwise be
available to any indemnified party at law or in equity.
If indemnification is available under this Section 5, the indemnifying
party shall indemnify each indemnified party to the full extent provided in
Sections 5(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 5(d).
SECTION 6. RULE 144. The Company covenants that it will file any
--------
reports required to be filed by it under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder (or, if
the Company is not required to file such reports, it will, upon the request of
any Holder, make publicly available other information so long as necessary to
permit sales of the Registrable Securities pursuant to Rule 144 under the
Securities Act), and it will take such further action as any Holder may request,
all to the extent required from time to time to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any successor rule or
similar provision
16
<PAGE>
hereafter adopted by the Commission. Upon the request of any Holder, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
SECTION 7. RULE 144A. The Company covenants that it will file all
---------
reports required to be filed by it under the Securities Act and the Exchange
Act, and the rules and regulations adopted by the Commission thereunder (or if
the Company is not required to file such reports, it will, upon the request of
any Holder, make available other information so long as necessary to permit
sales of the Registrable Securities pursuant to Rule 144A under the Securities
Act), and it will take such further action as any Holder may request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (a) Rule 144A, as such rule may be amended from
time to time, or (b) any successor rule or similar provision hereafter adopted
by the Commission. Upon the request of any Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
SECTION 8. MISCELLANEOUS.
-------------
(a) No Inconsistent Agreements. The Company has not entered into nor
--------------------------
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with, and
are not inconsistent with, the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements. The Company
may grant registration rights that would permit any Person the right to piggy-
back or may itself exercise its right to piggy-back, on any Shelf Registration
Statement, provided that if the managing underwriter or underwriters, if any, of
--------
such offering delivers an opinion to the Holders that the total amount of
securities which they and the holders of such new piggy-back rights intend to
include in any Shelf Registration Statement is so large as to materially and
adversely affect the success of such offering (including the price at which such
securities can be sold), then only the amount, number or kind of securities to
be offered for the account of holders of such new piggy-back rights (other than
the Company) will be reduced to the extent necessary to reduce the total amount
of securities to be included in such Shelf Registration Statement to the amount,
number or kind recommended by the managing underwriter prior to any reduction in
the amount of Registrable Securities to be included; and provided further that
-------- -------
if such offering is not underwritten, then such piggy-back rights shall only be
exercised with the consent of the Holders of Warrants exercisable into a
majority of the Warrant Shares being offered under such Shelf Registration
Statement.
(b) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of Warrants exercisable into at least a majority of Warrant Shares which are
affected by such amendment, modification, supplement, waiver or consent.
17
<PAGE>
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telecopier, registered or certified
mail (return receipt requested), postage prepaid or courier to the parties at
their respective addresses set forth on the signature pages hereof (or at such
other address for any party as shall be specified by like notice, provided that
notices of a change of address shall be effective only upon receipt thereof).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; by confirmed
receipt of transmission, if telecopied; and on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery.
(d) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Registrable Securities in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York without regard to
principles or rules of conflicts of law.
(h) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(i) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and is intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth
18
<PAGE>
or referred to herein. This Agreement, the Warrant Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings between the
parties with respect to such subject matter.
(j) Attorneys' Fees. In any action or proceeding brought to enforce
---------------
any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall, to the extent permitted by
applicable law, be entitled to recover reasonable attorneys' fees in addition to
any other available remedy.
(k) Further Assurances. Each party shall cooperate and take such
------------------
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
(l) Remedies. In the event of a breach or a threatened breach by any
--------
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that remedies at law for violations
hereof including monetary damages, are inadequate and that the right to object
in any action for specific performance or injunctive relief hereunder on the
basis that a remedy at law would be adequate is waived.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
SILICON GAMING, INC.
By: /s/ Thomas E. Carlson
------------------------------
Name: Thomas E. Carlson
Title: Vice President and
Chief Financial Officer
Notice Information:
Mr. Thomas E. Carlson
Silicon Gaming, Inc.
2800 W. Bayshore Road
Palo Alto, California 94303
Phone: (650) 842-9000
Fax: (650) 842-9001
20
<PAGE>
REGISTRATION RIGHTS AGREEMENT
PURCHASER SIGNATURE PAGE
B III CAPITAL PARTNERS, L.P.,
a Delaware limited partnership
By: DDJ CAPITAL III, LLC,
its General Partner
By: DDJ CAPITAL MANAGEMENT, LLC,
its Manager
By: /s/ Judy K. Mencher
---------------------------
Name:
Title:
Notice Information:
Mr. Jay Burnham
DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, Massachusetts 02181
Phone: (617) 283-8500
Fax: (617) 283-8555
21
<PAGE>
EXECUTION COPY
================================================================================
EXHIBIT 4.3
AMENDED AND RESTATED
WARRANT AGREEMENT
BY AND BETWEEN
SILICON GAMING, INC.
AND
THE PURCHASER NAMED HEREIN
AS AMENDED AS OF JULY 8, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - WARRANT CERTIFICATES.............................................. 1
Section 1.1 Forms of Warrant Certificates............................... 1
Section 1.2 Execution of Warrant Certificates........................... 1
Section 1.3 Registration of Warrant Certificates........................ 2
Section 1.4 Exchange and Transfer of Warrant Certificates............... 2
Section 1.5 Lost, Stolen, Mutilated or Destroyed Warrant Certificates... 2
Section 1.6 Cancellation of Warrant Certificates........................ 2
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS.................. 3
Section 2.1 Exercise Price.............................................. 3
Section 2.2 Registration of Warrants and Warrant Shares................. 3
Section 2.3 Procedure for Exercise of Warrants.......................... 3
Section 2.4 Issuance of Common Stock.................................... 5
Section 2.5 Certificates for Unexercised Warrants....................... 5
Section 2.6 Reservation of Shares....................................... 5
Section 2.7 No Impairment............................................... 5
ARTICLE III - ADJUSTMENTS AND NOTICE PROVISIONS............................... 6
Section 3.1 Adjustment of Exercise Price................................ 6
Section 3.2 Sales of Certain Securities................................. 8
Section 3.3 No Adjustments to Exercise Price............................ 9
Section 3.4 Adjustment of Number of Shares.............................. 9
Section 3.5 Reorganizations............................................. 9
Section 3.6 Verification of Computations................................10
Section 3.7 Notice of Certain Actions...................................10
Section 3.8 Certificate of Adjustments..................................11
Section 3.9 Warrant Certificate Amendments..............................11
Section 3.10 Fractional Shares...........................................11
ARTICLE IV - MISCELLANEOUS....................................................11
Section 4.1 Payment of Taxes and Charges................................11
Section 4.2 Changes to Agreement........................................12
Section 4.3 Assignment..................................................12
Section 4.4 Successor to Company........................................12
Section 4.5 Notices.....................................................12
Section 4.6 Defects in Notice...........................................13
Section 4.7 Governing Law...............................................13
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Section 4.8 Standing................................................. 13
Section 4.9 Headings................................................. 13
Section 4.10 Counterparts............................................. 13
Section 4.11 Availability of the Agreement............................ 14
Section 4.12 Entire Agreement......................................... 14
WARRANT AGREEMENT COMPANY SIGNATURE PAGE................................... 15
WARRANT AGREEMENT PURCHASER SIGNATURE PAGE................................. 16
EXHIBIT A - FORM OF WARRANT CERTIFICATE................................... A-1
</TABLE>
(ii)
<PAGE>
WARRANT AGREEMENT
THIS AMENDED AND RESTATED WARRANT AGREEMENT, dated as of September 30, 1997
and amended as of July 8, 1998, is entered into by and between Silicon Gaming,
Inc., a California corporation (the "Company"), and the undersigned purchaser
(the "Purchaser").
