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UNITED STATES
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): JUNE 16, 1998
ARGOSY GAMING COMPANY
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(Exact name of Registrant as specified in its charter)
DELAWARE 0-21122 37-1304247
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(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION
INCORPORATION) NUMBER)
219 PIASA STREET, ALTON, ILLINOIS 62002
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(618) 474-7500
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(REGISTRANT'S TELEPHONE NUMBER,INCLUDING AREA CODE)
N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ARGOSY GAMING COMPANY
ITEM 5. OTHER EVENTS
Incorporated by reference is the press release issued by the
Registrant on June 16, 1998, a copy of which is attached hereto and made a
part hereof.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
The Exhibits listed on the accompanying Exhibit Index are filed as
a part of this Report and are incorporated herein by reference.
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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 thereunto duly authorized.
ARGOSY GAMING COMPANY
a Delaware corporation
Dated: June 16, 1998 By: /s/ Dale R. Black
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Name: Dale R. Black
Title: Vice President-
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NO.
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4.17 Form of Securities Purchase Agreement dated May 29, 1998
between the Company and the Buyers named therein................ Filed Electronically
4.18 Form of Certificate of Designations, Preferences, and
Rights of Series A Convertible Preferred Stock of
Argosy Gaming Company........................................... Filed Electronically
4.19 Form of Warrant to Purchase Common Stock........................ Filed Electronically
4.20 Form of Registration Rights Agreement dated May 29, 1998
between the Company and the Buyers named therein................ Filed Electronically
99 Press Release of the Registrant dated June 16, 1998............. Filed Electronically
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 12, 1998,
by and among Argosy Gaming Company, a Delaware corporation, with headquarters
located at 219 Piasa Street, Alton, Illinois 62002-6232 (the "COMPANY"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("REGULATION D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 ACT");
B. The Company has authorized the following new series of its Preferred
Stock, par value $.01 per share (the "PREFERRED STOCK"): the Company's Series A
Convertible Preferred Stock (the "PREFERRED SHARES"), which shall be convertible
into shares of the Company's Common Stock, par value $.01 per share (the "COMMON
STOCK") (as converted, the "CONVERSION SHARES"), in accordance with the terms of
the Company's Certificate of Designations, Preferences and Rights of the
Preferred Shares, substantially in the form attached hereto as EXHIBIT A (the
"CERTIFICATE OF DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially an aggregate of up to 800 of the Preferred Shares (the
"INITIAL PREFERRED SHARES") in the respective amounts set forth opposite each
Buyer's name on the Schedule of Buyers and one warrant for each Preferred Share
purchased, in substantially the form attached hereto as EXHIBIT E (the
"WARRANT"), to acquire that number of shares of Common Stock (the "WARRANT
SHARES") equal to $500 divided by the Warrant Value (as defined in Section
1(g));
D. Subject to the terms and conditions set forth in this Agreement, each
Buyer has the right to purchase a number of additional Preferred Shares, along
with the related Warrants, equal to up to the sum of (i) the number of Initial
Preferred Shares held by such Buyer on the date which is 270 days after the
Initial Closing Date (as defined in Section 1(b)) and (ii) the number of Initial
Preferred Shares converted by such Buyer at a Conversion Price equal to the
Fixed Conversion Price (each as defined in the Certificate of Designations) of
such Initial Preferred Shares on or prior to the date which is 270 days after
the Initial Closing Date (the "ADDITIONAL PREFERRED SHARES"). In addition,
subject to the terms and conditions set forth in this Agreement, the Company has
the right to cause the Buyers to purchase up to an aggregate of 800 Preferred
Shares, along with the related Warrants, (pro rata based on the number of
Initial Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred
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Shares) (the "PUT PREFERRED SHARES") (the Initial Preferred Shares, the
Additional Preferred Shares and the Put Preferred Shares collectively are
referred to in this Agreement as the "PREFERRED SHARES"). The Preferred
Shares, the Conversion Shares, the Warrants, the Warrant Shares and any
shares of Common Stock (the "REGISTRATION DELAY PAYMENT SHARES") issued as
payment of Registration Delay Payments (as defined in the Registration Rights
Agreement referred to below) are collectively referred to in this Agreement
as the "SECURITIES"; and
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. PURCHASE OF PREFERRED SHARES. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a), the Company shall
issue and sell to the Buyers and the Buyers severally shall purchase from the
Company an aggregate of up to 800 Initial Preferred Shares, along with the
related Warrants, in the respective amounts set forth opposite each Buyer's name
on the Schedule of Buyers (the "INITIAL CLOSING"). Subject to Section 1(h) and
satisfaction (or waiver) of the conditions set forth in Sections 1(c), 6(b) and
7(b), at the option of each Buyer, the Company shall issue and sell to each such
Buyer and each such Buyer shall purchase from the Company at multiple closings,
if applicable, an aggregate of up to that number of Additional Preferred Shares,
along with the related Warrants, equal to the sum of (i) the number of Initial
Preferred Shares held by such Buyer on the date which is 270 days after the
Initial Closing Date, and (ii) the number of Initial Preferred Shares converted
by such Buyer at a Conversion Price equal to the Fixed Conversion Price on or
prior to the date which is 270 days after the Initial Closing Date (the
"ADDITIONAL CLOSINGS"). Subject to Section 1(h) and satisfaction (or waiver) of
the conditions set forth in Sections 1(d), 1(e), 6(c) and 7(c), the Company may
require that each Buyer purchase in the aggregate that number of Put Preferred
Shares, along with the related Warrants, equal to such Buyer's pro rata portion
of up to 800 Preferred Shares (based on the number of Initial Preferred Shares
each Buyer purchased in relation to the total number of Initial Preferred Shares
purchased by the Buyers) in one or two closings (the "PUT CLOSINGS"). The
Initial Closing, the Additional Closings and the Put Closings collectively are
referred to in this Agreement as the "CLOSINGS." The purchase price (the
"PURCHASE PRICE") of each Preferred Share and the related Warrant at each of the
Closings shall be $10,000.
b. THE INITIAL CLOSING DATE. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time within
three (3) business days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the
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Company and the Buyers). The Initial Closing shall occur on the Initial
Closing Date at the offices of Katten Muchin & Zavis, 525 West Monroe Street,
Suite 1600, Chicago, Illinois 60661-3693.
c. THE ADDITIONAL CLOSING DATES. The date and time of each of the
Additional Closings (the "ADDITIONAL CLOSING DATES") shall be 10:00 a.m. Central
Time on the date specified in an Additional Share Notice (as defined below),
subject to satisfaction (or waiver) of the conditions to the Additional Closing
set forth in Sections 6(b) and 7(b) and the conditions set forth in this
paragraph (or such later date as is mutually agreed to by the Company and the
Buyers). During the period (the "BUYER CALL RIGHT PERIOD") beginning on and
including the date which is the earlier of (A) 270 days after the Initial
Closing Date, and (B) the first date on which such Buyer converts any Initial
Preferred Shares at a Conversion Price equal to the Fixed Conversion Price for
such Initial Preferred Shares, and ending on and including the date which is 450
days after the Initial Closing Date, but subject to Section 1(h) and the
requirements of Sections 6(b) and 7(b), each Buyer may purchase Additional
Preferred Shares, along with the related Warrants, by delivering written notice
to the Company (an "ADDITIONAL SHARE NOTICE") at least three business days but
not more than 20 business days prior (an "ADDITIONAL SHARE NOTICE DATE") to the
Additional Closing Date set forth in such Buyer's Additional Share Notice. Each
Additional Share Notice shall set forth (i) the number of Additional Preferred
Shares, along with the related Warrants, to be purchased by such Buyer at the
Additional Closing, (ii) the aggregate Purchase Price for such Additional
Preferred Shares and the related Warrants, and (iii) the date selected by the
Buyer for the Additional Closing Date. Notwithstanding the foregoing, no Buyer
shall be entitled to deliver an Additional Share Notice unless on the date of
the delivery of the Additional Share Notice the Closing Bid Price (as defined in
the Certificate of Designations) of the Common Stock is greater than the Closing
Bid Price of the Common Stock on the Initial Closing Date and each Buyer,
including any assignees of such Buyer, may only exercise its right to purchase
Additional Preferred Shares at an aggregate of two Additional Closings. Each
Additional Closing shall occur on the applicable Additional Closing Date at the
offices of Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693.
