EXHIBIT 10.23
FORM OF NOTE
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH
RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER AND THAT SUCH TRANSFER IS NOT IN VIOLATION OF ANY
APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY
NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND PAYEE HEREUNDER
ARE SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN SECTION 3 HEREOF.
IN THE EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF
SUCH SECTION 3, THE TERMS OF SECTION 3 SHALL GOVERN.
________________________________________________________________
JACKPOT ENTERPRISES, INC.
No. _________ $_________
Convertible Subordinated Note
Jackpot Enterprises, Inc., a Nevada corporation (the "Company"), for
value received, hereby promises to pay to the order of _____________ (the
"Payee") on March 31, 2007 (the "Maturity Date") at the offices of the
Company, the principal sum of _________________ Dollars ($_________) or such
lesser principal amount as shall at such time be outstanding hereunder (the
"Principal Amount"). Each payment by the Company pursuant to this Note shall
be made in lawful currency of the United States of America and in immediately
available funds. Interest on this Note shall accrue on the Principal Amount
outstanding from time to time at a rate per annum computed in accordance with
Section 4 hereof.
Accrued and unpaid interest on the Principal Amount of this Note
outstanding shall commence on the date hereof and be payable (i) on the last
day of each March, June, September, and December commencing June 30, 2000 (ii)
upon maturity (whether at the Maturity Date, by acceleration or otherwise) and
(ii) after maturity until paid in full (after as well as before judgment), on
demand. Each of the dates referred to in clauses (i) and (ii) is sometimes
hereinafter referred to as an "Interest Payment Date." All computations of
interest hereunder shall be made based on the actual number of days elapsed in
a year of 365 days (including the first day but excluding the last day during
which any such Principal Amount is outstanding). The Principal Amount of this
Note together with interest accrued and unpaid thereon shall be payable on the
Maturity Date unless this Note is converted or prepaid in accordance with
Section 5 hereof.
The amount of all repayments of principal, interest rates applicable
thereto and interest accrued thereon shall be recorded on the records of the
Company and, prior to any transfer of, or any action to collect on this Note,
shall be endorsed on this Note. Any such recordation or endorsement shall
constitute prima facie evidence of the accuracy of the information so recorded
or endorsed, but the failure to record any such amount or rate shall not limit
or otherwise affect the obligations of the Company hereunder to make payments
of principal or interest when due. All payments by the Company hereunder
shall be applied first to pay any interest which is due, but unpaid, then to
reduce the Principal Amount.
The Company (i) waives presentment, demand, protest or notice of any
kind in connection with this Note and (ii) in the event of a default by the
Company after notice, agrees to pay to the holder hereof, all reasonable costs
and expenses (including reasonable legal fees and expenses) incurred in
connection with the enforcement and collection or this Note.
This Note is issued pursuant to a Subscription Agreement dated the
date of this Note, between the Company and the Payee (the "Subscription
Agreement"), a copy of which agreement is available for inspection at the
Company's principal office. This Note is one of several Notes issued in
connection with the sale of an aggregate of $20 million of such Notes.
Notwithstanding any provision to the contrary contained herein, this Note is
subject and entitled to those terms, conditions, covenants and agreements
contained in the Subscription Agreement which are expressly applicable to the
Notes. Any transferee of this Note, by its acceptance hereof, assumes the
obligations of the Payee in the Subscription Agreement with respect to the
conditions and procedures for transfer of this Note.
1. Definitions. For purposes of this Note, the following terms
shall have the meanings described below:
A. "Indebtedness for Borrowed Money" means (i) all payment
obligations of the Company to a bank, financial institution, insurance
company, finance company or other institutional lender or other entity
regularly engaged in the business of extending credit in the form of
borrowed money (each of the foregoing, an "Institutional Lender") in respect
of extensions of credit to the Company (or to a subsidiary of the Company to
the extent such obligations are guaranteed by the Company) and (ii) all
obligations, contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker's acceptances, in each
case issued for the account of the Company.