WITNESSETH:
WHEREAS, the Company proposes to sell pursuant to a Securities Purchase
Agreement, dated as of September 30, 1997 and as amended from time to time (the
"Securities Purchase Agreement," capitalized terms not otherwise defined herein
having the meanings ascribed to them in the Securities Purchase Agreement), by
and between the Company and the Purchaser, units consisting of Senior Discount
Notes (Series A) in the aggregate principal amount of $30,000,000 and warrants
(each, a "Warrant," and collectively, the "Warrants") to purchase up to an
aggregate of 375,000 shares (subject to adjustment) of the common stock, par
value $.001 per share, of the Company (the "Common Stock") and, at an Additional
Closing, units consisting of Senior Discount Notes (Series B) in the aggregate
principal amount of $17,250,000 and Warrants to purchase up to an aggregate of
250,000 shares (subject to adjustment) of Common Stock (the Common Stock
issuable upon exercise of all such Warrants being referred to herein as the
"Warrant Shares");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
WARRANT CERTIFICATES
Section 1.1 Forms of Warrant Certificates. The warrant certificates (the
-----------------------------
"Warrant Certificates") shall be issued in registered form only and, together
with the form of the election to purchase (the "Election to Purchase"), and
assignment (the "Assignment") to be attached thereto, shall be substantially in
the form of Exhibit A attached hereto and, in addition, may have such letters,
---------
numbers or other marks of identification or designation and such legends,
summaries, or endorsements stamped, printed, lithographed or engraved thereon as
the Company may deem appropriate and as are not inconsistent with the provisions
of this Agreement, or as, in any particular case, may be required in the opinion
of counsel for the Company, to comply with any law or with any rule or
regulation of any regulatory authority or agency, or to conform to customary
usage.
Section 1.2 Execution of Warrant Certificates. The Warrant Certificates
---------------------------------
shall be executed on behalf of the Company by its Chairman or President or any
Vice President and attested to by its Secretary or Assistant Secretary, either
manually or by facsimile signature printed thereon. In case any authorized
officer of the Company who shall have signed any of the
<PAGE>
Warrant Certificates shall cease to be an officer of the Company either before
or after delivery thereof by the Company to any Purchaser, the signature of such
person on such Warrant Certificates shall be valid nevertheless and such Warrant
Certificates may be issued and delivered to those persons entitled to receive
the Warrants represented thereby with the same force and effect as though the
person who signed such Warrant Certificates had not ceased to be an officer of
the Company.
Section 1.3 Registration of Warrant Certificates. The Company shall
------------------------------------
number and register the Warrant Certificates in a register as they are needed.
The Company may deem and treat the registered holder(s) of the Warrant
Certificates (the "Holders") as the absolute owner(s) thereof for all purposes.
Section 1.4 Exchange and Transfer of Warrant Certificates. The Warrants
---------------------------------------------
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Securities Purchase
Agreement and as may be required by law and shall be transferable only in
accordance with the terms of this Agreement and the Securities Purchase
Agreement.
The Company may from time to time register the transfer of any outstanding
Warrant Certificates in a warrant register to be maintained by the Company upon
surrender thereof accompanied by a written instrument or instruments of transfer
in form satisfactory to the Company duly executed by the Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s).
Warrant Certificates may be exchanged at the option of the Holder(s)
thereof, when surrendered to the Company at the address set forth in Section 4.5
hereof for another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrant Shares: provided that the
--------
Company shall not be required to issue any Warrant Certificate representing any
fractional Warrant Shares.
Section 1.5 Lost, Stolen, Mutilated or Destroyed Warrant Certificates. If
---------------------------------------------------------
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated Warrant Certificate, or in lieu of or in
substitution for a lost, stolen or destroyed Warrant Certificate, a new Warrant
Certificate representing an equivalent number of Warrants or Warrant Shares. If
required by the Company, the Holder of the mutilated, lost, stolen or destroyed
Warrant Certificate must provide indemnity sufficient to protect the Company
from any loss which it may suffer if the Warrant Certificate is replaced. Any
such new Warrant Certificate shall constitute an original contractual obligation
of the Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant Certificate shall be at any time enforceable by anyone.
Section 1.6 Cancellation of Warrant Certificates. Any Warrant
------------------------------------
Certificate surrendered upon the exercise of Warrants or for exchange or
transfer, or purchased or otherwise acquired by the Company, shall be canceled
and shall not be reissued by the Company; and, except as
2
<PAGE>
provided in Section 2.5 hereof in case of the exercise of less than all of the
Warrants evidenced by a Warrant Certificate or in Section 1.4 in an exchange or
transfer, no Warrant Certificate shall be issued hereunder in lieu of such
canceled Warrant Certificate. Any Warrant Certificate so canceled shall be
destroyed by the Company.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 Exercise Price. Each Warrant Certificate shall, when signed
--------------
by the Chairman or President or any Vice President and attested to by the
Secretary or Assistant Secretary of the Company, entitle the Holder thereof to
purchase from the Company, subject to the terms and conditions of this
Agreement, the number of fully paid and nonassessable Warrant Shares evidenced
thereby at a purchase price of $8.00 per share (the "Initial Exercise Price") or
such adjusted number of Warrant Shares at such adjusted purchase price as may be
established from time to time pursuant to the provisions of Article III hereof,
payable in full in accordance with Section 2.3 hereof, at the time of exercise
of the Warrant. Except as the context otherwise requires, the term "Exercise
Price" as used in this Agreement shall mean the purchase price of one share of
Common Stock, reflecting all appropriate adjustments made in accordance with the
provisions of Article III hereof.
Section 2.2 Registration of Warrants and Warrant Shares. The Company
-------------------------------------------
shall secure the effective registration of the Warrant Shares for resale under
the Securities Act upon the terms and subject to the conditions set forth in the
Registration Rights Agreement (the "Registration Rights Agreement"), as amended
from time to time, between the Company and the Purchaser. Promptly after a
registration statement under the Securities Act covering the Warrant Shares has
become effective, the Company shall cause notice thereof together with a copy of
the prospectus covering the Warrant Shares to be mailed to each registered
Holder.
Section 2.3 Procedure for Exercise of Warrants. The Warrants may be
exercised prior to the Expiration Date (as hereinafter defined) at the Exercise
Price at any time (a) after 6 months of the date of their issuance, (b) after
eleven (11) business days following the commencement of a tender offer (as
provided in Rule 14d-2 of the Exchange Act (as defined below)) with respect to
the Common Stock pursuant to Regulation 14D promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), unless the Company has
published, sent or given to securityholders pursuant to Rule 14e-2(a) under the
Exchange Act a statement that the Company recommends rejection of such tender
offer (a "Rejection Recommendation"), (c) after a Rejection Recommendation, if
and upon the public announcement by the Company, a filing by the Company with
the Securities and Exchange Commission, or the sending by the Company to
securityholders of a statement pursuant to Rule 14e-2(b) under the Exchange Act,
in each case, which changes the Company's position with respect to such tender
offer to a recommendation of acceptance of such tender offer or an expression of
no opinion with respect to such tender offer, (d) immediately prior to
consummation by the Company of any consolidation or merger with any entity
(other than a wholly-owned subsidiary of the Company) other than a consolidation
or merger as a result of which each of the stockholders of the Company owns,
immediately after consummation of such consolidation or merger, directly or
indirectly, at least 70% of the percentage of the fully diluted
3
<PAGE>
capital stock of the Company or the surviving entity of such consolidation or
merger which such stockholder owned immediately prior to the consummation of
such consolidation or merger, calculated without giving effect to the issuance
as part of such consolidation or merger of up to 625,000 shares of Common Stock
upon exercise of the Warrants, or (e) after the consummation by the Company of
any sale, transfer or other disposition of all or substantially all of its
property, assets or business, other than to a wholly-owned subsidiary of the
Company. The Warrants shall expire at 5:00 p.m., New York City time, five years
from the date of their issuance (the "Expiration Date"). The Warrants may be
exercised by surrendering the Warrant Certificates representing such Warrants to
the Company at its address set forth in Section 4.5 hereof, together with the
Election to Purchase duly completed and executed, accompanied by payment in
full, as set forth below, to the Company of the Exercise Price for each Warrant
Share in respect of which such Warrants are being exercised. Such Exercise Price
shall be paid in full by (i) cash or a certified check or a wire transfer in
same day funds in an amount equal to the Exercise Price multiplied by the number
of Warrant Shares then being purchased or (ii) delivery to the Company of that
number of shares of Common Stock having a Fair Market Value (as hereinafter
defined) equal to the Exercise Price multiplied by the number of Warrant Shares
then being purchased. In the alternative, the Holder of a Warrant Certificate
may exercise its right to purchase some or all of the Warrant Shares subject to
such Warrant Certificate, on a net basis, such that, without the exchange of any
funds, such Holder receives that number of Warrant Shares subscribed to pursuant
to such Warrant Certificate less that number of shares of Common Stock having an
aggregate Fair Market Value at the time of exercise equal to the aggregate
Exercise Price that would otherwise have been paid by such Holder for the number
of Warrant Shares subscribed to pursuant to such Warrant Certificate
(hereinafter, a "Net Cashless Exercise").