d. THE PUT CLOSING DATE. The date and time of each Put Closing
(the "PUT CLOSING DATE") shall be 10:00 a.m. Central Time on the date specified
in the Company's Put Share Notice (as defined below), subject to satisfaction
(or waiver) of the conditions to the Put Closing set forth in Sections 6(c) and
7(c) and the conditions set forth in Section 1(e) (or such later date as is
mutually agreed to by the Company and the Buyers). During the period (the
"COMPANY PUT RIGHT PERIOD") beginning on and including the date which is 270
days after the Initial Closing Date and ending on and including the date which
is 450 days after the Initial Closing Date, but subject to Section 1(h), the
requirements of Sections 6(c) and 7(c) and satisfaction of the Put Notice
Conditions (as defined in Section 1(e)), the Company may require each Buyer to
purchase Put Preferred Shares, along with the related Warrants, by delivering
written notice to each of the Buyers (a "PUT SHARE NOTICE") at least 15 business
days but not more than 20 business days (the "PUT SHARE NOTICE DATE") prior to
the Put Closing Date set forth in the Put Share Notice. The Put Share Notice
shall set forth (i) each Buyer's pro rata
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portion (based on the number of Initial Preferred Shares each Buyer purchased
in relation to the total number of Initial Preferred Shares purchased by the
Buyers) of the aggregate number of Put Preferred Shares (which aggregate
number shall not exceed 800 Preferred Shares), along with the related
Warrants, which the Company is requiring each Buyer to purchase at the Put
Closing, (ii) the aggregate Purchase Price for each such Buyer's Put
Preferred Shares and the related Warrants, and (iii) the date selected by the
Company for the Put Closing Date, which Put Closing Date shall be not later
than the date which is 450 days after the Initial Closing Date. Each Put
Closing shall occur on the applicable Put Closing Date at the offices of
Katten Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661-3693. The Initial Closing Date, the Additional Closing Dates and the
Put Closing Dates collectively are referred to in this Agreement as the
"CLOSING DATES."
e. THE PUT NOTICE CONDITIONS. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be entitled to deliver a Put
Share Notice and require the Buyers to purchase the Put Preferred Shares unless,
in addition to the satisfaction (or waiver) of the requirements of Sections 6(c)
and 7(c), all of the following conditions (the "PUT NOTICE CONDITIONS") are
satisfied: (i) the Company's stockholders shall have approved the issuance of
the Conversion Shares and the Warrant Shares on or prior to the Put Share Notice
Date; (ii) during the period beginning on and including the date which is 60
business days prior to the Put Closing Date and ending on and including the Put
Closing Date, the registration statement (the "REGISTRATION STATEMENT") covering
the resale of the Conversion Shares and Warrant Shares (as defined in Section
2(a)) has been declared effective by the SEC and at all times has been effective
and available for the sale of no less than 125% of the sum of (A) the number of
Conversion Shares then issuable upon the conversion of all outstanding Preferred
Shares and the Put Preferred Shares to be issued by the Company, (B) the number
of Warrant Shares then issuable upon exercise of all outstanding Warrants and
the Warrants to be issued in connection with the Put Preferred Shares, and (C)
the number of Conversion Shares and Warrant Shares that are then held by the
Buyers; (iii) during the period beginning on the Initial Closing Date and ending
on and including the Put Closing Date, the Common Stock is listed on The New
York Stock Exchange, Inc. ("NYSE") and has not been suspended from trading at
any time during such period (excluding suspensions of not more than one day
resulting from business announcements), has not been delisted at any time during
such period, nor is there any pending or threatened delisting or suspension;
(iv) no event constituting a Major Transaction (as defined in Section 3(c) of
the Certificate of Designations), including an agreement to consummate a Major
Transaction, or a Triggering Event (as defined in Section 3(d) of the
Certificate of Designations) shall have occurred nor shall any pending event
which would constitute a Major Transaction have been publicly disclosed from the
period beginning on and including the Initial Closing Date and ending on and
including the Put Closing Date; (v) on each day during the period beginning on
and including the date which is 20 business days prior to the Put Closing Date
and ending on and including the Put Closing Date, the Closing Bid Price of the
Common Stock is not less than the Fixed Conversion Price for the Initial
Preferred Shares on the Initial Closing Date; (vi) on each trading day during
the period beginning on and including the Put Share Notice Date and ending on
and including the Put Closing Date, the Floating Conversion Price (as defined in
the Certificate of Designations) is not less than 90% of the Floating
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Conversion Price on the Put Share Notice Date; (vii) during the period
beginning on the Initial Closing Date and ending on and including the Put
Closing Date, the Company shall have delivered Conversion Shares upon
conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants to the Buyers on a timely basis as set forth in Section 2(f)(ii) of
the Certificate of Designations and Sections 2(a) and 2(b) of the Warrants,
respectively; and (viii) not more than one other Put Closing Date shall have
occurred previously.
f. FORM OF PAYMENT. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to the Company for the Preferred Shares and the
related Warrants to be issued and sold to such Buyer at the respective Closing,
by wire transfer of immediately available funds in accordance with the Company's
written wire instructions; and (ii) the Company shall deliver to each Buyer (A)
stock certificates (in the denominations as such Buyer shall request) (the
"STOCK CERTIFICATES") representing such number of Preferred Shares which such
Buyer is then purchasing, and (B) the related Warrants which the Buyer is then
purchasing at the respective Closing, duly executed on behalf of the Company and
registered in the name of such Buyer or its designee.
g. WARRANTS. In connection with the purchase of Preferred Shares
pursuant to this Agreement, the Buyers shall also receive one Warrant for each
Preferred Share purchased to acquire that number of Warrant Shares equal to $500
divided by the Warrant Value. For purposes of the Initial Closing, "WARRANT
VALUE" shall mean $1.366997 For purposes of the Additional Closings and the Put
Closings, "WARRANT VALUE" shall mean the value of the Warrant as of the
applicable Closing Date as determined by use of the Black-Scholes valuation
model or by use of such other valuation model as the parties shall mutually
agree upon. The determination of the Warrant Value shall be made by Buyers of a
majority of the Preferred Shares to be purchased at the Additional Closing or
Put Closing, as the case may be, subject to the Company's right to object as
described below. Such Buyers shall notify the Company in writing of such
Warrant Value (i) for an Additional Closing, in the Additional Share Notice, or
(ii) for a Put Closing, at least five business days prior to the Put Closing
Date set forth in the Put Share Notice. If the Company does not object in
writing to such Buyers' determination of the Warrant Value within two business
days after receipt of written notice of such Buyers' determination, then the
Warrant Value on the applicable Closing Date shall be the Warrant Value
determined by such Buyers. If the Company objects in writing to such Buyers'
determination of the Warrant Value and the parties cannot agree on the Warrant
Value within one business day of the Buyers' receipt of the Company's notice of
objection, then the Company shall immediately submit the disputed Warrant Value
determination to Salomon Smith Barney (or any successor thereto) or to another
independent, reputable investment bank acceptable to the Buyers of a majority of
the Preferred Shares being purchased at the applicable Closing. Such investment
bank's determination shall be binding upon all parties absent manifest error.