B. "Market Price" as of any date, (i) means the last
reported sale price for the shares of Common Stock on the New York Stock
Exchange (the "NYSE") or the Nasdaq National Market ("Nasdaq") as
reported by Bloomberg Financial Markets or an equivalent reliable reporting
service mutually acceptable to and hereafter designated by the holder of
this Note and the Company ("Bloomberg"), or (ii) if the NYSE or Nasdaq is
not the principal trading market for the shares of Common Stock, the last
reported sale price on the principal trading market for the Common Stock as
reported by Bloomberg, or (iii) if market value cannot be calculated as of
such date on any of the foregoing bases, the Market Price shall be the fair
market value as reasonably determined in good faith by (a) the Board of
Directors of the Company or, at the option of a majority-in-interest of the
holders of the outstanding Notes, by (b) an independent investment bank of
nationally recognized standing in the valuation of businesses similar to the
business of the Company. The manner of determining the Market Price of the
Common Stock set forth in the foregoing definition shall apply with respect
to any other security in respect of which a determination as to market value
must be made hereunder.
C. "Senior Debt" means, collectively, (i) all Indebtedness for
Borrowed Money (and all renewals, extensions, refundings, amendments and
modifications of any such Indebtedness for Borrowed Money); (ii) all other
indebtedness incurred prior to or after the issuance of the Notes which by
its terms is superior in right of payment to the Notes; and (iii) all
payment obligations of the Company pursuant to any capitalized lease with an
entity that is not an affiliate of the Company, unless by the terms of the
instrument creating or evidencing any such indebtedness it is expressly
provided that such indebtedness is not superior in right of payment to the
Notes.
2. Prepayment. The Principal Amount of this Note may not be prepaid
in whole or in part, except as provided in Section 5A hereof.
3. Subordination. The Company, for itself, its successors and
assigns, covenants and agrees, and the Payee and each successive holder of
this Note, by its acceptance of this Note, likewise covenants and agrees
(expressly for the benefit of the present and future holders of the Senior
Debt, that the payment of principal of, and interest on, this Note is hereby
expressly subordinated in right of payment to the prior payment in full of
the principal of, premium (if any) and interest on, all Senior Debt of the
Company (other than the Notes), whether outstanding on the date hereof or
hereafter incurred or created.
The provisions of this Section 2 are not for the benefit of the
Company, but are solely for the purpose of defining the relative rights of the
holders of the Senior Debt, on the one hand, and the holders of the Notes, on
the other hand. Nothing contained herein (i) shall impair, as between the
Company and the holder of this Note, the obligations of the Company, which are
absolute and unconditional, to pay to the holder hereof all amounts payable in
respect of this Note as and when the same shall become due and payable in
accordance with the terms hereof or (ii) shall prevent the holder of this
Note from exercising all rights, powers and remedies otherwise permitted by
applicable law or upon a default under this Note as set forth in these
subordination provisions.
4. Computation of Interest.
A. Base Interest Rate. Subject to subsections 4B below, the
outstanding Principal Amount shall bear interest at the rate of eight (8%)
percent per annum.
B. Maximum Rate. In the event that it is determined that, under
applicable law, the interest charges and fees payable by the Company in
connection herewith or in connection with any other document or instrument
executed and delivered in connection herewith cause the effective interest
rate applicable to the indebtedness evidenced by this Note to exceed the
maximum rate allowed by law (the "Maximum Rate"), then such interest shall be
recalculated for the period in question and any excess over the Maximum Rate
paid with respect to such period shall be credited, without further agreement
or notice, to the Principal Amount outstanding hereunder to reduce said
balance by such amount with the same force and effect as though the Company
had specifically designated such extra sums to be so applied to principal and
the Payee had agreed to accept such extra payment(s) as a premium-free
prepayment. All such deemed prepayments shall be applied to the principal
balance payable at Maturity.
5. Conversion of Note. Subject to the terms stated below, the Payee
shall have conversion rights ("Conversion Rights") as follows:
A. Mandatory Conversion. This Note shall be convertible
automatically without further action of the Company, the Payee or any other
party if at any time after April 1, 2004, the common stock of the Company
(the "Common Stock") shall have a Market Price of over 250% of the then
current Conversion Price for a period of ten trading days within any twenty
consecutive trading day period, into such number of fully paid and non-
assessable shares of Common Stock as are determined pursuant to Sections 5C
and 5E(i).
B. Optional Conversion. At the option of the Payee, all of the
outstanding Principal Amount of this Note with all accrued and unpaid
interest shall be convertible anytime after June 1, 2001 and from time to
time up to and including the Maturity Date, into such number of fully paid
and non-assessable shares of Common Stock as shall be determined below.