As used herein: (a) the term "Fair Market Value," on a per share basis,
means the average of the daily Closing Prices (as hereinafter defined) of the
Common Stock for the five (5) consecutive Trading Days (as hereinafter defined)
ending the Trading Day immediately preceding the Date of Exercise; (b) the term
"Date of Exercise" with respect to any Warrant means the date on which such
Warrant is exercised as provided herein; (c) the term "Closing Price" for any
date shall mean the last sale price reported in The Wall Street Journal regular
-----------------------
way or, in case no such reported sale takes place on such date, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted to
trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported on The Nasdaq Stock Market, Inc.'s National
Market ("Nasdaq") or its successor, if any, or if the Common Stock is not so
reported, the average of the reported bid and asked prices in the over-the-
counter market, as furnished by the National Quotation Bureau, Inc., or if such
firm is not then engaged in the business of reporting such prices, as furnished
by any similar firm then engaged in such business and selected by the Company
or, if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc. ("NASD") selected by the Company or, if
the Common Stock is not quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Company's Board of Directors as of a
date which is within 15 days of the date as of which the determination is to be
made; and (d) the term "Trading Days" with respect to the Common Stock means (i)
if the Common Stock is quoted on Nasdaq or any similar system of
4
<PAGE>
automated dissemination of quotations of securities prices, days on which trades
may be made on such system or (ii) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business.
Section 2.4 Issuance of Common Stock. As soon as practicable after the
------------------------
Date of Exercise of any Warrants, the Company shall issue, or cause its transfer
agent to issue, a certificate or certificates for the number of full Warrant
Shares, registered in accordance with the instructions set forth in the Election
to Purchase, together with cash for fractional shares as provided in Section
3.10. All Warrant Shares issued upon the exercise of any Warrants shall be
validly authorized and issued, fully paid, non-assessable, free of preemptive
rights and (subject to Section 4.1 hereof) free from all taxes, liens, charges
and security interests in respect of the issuance thereof. Each person in whose
name any such certificate for Warrant Shares is issued shall be deemed for all
purposes to have become the holder of record of the Common Stock represented
thereby on the Date of Exercise of the Warrants resulting in the issuance of
such shares, irrespective of the date of issuance or delivery of such
certificate for Warrant Shares.
Section 2.5 Certificates for Unexercised Warrants. In the event that,
-------------------------------------
prior to the Expiration Date, a Warrant Certificate is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise a new Warrant
Certificate representing the remaining Warrant Shares shall be issued and
delivered pursuant to the provisions hereof; provided that the Company shall not
be required to issue any Warrant Certificate representing any fractional Warrant
Shares.
Section 2.6 Reservation of Shares. The Company shall at all times
---------------------
reserve and keep available, free from preemptive rights, for issuance upon the
exercise of Warrants, the maximum number of its authorized but unissued shares
of Common Stock which may then be issuable upon the exercise in full of all
outstanding Warrants. The Company shall from time to time take all action which
may be necessary or appropriate so that the Warrant Shares, immediately upon
their issuance following an exercise of Warrants, will be listed or quoted, as
the case may be, on the principal securities exchanges or markets within the
United States of America, if any, on which other shares of the Common Stock are
then listed.
Section 2.7 No Impairment. The Company shall not by any action,
-------------
including, without limitation, amending its articles of incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of the Warrants, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holders against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value of any Warrant
Shares receivable upon the exercise of the Warrants above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (c) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not
5
<PAGE>
be required to issue Warrant Shares upon the exercise of any Warrant if such
issuance would result in a violation by the Company of any applicable law.
ARTICLE III
ADJUSTMENTS AND NOTICE PROVISIONS
Section 3.1 Adjustment of Exercise Price. Subject to the provisions of
----------------------------
this Article III, the Exercise Price in effect from time to time shall be
subject to adjustment, as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding shares of its Common Stock in shares of its
Common Stock, (ii) subdivide or reclassify the outstanding shares of its Common
Stock into a greater number of shares, or (iii) combine or reclassify the
outstanding shares of its Common Stock into a smaller number of shares, the
Exercise Price in effect immediately after the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such dividend, distribution, subdivision,
combination or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such dividend,
distribution, subdivision, combination or reclassification. Any shares of
Common Stock of the Company issuable in payment of a dividend shall be deemed to
have been issued immediately prior to the record date for such dividend for
purposes of calculating the number of outstanding shares of Common Stock of the
Company under Subsections 3.l(b), 3.l(c) and 3.2(a) hereof. Such adjustment
shall be made successively whenever any event specified above shall occur.
(b) In case the Company shall fix a record date for the issuance
of rights, options, warrants or convertible or exchangeable securities to all
holders of its Common Stock entitling them (for a period which, by its express
terms, expires within forty-five (45) days after such record date) to subscribe
for or purchase shares of its Common Stock at a price per share less than the
Current Market Price (as such term is defined in Subsection 3.1(d) hereof) of a
share of Common Stock of the Company on such record date, the Exercise Price
shall be adjusted immediately thereafter so that it shall equal the price
determined by multiplying the Exercise Price in effect immediately prior thereto
by a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on such record date plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered would purchase at the Current Market Price per share, and of which
the denominator shall be the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock offered
for subscription or purchase. Such adjustment shall be made successively
whenever such a record date is fixed. To the extent that any such rights,
options, warrants or convertible or exchangeable securities are not so issued or
expire unexercised, the Exercise Price then in effect shall be readjusted to the
Exercise Price which would then be in effect if such unissued or unexercised
rights, options, warrants or convertible or exchangeable securities had not been
issuable.
6
<PAGE>
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of shares of its Common Stock (i) of shares of any
class other than its Common Stock or (ii) of evidences of its indebtedness or
(iii) of assets (excluding cash dividends or distributions (other than
extraordinary cash dividends or distributions), and dividends or distributions
referred to in Subsection 3.1(a) hereof) or (iv) of rights, options, warrants or
convertible or exchangeable securities (excluding those rights, options,
warrants convertible or exchangeable securities referred to Subsection 3.1(b)
hereof), then in each such case the Exercise Price in effect immediately
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding on such record date
multiplied by the Current Market Price (as such term is defined in Subsection
3.l(d) hereof) per share on such record date, less the aggregate fair market
value as determined in good faith by the Board of Directors of the Company of
said shares or evidences of indebtedness or assets or rights, options, warrants
or convertible or exchangeable securities so distributed, and of which the
denominator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by such Current Market Price per share. Such
adjustment shall be made successively whenever such a record date is fixed;
provided, however, that in no event shall the exercise price be less than zero.
In the event that such distribution is not so made, or that such distribution,
by its express terms, is intended to be made, and is in fact made, to all
holders of Warrant Shares upon exercise of their respective Warrants, the
Exercise Price then in effect shall be readjusted to the Exercise Price which
would then be in effect if such record date had not been fixed.