No Additional Closing or Put Closing shall occur until the Warrant Value with
respect to such Closing shall have been determined in the manner described
above.
h. LIMITATIONS ON ADDITIONAL PREFERRED SHARES AND PUT PREFERRED
SHARES. Notwithstanding anything contained in this Agreement to the contrary,
the total number of
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Preferred Shares issued by the Company at all Additional Closings and Put
Closings shall not exceed 800 Preferred Shares in the aggregate. In
addition, the total number of Preferred Shares purchased by any Buyer at all
Additional Closings and Put Closings shall not in the aggregate exceed the
number of Initial Preferred Shares purchased by such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the Preferred
Shares and the Warrants, (ii) upon conversion of the Preferred Shares, will
acquire the Conversion Shares then issuable, and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations
herein, such Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. INFORMATION. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer's right to rely on the Company's representations and
warranties contained in Sections 3 and 9(m). Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Securities.
e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the
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investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
f. TRANSFER OR RESALE. Such Buyer understands that, except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that the Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) such Buyer
provides the Company with reasonable assurance that the Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or
a successor rule thereto)("RULE 144"); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. LEGENDS. Such Buyer understands that the certificates or other
instruments representing the Preferred Shares and the Warrants and, until such
time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder
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provides the Company with an opinion of counsel, in a generally acceptable
form, to the effect that a public sale, assignment or transfer of such
Securities may be made without registration under the 1933 Act, or (iii) such
holder provides the Company with reasonable assurances that such Securities
can be sold without restriction pursuant to Rule 144(k). Each Buyer
acknowledges, covenants and agrees to sell the Securities represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of
counsel that such sale is exempt from registration required by Section 5 of
the 1933 Act.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is
a valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles
of equity and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of that country or
jurisdiction specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in SCHEDULE 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the
Certificate of Designations.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Warrants, the Registration Rights Agreement, and
the Irrevocable Transfer Agent Instructions (as defined in Section 5) and each
of the other agreements entered into by the
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parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue the
Securities in accordance with the terms hereof and thereof; (ii) the
execution and delivery of the Transaction Documents and the Certificate of
Designations by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance
of the Preferred Shares and the Warrants and the reservation for issuance and
the issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise, as the case may be) have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, except
for, if required by NYSE, approval by its stockholders prior to the issuance
of a number of shares of Common Stock equal to or in excess of 20% of the
number of shares of Common Stock outstanding immediately prior to the Initial
Closing Date; (iii) the Transaction Documents have been duly executed and
delivered by the Company; (iv) the Transaction Documents constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies; and
(v) prior to each of the Closing Dates, the Certificate of Designations will
have been filed with the Secretary of State of the State of Delaware and will
be in full force and effect, enforceable against the Company in accordance
with its terms.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of (i) 60,000,000 shares of Common Stock, of which
as of the date hereof, 24,498,333 shares were issued and outstanding, 2,550,000
shares are issuable and reserved for issuance pursuant to the Company's stock
option and purchase plans and 6,497,175 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock; (ii) 10,000,000 shares of Preferred Stock, of which as of the date
hereof, none were issued and outstanding; and (iii) 85 shares of redeemable
common stock, of which as of the date hereof, none were issued and outstanding.
All of such outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable. Except as disclosed in SCHEDULE
3(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company; (ii) there are no outstanding debt securities; (iii)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement); (v) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
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any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its Subsidiaries is or may become bound to redeem a security of the Company
or any of its Subsidiaries; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; and (vii) the
Company does not have any stock appreciation rights or "phantom stock" plans
or agreements or any similar plan or agreement. The Company has furnished to
the Buyers true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Preferred Shares and the Warrants
are duly authorized and, upon issuance in accordance with the terms hereof,
shall be (i) validly issued, fully paid and non-assessable, (ii) free from all
taxes, liens and charges with respect to the issue thereof and (iii) entitled to
the rights and preferences set forth in the Certificate of Designations and the
Warrants. 6,000,000 shares of Common Stock (subject to adjustment pursuant to
the Company's covenant set forth in Section 4(f) below) have been duly
authorized and reserved for issuance upon conversion of the Preferred Shares and
upon exercise of the Warrants. Upon conversion or exercise in accordance with
the Certificate of Designations or the Warrants (as the case may be) the
Conversion Shares and the Warrant Shares, and upon issuance the Registration
Delay Payment Shares, will be validly issued, duly listed, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Subject to the truth and accuracy of each Buyer's
representations and warranties as to factual matters set forth in Section 2, the
issuance by the Company of the Securities is exempt from registration under the
1933 Act.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the Warrants and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares and the Warrant
Shares) will not (i) result in a violation of the Certificate of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of Preferred Stock of the Company or the By-laws; (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party; or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected. Except as disclosed in SCHEDULE 3(e), neither the Company nor its
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Subsidiaries is in violation of any term of or in default under (x) its
Certificate of Incorporation, any Certificate of Designation, Preferences and
Rights of any outstanding series of Preferred Stock or By-laws or their
organizational charter or by-laws, respectively, or (y) any material
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company
or its Subsidiaries. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law,
ordinance or regulation of any governmental entity, except for any violations
which individually or in the aggregate will not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or governmental agency or any regulatory or self-regulatory agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or the Certificate of Designations
in accordance with the terms hereof or thereof. Except as disclosed in
SCHEDULE 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Management Employees (as defined below) of the Company and its
Subsidiaries have no knowledge of any facts or circumstances which might give
rise to any of the foregoing. The Company is not in violation of the listing
requirements of NYSE as in effect on the date hereof and on each of the
Closing Dates and is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by NYSE in the foreseeable
future. "MANAGEMENT EMPLOYEES" shall mean the officers and directors of the
Company and each of its Subsidiaries and the general managers of its casinos.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1996,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly
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present in all material respects the financial position of the Company as of
the dates thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or on behalf
of the Company to the Buyers which is not included in the SEC Documents,
including, without limitation, information referred to in Section 2(d) of
this Agreement, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made, not
misleading. Neither the Company nor any of its Subsidiaries or any of their
officers, directors or employees have provided the Buyers with any material,
nonpublic information.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(g) or the SEC Documents filed on EDGAR at least five business days prior to
the date hereof, since December 31, 1997, there has been no material adverse
change and no material adverse development in the business, properties,
operations, financial condition, liabilities or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor do the Management Employees of the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Management Employees of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or
directors in their capacities as such which could result in a judgment, decree
or order having a Material Adverse Effect, except as expressly set forth in
SCHEDULE 3(h) or as specifically disclosed in the SEC Documents filed on EDGAR
at least five business days prior to the date hereof.
i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF PREFERRED SHARES.
The Company acknowledges and agrees that each of the Buyers is acting solely in
the capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges
that each Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
Certificate of Designations and the transactions contemplated thereby and any
advice given by any of the Buyers or any of their respective representatives or
agents in connection with the Transaction Documents and the Certificate of
Designations and the transactions contemplated thereby is merely incidental to
such Buyer's purchase of the Securities. The Company further represents to each
Buyer that the Company's decision to enter into the Transaction Documents has
been based solely on the independent evaluation by the Company and its
representatives.
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No event, liability, development or circumstance has occurred or
exists with respect to the Company
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or its Subsidiaries or their respective business, properties, operations or
financial condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement filed with the
SEC relating to the issuance and sale by the Company of its Common Stock and
which has not been publicly disclosed.
k. NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of NYSE, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Management Employees of the Company or any of its Subsidiaries,
is any such dispute threatened. Except as disclosed in SCHEDULE 3(m), neither
the Company nor any of its Subsidiaries is a party to a collective bargaining
agreement. To the knowledge of the Management Employees of the Company and its
Subsidiaries, relations between the Company and its employees are generally
good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
n. INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(n), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement. The Management
Employees of the Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service mark registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secret or
technical information by others and, except as set forth on SCHEDULE 3(n), there
is no
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claim, action or proceeding being made or brought against, or to the
Management Employees of the Company's knowledge, being threatened against,
the Company or its Subsidiaries regarding trademarks, trade name rights,
patents, patent rights, inventions, copyrights, licenses, service names,
service marks, service mark registrations, trade secrets or other
infringement; and the Management Employees of the Company and its
Subsidiaries have no knowledge of any facts or circumstances which might give
rise to any of the foregoing. The Management Employees of the Company and
its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties.
o. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are
in compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all material permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance in all material respects with all terms and conditions of any
such permit, license or approval.
p. TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(p) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
r. REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses the failure of which to have would individually or in the aggregate
have a Material Adverse Effect, and neither the
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Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or a material modification of any such
certificate, authorization or permit.
s. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
t. GAMING LAWS. Except as set forth in SCHEDULE 3(t), no Buyer
will be subject to the regulation of any gaming commission or to any gaming
laws, rules or regulations based solely on its purchase of the Securities or its
status as a holder of the Securities.
u. TAX STATUS. Except as set forth on SCHEDULE 3(u), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except as
disclosed in SCHEDULE 3(u), there are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
v. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(v) and
in the SEC Documents filed on EDGAR at least five business days prior to the
date hereof and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on SCHEDULE 3(c), none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Management Employees of the Company, any corporation, partnership, trust or
other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
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w. DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the
Preferred Shares will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion
of the Preferred Shares in accordance with this Agreement and the Certificate
of Designations is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
x. NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. FORM D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all filings and reports relating to
the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following each of the Closing
Dates.