C. Conversion Price . The number of shares of Common Stock to
be received by the Payee upon conversion (the "Conversion Shares") is to be
determined by dividing the Principal Amount of this Note by the conversion
price in effect at the time of conversion (the "Conversion Price"). The
Conversion Price at which the Conversion Shares shall be deliverable upon
conversion of this Note without the payment of additional consideration by
the Payee shall initially be $10.75 Such initial Conversion Price, and the
rate at which this Note may be converted into Conversion Shares, shall be
subject to adjustment as provided in Section 5F below.
D. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Note. The determination of
fractional shares shall be made on the basis of the Principal Amount of this
Note plus accrued and unpaid interest at the time of conversion divided by
the Conversion Price. In lieu of any fractional shares to which the Payee
would otherwise be entitled, the Company shall pay cash equal to such
fraction multiplied by the Conversion Price immediately in effect prior to
the event which would result in the issuance of a fractional share of Common
Stock.
E. Mechanics of Conversion.
(i) Mandatory Conversion. In the event the Notes
automatically convert pursuant to the provisions of Sections 5A hereof, the
Company shall deliver to the Payee at its address appearing on the records
of the Company a written notice of the conversion of this Note (the
"Conversion Notice") including a brief description of the event which
resulted in the conversion and the effective date of such conversion (the
"Conversion Date"), requesting surrender of this Note for cancellation and
written instructions regarding the registration and delivery of certificates
for the Conversion Shares. In the event the Payee receives a Conversion
Notice, the Payee shall be required to surrender this Note for cancellation,
or, if the Note is lost or otherwise unavailable for delivery, an affidavit
of lost Note in form reasonably acceptable to the Company, but the failure
of the Payee to so surrender this Note shall not affect the conversion of
the outstanding Principal Amount into Conversion Shares. Promptly after the
Company receives this Note for cancellation, or, if this Note is lost or
otherwise unavailable for delivery, an affidavit of lost Note in form
reasonably acceptable to the Company, the Company will issue to the Payee or
its designee such number of fully paid and non-assessable Conversion Shares
as are determined pursuant to Section 5C. No holder of this Note shall be
entitled upon conversion of this Note to have the Conversion Shares
registered in the name of another person or entity without first complying
with all applicable restrictions on the transfer of this Note. In the event
the Payee does not provide the Company with written instructions regarding
the registration and delivery of certificates for the Conversion Shares, the
Company shall issue such shares in the name of the Payee and shall forward
such certificates to the Payee at its address appearing on the records of
the Company. The person entitled to receive the Conversion Shares shall be
deemed to have become the holder of record of such shares at the close of
business on the Conversion Date and the person entitled to receive share
certificates for the Conversion Shares shall be regarded for all corporate
purposes after the Conversion Date as the record holder of the number of
Conversion Shares to which it is entitled upon the conversion. The Company
may rely on record ownership of this Note for all corporate purposes,
notwithstanding any contrary notice. After the Conversion Date, this Note
shall, until surrendered to the Company, represent the right to receive the
Conversion Shares plus cash in lieu of fractional shares, if any.
(ii) Optional Conversion. Upon election of the Payee to
convert this Note into Conversion Shares pursuant to Section 5B, the Payee
shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company, and shall give written notice to the Company at
its principal corporate office, of the election to convert the same and
shall state therein the name or names in which the certificate or
certificates for the Conversion Shares are to be issued. Promptly after the
Company receives this Note for cancellation, or, if this Note is lost or
otherwise unavailable for delivery, an affidavit of lost Note in form
reasonably acceptable to the Company, the Company will issue to the Payee or
its designee such number of fully paid and non-assessable Conversion Shares
as are determined pursuant to Section 5C. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of
such surrender of the Note to be converted, and the person or persons
entitled to receive the Conversion Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock as of such date.
(iii) Noteholder Rights. All Notes subject to conversion
as herein provided shall no longer be deemed to be outstanding and all
rights with respect thereto, including the rights, if any, to receive
notice, is and shall immediately cease and terminate on the Conversion Date,
except for Conversion Rights.