(d) Immediately after the close of business on July 15, 1999, the
Exercise Price shall be reset to the lesser of: (i) the Exercise Price then in
effect or (ii) 120% of the Closing Price (as defined in clause (c) of the second
paragraph of Section 2.3) of the Company's Common Stock on July 15, 1999.
(e) For the purpose of any computation under Subsection 3.1(b) or
3.1(c) hereof, the "Current Market Price" per share at any date (the
"Computation Date") shall be deemed to be the average of the daily Closing
Prices of the Common Stock for the five (5) consecutive Trading Days ending the
Trading Day immediately preceding the Computation Date; provided, however, that
-------- -------
if there shall have occurred prior to the Computation Date any event described
in Subsection 3.l(a), 3.l(b) or 3.1(c) which shall have become effective with
respect to market transactions at any time (the "Market-Effect Date") on or
within such 10-day period, the Closing Price for each Trading Day preceding the
Market-Effect Date shall be adjusted, for purposes of calculating such average,
by multiplying such Closing Price by a fraction, of which the numerator shall be
the Exercise Price as in effect immediately prior to the Computation Date and
the denominator of which shall be the Exercise Price as in effect immediately
prior to the Market-Effect Date, it being understood that the purpose of this
proviso is to ensure that the effect of such event on the market price of the
Common Stock shall, as nearly as possible, be eliminated in order that the
distortion in the calculation of the Current Market Price may be minimized.
7
<PAGE>
Section 3.2 Sales of Certain Securities.
---------------------------
(a) In case the Company shall on or after the date hereof issue or
sell any shares of Common Stock or any rights, options, warrants or convertible
or exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock (excluding Excluded Securities, as defined in Subsection
3.2(b) below) at a price per share less than the fair market value of the Common
Stock on the date of such issuance or sale, which value shall be either the
Current Market Price if the Common Stock is quoted on Nasdaq or listed or
admitted for trading on any national securities exchange, or the value
determined by the Board of Directors in good faith, on a reasonable basis, as
the case may be (which amount shall be subject to adjustment in the event of a
stock dividend, stock split or subdivision, combination or reclassification of
the Common Stock), then the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying the
Exercise Price in effect immediately prior to such issuance or sale by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance or sale (and shares issuable upon
conversion of the Company's Series A1 Preferred Stock and Series B1 Preferred
Stock) plus the number of additional shares of Common Stock the Aggregate
Consideration Receivable (as defined in Subsection 3.2(d) below) would purchase
at the fair market value per share on the date of such issuance or sale as
determined above (which amount shall be subject to adjustment in the event of a
stock dividend, stock split or subdivision, combination or reclassification of
the Common Stock), and of which the denominator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance or sale (and shares
issuable upon conversion of the Company's Series A1 Preferred Stock and Series
B1 Preferred Stock) plus the number of additional shares of Common Stock offered
for subscription or purchase. Such adjustment shall be made successively
whenever such issuance or sale shall occur. To the extent that any such shares
of Common Stock are not so issued or sold or any such rights, options, warrants
or convertible or exchangeable securities are not so issued or sold or expire
unexercised, the Exercise Price then in effect shall be readjusted to the
Exercise Price which would then be in effect if such unissued or unsold shares
of Common Stock and such unissued or unsold or unexercised rights, options,
warrants or convertible or exchangeable securities had not been issuable.
(b) "Excluded Securities" means (i) rights, options, warrants, or
convertible or exchangeable securities issued in any of the transactions
described in Subsections 3.l(b) or (c) or Section 3.5 hereof; (ii) shares of
Common Stock issuable upon exercise of the Warrants, and (iii) shares of Common
Stock issuable upon exercise of rights, options or warrants or conversion or
exchange of convertible or exchangeable securities issued or sold under
circumstances causing an adjustment pursuant to this Section 3.2.
(c) The price per share of Common Stock referred to in Subsection
3.2(a) above shall be determined by dividing (i) the Aggregate Consideration
Receivable in respect of such rights, options, warrants or convertible or
exchangeable securities, by (ii) the total number of shares of Common Stock
covered by such rights, options, warrants or convertible or exchangeable
securities.
8
<PAGE>
(d) "Aggregate Consideration Receivable" means the aggregate
amount paid to the Company for such rights, options, warrants or convertible or
exchangeable securities, plus the aggregate consideration or premiums stated in
such rights, options, warrants or convertible or exchangeable securities to be
payable for the shares of Common Stock covered thereby.
(e) In case the Company shall sell and issue rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock, for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then in determining the "price per share of Common Stock" referred to in
Subsections 3.2(a) and (c) above and the "Aggregate Consideration Receivable"
referred to in Subsections 3.2(a), (c) and (d) above, the Board of Directors of
the Company shall determine, in good faith and on a reasonable basis, the fair
value of said property.
Section 3.3 No Adjustments to Exercise Price. No adjustment in the
--------------------------------
Exercise Price in accordance with the provisions of Subsection 3.1(a), (b) or
(c) or Subsection 3.2(a) hereof need be made unless such adjustment would amount
to a change of at least 0.5% in such Exercise Price, provided, however, that the
-------- -------
amount by which any adjustment is not made by reason of the provisions of this
Section 3.3 shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
Section 3.4 Adjustment of Number of Shares. Upon each adjustment of the
------------------------------
Exercise Price pursuant to Subsection 3.l(a), (b) or (c) or Subsection 3.2(a)
hereof, each Warrant shall thereupon evidence the right to purchase that number
of Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of the Warrant by the Exercise Price in effect
immediately prior to such adjustment and dividing the product so obtained by the
Exercise Price in effect immediately after such adjustment.
Section 3.5 Reorganizations. In case of any capital reorganization,
---------------
other than in the cases referred to in Section 3.1 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or property), or the sale or conveyance of
the property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of Warrant Shares theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of Warrant
Shares which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, shall be made in the application of the provisions
herein set forth with respect to the rights and interests of Holders so that the
provisions set forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter deliverable
upon exercise of Warrants. Any such adjustment shall be
9
<PAGE>
made by and set forth in a supplemental agreement prepared by the Company or any
successor thereto, between the Company and any successor thereto, and shall for
all purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization, unless upon or prior to the
consummation thereof the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
Holder of any Warrant Certificate such shares of stock, securities, cash or
other property as such holder shall be entitled to purchase in accordance with
the foregoing provisions.
Section 3.6 Verification of Computations. The Company shall select a
----------------------------
firm of independent public accountants (which may be its outside auditors),
which selection may be changed from time to time, to verify each computation
and/or adjustment made in accordance with this Article III. The certificate,
report or other written statement of any such firm shall be conclusive evidence
of the correctness of any computation made under this Article III. Promptly upon
its receipt of such certificate, report or statement from such firm of
independent public accountants, the Company shall deliver a copy thereof to each
Holder.
Section 3.7 Notice of Certain Actions. In the event the Company shall
-------------------------
(a) declare any dividend payable in stock to the holders of its Common Stock or
make any other distribution in property other than cash to the holders of its
Common Stock, (b) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options,
or (c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock) or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company; then, in each such
case, the Company shall cause notice of such proposed action to be mailed to
each Holder at least thirty (30) days prior to such action; provided, however,
-------- -------
that in the event that the Company provides public notice of such action
specifying the information set forth below at least fifteen (15) days prior to
such action, the Company shall be deemed to have satisfied its obligation to
provide notice pursuant to this Section 3.7. Such notice shall specify the date
on which the books of the Company shall close, or a record be taken, for
determining holders of Common Stock entitled to receive such stock dividend or
other distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up or exchange shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed in the case of any action covered by paragraph (a)
or (b) of this Section 3.7, at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and in the case of any action covered by this paragraph (c), at least
ten (10) days prior to the earlier of the date upon which such action is to take
place or any
10
<PAGE>
record date to determine holders of Common Stock entitled to receive such
securities or other property.