c. REPORTING STATUS. Until the earlier of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto); or (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares, and (B) none
of the Preferred Shares or Warrants is outstanding (the "REGISTRATION PERIOD");
the Company (I) shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and (II) except as a result of a Major Transaction
(provided that the Company has complied with Sections 2(d)(iv) and 3(g) of the
Certificate of Designations and Section 9(f) of the Warrants), shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would otherwise
permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Shares and the Warrants for general corporate purposes.
e. FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration
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Period: (i) within five days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any
Current Reports on Form 8-K and any registration statements or amendments
(other than on Form S-8) filed pursuant to the 1933 Act; (ii) on or prior to
the next business day after the release thereof, facsimile copies of all
press releases issued by the Company or any of its Subsidiaries, and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares
(without regard to any limitations on conversions).
g. RIGHT OF FIRST REFUSAL. Subject to the exceptions described
below, the Company and its Subsidiaries (other than the Indiana Gaming Company,
L.P.) shall not negotiate or contract with any party for any equity financing
(including any debt financing with an equity component) or issue any equity
securities of the Company or any Subsidiary (other than the Indiana Gaming
Company, L.P.) or securities convertible or exchangeable into or for equity
securities of the Company or any Subsidiary (other than the Indiana Gaming
Company, L.P.) (including debt securities with an equity component) in any form
("FUTURE OFFERING") during the period beginning on the date hereof and ending on
and including the date which is 365 days after the Initial Closing Date (or, if
there has been a Put Closing, then the date which is 210 days after the latest
Put Closing Date), unless it shall have first delivered to each Buyer or a
designee appointed by such Buyer written notice (the "FUTURE OFFERING NOTICE")
describing the proposed Future Offering, including the terms and conditions
thereof, and providing each Buyer an option to purchase up to its Aggregate
Percentage (as defined below), as of the date of delivery of the Future Offering
Notice, in the Future Offering (the limitation referred to in this sentence is
referred to as the "CAPITAL RAISING LIMITATION"). For purposes of this Section
4(g), "AGGREGATE PERCENTAGE" at any time with respect to any Buyer shall mean
the percentage obtained by dividing (i) the aggregate number of Preferred Shares
purchased by such Buyer at the Closings by (ii) the aggregate number of
Preferred Shares purchased by all Buyers at the Closings. A Buyer can exercise
its option to participate in a Future Offering by delivering written notice
thereof to participate to the Company within ten business days of receipt of a
Future Offering Notice, which notice shall state the quantity of securities
being offered in the Future Offering that such Buyer will purchase, up to its
Aggregate Percentage, and that number of securities it is willing to purchase in
excess of its Aggregate Percentage. In the event that one or more Buyers fail
to elect to purchase up to each such Buyer's Aggregate Percentage then each
Buyer which has indicated that it is willing to purchase a number of securities
in excess of its Aggregate Percentage shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the preceding sentence)
of the securities in the Future Offering which one or more Buyers have not
elected to purchase. In the event the Buyers fail to elect to fully participate
in the Future Offering within the periods described in this Section 4(g), the
Company shall have 60 days thereafter to sell the securities of the Future
Offering respecting which such Buyer's rights were not exercised, upon terms and
conditions no more favorable to
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the purchasers thereof than specified in the Future Offering Notice. In the
event the Company has not sold such securities of the Future Offering within
such 60 day period, the Company shall not thereafter issue or sell such
securities without first offering such securities to the Buyers in the manner
provided in this Section 4(g). The Capital Raising Limitation shall not
apply to (i) a loan from a commercial bank; (ii) any transaction involving
the Company's issuances of securities (A) as consideration in a merger or
consolidation, (B) in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or (C)
as consideration for the acquisition of a business, product or license or
other assets by the Company; (iii) the issuance of Common Stock in a firm
commitment, underwritten public offering; (iv) the issuance of Common Stock
at fair market value to Indiana Gaming Company L.P.; (v) the issuance of
securities upon exercise or conversion of the Company's options, warrants or
other convertible securities outstanding as of the date hereof, or (vi) the
grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option plan, restricted stock plan, stock
purchase plan or other plan or written compensation contract for the benefit
of the Company's employees or directors. The Buyers shall not be required to
participate or exercise their right of first refusal with respect to a
particular Future Offering in order to exercise their right of first refusal
with respect to later Future Offerings.
h. LISTING. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system (including
The Nasdaq SmallCap Market and the Nasdaq National Market), if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance)
and shall maintain, so long as any other shares of Common Stock shall be so
listed, such listing of all Registrable Securities from time to time issuable
under the terms of the Transaction Documents and the Certificate of
Designations. The Company shall maintain the Common Stock's authorization for
listing on The Nasdaq SmallCap Market, the Nasdaq National Market or NYSE.
Neither the Company nor any of its Subsidiaries shall take any action which may
result in the delisting or suspension of the Common Stock on The Nasdaq SmallCap
Market, the Nasdaq National Market or NYSE (other than to switch listings from
The Nasdaq SmallCap Market to the Nasdaq National Market or NYSE, from the
Nasdaq National Market to NYSE or from NYSE to The Nasdaq National Market). The
Company shall promptly provide to each Buyer copies of any notices it receives
from The Nasdaq SmallCap Market, the Nasdaq National Market or NYSE regarding
the continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(h).
i. EXPENSES. Subject to Section 9(l) below, following the Initial
Closing, the Company shall reimburse the Buyers for the Buyers' expenses
(including attorneys' fees and expenses) in connection with negotiating and
preparing the Transaction Documents and consummating the transactions
contemplated thereby up to an aggregate of $35,000. In addition, the Company
will reimburse any of the initial Buyers listed on the Schedule of Buyers
(including the equityholders, officers, directors and employees of such Buyer)
for all costs of any investigation by, any filing with or preparation for any
filing with any gaming commission
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concerning the suitability or licensing of such Buyer (or equityholder,
officer, director or employee of such Buyer). The Company shall reimburse
such Buyer (or equityholder, officer, director or employee of such Buyer)
promptly as such costs are incurred and are due and payable. Notwithstanding
the foregoing, such Buyer will repay the Company for any such costs which the
Company has previously reimbursed to such Buyer to the extent there has been
a final, unappealable determination of unsuitability with respect to any
principal, manager, officer or director of such Buyer; and thereafter the
Company will have no further obligation to reimburse such Buyer for costs
relating to the particular investigation which resulted in such final,
unappealable determination of unsuitability.
j. Intentionally omitted.
k. FILING OF FORM 8-K. On or before the second business day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
l. PROXY STATEMENT. If on any date (a "PROXY STATEMENT TRIGGER
DATE") after the Initial Closing Date the average of the Closing Bid Prices of
the Common Stock for the five consecutive trading days immediately preceding
such date is equal to or less than $2.75, subject to adjustment for stock
splits, stock dividends, recapitalizations and reclassifications, then the
Company shall provide each stockholder entitled to vote at the next meeting of
stockholders of the Company, which meeting shall not be later than 75 days after
the Proxy Statement Trigger Date (the "STOCKHOLDER MEETING DEADLINE"), a proxy
statement, which has been previously reviewed by the Buyers and a counsel of
their choice, soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in this Agreement, and the Company shall use its best
efforts to solicit its stockholders' approval of such issuance of the Securities
and cause the Board of Directors of the Company to recommend to the stockholders
that they approve such proposal. Such proxy statement shall not seek approval
of any matters other than the approval described in the preceding sentence and
the election of directors. If the Company fails to hold a meeting of its
stockholders by the Stockholder Meeting Deadline (unless such failure is the
result solely of the actions of the Buyers), then, as partial relief (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each holder of Preferred Shares an amount in
cash per Preferred Share equal to the product of (i) $10,000; multiplied by (ii)
.025; multiplied by (iii) the quotient of (x) the number of days after the
Stockholder Meeting Deadline that a meeting of the Company's stockholders is not
held, divided by (y) 30. The Company shall make the payments referred to in the
immediately preceding sentence within five days of the earlier of (I) the
holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments, and (II) the last day of each
30-day period beginning on the Stockholder Meeting deadline. In the event the
Company fails to make such payments in a timely manner, such payments shall bear
interest at the rate of 2.0% per month (pro rated for partial months) until paid
in full. Notwithstanding the provisions of this
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Section 4(l), on or prior to a Put Share Notice Date, the Company's
stockholders shall have approved the issuance of the Securities.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Preferred Shares or exercise of the
Warrants, as the case may be (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS").