F. Adjustment of Conversion Price and Number of Conversion
Shares. The Conversion Price in effect at any time and the number and kind
of securities issuable upon conversion of the Notes shall be subject to
adjustment from time to time upon the happening of certain events as
follows:
(i) Adjustment upon Declaration of Dividends or
Reclassification. In case the Company shall (a) declare a dividend or make
a distribution on its outstanding shares of Common Stock in shares of Common
Stock, (b) subdivide or reclassify its outstanding shares of Common Stock
into a greater number of shares, or (c) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
applicable Conversion Price in effect at the time of the record date for
such dividend or distribution or of the effective date of such subdivision,
combination or reclassification shall be adjusted by multiplying the
Conversion Price prior to such action by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding after giving
effect to such action, and the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(ii) Adjustment upon Issuance of Common Stock. (a) If,
at any time after the date hereof the ("Closing Date"), the Company shall
issue, sell or otherwise distribute (or, in accordance with Sub-section
(ii)(b) hereof, shall be deemed to have issued, sold or otherwise
distributed) any shares of Common Stock without consideration or for a
consideration per share less than the Market Price (determined on a per
share basis) as of the date of such issuance or sale, then, effective
immediately upon such issuance or sale, the Conversion Price shall be
reduced (without regard to any other provisions hereof) to an amount equal
to the product obtained by multiplying (A) the Conversion Price in effect
immediately prior to such issuance or sale, by (B) a fraction, the numerator
of which shall be the sum of (x) the product obtained by multiplying (1) the
number of shares of Common Stock outstanding (on a Fully-Diluted Basis)
immediately prior to such issuance or sale by (2) the Market Price prior to
the date of such issuance or sale, and (y) the consideration, if any,
received by the Company upon such issuance or sale, and the denominator of
which shall be the product obtained by multiplying (C) the number of shares
of Common Stock outstanding (on a Fully-Diluted Basis) immediately after
such issuance or sale, by (D) the Market Price as of the date of issuance or
sale. Upon each such adjustment of the Conversion Price hereunder, the
number of Conversion Shares which may be obtained upon conversion of a Note
shall be increased to the number of shares determined by multiplying (A) the
number of Conversion Shares which could be obtained upon conversion of such
Note immediately prior to such adjustment by (B) a fraction, the numerator
of which shall be the Conversion Price in effect immediately prior to such
adjustment and the denominator of which shall be the Conversion Price in
effect immediately after such adjustment.
(b) For the purpose of determining the adjusted Conversion Price under
Subsection (ii)(a) hereof, the following shall be applicable:
(I) Issuance of Rights or Options. If the Company in any manner
issues, grants or otherwise distributes any rights or options to subscribe
for or to purchase (A) Common Stock or (B) any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options
being herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), and the price per
share for which Common Stock is issuable upon the exercise of such Options
or upon conversion or exchange of such Convertible Securities is less than
the Market Price (determined on a per share basis) as of the date of
issuance or grant of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options (or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options) shall be deemed to be
outstanding and to have been issued and sold by the Company for such price
per share. For purposes of this paragraph, the price per share for which
Common Stock is issuable upon exercise of Options or upon conversion or
exchange of Convertible Securities issuable upon exercise of Options shall
be determined by dividing (A) the total amount, if any, received or
receivable by the Company as consideration for the issuing or granting of
such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon issuance or sale of such Convertible Securities and the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options.
No further adjustment of the Conversion Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities. The provisions
of this Section F(ii)(a)(I) shall not apply to any Options issued pursuant
to any stock option plan of the Company approved by the stockholders of the
Company.
(II) Issuance of Convertible Securities. If the Company in any manner
issues, sells or otherwise distributes any Convertible Securities having an
exercise or conversion or exchange price per share of Common Stock which is
less than the Market Price (determined on a per share basis) as of the date
of such issuance or sale, then the maximum number of shares of Common Stock
issuable upon the conversion or exchange of such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold by the
Company for such lower price per share. For purposes of this paragraph, the
price per share for which Common Stock is issuable upon conversion or
exchange of Convertible Securities is determined by dividing (A) the total
amount received or receivable by the Company as consideration for the
issuance or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment of the Conversion Price shall
be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities, and if any such issuance or sale of
such Convertible Securities is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are required to be made
pursuant to other provisions of this Sub-section F(ii)(b), no further
adjustment of the Conversion Price shall be made by reason of such issuance
or sale.
(III) Change in Option Price or Conversion Price. If, at any time,
there is any change in (x) the purchase price provided for in any Options,
(y) the additional consideration, if any, payable upon the issuance,
conversion or exchange of any Convertible Securities, or (z) the rate at
which any Convertible Securities are convertible into or exchangeable for
Common Stock, then the Conversion Price in effect at the time of such change
shall be readjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or
changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Conversion Shares shall be correspondingly
readjusted.