Section 3.8 Certificate of Adjustments. Whenever any adjustment is to be
--------------------------
made pursuant to this Article III, the Company shall prepare a certificate
executed by the Chief Financial Officer of the Company, setting forth such
adjustments to be mailed to each Holder at least fifteen (15) days prior
thereto, such notice to include in reasonable detail (a) the events
precipitating the adjustment, (b) the computation of any adjustments, and (c)
the Exercise Price and the number of shares or the securities or other property
purchasable upon exercise of each Warrant after giving effect to such
adjustment. Such Certificate shall be accompanied by the accountant's
verification required by Section 3.6 hereof.
Section 3.9 Warrant Certificate Amendments. Irrespective of any
------------------------------
adjustments pursuant to this Article III, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments;
provided the Company may, at its option, issue new Warrant Certificates
- --------
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment in the Exercise Price and number of Warrant Shares
purchasable under the Warrants.
Section 3.10 Fractional Shares. The Company shall not be required upon
-----------------
the exercise of any Warrant to issue fractional Warrant Shares which may result
from adjustments in accordance with this Article III to the Exercise Price or
number of Warrant Shares purchasable under each Warrant. If more than one
Warrant is exercised at one time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed based
on the aggregate number of Warrant Shares purchasable upon exercise of such
Warrants. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay an amount in cash to
the Holder of the Warrants in respect of such final fraction in an amount equal
to the Fair Market Value of a share of Common Stock as of the Date of Exercise
of such Warrants, multiplied by such fraction. All calculations under this
Section 3.10 shall be made to the nearest hundredth of a share.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Payment of Taxes and Charges. The Company will pay all taxes
----------------------------
(other than income taxes) and other government charges in connection with the
issuance or delivery of the Warrants and the initial issuance or delivery of
Warrant Shares upon the exercise of any Warrants and payment of the Exercise
Price. The Company shall not, however, be required to pay any additional
transfer taxes in connection with the subsequent transfer of Warrants or any
transfer involved in the issuance and delivery of Warrant Shares in a name other
than the name in which the Warrants to which such issuance relates were
registered, and, if any such tax would otherwise be payable by the Company, no
such issuance or delivery shall be made unless and until the person requesting
such issuance has paid to the Company the amount of any such tax, or it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.
11
<PAGE>
Section 4.2 Changes to Agreement. The Company, when authorized by its
--------------------
Board of Directors, with the written consent of Holders of at least a majority
of the outstanding Warrants may amend or supplement this Agreement. The Company
may, without the consent or concurrence of any Holder, by supplemental agreement
or otherwise, make any changes or corrections in this Agreement that the Company
shall have been advised by counsel (a) are required to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained, (b) add to the covenants and agreements of
the Company in this Agreement such further covenants and agreements thereafter
to be observed, or (c) result in the surrender of any right or power reserved to
or conferred upon the Company in this Agreement, in each case which changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders.
Section 4.3 Assignment. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Holders shall bind and
inure to the benefit of their respective successors and assigns.
Section 4.4 Successor to Company. In the event that the Company merges
--------------------
or consolidates with or into any other corporation or sell or otherwise
transfers its property, assets and business substantially as an entirety to a
successor corporation, the Company shall use reasonable commercial efforts to
have such successor corporation assume each and every covenant and condition of
this Agreement to be performed and observed by the Company.
Section 4.5 Notices. Any notice or demand required by this Agreement to
-------
be given or made by any Holder to or on the Company shall be sufficiently given
or made if sent by first-class or registered mail, postage prepaid, addressed as
follows:
Silicon Gaming, Inc.
2800 W. Bayshore Road
Palo Alto, California 94303
Attn: Vice President--Chief Financial Officer
With a copy to:
Gray Cary Ware & Freidenrich,
A Professional Corporation
400 Hamilton Avenue
Palo Alto, California 94301-1825
Attn: James M. Koshland, Esq.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed to such Holder and
sent to the following address:
12
<PAGE>
DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, MA 02181
Attn: Wendy Schnipper Clayton, Esq.
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Attn: Laura Hodges Taylor, P.C.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made, whether or not
such holder receives the notice, five (5) days after mailing, if sent by first-
class or registered mail, postage prepaid, addressed to such Holder at its last
address as shown on the books of the Company. Otherwise, such notice or demand
shall be deemed given when received by the party entitled thereto.
Section 4.6 Defects in Notice. Failure to file any certificate or notice
-----------------
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of any Holder or the
legality or validity of any adjustment made pursuant to Section 3.1 or Section
3.2 hereof, or any transaction giving rise to any such adjustment, or the
legality or validity of any action taken or to be taken by the Company.
Section 4.7 Governing Law. This Agreement and each Warrant Certificate
-------------
issued hereunder shall be governed by the laws of the State of New York without
regard to principles of conflicts of laws thereof.
Section 4.8 Standing. Nothing in this Agreement expressed and nothing
--------
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holders of any right, remedy or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holders.
Section 4.9 Headings. The descriptive headings of the articles and
--------
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 4.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
13
<PAGE>
Section 4.11 Availability of the Agreement. The Company shall keep
-----------------------------
copies of this Agreement available for inspection by Holders during normal
business hours. Copies of this Agreement may be obtained upon written request
addressed to the Company at the address set forth in Section 4.5 hereof.
Section 4.12 Entire Agreement. This Agreement, including the Exhibits
----------------
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings.
14
<PAGE>
WARRANT AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the
parties as of the day and year first above written.
SILICON GAMING, INC.,
a California corporation
By: /s/ Thomas E. Carlson
----------------------------------------------
Name: Thomas E. Carlson
Title: Vice President and Chief Financial Officer
<PAGE>
WARRANT AGREEMENT
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the date first written above.
B III CAPITAL PARTNERS, L.P.,
a Delaware limited partnership
By: DDJ CAPITAL III, LLC,
its General Partner
By: DDJ CAPITAL MANAGEMENT, LLC,
its Manager
By: /s/ Judy K. Mencher
----------------------------
Name: Judy K. Mencher
Title: Member
Notice Information:
Mr. Jay Burnham
DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, Massachusetts 02181
Phone: (617) 283-8500
Fax: (617) 283-8555
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS
SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH SECURITY ARE
SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN, A SECURITIES PURCHASE
AGREEMENT DATED AS OF SEPTEMBER 30, 1997, AS AMENDED, A COMPLETE AND CORRECT
COPY OF THE FORM OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE. SUCH AGREEMENT, AMONG OTHER THINGS,
RESTRICTS THE DETACHMENT OF THIS SENIOR DISCOUNT NOTE FROM THE COMMON STOCK
PURCHASE WARRANTS ATTACHED HERETO.
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING TO ORIGINAL
ISSUE DISCOUNT AND TREASURY REGULATIONS PUBLISHED THEREUNDER, THE FOLLOWING
INFORMATION IS PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT IN THE AMOUNT OF $189.57 PER $1,000 OF FACE AMOUNT; (2) THE ISSUE PRICE
OF THIS SECURITY IS $810.43 PER $1,000 FACE AMOUNT; (3) THE ISSUE DATE OF THIS
SECURITY IS JULY 8, 1998; AND (4) THE YIELD TO MATURITY OF THIS SECURITY IS
18.3%.
SILICON GAMING, INC.
SENIOR DISCOUNT NOTE (SERIES B) DUE SEPTEMBER 30, 2002
No. B-1 $17,250,000
Silicon Gaming, Inc., a California corporation (hereinafter called the
"Company", which term includes any successor entity under the Agreement
hereinafter referred to), for value received, hereby promises to pay to GOLDMAN
SACHS & COMPANY FFC: BIII CAPITAL PARTNERS, L.P., a Delaware limited
partnership, or registered assigns, the principal sum of Seventeen Million Two
Hundred Fifty Thousand Dollars on September 30, 2002.
Interest Payment Dates: July 1 and January 1 commencing July 1, 1999
Record Dates: June 15 and December 15
Reference is hereby made to the further provisions of this Senior
Discount Note set forth on the following six (6) pages, which further provisions
shall for all purposes have the same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Senior Discount Note to
be signed manually or by facsimile by its duly authorized officers and a
facsimile of its seal to be affixed hereto or imprinted hereto.