Prior to registration of the Conversion Shares and the Warrant Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company shall acknowledge Conversion
Notices with respect to the Preferred Shares and Subscription Notices with
respect to the Warrants, as applicable, and in such acknowledgement shall
appropriately instruct its transfer agent as to whether or not the Conversion
Shares or Warrant Shares to be issued pursuant to the Conversion Notice or
Subscription Notice, as the case may be, shall bear the restrictive legend
specified in Section 2(g). After the registration of the Conversion Shares and
the Warrant Shares under the 1933 Act, the Company shall acknowledge Conversion
Notices and Subscription Notices, as applicable, and in such acknowledgement
shall direct its transfer agent to not place the restrictive legend on the
Conversion Shares or Warrant Shares, as the case may be, by marking the "Without
Restrictive Legend" box on the Conversion Notice or Subscription Notice.
Nothing in this Section 5 shall in any way affect the Company's obligation to
deliver Conversion Shares pursuant to Section 2(f) of the Certificate of
Designations or Warrant Shares pursuant to Section 2 of the Warrant. The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions and the instructions regarding the restrictive legend referred to
in this Section 5, and other than stop transfer instructions permitted by the
Irrevocable Transfer Agent Instructions or to give effect to Section 2(f) (in
the case of the Conversion Shares and the Warrant Shares, prior to registration
of the Conversion Shares and the Warrant Shares under the 1933 Act) will be
given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section 5 shall affect in any way each Buyer's obligations and
agreements set forth in Section 2(g) to comply with all applicable prospectus
delivery requirements, if any, upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
that registration of a resale by such Buyer of any of such Securities is not
required under the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares or the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this
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Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. INITIAL CLOSING DATE. The obligation of the Company hereunder
to issue and sell the Initial Preferred Shares and the related Warrants to each
Buyer at the Initial Closing is subject to the satisfaction, at or before the
Initial Closing Date, of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Each Buyer shall have executed each of this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed with the
Secretary of State of the State of Delaware.
(iii) All of the Buyers shall have delivered to the Company the
Purchase Price for the Preferred Shares and the related Warrants being
purchased by the Buyers at the Initial Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
(iv) The representations and warranties of each Buyer shall be true
and correct as of the date when made and as of the Initial Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Initial Closing Date.
b. ADDITIONAL CLOSING DATES. The obligation of the Company
hereunder to issue and sell the Additional Preferred Shares and the related
Warrants to the applicable Buyer at each of the Additional Closings is subject
to the satisfaction, at or before the respective Additional Closing Date, of
each of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have complied with the requirements of Section
1(c).
(ii) Such Buyer shall have delivered to the Company the Purchase
Price for the Additional Preferred Shares and the related Warrants being
purchased by such Buyer at the Additional Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by
the Company.
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(iii) The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such
Buyer shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at or
prior to the Additional Closing Date.
c. PUT CLOSING DATE. The obligation of the Company hereunder to
issue and sell the Put Preferred Shares and the related Warrants to each Buyer
at each Put Closing is subject to the satisfaction, at or before the Put Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase
Price for the Put Preferred Shares and the related Warrants being purchased
by such Buyer at the Put Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer shall be true
and correct in all material respects as of the date when made and as of the
Put Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Transaction Documents
to be performed, satisfied or complied with by such Buyer at or prior to
the Put Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. INITIAL CLOSING DATE. The obligation of each Buyer hereunder
to purchase the Initial Preferred Shares and the related Warrants at the Initial
Closing is subject to the satisfaction, at or before the Initial Closing Date,
of each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designations, shall have been filed with the
Secretary of State of the State of Delaware, and a copy thereof certified
by such Secretary of State shall have been delivered to such Buyer.
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(iii) The Common Stock shall be authorized for quotation on The
Nasdaq SmallCap Market or the Nasdaq National Market or listing on NYSE,
trading in the Common Stock issuable upon conversion of the Initial
Preferred Shares to be traded on The Nasdaq SmallCap Market, the Nasdaq
National Market or NYSE shall not have been suspended by the SEC, The
Nasdaq Stock Market, Inc. or NYSE and all of the Conversion Shares issuable
upon conversion of the Initial Preferred Shares to be sold at the Initial
Closing shall be listed upon The Nasdaq SmallCap Market, the Nasdaq
National Market or NYSE.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Initial Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents or Certificate of Designations to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Initial Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer including, without limitation,
an update as of the Initial Closing Date regarding the representation
contained in Section 3(c) above.
(v) Such Buyer shall have received the opinion of Winston & Strawn
dated as of the Initial Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
EXHIBIT C attached hereto; and such Buyer shall have received the opinion
of Donald J. Malloy, Esq. dated as of the Initial Closing Date, in form,
scope and substance reasonably satisfactory to such Buyer and in
substantially the form of EXHIBIT F.
(vi) The Company shall have executed and delivered to such Buyer (i)
the Stock Certificates (in such denominations as such Buyer shall request)
for the Initial Preferred Shares, and (ii) the Warrants being purchased by
such Buyer at the Initial Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares and exercise of the
Warrants, at least 6,000,000 shares of Common Stock.
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(ix) The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within ten
days of the Initial Closing Date.
(xi) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies of
its Certificate of Incorporation and (C) By-laws, each as in effect at the
Initial Closing.
(xii) The Company shall have delivered to such Buyer a certified copy
of its Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within ten days of the Initial Closing Date.
(xiii) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Initial Closing
Date.
(xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
b. ADDITIONAL CLOSING DATES. The obligation of each Buyer
hereunder to purchase the Additional Preferred Shares and the related Warrants
at each of the Additional Closings is subject to the satisfaction, at or before
the Additional Closing Dates, of each of the following conditions, provided that
these conditions are for each Buyer's sole benefit and may be waived by such
Buyer at any time in its sole discretion:
(i) The Certificate of Designations shall be in full force and
effect and shall not have been amended since the Initial Closing Date, and
a copy thereof certified by the Secretary of State of the State of Delaware
shall have been delivered to such Buyer.
(ii) The Common Stock shall be authorized for quotation on The
Nasdaq SmallCap Market or the Nasdaq National Market or listing on NYSE,
trading in the Common Stock issuable upon conversion of the Additional
Preferred Shares to be traded on The Nasdaq SmallCap Market, the Nasdaq
National Market or NYSE shall not have been suspended by the SEC, The
Nasdaq Stock Market, Inc. or NYSE and all of the Conversion Shares issuable
upon conversion of the Additional Preferred Shares to be sold at the
Additional Closing shall be listed upon The Nasdaq SmallCap Market, the
Nasdaq National Market or NYSE.
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(iii) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the respective Additional
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents or the Certificate of
Designations to be performed, satisfied or complied with by the Company at
or prior to the respective Additional Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of such Additional Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of such Additional Closing Date
regarding the representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of Winston & Strawn
dated as of such Additional Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
EXHIBIT C attached hereto; and such Buyer shall have received the opinion
of Donald J. Malloy, Esq. dated as of such Additional Closing Date, in
form, scope and substance reasonably satisfactory to such Buyer in
substantially the form of EXHIBIT F.
(v) The Company shall have executed and delivered to such Buyer (i)
the Stock Certificates (in such denominations as such Buyer shall request)
for the Additional Preferred Shares, and (ii) the Warrants being purchased
by such Buyer at the Additional Closing.
(vi) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
(vii) As of such Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Preferred Shares and exercise of
the Warrants, a number of shares of Common Stock equal to at least 150% of
the number of shares of Common Stock which would be issuable upon
conversion or exercise in full of the then outstanding Preferred Shares and
Warrants, as the case may be, including for such purposes the Additional
Preferred Shares and Warrants to be issued at such Additional Closing.
(viii) The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT D attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in the state of such corporation's state of incorporation issued
by the Secretary of State of such state of incorporation as of a date
within ten days of such Additional Closing Date.
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<PAGE>
(x) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies of
its Certificate of Incorporation and (C) By-laws, each as in effect at the
Additional Closing.
