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Expires: August 31, 1999
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No.__)*
Silicon Gaming, Inc.
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(Name of Issuer)
Common Stock, $.001 par value
------------------------------
(Title of Class of Securities)
827054 10 7
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(CUSIP Number)
Joel J. Agena, Esq,
Squire, Sanders & Dempsey L.L.P.
40 N. Central Avenue, Suite 2700
Phoenix, AZ 85004
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 24, 1999
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED
IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
VALID OMB CONTROL NUMBER.
<PAGE>
SCHEDULE 13D
- --------------------- -------------------
CUSIP NO. 827054 10 7 PAGE 2 OF 5 PAGES
- --------------------- -------------------
1 NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paul D. Mathews
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
SC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
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6 CITZENSHIP OR PLACE OF ORGANIZATION
United States of America
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7 SOLE VOTING POWER
7,878,744
NUMBER OF ---------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY N/A
OWNED BY ---------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ---------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
N/A
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,878,744
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
--------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
- --------------------- -------------------
CUSIP NO. 827054 10 7 PAGE 3 OF 5 PAGES
- --------------------- -------------------
ITEM 1. SECURITY AND ISSUER
This Schedule 13D relates to shares of the common stock, $.001 par value of
Silicon Gaming, Inc. (the "Company"). The principal executive offices of the
Company are located at 2800 West Bayshore Road, Palo Alto, California 94303.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is being filed by Paul D. Mathews, a United States
citizen. The Company issued 7,828,745 shares of common stock (the "Shares") to
Mr. Mathews on November 24, 1999. Mr. Mathews' business address is c/o Silicon
Gaming, Inc., 2800 West Bayshore Road, Palo Alto, California 94303. Mr. Mathews
is the Vice President of Business Development and Government Affairs of the
Company. The address of the Company is 2800 West Bayshore Road, Palo Alto,
California 94303. Mr. Mathews has not during the last five years been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
In addition, Mr. Mathews has not, to the best of his knowledge, during the last
five years, been a party to a civil proceeding of a judicial or administrative
body of competent jurisdiction which would make him subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violations with respect to such laws.
ITEMS 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The Shares were issued to Mr. Mathews under the Silicon Gaming, Inc. 1999
Long Term Compensation Plan. Mr. Mathews paid for the Shares by issuing a
non-recourse promissory note to the Company for the fair market value of the
Shares on the date of issuance. Mr. Mathews pledged the Shares as collateral
against the payment of the promissory note.
ITEM 4. PURPOSE OF TRANSACTION
The Company recently completed a restructuring (the "Restructuring") that
involved an exchange of 39,750 shares of the Company's Series D Convertible
Preferred Stock ("Series D Preferred Stock") as well as a warrant (the "Series E
Warrant") to purchase shares of Series E Convertible Preferred Stock ("Series E
Preferred Stock") in exchange for cancellation of $39.75 million in aggregate
principal amount of its outstanding 10% Senior Discount Notes ("Senior Discount
Notes"), and an amendment to the terms and provisions of an additional $7.5
million of Senior Discount Notes which remain outstanding. As a part of the
Restructuring, the board of directors of the Company adopted the 1999 Long Term
Compensation Plan pursuant to which equity-based incentives have been and will
continue to be issued to management and employees (the "Management Incentive
Plan"). The purpose of grants and sales of common stock, and options to purchase
common stock, under the Management Incentive Plan is to advance the long-term
interests of the Company by (i) motivating executive personnel by means of
long-term incentive compensation, (ii) aligning the interest of participants in
the Management Incentive Plan with those of the shareholders of the Company
through ownership of the common stock of the Company, and (iii) allowing the
Company to attract and retain directors and executive personnel whose skills and
expertise greatly enhance the success of the Company. On November 24, 1999, the
board of directors approved and authorized the sale and issuance of 7,828,745
shares of common stock to Mr. Mathews under the Management Incentive Plan, and
pursuant further to the terms and conditions of a Restricted Stock Agreement by
and between Mr. Mathews and the Company, dated November 24, 1999.
The Series D Preferred Stock is convertible into shares of common stock
of the Company. The Series E Warrant is convertible into shares of Series E
Preferred Stock and the Series E Preferred Stock is convertible into shares of
common stock of the Company. The shares of Series D and Series E Preferred Stock
issued are, in the aggregate, convertible into 235,092,858 shares of common
stock of the Company. Currently, there is not a sufficient quantity of unissued
shares of common stock of the Company available if all outstanding shares of
Series D and Series E Preferred Stock were converted, and all shares under the
<PAGE>
SCHEDULE 13D
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CUSIP NO. 827054 10 7 PAGE 4 OF 5 PAGES
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Management Incentive Plan were issued. The board of directors, on November 24,
1999, approved and authorized by resolution, an amendment (the "Amendment") to
the Company's Amended and Restated Articles of Incorporation to increase the
number of authorized shares of common stock from 50,000,000 to 750,000,000. The
Amendment is subject to the approval of a majority of the outstanding voting
stock of the Company. On or about December 27, 1999, Mr. Mathews intends to
participate in a written consent action approving the Amendment.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) Mr. Mathews beneficially owns 7,878,744 shares of the common stock of
the Company or approximately 26.1% of the outstanding common stock of the
Company.