SILICON GAMING, INC.
By: /s/ Thomas E. Carlson
--------------------------------------------
Name: Thomas E. Carlson
Title: CFO
2
<PAGE>
Senior Discount Note due September 30, 2002
1. Interest. Silicon Gaming, Inc. (the "Company") promises to pay
--------
interest on the principal amount of this Senior Discount Note at the rate and in
the manner specified below. Interest on this Senior Discount Note will accrue
at 12.5% per annum from January 1, 1999 until maturity and will be payable
semiannually in cash on January 1 and July 1 of each year beginning on July 1,
1999, or if any such day is not a Business Day on the next succeeding Business
Day (each an "Interest Payment Date"), to the holder of record on the
immediately preceding June 15, or December 15, as the case may be. Interest on
this Senior Discount Note will accrue from the most recent date on which
interest has been paid or, if no interest has been paid, from January 1, 1999,
provided that the first Interest Payment Date shall be July 1, 1999. The
Company shall pay interest on overdue principal and premium, if any, from time
to time on demand at the rate of 1.5% per annum in excess of the interest rate
then in effect and shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. The Company shall also pay interest from
time to time after March 31, 1998 at the rate of 2.0% per annum in excess of the
interest rate then in effect if the Company shall fail to provide adequate
evidence of the grant of a security interest to the Holders. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Accreted Value of this Senior Discount Note shall accrete, for purposes
of calculating any Redemption Price or Purchase Price and for all other purposes
in determining Accreted Value, in the period during which this Senior Discount
Note remains outstanding, at 18.3% per annum from the date hereof until
September 30, 2002 on a semi-annual basis compounding on each March 31 and
September 30, using a 360-day year comprised of twelve 30-day months, commencing
on the date of issuance of this Senior Discount Note, and shall cease to accrete
upon payment in full on the earliest of September 30, 2002, any Redemption Date
or any Purchase Date.
2. Method of Payment. The Company will pay interest on this Senior
-----------------
Discount Note (except defaulted interest) to the Person who is the registered
Holder of this Senior Discount Note at the close of business on the record date
for the next Interest Payment Date even if such Senior Discount Note is canceled
after such record date and on or before such Interest Payment Date. Holders
must surrender Senior Discount Notes to the Company to collect principal
payments on such Senior Discount Notes. The Company will pay principal,
premium, if any, and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company may pay principal, premium, if any, and interest by wire transfer of
Federal funds, or interest by check payable in such money, and any such check
may be mailed to a Holder's registered address.
3. Securities Purchase Agreement. The Company issued the Senior Discount
-----------------------------
Notes pursuant to a Securities Purchase Agreement, dated as of September 30,
1997, as amended (the "Agreement"), by and between the Company, as issuer of the
Senior Discount Notes, and the Purchaser named therein. The terms of the Senior
Discount Notes are those stated in the Agreement and herein. The Senior
Discount Notes are subject to, and qualified by, all such terms, certain of
which are summarized herein, and Holders are referred to the Agreement (all
capitalized terms not defined herein shall have the meanings assigned them in
the Agreement). The Senior Discount Notes (Series B) are general obligations of
the Company limited to $17,250,000 in aggregate principal amount. Reference is
hereby made to the Agreement for a description of the properties and assets in
which a security interest has been granted, the nature of the security, the
terms and conditions upon which the security interests were granted.
4. Redemption Provisions. The Senior Discount Notes will be subject to
---------------------
redemption, in whole or from time to time in part (in multiples of $1,000 of
principal amount) at the option of the
3
<PAGE>
Company at the price per $1,000 principal amount at maturity with respect to any
Redemption Date appearing opposite the period in which such Redemption Date
occurs, plus any accrued and unpaid interest to the Redemption Date:
<TABLE>
<CAPTION>
Period Price per $1,000 Principal Amount
------ ---------------------------------
<S> <C>
July 1998 $ 931.32
August 1998 943.56
September 1998 955.79
October 1998 969.05
November 1998 982.30
December 1998 995.56
January 1999 997.20
February 1999 998.84
After February 28, 1999 1,000.00
</TABLE>
Notwithstanding the foregoing, if any Gaming Authority requires that any
Purchaser, Holder or beneficial owner of the Senior Discount Notes must be
licensed, qualified or found suitable under any Gaming Laws and such Purchaser,
Holder or beneficial owner of the Senior Discount Notes fails to apply for a
license, qualification or finding of suitability within 30 days after being
requested to do so by any Gaming Authority (or such lesser period that may be
required by such Gaming Authority), or, if any Purchaser, Holder or beneficial
owner of the Senior Discount Notes is not so licensed, qualified or found
suitable, the Purchaser, Holder or beneficial owner of the Senior Discount Notes
shall comply with any order by such Gaming Authorities requiring that such
Person dispose of any Securities held by it; provide, however, that in the event
the Purchaser, Holder or beneficial owner of the Senior Discount Notes does not
comply with such order within the required period, the Company shall have the
option as its sole remedy with respect to the Senior Discount Notes to call for
redemption the Senior Discount Notes held by such Purchaser, Holder or
beneficial owner at a price equal to the Accreted Value thereof on the
Redemption Date, plus accrued and unpaid interest to the Redemption Date.
Notwithstanding the foregoing, $3.0 million in aggregate principal amount
of Senior Discount Notes (Series B) originally issued under the Agreement shall
be redeemed by the Company on the date which is four years following the date of
original issuance thereof, at a redemption price equal to 100% of the principal
amount thereof, together with accrued and unpaid interest to the date of
redemption, subject to certain conditions set forth in the Agreement.
In addition, if not previously redeemed, the Senior Discount Notes will be
subject to redemption (a "Change of Control Redemption") at the option of the
Holders, in whole or in part, at any time within 30 days after the completion of
an Offer made as a result of a Change of Control, at a redemption price equal to
101% of the principal amount thereof, plus accrued and unpaid interest to the
Purchase Date, subject to certain conditions set forth in the Agreement.
In addition, the Senior Discount Notes will be subject to redemption
("Securities Sale Redemption") at the option of the Holders, in whole or in
part, following a Securities Sale or a Mezzanine Debt Financing, from the Net
Cash Proceeds of such Securities Sale or Mezzanine Debt Financing; provided that
an Offer to make a Securities Sale Redemption shall be made by the Company only
if, and to the extent that, the aggregate amount of Net Cash Proceeds from all
such Securities Sales or Mezzanine Debt Financings occurring on or after the
date hereof exceed $40,000,000. In the event of a Securities Sale Redemption,
the Senior Discount Notes will be redeemable at a price per $1,000 principal
amount
4
<PAGE>
equal to the price set forth in Section 4 hereof opposite the period in which
the Purchase Date occurs, plus any accrued and unpaid interest to the Purchase
Date.
5. Mandatory Offers. (a) Within 10 days after any Change of Control
----------------
Trigger Date, any Repayment Trigger Date or any Excess Proceeds Date, the
Company shall mail a notice to each Holder stating a number of items as set
forth in Section 6.7 of the Agreement.
(a) Holders may tender all or, subject to Section 8 below, any portion
of their Senior Discount Notes in an Offer by completing the form below entitled
"OPTION OF HOLDER TO ELECT PURCHASE."
(b) Promptly after consummation of an Offer, (i) the Company shall
mail to each Holder of Senior Discount Notes or portions thereof accepted for
payment an amount equal to the purchase price for, plus any accrued and unpaid
interest on, such Senior Discount Notes, (ii) with respect to any tendered
Senior Discount Note not accepted for payment in whole or in part, the Company
shall return such Senior Discount Note to the Holder thereof, and (iii) with
respect to any Senior Discount Note accepted for payment in part, the Company
shall authenticate and mail to each such Holder a new Senior Discount Note equal
in principal amount to the unpurchased portion of the tendered Senior Discount
Note.