(xi) The Company shall have delivered to such Buyer a certified copy
of its Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within ten days of the Additional Closing Date.
(xii) During the period beginning on the Additional Share Notice Date
and ending on and including the Additional Closing Date, the Company shall
have delivered Conversion Shares upon conversion of the Preferred Shares
and the Warrant Shares upon exercise of the Warrants to the Buyers on a
timely basis as set forth in Section 2(f)(ii) of the Certificate of
Designations and Sections 2(a) and 2(b) of the Warrants, respectively.
(xiii) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Additional Closing
Date.
(xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
c. PUT CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Put Preferred Shares and the related Warrants at each Put Closing
is subject to the satisfaction, at or before the applicable Put Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(i) The Company shall have complied with the requirements of
Section 1(d) and all of the Put Notice Conditions set forth in Section 1(e)
shall have been satisfied.
(ii) The Certificate of Designations, shall be in full force and
effect and shall not have been amended since the Initial Closing Date, and
a copy thereof certified by the Secretary of State of the State of Delaware
shall have been delivered to such Buyer.
(iii) The Common Stock shall be authorized for listing on NYSE,
trading in the Common Stock issuable upon conversion of the Put Preferred
Shares to be traded on The Nasdaq SmallCap Market, the Nasdaq National
Market or NYSE shall not have been suspended by the SEC, The Nasdaq
SmallCap Market, The Nasdaq Stock Market, Inc. or NYSE and all of the
Conversion Shares issuable upon conversion of the Put Preferred Shares to
be sold at the Put Closing shall be listed upon The Nasdaq SmallCap Market,
the Nasdaq National Market or NYSE.
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(iv) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 3, in which case such representations and warranties shall be true
and correct without further qualification) as of the date when made and as
of the Put Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents or the Certificate of Designations to be performed,
satisfied or complied with by the Company at or prior to the Put Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Put Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of the
Put Closing Date regarding the representation contained in Section 3(c)
above.
(v) Such Buyer shall have received the opinion of Winston & Strawn
dated as of the Put Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of EXHIBIT C; and
such Buyer shall have received the opinion of Donald J. Malloy, Esq. dated
as of such Put Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer in substantially the form of EXHIBIT F.
(vi) The Company shall have executed and delivered to such Buyer (i)
the Stock Certificates (in such denominations as such Buyer shall request)
for the Put Preferred Shares, and (ii) the Warrants being purchased by such
Buyer at the Put Closing.
(vii) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
(viii) As of the Put Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Preferred Shares and exercise of the
Warrants, a number of shares of Common Stock equal to at least 150% of the
number of shares of Common Stock which would be issuable upon conversion or
exercise in full of the then outstanding Preferred Shares and the Warrants,
respectively, including for such purposes the Put Preferred Shares and the
Warrants to be issued at such Put Closing.
(ix) The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT D, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
(x) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
Subsidiary in the state of such corporation's state of incorporation issued
by the Secretary of State of
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such state of incorporation as of a date within ten days of the Put
Closing Date.
(xi) The Company shall have delivered to such Buyer a certified copy
of its Certificate of Incorporation as certified by the Secretary of State
of the State of Delaware within ten days of the Put Closing Date.
(xii) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (A) the Resolutions, (B) certified copies of
its Certificate of Incorporation and (C) By-laws, each as in effect at the
Put Closing.
(xiii) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Put Closing Date.
(xiv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
d. FAILURE TO PURCHASE PUT PREFERRED SHARES. If the Put Notice
Conditions and the conditions set forth in Section 7(c) are satisfied and a
Buyer fails to purchase the required Preferred Shares on a Put Closing Date,
then (i) the Fixed Conversion Price for any unconverted Preferred Shares held by
such Buyer will be reset to the higher of (A) the Fixed Conversion Price in
effect immediately prior to the scheduled Put Closing Date, or (B) the Fixed
Conversion Price calculated on the scheduled Put Closing Date based on the
average Closing Bid Price of the Common Stock for the five consecutive trading
days immediately prior to the scheduled Put Closing Date; and (ii) such Buyer
shall not be able to exercise its right to purchase Additional Preferred Shares
until the breach is cured.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Designations, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the forgoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or the Certificate of Designations or any
other certificate, instrument or document contemplated hereby or thereby, (b)
any breach
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of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or the Certificate of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee (other
than a cause of action, suit or claim which (i) is brought or made by the
Company and (ii) is not a shareholder derivative suit) and arising out of or
resulting from the execution, delivery, performance, breach or enforcement of
the Transaction Documents or the Certificate of Designations, (d) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (e) the
status of such Buyer or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which
is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-exclusive jurisdiction of the state and federal courts sitting in the
City of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
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c. HEADINGS. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares and
the Conversion Shares held by holders or former holders of the Preferred Shares
(determined on an as converted to Common Stock basis at the time of such
determination) then outstanding, and no provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Preferred Shares then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents or
the Certificate of Designations unless the same consideration also is offered to
all of the parties to the Transaction Documents or holders of the Preferred
Shares, as the case may be.
f. NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically generated and kept on
file by the sending party); or (iii) upon receipt, when delivered by a delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002-6232
Telephone: (618) 474-7500
Facsimile: (618) 474-7636
Attention: President
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<PAGE>
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 558-5600
Facsimile: (312) 558-5700
Attention: Joseph A. Walsh, Jr.
If to the Transfer Agent:
Harris Trust & Savings Bank
311 West Monroe Street
Chicago, Illinois 60606
Facsimile: (312) 765-8052
Attention: Carl Anderson
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five days' prior written notice to the other party
of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of two-thirds of the Preferred Shares then
outstanding, including by merger or consolidation. A Buyer may assign some or
all of its rights hereunder without the consent of the Company; provided,
however, that any such assignment shall not release such Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption, and that any such
assignment is subject to all applicable gaming laws, rules and regulations of
the jurisdictions in which the Company or one of its Subsidiaries is licensed.
Notwithstanding anything to the contrary contained in the Transaction Documents,
each Buyer shall be entitled to pledge the Securities in connection with a bona
fide margin account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive each
of the Closings, subject to the limitations set forth in
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<PAGE>
Section 8. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Initial Closing shall
not have occurred with respect to a Buyer on or before three business days
from the date hereof due to the Company's or such Buyer's failure to satisfy
the conditions set forth in Sections 6 and 7 above (and the nonbreaching
party's failure to waive such unsatisfied condition(s)), the nonbreaching
party shall have the option to terminate this Agreement with respect to such
breaching party at the close of business on such date without liability of
any party to any other party; provided, however, that if this Agreement is
terminated pursuant to this Section 9(l), the Company shall remain obligated
to reimburse the non-breaching Buyers for expenses up to the amount described
in Section 4(i).
m. PLACEMENT AGENT. The Company acknowledges that it has engaged
Salomon Smith Barney as placement agent in connection with the sale of the
Preferred Shares and the related Warrants, which placement agent may have
formally or informally engaged other agents on its behalf. The Company shall be
responsible for the payment of any placement agent's fees or brokers commissions
relating to or arising out of the transactions contemplated hereby. The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense
(including, without limitation, attorneys' fees and out of pocket expenses)
arising in connection with any such claim.
n. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. REMEDIES. Each Buyer and each holder of Preferred Shares or
Conversion Shares shall have all rights and remedies set forth in the
Transaction Documents and the Certificate of Designations and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have
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<PAGE>
under any law. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach
of any provision of this Agreement and to exercise all other rights granted
by law.
p. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Certificate of
Designations or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
* * * * * *
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<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
ARGOSY GAMING COMPANY THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By:
------------------------------
Name:
Its: By:
--------------------------------------
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By:
--------------------------------------
Name: James F. O'Brien, Jr.
Its: President
AGR HALIFAX FUND, LTD.