(b) Mr. Mathews has the sole power to vote the Shares so indicated. Mr.
Mathews has sole power to dispose of 0 of the Shares.
(c) Except as set forth in Item 3, Mr. Mathews has not effected any
transaction in the Shares during the past sixty (60) days.
(d) The Company has the right to receive the proceeds from the sale of the
Shares to the extent that there remains outstanding at the time of the sale any
principal balance on the promissory note issued to the Company by Mr. Mathews as
consideration for the Shares.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Mr. Mathews is a party to a Stockholders Agreement by and among other
holders of capital stock of the Company, including the holders of the Series D
Preferred Stock. In accordance with the Stockholders Agreement, Mr. Mathews may
dispose of the Shares in a market transaction on a national securities exchange
or over the counter market or Nasdaq Bulletin Board at the market price, through
a "brokers' transaction" or in a transaction directly with a "market maker," as
such terms are defined in Rule 144(f) of the Rules promulgated under the
Securities Act of 1933, as amended. Under the Stockholders Agreement, Mr.
Mathews may be required to dispose of the Shares in conjunction with a
disposition of shares of other parties to the Stockholders Agreement, or, if
disposing of the shares in a transaction other than a market transaction, Mr.
Mathews may be required to allow other parties to the Stockholders Agreement to
participate in a proposed disposition of the Shares.
The Shares are also subject to a Restricted Stock Agreement by and between
the Company and Mr. Mathews. Of the 7,828,745 shares issued on November 24,
1999, 20% vested upon issuance and the remainder vest at a rate of 1/48th for
each of the 48 months following issuance. Unvested Shares cannot be transferred
by Mr. Mathews for any reason until they become vested, and vested Shares cannot
be transferred by Mr. Mathews until such time as there is an effective
registration of the Shares pursuant to the Securities Act of 1933, as amended,
or in the opinion of counsel for the Company an exemption from registration is
available. Under the Restricted Stock Agreement, Mr. Mathews has agreed that the
Company will permit the transfer of the Shares only if, in the opinion of the
Company's counsel, neither the sale nor the proposed transfer of the Shares will
result in a violation of any applicable securities law, rule or regulation.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. Stockholders Agreement - Incorporated by reference to Exhibit 10.7 to
the Company's Current Report on Form 8-K, filed with the Commission on
December 6, 1999
2. Restricted Stock Agreement (with form of Promissory Note and form of
Stock Pledge Agreement)
<PAGE>
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CUSIP NO. 827054 10 7 PAGE 5 OF 5 PAGES
- --------------------- -------------------
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
December 6, 1999 Paul D. Mathews
- ----------------------- ----------------------------------
Date Vice President of Business
Development and Government Affairs
The original statement shall be signed by each person on whose behalf
the statement is filed or his authorized representative. If the statement is
signed on behalf of a person by his authorized representative (other than an
executive officer or general partner of the filing person), evidence of the
representative's authority to sign on behalf of such person shall be filed with
the statement; provided, however, that a power of attorney for this purpose
which is already on file with the Commission may be incorporated by reference.
The name and any title of each person who signs the statement shall be typed or
printed beneath his signature. ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS
OF FACT CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C.
1001)
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT
CONSTITUTE FEDERAL CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001)
EXHIBIT 2
RESTRICTED STOCK AGREEMENT
SILICON GAMING, INC.
This RESTRICTED STOCK AGREEMENT (the "AGREEMENT") is entered into as of the
24th day of November, 1999 by and between Silicon Gaming, Inc. (the "COMPANY"),
a California corporation and Paul D. Mathews, the Vice President of Business
Development and Government Affairs of the Company (the "EMPLOYEE").
W I T N E S S E T H
WHEREAS, pursuant to the provisions of the Silicon Gaming, Inc. 1999
Long-Term Compensation Plan (the "PLAN"), the Company desires to award to the
Employee restricted shares of the Company's Common Stock, par value $.001 per
share ("COMMON STOCK"), at the fair market value of the shares and in accordance
with the provisions of the Plan, all on the terms and conditions hereinafter set
forth; and
WHEREAS, Employee wishes to accept the Company's offer; and
WHEREAS, the parties hereto understand and agree that any terms used and
not defined in this Agreement have the meanings ascribed to them in the Plan;
and
WHEREAS, the Board of Directors has determined that the price per share of
the Company's Common Stock reflected in the OTC Bulletin Board market trading
does not reflect the true fair market value of the shares.
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
1. TERMS OF AWARD. The Company awards to the Employee 7,828,745 shares of
the Company's Common Stock (the "SHARES") in accordance with the terms of this
Agreement, at a share price per share of $.015. Payment must be received by the
Company on the date of this Agreement. Payment may be made in cash or by
execution and delivery of a promissory note for all or any part of the purchase
price in substantially the form set forth on EXHIBIT A which note shall be
secured by a pledge of the Shares under a stock pledge agreement in
substantially the form set forth on EXHIBIT B.