(c) The Company will (i) publicly announce the results of the Offer to
Holders on or as soon as practicable after the Purchase Date, and (ii) comply
with Rule 14e-1 under the Securities Exchange Act of 1934, as amended, and any
other securities laws and regulations to the extent applicable to any Offer.
6. Notice of Redemption or Purchase. At least 30 days but not more than
--------------------------------
60 days before any Redemption Date the Company shall mail by first class mail a
notice of redemption to each Holder of Senior Discount Notes or portions thereof
that are to be redeemed.
7. Senior Discount Notes to be Redeemed or Purchased. The Senior
-------------------------------------------------
Discount Notes may be redeemed or purchased in part, but only in whole multiples
of $1,000 unless all Senior Discount Notes held by a Holder are to be redeemed
or purchased. On or after any date on which Senior Discount Notes are redeemed
or purchased, interest ceases to accrue on the Senior Discount Notes or portions
thereof called for redemption or accepted for purchase on such date.
8. Denominations, Transfer, Exchange. The Senior Discount Notes are in
---------------------------------
registered form without coupons in denominations of $100,000 and integral
multiples thereof (subject to adjustment as provided in the Agreement). The
transfer of Senior Discount Notes may be registered and Senior Discount Notes
may be exchanged as provided in the Agreement. Holders seeking to transfer or
exchange their Senior Discount Notes may be required, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Agreement. The Company need not
exchange or register the transfer of any Senior Discount Note or portion of a
Senior Discount Note selected for redemption or tendered pursuant to an Offer.
9. Persons Deemed Owners. The registered holder of a Senior Discount
---------------------
Note may be treated as its owner for all purposes.
5
<PAGE>
10. Amendments and Waivers.
----------------------
(a) Subject to certain exceptions, the Agreement and the Senior
Discount Notes may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the then
outstanding Senior Discount Notes, and any existing Default or Event of Default
or compliance with any provision of the Agreement or the Senior Discount Notes
may be waived with the consent of the Holders of at least a majority in
principal amount of the then outstanding Senior Discount Notes.
(b) Notwithstanding Section 10(a) above, the Company may amend or
supplement the Agreement or the Senior Discount Notes without the consent of any
Holder to: cure any ambiguity, defect or inconsistency; provide for
uncertificated Senior Discount Notes in addition to or in place of certificated
Senior Discount Notes; provide for the assumption of the Company's obligations
to the Holders in the event of any Disposition involving the Company that is
permitted under Article VIII of the Agreement and in which the Company is not
the Surviving Person; or make any change that would provide any additional
rights or benefits to Holders or not adversely affect the legal rights under the
Agreement of any Holder.
(c) Certain provisions of the Agreement cannot be amended,
supplemented or waived without the consent of each Holder of Senior Discount
Notes affected.
11. Defaults and Remedies. Events of Default include: (i) the Company's
---------------------
failure to make any payment in respect of (A) the principal of or premium, if
any, on the Senior Discount Notes as the same shall become due, whether at
maturity, upon acceleration, redemption, or otherwise, or (B) interest on or in
respect of any Senior Discount Notes as the same shall become due and such
failure shall continue for a period of 15 Business Days; (ii) failure by the
Company for 30 days after receipt of notice from the Holders of at least 25% of
the outstanding Senior Discount Notes to comply with any other provisions of the
Agreement or the Senior Discount Notes; (iii) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness now exists, or is created after
the date hereof, if (A) such default results in the acceleration of such
Indebtedness prior to its express maturity or shall constitute a default in the
payment of such Indebtedness at final maturity of such Indebtedness, and (B) the
principal amount of any such Indebtedness that has been accelerated or not paid
at maturity, when added to the aggregate principal amount of all other such
Indebtedness that has been accelerated or not paid at maturity, exceeds
$1,000,000; (iv) failure by the Company or any of its Subsidiaries to pay final
judgments, the uninsured portion of which exceeds $1,000,000, which judgments
are not paid, discharged, bonded or stayed for a period of 60 days after the
date of entry thereof; (v) if under any Bankruptcy Law, (A) the Company or any
Subsidiary commences a voluntary case, consents to the entry of an order for
relief against it in an involuntary case, consents to the appointment of a
Custodian of it or for all or substantially all of its property, or makes a
general assignment for the benefit of its creditors, or (B) a court of competent
jurisdiction enters an order or decree, and such order or decree remains
unstayed and in effect for 90 days, that is for relief against the Company or
any Subsidiary in an involuntary case, appoints a Custodian of the Company or
any Subsidiary or for all or substantially all of the Property of the Company or
any Subsidiary, or orders the liquidation of the Company or any Subsidiary; (vi)
if the Company by September 30, 1998 has not delivered to the Purchaser both of
the opinions of counsel contemplated by Section 11.14(c) of the Agreement; and
(vi) any of the Transactions Documents shall cease for any reason, to be in full
force and effect, in any material respect, except as a result of an amendment,
waiver or termination thereof as contemplated or permitted hereby, or the
Company shall so assert in writing.
6
<PAGE>
12. No Recourse Against Others. No director, officer, employee,
--------------------------
incorporator or shareholder of the Company shall have any liability for any
obligation of the Company under the Agreement or the Senior Discount Notes or
for any claim based on, in respect of, or by reason of, any such obligation or
the creation of any such obligation. Each Holder by accepting a Senior Discount
Note waives and releases such Persons from all such liability, and such waiver
and release is part of the consideration for the Issuance of the Senior Discount
Notes.
13. Successor Substituted. Upon the merger, consolidation or other
---------------------
business combination involving the Company or upon the sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the Company's properties and assets, the Surviving Person (if other than the
Company) resulting from such Disposition shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Agreement
with the same effect as if such Surviving Person had been named as the Company
in the Agreement.
14. Governing Law. This Senior Discount Note shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
regard to the conflict of laws provisions thereof.
15. CUSIP Numbers. The Company will use reasonable efforts to cause CUSIP
-------------
numbers to be printed on the Senior Discount Notes and to use CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Senior Discount Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers printed on the securities.
16. Copies of Agreement. The Company will furnish to any Holder upon
-------------------
written request and without charge a copy of the Agreement, which has in it the
text of this Senior Discount Note. Requests may be made to: Silicon Gaming,
Inc., 2800 W. Bayshore Road, Palo Alto, California 94303, Attn: President.
17. Certain Information Obligations. To the extent permitted by
-------------------------------
applicable law or regulation, whether or not the Company is subject to the
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the Commission all quarterly and annual reports and such other information,
documents or other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) required to be filed
pursuant to such provisions of the Exchange Act. At any time when the Company
is not permitted by applicable law or regulations to file the aforementioned
reports, the Company shall mail to the Holders, within five days after it would
have been required to file the same with the Commission, all information that
the Company would have had to provide to the Commission if the Company had been
subject to Section 13 or 15(d) of the Exchange Act. Also, at any time when the
Company is not permitted by applicable law or regulations to file the
aforementioned reports, upon the request of a Holder of a Senior Discount Note,
the Company will promptly furnish or cause to be furnished such information as
is specified pursuant to Rule 144A(d)(4) under the Securities Act (or any
successor provision thereto) to such Holder or to a prospective purchaser of
such Senior Discount Note, as the case may be, in order to permit compliance by
such Holder with Rule 144A under the Securities Act.
7
<PAGE>
ASSIGNMENT FORM
To assign this Senior Discount Note, fill in the form below:
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
- --------------------------------------------------------------------------------
(Please insert social security or other identifying number of assignee)
at
------------------------------------------------------------------------------
(Please print or typewrite name and address including postal zip code of
assignee)
- --------------------------------------------------------------------------------
the within Senior Discount Note and all rights thereunder, hereby irrevocably
constituting and appointing ________________________________________ to transfer
said Senior Discount Note on the books of the Company. The agent may substitute
another to act for him.