By: AG Ramius Partners, LLC
Its: Investment Advisor
By:
--------------------------------------
Name:
Its: Managing Officer
<PAGE>
[Signature Page to Securities Purchase Agreement - p. 2 of 3]
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By:
---------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By:
--------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By:
--------------------------------------
Name: Michael L. Gordon
Its: Managing Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By:
--------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE>
[Signature Page to Securities Purchase Agreement - p. 3 of 3]
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By:
--------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE PREFERRED STOCK
OF
ARGOSY GAMING COMPANY
Argosy Gaming Company (the "COMPANY"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that, pursuant to authority conferred upon the Board of Directors of the Company
by the Certificate of Incorporation, as amended, of the Company, and pursuant to
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Company at a meeting duly held adopted resolutions (i)
authorizing a series of the Company's previously authorized preferred stock, par
value $.01 per share, and (ii) providing for the designations, preferences and
relative, participating, optional or other rights, and the qualifications,
limitations or restrictions thereof, of One Thousand Six Hundred (1,600) shares
of Series A Convertible Preferred Stock of the Company, as follows:
RESOLVED, that the Company is authorized to issue 1,600 shares of
Series A Convertible Preferred Stock (the "PREFERRED SHARES"), par value
$.01 per share, which shall have the following powers, designations,
preferences and other special rights:
(1) DIVIDENDS. The Preferred Shares shall not bear any dividends.
(2) HOLDER'S CONVERSION OF PREFERRED SHARES. A holder of Preferred
Shares shall have the right, at such holder's option, to convert the Preferred
Shares into shares of the Company's common stock, par value $.01 per share (the
"COMMON STOCK"), on the following terms and conditions:
(a) CONVERSION RIGHT. Subject to the provisions of Section
2(j), at any time or times on or after the Issuance Date (as defined
below), any holder of Preferred Shares shall be entitled to convert any
whole number of Preferred Shares into fully paid and nonassessable shares
(rounded to the nearest whole share in accordance with Section 2(h)) of
Common Stock, at the Conversion Rate (as defined below); provided, however,
that in no event shall any holder be entitled to convert Preferred Shares
in excess of that
<PAGE>
number of Preferred Shares which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares of
Common Stock beneficially owned by the holder and its affiliates shall
include the number of shares of Common Stock issuable upon conversion of
the Preferred Shares with respect to which the determination of such
proviso is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (i) conversion of the remaining,
nonconverted Preferred Shares beneficially owned by the holder and its
affiliates, and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including,
without limitation, any warrants) subject to a limitation on conversion
or exercise analogous to the limitation contained herein beneficially
owned by the holder and its affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 2(a), beneficial
ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. The holder may waive the
foregoing limitations by written notice to the Company upon not less
than 61 days prior notice (with such waiver taking effect only upon the
expiration of such 61 day notice period).
(b) CONVERSION RATE AND OTHER DEFINITIONS. The number of shares
of Common Stock issuable upon conversion of each of the Preferred Shares
pursuant to Sections (2)(a), 2(g) and 5 shall be determined according to
the following formula (the "CONVERSION RATE"):
Conversion Amount
-----------------
Conversion Price
For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
(i) "CONVERSION PRICE" means, as of any Conversion Date (as
defined in Section 2(f)) or other date of determination, the lower of the
Fixed Conversion Price (as defined below) and the Floating Conversion Price
(as defined below), each in effect as of such date and subject to
adjustment as provided herein.
(ii) "FIXED CONVERSION PRICE" means (A) for Preferred Shares
issued on the first Issuance Date of any Preferred Shares, 120% of the
average of the Closing Bid Prices (as defined below) of the Common Stock
for the five consecutive trading days immediately preceding such Issuance
Date; or (B) for all other Preferred Shares, 125% of the average of the
Closing Bid Prices of the Common Stock for the five consecutive trading
days immediately preceding the applicable Issuance Date; subject to
adjustment as provided herein.
(iii) "FLOATING CONVERSION PRICE" means, as of any date
of determination, the amount obtained by multiplying the Conversion
Percentage (as defined
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<PAGE>
below) in effect as of such date by the Market Price (as defined below) of
the Common Stock as of such date.
(iv) "CONVERSION PERCENTAGE" means 100%, subject to
adjustment as provided herein.
(v) "MARKET PRICE" means, with respect to any security for
any date, the average of the five lowest consecutive Closing Bid Prices for
such security during the 30 consecutive trading days immediately preceding
such date.
(vi) "CLOSING BID PRICE" means, for any security as of any
date, the last closing bid price for such security on The New York Stock
Exchange, Inc. ("NYSE") as reported by Bloomberg Financial Markets
("BLOOMBERG"), or, if NYSE is not the principal trading market for such
security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or,
if no closing bid price is reported for such security by Bloomberg, the
last closing trade price of such security as reported by Bloomberg, or, if
no last closing trade price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If
the Closing Bid Price cannot be calculated for such security on such date
on any of the foregoing bases, the Closing Bid Price of such security on
such date shall be the fair market value as mutually determined by the
Company and the holders of a majority of the outstanding Preferred Shares
(including for purposes of this determination any Preferred Shares with
respect to which the Closing Bid Price is being determined). If the
Company and the holders of Preferred Shares are unable to agree upon the
fair market value of the Common Stock, then such dispute shall be resolved
pursuant to Section 2(f)(iii) with the term "Closing Bid Price" being
substituted for the term "Market Price." (All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during any period for which the Closing Bid Price is being
determined).
(vii) "N" means the number of days from, but excluding,
the Issuance Date through and including the Conversion Date for the
Preferred Shares for which conversion is being elected.
(viii) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(ix) "CONVERSION AMOUNT" means the sum of (A) the
Additional Amount (as defined below), provided that the Company has not
elected to pay the Additional Amount in cash as described in Section 2(l),
and (B) the Stated Value (as defined below).
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<PAGE>
(x) "ADDITIONAL AMOUNT" means the result of the following
formula: (Dividend Rate)(N/365)(Stated Value).
(xi) "DIVIDEND RATE" means .04; provided, however,
that, subject to the satisfaction of the Dividend Elimination Conditions
described below, the Dividend Rate with respect to a Preferred Share shall
be 0.00 beginning on the next trading day following any date (A) which is
on or after the twenty-first trading day following the Issuance Date of
such Preferred Share, and (B) on which the average of the Closing Bid
Prices for the Common Stock for the 20 consecutive trading days immediately
preceding such date (the "ELIMINATION PERIOD") is greater than the product
of (x) 1.5, and (y) the average of the Closing Bid Prices for the Common
Stock for the five consecutive trading days immediately preceding the
Issuance Date of the applicable Preferred Shares. Notwithstanding the
foregoing, the Dividend Rate shall not be changed to 0.00 on a prospective
basis pursuant to the foregoing sentence unless the Dividend Elimination
Conditions (as defined below) are satisfied. The "DIVIDEND ELIMINATION
CONDITIONS" are as follows: (i) on each day during the Elimination Period
the registration statement (the "REGISTRATION STATEMENT") covering the
resale of the shares of Common Stock issuable upon conversion or exercise
of the Preferred Shares and the Warrants (as defined in the Securities
Purchase agreement referred to in Section 2(f)(v)), respectively, and
required to be filed by the Company pursuant the Registration Rights
Agreement between the Company and the Buyers referred to therein (the
"REGISTRATION RIGHTS AGREEMENT") was effective and available for the sale
of no less than 125% of the sum of (A) the number of Conversion Shares then
issuable upon the conversion of all outstanding Preferred Shares (without
regard to any limitation on conversion), (B) the number of Warrant Shares
then issuable upon the exercise of all outstanding Warrants (without regard
to any limitation on exercise), and (C) the number of Conversion Shares and
Warrants Shares that are then held by the holders of the Preferred Shares;
(ii) on each day during the Elimination Period the Common Stock was listed
on NYSE and was not suspended from trading; (iii) during the Elimination
Period the Company delivered Conversion Shares upon conversion of the
Preferred Shares and Warrant Shares upon exercise of the Warrants to the
holders of Preferred Shares on a timely basis as set forth in Section
2(f)(ii) of this Certificate of Designations and Sections 2(a) and 2(b) of
the Warrants, respectively; (iv) no event constituting a Major Transaction
(as defined in Section 3(c)), including an agreement to consummate a Major
Transaction, or a Triggering Event (as defined in Section 3(d)) shall have
occurred nor shall any pending event which would constitute a Major
Transaction have been publicly disclosed during the Elimination Period; and
(v) the Company has otherwise satisfied in all material respects its
obligations and is not in default in any material respect under this
Certificate of Designations, the Warrants, the Securities Purchase
Agreement and the Registration Rights Agreement. If a change is made to
the Dividend Rate as provided in this paragraph, then the Additional Amount
formula shall be appropriately altered to produce an Additional Amount
which reflects the two different Dividend Rates over the corresponding
periods.