2. PROVISIONS OF AGREEMENT CONTROLLING. The Employee specifically
understands and agrees that the Shares are being sold to the Employee pursuant
to the Plan. The Employee acknowledges he has read, understands and agrees to be
bound by the Plan. The provisions of the Plan are incorporated herein by
reference. In the event of a conflict between the terms and conditions of the
Plan and this Agreement, the provisions of the Plan will control. For purposes
of this Agreement, employment by the Company includes employment by any
Subsidiary of the Company.
3. COMPANY OPTION TO REPURCHASE SHARES.
If the Employee's employment is terminated by the Company or any Subsidiary
of the Company, by the Employee, or as a result of the Employee's disability or
death, the Company will have the option, but not the obligation, to repurchase
all or any part of the Shares purchased pursuant to this Agreement and then held
by the Employee on the date of such termination event. The following provisions
apply to a repurchase under this Section 3:
<PAGE>
(a) The per share repurchase price for Shares under this Section 3 will be
equal to:
(i) for vested Shares, the fair market value of each vested Share
determined by the Committee as of the date of termination, death or disability;
and
(ii) for unvested Shares, the amount of consideration paid to the
Company by the Employee for each unvested Share.
(b) The Company's option to repurchase the Shares will be valid for a
period of six (6) months commencing with the date of any termination. The
Employee may not transfer the Shares during such period.
(c) If the Company elects to exercise its option to repurchase the Shares
the Company must give written notice of its intent to repurchase the Shares to
the Employee or, in case of the Employee's death, his or her representative. The
written notice may be mailed by the Company at any time up to and including the
last day of the six (6) months following the date of the Employee's termination,
death or disabiliy.
(d) The written notice to the Employee must specify the address at, and the
time and date on, which payment of the repurchase price is to be made (the
"CLOSING"). The date specified must not be less than ten (10) days nor more than
sixty (60) days from the date of the mailing of the notice. The Employee or his
or her successor in interest with respect to the Shares shall have no further
rights as the owner thereof from and after the date specified in the notice. At
the Closing, the Company will deliver the repurchase price to the Employee or
his or her successor in interest, and the Employee or his or her successor in
interest, will deliver the Shares being purchased duly endorsed for transfer.
Notwithstanding the immediately preceding sentence, if any part of the
consideration paid by the Employee to the Company for the purchase of the Shares
was in the form of a promissory note or other debt instrument, the repurchase
price will first be used to repay any outstanding balance owed by the Employee
to the Company for such purchase.
(e) If the Employee or his or her successor in interest fails to deliver
the Shares to be repurchased by the Company under this Agreement, the Company
may elect to (i) establish a segregated account in the amount of the repurchase
price to be turned over to the Employee or his or her successor in interest upon
delivery of the Shares, and (ii) immediately take any appropriate action to
transfer record title of the Shares from the Employee to the Company and to
treat the Employee and the Shares in all respects as if delivery of the Shares
had been made as required by this Agreement. The Employee hereby irrevocably
grants the Company a power of attorney which is coupled with an interest for the
purpose of effectuating the preceding sentence.
4. RESTRICTIONS ON TRANSFER OF SHARES. As of the date hereof, the Employee
has entered into that certain Stockholders Agreement by and among BIII Capital
Partners, LP and certain of the stockholders of the Company (the "STOCKHOLDERS
AGREEMENT") which provides for certain restrictions on the transferability of
the Shares. In addition, except pursuant to Section 3 above, unvested Shares
cannot be transferred by the Employee for any reason until they become vested,
and vested Shares cannot be transferred by the Employee until such time as there
is an effective registration of the Shares pursuant to the Securities Act of
1933, as amended, or in the opinion of counsel for the Company an exemption from
registration is available. The Employee understands that the Company will permit
the transfer of the Shares only if, in the opinion of the Company's counsel,
neither the sale nor the proposed transfer of such Shares will result in a
violation of any applicable securities law, rule or regulation.
<PAGE>
5. VESTING OF RESTRICTED STOCK. Twenty percent of the Shares vest upon
issuance. The remaining eighty percent of the Shares vest at the rate of 1/48th
of the remaining shares per month on the last day of each successive calendar
month following the date of this Agreement so long as the Employee remains
employed by the Company. If the Employee's employment with the Company is
terminated as a result of death or disability any Shares that would have vested
within the 90 days following the termination of the Employee's employment with
the Company as a result of death or disability will vest upon the date of such
death or disability. In the event of a Change in Control (as defined in the
Plan), all unvested Shares will vest automatically on the date of such Change in
Control.
6. VOTING AND OTHER RIGHTS OF SHARES. Except for the restrictions set forth
in Sections 3, 4 and 5 above, the Employee will have any and all rights of a
stockholder of Common Stock of the Company, including voting rights, upon
issuance of the Shares.