Date:________________________
Your Signature:___________________
(Sign exactly as your name appears on
the other side of this Senior Discount
Note)
Signature Guarantee: _________________________
8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you elect to have this Senior Discount Note purchased by the Company
pursuant to Section 7.12 of the Agreement, check the box:[_]
If you elect to have this Senior Discount Note purchased by the Company
pursuant to Section 7.13 of the Agreement, check the box:[_]
If you elect to have this Senior Discount Note purchased by the Company
pursuant to Section 7.18 of the Agreement, check the box:[_]
If you elect to have only part of this Senior Discount Note purchased by
the Company pursuant to Section 7.12, 7.13 or 7.18 of the Agreement, state the
amount (multiples of $1,000 only):
$_________________________
Date______________________ Your Signature:____________________________________
(Sign exactly as your name appears
on the other side of this Senior
Discount Note)
Signature Guarantee: _________________________
<PAGE>
EXHIBIT 4.5
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN A SECURITIES PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1997, AS AMENDED FROM TIME TO TIME, A COMPLETE AND
CORRECT COPY OF THE FORM OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER
HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE. SUCH AGREEMENT, AMONG OTHER
THINGS, RESTRICTS THE DETACHMENT OF THE COMMON STOCK PURCHASE WARRANTS FROM THE
SENIOR DISCOUNT NOTE ATTACHED HERETO.
No. W-2
Certificate for 250,000 Warrants
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON JULY 8, 2003
SILICON GAMING, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that GOLDMAN, SACHS & COMPANY FFC: BIII CAPITAL PARTNERS,
L.P., a Delaware limited partnership, or its registered assigns is the
registered holder (the "Registered Holder") of Warrants set forth above, each of
which represents the right to purchase one fully paid and non-assessable share
of common stock, par value $.001 per share (the "Common Stock"), of Silicon
Gaming, Inc., a California corporation (the "Company"), at the Exercise Price
(as defined in the Warrant Agreement) at the times specified in the Warrant
Agreement, by surrendering this Warrant Certificate, with the form of Election
to Purchase attached hereto duly executed and by paying in full the Exercise
Price. Payment of the Exercise Price shall be made as set forth in the Warrant
Agreement (as hereinafter defined). No Warrant may be exercised after 5:00
P.M., New York City time, on July 8, 2003 (the "Expiration Date"). All Warrants
evidenced hereby shall thereafter become void, subject to the terms of the
Warrant Agreement hereinafter referred to.
<PAGE>
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Agreement hereinafter referred to, the Registered
Holder shall be entitled to transfer this Warrant Certificate, in whole or in
part, upon surrender of this Warrant Certificate at the principal office of the
Company with the form of assignment set forth hereon duly executed. Upon any
such transfer, a new Warrant Certificate or Warrant Certificates representing
the same aggregate number of Warrants to purchase the shares of the Common Stock
will be issued in accordance with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants to purchase the shares
of the Common Stock evidenced by this Warrant Certificate, there shall be issued
to the Registered Holder a new Warrant Certificate in respect of the Warrants
not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled to
exchange this Warrant Certificate, with or without other Warrant Certificates,
for another Warrant Certificate or Warrant Certificates for the same aggregate
number of Warrants to purchase the shares of the Common Stock, upon surrender of
this Warrant Certificate at the principal office of the Company.
Upon certain events provided for in the Warrant Agreement, the Exercise
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
No fractional shares will be issued upon the exercise of Warrants. As to
any final fraction of a share of Common Stock which the Registered Holder of one
or more Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement. No Warrant Certificate representing any fractional Warrant Shares
will be issued.
This Warrant Certificate is issued under and in accordance with the Warrant
Agreement dated as of September 30, 1997, as amended (the "Warrant Agreement"),
by and among the Company and the Purchaser (as defined in the Warrant Agreement)
and is subject to the term and provisions contained in the Warrant Agreement.
All capitalized terms not defined herein shall have the meanings given such
terms as set forth in the Warrant Agreement.
This Warrant Certificate shall not entitle the Registered Holder 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 attend or receive
any notice of meetings of stockholders or any other proceedings of the Company.
2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its facsimile corporate seal.
SILICON GAMING, INC.
By: /s/ Thomas E. Carlson
-------------------------
Name: Thomas E. Carlson
Title: CFO
[Seal] Attest:
By: /s/ Donald J. Massaro
-------------------------
Name: Donald J. Massaro
Title: Secretary
3
<PAGE>
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants to purchase the shares of the Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF WARRANTS
---------------- ------- ---------------
and does hereby irrevocably constitute and appoint _____________________ true
and lawful Attorney, to make such transfer on the books of Silicon Gaming, Inc.,
maintained for that purpose, with full power of substitution in the premises.
Dated: __________ ___, _____ ___________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
4
<PAGE>
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise ____________ of the
Warrants represented by this Warrant Certificate and to purchase the shares of
Common Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
---------------------------------------------------------------------
(NAME)
- ------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- ------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO:
-------------------------------------------------------------------
(NAME)
at
----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
In full payment of the purchase price with respect to the exercise of
Warrants to purchase shares of the Common Stock, the undersigned:
[ ] hereby tenders payment of $________ by cash, certified check,
cashier's check or money order payable in United States currency to
the order of the Company; or
[ ] hereby delivers to the Company that number of shares of Common Stock
having a Fair Market Value (as defined in the Warrant Agreement) equal
to the Exercise Price multiplied by the number of Warrant Shares being
purchased; or
[ ] hereby makes a Net Cashless Exercise (as defined in the Warrant
Agreement).
If the number of Warrants to purchase the shares of the Common Stock
hereby exercised is less than all the Warrants represented by this Warrant
Certificate, the undersigned requests that a new Warrant Certificate
representing the number of such full Warrants not exercised be issued and
delivered as follows:
5
<PAGE>
ISSUE TO:
---------------------------------------------------------------------
(NAME)
- ------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- ------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO:
-------------------------------------------------------------------
(NAME)
at
----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Date: __________ ___, ______ _____________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
PLEASE INSERT SOCIAL SECURITY OR TAX
I.D. NUMBER OF HOLDER
6
<PAGE>
Exhibit 99.1
------------
Press Release of July 13, 1998
Silicon Gaming Receives Additional Financing
- --------------------------------------------
PALO ALTO, Calif., July 13 /PRNewswire/ -- Silicon Gaming, Inc.
(Nasdaq: SGIC) announced today that it has added $17.25 million face
amount to its $30 million Senior Discount Notes due September 30, 2002. Gross
proceeds to the Company, before expenses, total $15 million. In connection with
the placement, purchasers of the additional Notes were also issued warrants to
purchase a total of 250,000 shares of the Company's Common Stock at an exercise
price of $8.00 per share. In addition, the warrants previously issued in
connection with the $30 million of Notes were adjusted to an exercise price of
$8.00 per share. Proceeds from the additional financing will be used for working
capital, development and introduction of the Company's wide-area progressive
products, and for general corporate purposes.
"Our business plan includes entry into the wide-area progressives market later
this year with follow-on network-based products in 1999," said Thomas E.
Carlson, chief financial officer. "We believe that this additional funding will
accommodate our development efforts and product introductions."
Silicon Gaming, Inc. is an industry leader in the design and manufacture of
innovative slot machines. The Company's Odyssey(TM) games are found in nearly
every major gaming market across the U.S.
Forward-Looking Statements:
This press release contains certain forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially from
the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to, the
Company's dependence on a single product, risk of technical errors in the
Company's product, uncertain market acceptance of the Company's product, the
Company's management of its growth, expectation of losses, capital requirements,
regulatory approval of the Company's product, intense competition and those
other risks identified in the Company's Form 10-K for the year ended December
31, 1997 and Form 10-Q for the quarter ended March 31, 1998.
For more information on Silicon Gaming, visit their website at
http://www.silicongaming.com
CONTACT: analysts, Tom Carlson, CFO, 650-842-9000, or Susan Berry, Investor
Relations, 650-798-7798, or media, Mary Ellen Sweeny, 650-842-9061, or
408-736-0491, all of Silicon Gaming, Inc.