(IV) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, then the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. If any Common
Stock, Options or Convertible Securities are issued or sold for
consideration other than cash, then the amount of the consideration other
than cash received by the Company shall be the fair value of such
consideration determined, in good faith, by the Board of Directors of the
Company.
(V) Treasury Shares. The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by or for the
account of the Company or any Subsidiary of the Company, and the disposition
of any shares so owned or held shall be considered an issue or sale of
Common Stock.
(VI) Record Date. If the Company takes a record of the holders of
Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date
of the issuance, sale or distribution of the shares of Common Stock deemed
to have been issued, sold or distributed upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
(iii) Consolidations and Mergers. If, at any time after the
Closing Date, the Company shall consolidate with, merge with or into, or
sell all or substantially all of its assets or property to, another
corporation, then the Company shall cause effective provision to be made so
that each Note shall, effective as of the effective date of such event
retroactive to the record date, if any, of such event, be exercisable or
exchangeable for the kind and number of shares of stock, other securities,
cash or other property to which a holder of the number of shares of Common
Stock deliverable upon conversion or exchange of such Note would have been
entitled upon such event.
(iv) Notice; Calculations; Etc. Whenever the Conversion
Price and the number of Conversion Shares shall be adjusted as provided in
this Sub-section F, the Company shall provide to each holder a statement,
signed by the President or Chief Financial Officer of the Company,
describing in detail the facts requiring such adjustment and setting forth a
calculation of the Conversion Price and the number of Conversion Shares
applicable to each Note after giving effect to such adjustment. All
calculations under this Sub-section F shall be made to the nearest one
hundredth of a cent ($.0001) or to the nearest one-tenth of a share, as the
case may be. Adjustments pursuant to Sub-section F shall apply to successive
events or transactions of the type covered thereby.
(v) Certain Adjustments; Cash Dividends or Distributions.
In the event that the Company in any manner issues or grants Options or
Convertible Securities, or any other transaction, circumstances or events
occur which give rise to anti-dilution adjustments under Other Anti-Dilution
Instruments, then the Company will promptly make proportional, equitable and
corresponding adjustments in the number of shares of Common Stock issuable
upon conversion of the Notes to protect the holders against dilution as a
result of such events. In the event the Company in any manner makes any
dividends or distributions in cash, cash equivalent or marketable
securities, other than Tax Distributions, the Conversion Price shall be
adjusted by multiplying the Conversion Price (determined on a per share
basis) by a fraction (x) the numerator of which is the Market Price
immediately prior to the time of such dividend or distribution (determined
on a per share basis) less the per share amount of such dividend or
distribution and (y) the denominator of which is such Market Price.
G. Validity of Stock. All shares of Common Stock which may be
issued upon conversion of this Note will, upon issuance by the Company in
accordance with the terms of this Note, be validly issued, fully paid and
non-assessable.
H. Reservation of Shares. The Company covenants and agrees that
it will at all times have authorized and reserved, solely for the purpose of
such possible conversion, out of its authorized but unissued shares, a
sufficient number of shares of its Common Stock to provide for the exercise
in full of the conversion rights contained in this Note.
I. Retirement of Stock. For so long as the Note shall be
outstanding, the Company covenants and agrees that it will not retire any
capital stock of the Company, or any warrants, other than in connection with
the redemption or cashless exercise of any stock options.
6. Amendments and Waivers.
A. The provisions of this Note may not be amended, modified,
waived, changed or terminated other than by an agreement in writing signed
by the Company and the holders of one hundred percent (100%) of the
outstanding principal amount of the Notes.