7. ADDITIONAL SHARES. (a) If the Company pays a stock dividend or declares
a stock split on or with respect to any of its Common Stock, or otherwise
distributes securities of the Company to the holders of its Common Stock, the
number of shares of stock or other securities of the Company issued with respect
to the Shares then subject to the restrictions contained in this Agreement will
be added to the Shares subject to this Agreement and the Stockholders Agreement.
If the Company distributes to its stockholders shares of stock of another
corporation, the shares of stock of such other corporation, distributed with
respect to the Shares then subject to the restrictions contained in this
Agreement, will be added to the Shares subject to the Company's rights to
repurchase pursuant to this Agreement.
(b) If the outstanding shares of Common Stock of the Company are subdivided
into a greater number of shares or combined into a smaller number of shares, or
in the event of a reclassification of the outstanding shares of Common Stock of
the Company, or if the Company is a party to a merger, consolidation or capital
reorganization, the Shares then subject to the restrictions contained in this
Agreement immediately prior to such action will be substituted by such amount
and kind of securities as are issued in such subdivision, combination,
reclassification, merger, consolidation or capital reorganization.
(c) Any shares issued, distributed or otherwise transferred to the Employee
pursuant to this Section 7 will be subject to the vesting provisions of Section
5, but only to the same extent that the underlying shares attributable to the
issuance, distribution or transfer under this Section 7 are subject to the
provisions of Section 5.
8. LEGENDS. All certificates representing the Shares to be issued to the
Employee pursuant to this Agreement must contain a legend substantially as
follows:
"The shares represented by this certificate are subject to
restrictions set forth in a Restricted Stock Agreement dated
November 24, 1999 with this Company, and a Stockholders Agreement
dated as of November 24, 1999 copies of which are available for
inspection at the offices of the Company or will be made available
upon request."
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a Registration
Statement with respect to such shares shall be effective under the
Securities Act of 1933, as amended, or (b) the Company shall have
received an opinion of counsel satisfactory to it that an exemption
from registration under such Act is then available, and (2) the
transfer complies with all applicable state securities laws."
<PAGE>
9. NO OBLIGATION TO EMPLOY. This Agreement is not an employment agreement.
The Company is not obligated by the Plan or this Agreement to continue the
employment of the Employee.
10. PURCHASE FOR INVESTMENT. The Employee represents and warrants to the
Company that he or she is acquiring the Shares for his own account, for
investment, and not with a view to, or for sale in connection with, the
distribution of any such Shares.
11. NOTICES. Any notices required or permitted by the terms of this
Agreement or the Plan must be given by recognized courier service, facsimile,
registered or certified mail, return receipt requested, addressed as follows:
To the Company:
Silicon Gaming, Inc.
2800 W. Bayshore Road
Palo Alto, California 94303
To the Employee:
Paul D. Mathews
Vice President of Business Development and Government Affairs
Silicon Gaming, Inc.
2800 W. Bayshore Road
Palo Alto, California 94303
or to such other address or addresses of which notice in the same manner has
previously been given. Any such notice is deemed to have been given upon the
earlier of receipt, one business day following delivery to a recognized courier
service or three business days following mailing by registered or certified
mail.
12. GOVERNING LAW. This Agreement is to be construed and enforced in
accordance with the laws of the State of California.
13. BENEFIT OF AGREEMENT. Subject to the provisions of the Plan and the
other provisions hereof, this Agreement will be for the benefit of and will be
binding upon the heirs, executors, administrators, successors and assigns of the
parties hereto.
14. ENTIRE AGREEMENT. This Agreement, together with the Plan and the
Stockholders Agreement, embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings relating to the subject
matter hereof. No statement, representation, warranty, covenant or agreement not
expressly set forth in this Agreement may affect or be used to interpret, change
or restrict, the express terms and provisions of this Agreement, provided,
however, in any event, this Agreement will be subject to and governed by the
Plan.
<PAGE>
15. MODIFICATIONS AND AMENDMENTS. The terms and provisions of this
Agreement may be modified or amended as provided in the Plan.
16. WAIVERS AND CONSENTS. The terms and provisions of this Agreement may be
waived, or consent for the departure therefrom granted, only by written document
executed by both parties. No such waiver or consent will be deemed to be, or
will constitute, a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver or
consent will be effective only in the specific instance and for the purpose for
which it was given, and will not constitute a continuing waiver or consent.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer, and the Employee has hereunto set his or
her hand, all as of the day and year first above written.
SILICON GAMING, INC.
-------------------------------------
By: Andrew Pascal
President and Chief Executive Officer
EMPLOYEE
-------------------------------------
Paul Mathews
<PAGE>
EXHIBIT A
PROMISSORY NOTE
U.S. ($ ) November 24, 1999
Palo Alto, California
FOR VALUE RECEIVED, the undersigned ("MAKER") hereby promises to pay to the
order of SILICON GAMING, INC., a California corporation ("HOLDER"), or order, at
2800 W. Bayshore Road, Palo Alto, California 94303, or such other place as may
be designated in writing by Holder from time to time in lawful money of the
United States of America and in immediately available funds, the principal sum
of of ____________________________ Dollars ($ ), together with interest on the
principal balance outstanding hereunder beginning on the date hereof until paid
in full at the interest rate set forth in PARAGRAPH 1 in accordance with the
following terms and conditions:
1. INTEREST RATE. Interest shall accrue at an annual rate of ____________
percent ( %) from the date hereof, until the outstanding balance hereof is paid
in full. This Note is subject to the express condition that at no time shall
Maker be obligated or be required to pay interest on the principal balance of
this Note at a rate which could subject Holder to liability as a result of being
in excess of the maximum rate which Maker is permitted by law to contract or
agree to pay. If, by the terms of this Note, Maker is at any time required or
obligated to pay interest on the principal balance of this Note at a rate in
excess of such maximum rate, then the rate of interest under this Note shall be
deemed to be immediately reduced to such maximum rate, interest payable
hereunder shall be computed at such maximum rate and any prior interest payments
made in excess of such maximum rate shall be applied and shall be deemed to have
been payments made in reduction of the principal balance of this Note. If the
outstanding principal balance has already been repaid, the excess amount paid
will be refunded to the Maker.
2. PAYMENTS. Commencing on ____________, and on the same day of each year
thereafter, Maker shall pay to Holder payments of accrued interest only. In no
event shall Maker be obligated to make any further payments under this PARAGRAPH
2 after the outstanding principal balance is paid in full. Payment of the
principal amount of this Note is due on or before ___________. Notwithstanding
the foregoing, if the Collateral (as defined in Section 4) is sold, transferred
or otherwise disposed of by the Maker at any time prior to the payment in full
of this Note, the then outstanding principal amount and accrued interest on the
Note will become immediately due and payable in full.
3. PREPAYMENT. Maker may not prepay all or any part of this Note.
4. RECOURSE. This Note is a non-recourse note and is secured only by a
pledge by the undersigned of ____________ shares of the common stock of Silicon
Gaming, Inc., a California corporation (the "COLLATERAL"). The terms of the
pledge of the Collateral are contained in a Stock Pledge Agreement between the
undersigned and the Lender of even date herewith. In the event of any default by
the undersigned in payment of the Principal Amount or any accrued interest,
Lender's sole remedy shall be against the Collateral and Lender shall be
permitted to sell either of such Collateral and retain the proceeds of such
sale, provided that Lender shall not be entitled to receive pursuant to the sale
or retention of the Collateral any amounts in excess of the Principal Amount
plus all accrued interest.
5. EVENTS OF DEFAULT; ACCELERATION. The failure of Maker to cure the
occurrence of any one or more of the following events within fifteen (15) days
after receipt of written notice from Holder shall constitute an "Event of
Default" hereunder, and upon such Event of Default and written notice delivered
by Holder to Maker, the entire principal balance outstanding hereunder, together
with any and all accrued interest, at the election of Holder, shall become
immediately due and payable:
<PAGE>
(a) nonpayment of principal, interest or other amounts when the same shall
become due and payable hereunder; or
(b) the failure of Maker to comply with any provision of this Note.
6. WAIVERS. Except as set forth in this Note, to the extent permitted by
applicable law, Maker waives and agrees not to assert: (a) any homestead or
exemption rights or (b) demand, diligence, grace, presentment for payment,
protest, notice of nonpayment, nonperformance, extension, dishonor, maturity,
protest and default. Holder may extend the time for payment of or renew this
Note or release any party from liability hereunder, and any such extension,
renewal, release or other indulgence shall not alter or diminish the liability
of Maker except to the extent expressly set forth in a writing evidencing or
constituting such extension, renewal, release or other indulgence.
7. NO WAIVER BY HOLDER. No delay or failure of Holder in exercising any
right hereunder shall affect such right, nor shall any single or partial
exercise of any right preclude further exercise thereof.
8. GOVERNING LAW. This Note shall be construed in accordance with and
governed by the laws of the State of California, without regard to principles of
conflicts of laws.
9. SEVERABILITY. Every provision of this Note is intended to be severable,
and if any term or provision hereof is invalid, illegal, or unenforceable for
any reason, the validity, legality, and enforceability of the remaining
provisions hereof will not be affected or impaired thereby, and any invalidity,
illegality, or unenforceability in any jurisdiction will not affect the
validity, legality, or enforceability of any such term or provision in any other
jurisdiction.
10. BINDING NATURE. The provisions of this Note are binding upon and inure
to the benefit of the heirs, personal representatives, successors and assigns of
the parties hereto.
11. AMENDMENTS. No amendment, modification, change, waiver, release, or
discharge hereof and hereunder will be effective unless evidenced by an
instrument in writing and signed by the party against whom enforcement is
sought.
12. PARAGRAPH HEADINGS. The paragraph headings set forth in this Note are
for convenience only and do not have substantive meaning hereunder and are not
deemed to be part of this Note.