B. No failure or delay on the part of the Payee in exercising any
power or right under this Note shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power or right preclude any other
or further exercise thereof or the exercise of any other power or right. No
notice to or demand on the Company in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or approval by the
Payee shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
7.1 Nature of Events. An "Event of Default" shall exist if any of
the following occurs and is continuing:
A. Failure to pay Interest on this Note on or before the date
such payment is due;
B. Failure to pay principal on this Note on or before the date
such payment is due;
C. Any material representation or warranty made by the Company
in this Note or the Subscription Agreement and Investment Representation of
even date herewith between the Company and the Holder (the "Subscription
Agreement") being untrue when made;
D. Failure to perform or observe any covenant or agreement of
the Company contained in this Note, or in the Subscription Agreement which
remains uncured for a period of 30 days after receipt of notice from any
holder of Notes as to such failure or after the Company had or should have
had knowledge of such failure;
E. Failure by the Company to pay principal at maturity of, or
interest on, or the occurrence and continuation of an event of default
under, any loan agreement, mortgage, indenture or other instruments under
which there is issued or by which there is secured or evidenced any
indebtedness (other than the Notes) of the Company, whether such
indebtedness exists on the date of the issuance of this Note or is created
thereafter and the principal amount of such indebtedness which, together
with any such other indebtedness under which the occurrence of such event of
default constitutes an event of default or, if not paid at maturity,
aggregates an amount equal to or greater than $100,000, or the rendering of
one or more final judgments, orders or decrees against the Company and/or
any subsidiary in an aggregate amount in excess of $300,000 which are not
vacated, satisfied, discharged or the execution thereof stayed within a
period of 30 days from entry thereof;
F. A custodian, receiver, liquidator or trustee of the Company,
or of any of its material property, is appointed or takes possession and
such appointment or possession remains in effect for more than 30 days; or
the Company is adjudicated bankrupt or insolvent; or an order for relief is
entered under the Federal Bankruptcy Code or any other applicable Federal or
state bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar law affecting the enforcement of creditors
rights generally against the Company; or any of the material property of the
Company is sequestered by court order and the order remains in effect for
more than 30 days; or a petition is filed against the Company under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
indebtedness, dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 30 days after
filing;
G. The Company files a petition in voluntary bankruptcy or
seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of indebtedness, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
consents to the filing of any petition against it under any such law; or
H. The Company makes an assignment for the benefit of its
creditors, or generally fails to pay its obligations as they become due
(without a waiver thereof), or consents to the appointment of or taking
possession by a custodian, receiver, liquidator or trustee of the Company or
all or any material part of its material property.
7.2 Default Remedies.
In case an Event of Default has occurred and is continuing, the holder
of this Note, by written notice to the Company, may declare the principal of
this Note, plus accrued Interest, to be immediately due and payable, and
upon any such declaration such principal, plus accrued Interest shall become
due and payable immediately. In case an Event of Default described in
Sections 7.1(F), (G), or (H) above occurs, such amounts will become due and
payable without any declaration or any act on the part of the holder of this
Note. Such declaration of acceleration may be rescinded and past defaults
may be waived by the holder of this Note.
8. Miscellaneous.
A. Registered Holder. The Company may consider and treat the
person in whose name this Note shall be registered as the absolute owner
thereof for all purposes whatsoever (whether or not this Note shall be
overdue) and the Company shall not be affected by any notice to the
contrary. In case of transfer of this Note by operation of law, the
transferee agrees to notify the Company of such transfer and of its address,
and to submit appropriate evidence regarding such transfer so that this Note
may be registered in the name of the transferee. This Note is transferable
only on the books of the Company by the holder hereof, in person or by
attorney, on the surrender hereof, duly endorsed. Communications sent to
any registered owner shall be effective as against all holders or
transferees of the Note not registered at the time of sending the
communication.
B. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to
conflict of laws principles applied in the State of New York.
C. Notices. Unless otherwise provided, all notices required or
permitted under this Note shall be in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified,
(ii) upon confirmed delivery by Federal Express or other nationally
recognized courier service providing next-business-day delivery, or (iii)
upon confirmed receipt if deposited with the United States Postal Service,
by registered or certified mail, postage prepaid and addressed to the party
to be notified, in each case at the address set forth below, or at such
other address as such party may designate by written notice to the other
party (provided that notice of change of address shall be effective upon
receipt by the party to whom such notice is addressed).
If sent to Payee, notices shall be sent to the following address:
[_____________
______________]
If sent to the Company, notices shall be sent to the following address:
Jackpot Enterprises, Inc.
1110 Palms Airport Drive
Las Vegas, Nevada 89119-3730
Attention: Mr. Bob Torkar
With a copy (which shall not constitute notice) to:
Camhy Karlinsky & Stein LLP
1740 Broadway
New York, New York 10019
Attention: Alan I. Annex, Esq.
D. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE
PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
PAYEE'S PURCHASING THIS NOTE.
9. No Rights or Liabilities as a Shareholder. This Note shall not
entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Note, in the absence of
affirmative action by the holder hereof to purchase Conversion Shares, and
no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors
of the Company.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name by its duly authorized officer.
JACKPOT ENTERPRISES, INC.
By:
Name: Allan R. Tessler
Title: Chairman