13. CONSTRUCTION. Construction of this Note is to be based as a whole, in
accordance with its fair meaning, and without regard to or taking into account
any presumption or other rule of law requiring construction against the party
preparing this Note.
IN WITNESS WHEREOF, Maker has executed this Note as of the date first set
forth above.
MAKER
-------------------------------------
<PAGE>
EXHIBIT B
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (the "PLEDGE AGREEMENT") is made and
entered into as of the ___ day of __________ by and between Silicon Gaming,
Inc., a California corporation ("PLEDGEE"), and _______________ ("PLEDGOR").
PRELIMINARY STATEMENTS
A. Pledgor and Pledgee have entered into a Restricted Stock Agreement
dated of even date herewith (the "RESTRICTED STOCK AGREEMENT") pursuant to which
Pledgee has agreed to sell shares of the common stock of Pledgee to Pledgor,
subject to the terms and conditions set forth in such Restricted Stock
Agreement.
B. Pledgor has executed and delivered a promissory note (the
"PROMISSORY NOTE") to Pledgee as consideration for the purchase of the shares
and has agreed to pledge those shares to Pledgee as collateral against payment
of the Promissory Note.
NOW, THEREFORE, in consideration of the premises and in order to induce
Pledgee to accept the Promissory Note, it is hereby agreed as follows:
1. DEFINITIONS. The following terms shall have the following meanings
in this Pledge Agreement:
COLLATERAL: The Securities and all dividends, distributions and
amounts or additional securities to which Pledgor (with or without
additional consideration) is or becomes entitled by virtue of its ownership
of any of the Securities or as the result of any corporate reorganization,
merger, consolidation, stock split, stock dividend, conversion, preemptive
right or otherwise.
SECURITIES: The capital stock described in EXHIBIT A hereto (and duly
executed assignments separate from such stock certificates satisfactory to
Pledgee attached thereto).
All capitalized terms not otherwise defined in this Pledge Agreement and defined
in the Restricted Stock Agreement shall have the meaning ascribed to them in the
Restricted Stock Agreement.
2. COLLATERAL. To secure payment and performance of the obligations of
Pledgor under the Promissory Note, Pledgor hereby pledges and deposits with
Pledgee the Securities and hereby grants to Pledgee a valid and perfected lien
on and security interest in the Securities and the other Collateral.
3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby covenants, represents
and warrants to Pledgee that, as to the Securities deposited by Pledgor with
Pledgee on the date hereof, (i) Pledgor is the legal and beneficial owner of
such Collateral; (ii) so long as any of Pledgor's obligations remain unperformed
or unpaid, Pledgor will not create or permit to exist any claim, lien, charge,
security interest or encumbrance upon or with respect to such Collateral, except
for the first security interest therein granted to Pledgee by this Pledge
Agreement and except as otherwise permitted pursuant to the terms of this Pledge
Agreement; (iii) Pledgor will not sell, transfer, convey, assign, or otherwise
divest its interests in the Collateral, or any part thereof, to any other
person; and (iv) no authorization, approval or other action by, or notice to or
filing with, any governmental body is required for the pledge by Pledgor of the
Collateral pursuant to the terms of this Pledge Agreement.
<PAGE>
4. STOCK SPLITS, STOCK DIVIDENDS, ETC.
4.1. Pledgor agrees that in the event that Pledgor, by virtue of
Pledgor's ownership of the Collateral, now is, or hereafter becomes, entitled
(with or without additional consideration) to other or additional securities as
the result of any corporate reorganization, merger, consolidation, stock split,
stock dividend, conversion or preemptive right or otherwise, Pledgor shall:
4.1.1. Cause the issuer of such additional securities to
deliver to Pledgee the certificates evidencing Pledgor's ownership thereof and
hereby authorizes and empowers Pledgee to demand the same from such issuer, and
agrees if such certificates are delivered to Pledgor, to take possession thereof
in trust for Pledgee;
4.1.2. Deliver to Pledgee an assignment separate from
certificate with respect to such securities, executed in blank by Pledgor;
4.1.3. Deliver to Pledgee a certificate, executed by Pledgor
and dated the date of such pledge, as to the truth and correctness on such date
of the representations and warranties set forth in Section 3 hereof; and
4.1.4. Deliver to Pledgee such other certificates, forms and
other instruments as Pledgee may request in connection with such pledge.
4.2 Pledgor agrees that such additional securities shall constitute a
portion of the Collateral and be subject to this Pledge Agreement in the same
manner and to the same extent as the Securities pledged hereby to Pledgee on the
date hereof.
5. VOTING POWER. Unless and until an Event of Default pursuant to the
terms of the Promissory Note shall have occurred, Pledgor shall be entitled to
exercise all voting powers in all corporate matters pertaining to the
Collateral.
6. DEFAULT AND REMEDIES.
6.1. The occurrence of an Event of Default under the Promissory Note
shall constitute an Event of Default hereunder.
6.2. If an Event of Default shall have occurred and be continuing,
Pledgee, at its option, may:
6.2.1. Cause the Collateral to be registered in its name or in
the name of its nominee;
6.2.2. Exercise all voting powers pertaining to the Collateral
and otherwise act with respect thereto as though Pledgee were the owner thereof;
6.2.3. Receive all dividends and all other distributions of
any kind whatsoever on all or any part of such Collateral;
6.2.4. Exercise any and all rights of collection, conversion
or exchange, and any and all other rights, privileges, options or powers of
Pledgor pertaining or relating to such Collateral;
6.2.5. Sell, assign and deliver the whole, or from time to
time, any part of such Collateral at any broker's board or at any private sale
or at public auction, with or without demand for performance or advertisement of
the time or place of sale or adjournment thereof or otherwise, and free from any
right of redemption (all of which are hereby expressly waived by Pledgor) for
cash, for credit or for other property, for immediate or future delivery, and
for such price and on such terms as Pledgee in its sole discretion may
determine; and
<PAGE>
6.2.6. Exercise any other remedy (a) specifically granted
under this Pledge Agreement, (b) available to a secured party under the laws of
the State of California, or (c) now or hereafter existing in equity, or at law,
by virtue of statute or otherwise.
With respect to the actions described in each of subsections 6.2.2 and
6.2.4 above, Pledgor hereby irrevocably constitutes and appoints Pledgee its
proxy and attorney-in-fact with full power of substitution and acknowledges that
the constitution and appointment of such proxy and attorney-in-fact are coupled
with an interest and are irrevocable.
6.3. Pledgee shall give not less than 10 business days prior written
notice to the Pledgor of any sale pursuant to this Section 6. Pledgor hereby
agrees that such notice is commercially reasonable.
6.4. At any sale made pursuant to Section 6.2 above, Pledgee may bid
for and purchase, free from any right or equity of redemption on the part of the
applicable Pledgor (the same hereby being waived and released by Pledgor), any
part or all of the Collateral that is offered for sale, and Pledgee, upon
compliance with the terms of sale, may hold, retain and dispose of such
Collateral without further accountability therefor.
6.5. Pledgee shall apply the proceeds of any sale of the whole or any
part of the Collateral and any other monies at the time held by Pledgee under
the provisions of this Pledge Agreement to the Obligations in such manner and
order as Pledgee shall determine in its sole discretion.
6.6. Pledgee shall not have any duty to exercise any of the rights,
privileges, options or powers or to sell or otherwise realize upon any of the
Collateral, as hereinbefore authorized, and Pledgee shall not be responsible for
any failure to do so or delay in so doing.
6.7. Any sale of all or any portion of the Collateral pursuant to
Section 6.2 above shall operate to divest all right, title and interest of the
Pledgor to the Collateral which is the subject of any such sale.
6.8. Pledgor acknowledges that Pledgee may be unable to effect a public
sale of all or a part of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, or that it may be able to
do so only after delay which might adversely affect the value that might be
realized upon the sale of the Collateral. Accordingly, Pledgor agrees that
Pledgee, without the necessity of attempting to cause any registration of the
Collateral to be effected under the Securities Act, may sell the Collateral or
any part thereof in one or more private sales to a restricted group of
purchasers who may be required to agree, among other things, that they are
acquiring the Collateral for their own account, for investment purposes only,
and not with a view toward the distribution or resale thereof. Pledgor agrees
that any such private sale may be at prices or on terms less favorable to the
owner of the Collateral than would be the case if such Collateral was sold at
public sale, and that any such private sale shall not be deemed to have been
made in a commercially unreasonable manner by virtue of such sale having been a
private sale.
7. PLEDGEE'S OBLIGATIONS, CUSTODIAL AGREEMENT, PERFORMANCE RIGHTS.
Except for the safe custody of any Collateral in its possession and the
accounting for monies actually received by it hereunder, Pledgee shall have no
duty with respect to any Collateral. Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if it takes such action for that purpose as Pledgor reasonably
requests in writing, but failure of Pledgee to comply with any such request at
any time shall not of itself be deemed a failure to exercise reasonable care. It
is expressly agreed that Pledgee shall have no responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
Pledgee has or is deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral, but Pledgee may do so and all expenses incurred in connection
therewith shall be payable by and for the sole account of Pledgor.
8. TERMINATION OF PLEDGE AGREEMENT. Upon the indefeasible and final
payment and performance in full of all of the Pledgor's obligations under the
Promissory Note, Pledgee shall deliver to Pledgor, without recourse to or
warranty by Pledgee, the Collateral in its possession and this Pledge Agreement
thereupon shall be terminated.
9. MISCELLANEOUS.
9.1. Pledgor further unconditionally agrees that if an Event of Default
has occurred, Pledgee may exercise its rights and remedies hereunder. The
obligations of Pledgor under this Pledge Agreement shall be absolute and
unconditional, and shall remain in full force and effect without regard to, and
shall not be released or discharged or in any way affected by:
9.1.1. Any amendment or modification of or supplement to the
Restricted Stock Agreement or the Promissory Note;
9.1.2. Any exercise or non-exercise of any right or remedy
under any of the Promissory Note, or the granting of any postponements or
extensions for time of payment or other indulgences to the Pledgor, Pledgor, or
any other person, or the settlement or adjustment of any claim or the release or
discharge or substitution of any person primarily or secondarily liable with
respect to the Promissory Note;
9.1.3. The institution of any bankruptcy, insolvency, debt
agreement, readjustment, composition, receivership or liquidation proceedings by
or against Pledgor; or
9.1.4. Any other circumstance which otherwise might constitute
a defense to, or a discharge of Pledgor with respect to his obligations.
9.2. Each and every right, remedy and power granted to Pledgee
hereunder shall be cumulative and in addition to any other right, remedy or
power specifically granted herein or now or hereafter existing in equity, at
law, by virtue of statute or otherwise and may be exercised by Pledgee, from
time to time, concurrently or independently and as often and in such order as
Pledgee may deem expedient. Any failure or delay on the part of Pledgee in
exercising any such right, remedy or power, or abandonment or discontinuance of
steps to enforce the same, shall not operate as a waiver thereof or affect
Pledgee's right thereafter to exercise the same, and any single or partial
exercise of any such right, remedy or power shall not preclude any other right,
remedy or power, and no such failure, delay, abandonment or single or partial
exercise of Pledgee's rights hereunder shall be deemed to establish a custom or
course of dealing or performance among the parties hereto.
9.3. Any modification or waiver of any provision of this Pledge
Agreement, or any consent to any departure by Pledgor therefrom, shall not be
effective in any event unless the same is in writing and signed by Pledgee, and
then such modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose given. Any notice to or demand on
Pledgor in any event not specifically required of Pledgee hereunder shall not
entitle Pledgor to any other or further notice or demand in the same, similar or
other circumstances unless specifically required hereunder.
9.4. Pledgor agrees that at any time, and from time to time, Pledgor,
upon the request of Pledgee and at the expense of Pledgor, promptly will execute
and deliver such further documents and do such further acts and things as
Pledgee may request in order to effect fully the purposes of this Pledge
Agreement and to subject to the security interest created hereby any property or
rights intended by the provisions hereof to be covered hereby.
9.5. Pledgor agrees that it will warrant, preserve, maintain and
defend, at its sole expense, the right, title and interest of Pledgee in and to
the Collateral and all right, title and interest represented thereby against all
claims, charges and demands of all persons whomsoever.
9.6. Any notice required hereunder shall be in writing and addressed to
Pledgor and Pledgee at their addresses set forth on the signature page hereto.
Notices hereunder shall be deemed received on the earlier of receipt, whether by
mail, personal delivery, facsimile, or otherwise, or upon deposit in the United
States mail, postage prepaid.
<PAGE>
9.7. NO WAIVER BY HOLDER. No delay or failure of Holder in exercising
any right hereunder shall affect such right, nor shall any single or partial
exercise of any right preclude further exercise thereof.
9.8 GOVERNING LAW. This Note shall be construed in accordance with and
governed by the laws of the State of California, without regard to principles of
conflicts of laws.
9.9. SEVERABILITY. Every provision of this Note is intended to be
severable, and if any term or provision hereof is invalid, illegal, or
unenforceable for any reason, the validity, legality, and enforceability of the
remaining provisions hereof will not be affected or impaired thereby, and any
invalidity, illegality, or unenforceability in any jurisdiction will not affect
the validity, legality, or enforceability of any such term or provision in any
other jurisdiction.
9.10. BINDING NATURE. The provisions of this Note are binding upon and
inure to the benefit of the heirs, personal representatives, successors and
assigns of the parties hereto.
9.11. AMENDMENTS. No amendment, modification, change, waiver, release,
or discharge hereof and hereunder will be effective unless evidenced by an
instrument in writing and signed by the party against whom enforcement is
sought.
9.12. PARAGRAPH HEADINGS. The paragraph headings set forth in this Note
are for convenience only and do not have substantive meaning hereunder and are
not deemed to be part of this Note.
9.13. COUNTERPARTS. This Pledge Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which taken together shall be one and the same instrument.
9.14. CONSTRUCTION. Construction of this Note is to be based as a
whole, in accordance with its fair meaning, and without regard to or taking into
account any presumption or other rule of law requiring construction against the
party preparing this Note.
IN WITNESS WHEREOF, the Pledgor and Pledgee have caused this Agreement
to be executed as of the date first written above.
PLEDGOR
-------------------------------------
PLEDGEE
Silicon Gaming, Inc.,
a California corporation
-------------------------------------
By: Andrew Pascal
Its: President and Chief Executive Officer
2800 W. Bayshore Road
Palo Alto, California 94303
<PAGE>
EXHIBIT A
Description of Securities
_____________ shares of the Common Stock of Silicon Gaming, Inc., par value
$.001 per share, as represented by share certificate No. ________.