(xii) "STATED VALUE" means $10,000.
-4-
<PAGE>
(c) ADJUSTMENT TO CONVERSION PRICE -- MARKET PRICE OF COMMON
STOCK AND REGISTRATION STATEMENT FAILURES. In addition to any other
adjustment to the Conversion Price provided for in this Certificate of
Designations, the Fixed Conversion Price shall be subject to the following
adjustments.
(i) 270 DAY ADJUSTMENT. In the event that neither (A) the
Closing Bid Price of the Common Stock on each day during any period of 20
consecutive trading days during the period beginning on and including the
date which is 21 trading days after the Issuance Date of the applicable
Preferred Shares and ending on the trading day immediately preceding the
date which is 270 days after the Issuance Date of the applicable Preferred
Shares (an "ADJUSTMENT DATE"), nor (B) the Closing Bid Price of the Common
Stock on the trading day immediately preceding the Adjustment Date is
greater than the Fixed Conversion Price in effect on the Issuance Date of
the Applicable Preferred Shares; then on and after the Adjustment Date, the
Fixed Conversion Price of the applicable Preferred Shares shall be equal to
the lesser of (x) the average of the Closing Bid Prices of the Common Stock
for the 20 consecutive trading days immediately preceding the Adjustment
Date, and (y) the Fixed Conversion Price of the applicable Preferred Shares
in effect on the Adjustment Date.
(ii) FAILURE TO MAKE REGISTRATION DELAY PAYMENTS. In the
event that the Company is prohibited under the Indenture dated as of
June 5, 1996 relating to the Company's 13-1/4% First Mortgage Notes due
2004 (the "INDENTURE") from making any Registration Delay Payments (as
defined in the Registration Rights Agreement referred to in Section
2(c)(iii)) in a timely manner as provided in Section 2(h) of the
Registration Rights Agreement, then if (i) the Registration Statement is
not filed on or before the date which is 60 days after the first
Issuance Date of any Preferred Shares (the "SCHEDULED FILING DATE"), and
such failure is not solely a result of an act or omission of an Investor
of which the Company has promptly notified the holders of Preferred
Shares and the Company is in compliance with Section 3(h) of the
Registration Rights Agreement; (ii) the Registration Statement is not
declared effective by the SEC on or before the date which is 120 days
after the first Issuance Date of any Preferred Shares (the "SCHEDULED
EFFECTIVE DATE"), and such failure is not solely a result of an act or
omission of an Investor of which the Company has promptly notified the
holders of Preferred Shares and the Company is in compliance with
Section 3(h) of the Registration Rights Agreement; or (iii) after the
Registration Statement has been declared effective by the SEC, the
Registration Statement is not available (other than on any days during
any Allowable Grace Period (as defined in Section 3(f) of the
Registration Rights Agreement)) for the sale of at least all the
Registrable Securities (as defined in the Registration Rights Agreement)
(whether because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for sales to be
made pursuant to the Registration Statement, to register sufficient
shares of Common Stock or otherwise), and such failure is not solely a
result of an act or omission of an Investor of which the Company has
promptly notified the holders of Preferred Shares and the Company is in
compliance with Section 3(h) of the Registration Rights Agreement; then,
as partial relief for the damages to any holder by reason of any such
delay in or reduction of its ability to sell the underlying shares of
Common Stock (which remedy
-5-
<PAGE>
shall not be exclusive of any other remedies available at law or in
equity), the Conversion Percentage and the Fixed Conversion Price shall
be adjusted as follows:
(A) CONVERSION PERCENTAGE. The Conversion Percentage in effect
at such time shall be reduced by a number of percentage points equal
to the sum of (I) 2.5, if the Registration Statement is not filed on
or before the Scheduled Filing Date, (II) 2.5, if the Registration
Statement is not declared effective by the SEC on or before the
Scheduled Effective Date, and (III) the product of (x) .067 and (y)
the sum of (a) the number of days after the Scheduled Filing Date that
the relevant Registration Statement is not filed with the SEC, (b) the
number of days after the Scheduled Effective Date that the relevant
Registration Statement is not declared effective by the SEC and (c)
the number of days after the Registration Statement has been declared
effective that the Registration Statement is not available for the
sale (other than on any days during any Allowable Grace Period) of at
least all of the Registrable Securities (such number of days being
collectively referred to as the "REGISTRATION STATEMENT DEFAULT
DAYS"); and
(B) FIXED CONVERSION PRICE. The Fixed Conversion Price in
effect at such time shall be reduced by an amount equal to the product
of (I) the Fixed Conversion Price in effect as of the Issuance Date of
the applicable Preferred Shares, multiplied by (II) the sum of (a)
.025, if the Registration Statement is not filed with the SEC on or
before the Scheduled Filing Date plus (b) .025, if the Registration
Statement is not declared effective by the SEC on or before the
Scheduled Effective Date, plus (c) the product of (x) .00067
multiplied by (y) the number of Registration Statement Default Days.
(iii) 180 DAY REGISTRATION STATEMENT FAILURE. In the
event that the Registration Statement is not declared effective by the SEC
on or prior to the date which is 180 days after the first Issuance Date of
any Preferred Shares (the "REGISTRATION EFFECTIVENESS ADJUSTMENT DATE");
then on and after the date immediately following the Registration
Effectiveness Adjustment Date, subject to further adjustment pursuant to
this Certificate of Designations, the Fixed Conversion Price of all
Preferred Shares outstanding at such time shall be equal to the lesser of
(x) the average of the five lowest consecutive Closing Bid Prices of the
Common Stock during the period (the "DELAY PERIOD") beginning on and
including the Registration Effectiveness Adjustment Date and ending on and
including the earlier of (I) the last date on which the Registration
Statement has not been declared effective by the SEC and (II) the
Conversion Date of the Preferred Shares with respect to which the
adjustment is being made, and (y) the Fixed Conversion Price in effect on
the Registration Effectiveness Adjustment Date. If the Delay Period is not
at least five days in duration, then the Delay Period shall consist of the
five consecutive trading days ending on the last trading date on which the
Registration Statement has not been declared effective by the SEC.
(d) ADJUSTMENT TO CONVERSION PRICE -- DILUTION AND OTHER EVENTS.
In order to prevent dilution of the rights granted under this Certificate
of Designations, the
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<PAGE>
Conversion Price will be subject to adjustment from time to time as
provided in this Section 2(d).
(i) ADJUSTMENT OF FIXED CONVERSION PRICE UPON ISSUANCE OF
COMMON STOCK. If and whenever on or after the Issuance Date, the Company
issues or sells, or is deemed to have issued or sold, any shares of Common
Stock (other than the Conversion Shares, the Warrant Shares (as defined in
the Securities Purchase Agreement) and shares of Common Stock deemed to
have been issued by the Company in connection with an Approved Stock Plan
(as defined below)) for a consideration per share less than a price (the
"APPLICABLE PRICE") equal to the Fixed Conversion Price in effect
immediately prior to such issuance or sale, then immediately after such
issue or sale, the Fixed Conversion Price then in effect shall be reduced
to an amount equal to the product of (x) the Fixed Conversion Price in
effect immediately prior to such issue or sale and (y) the quotient
determined by dividing (1) the sum of (I) the product of the Applicable
Price and the number of shares of Common Stock Deemed Outstanding (as
defined below) immediately prior to such issue or sale, and (II) the
consideration, if any, received by the Company upon such issue or sale, by
(2) the product of (I) the Applicable Price and (II) the number of shares
of Common Stock Deemed Outstanding immediately after such issue or sale.
For purposes of determining the adjusted Fixed Conversion Price under this
Section 2(d)(i), the following shall be applicable:
(A) ISSUANCE OF OPTIONS. If the Company in any manner
grants any rights or options to subscribe for or to purchase Common Stock
(other than pursuant to an Approved Stock Plan or upon conversion of the
Preferred Shares) or 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
Applicable Price, 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 Section 2(d)(i)(A), the "price per share for which Common Stock is
issuable upon exercise of such Options or upon conversion or exchange of
such Convertible Securities" is determined by dividing (I) the total
amount, if any, received or receivable by the Company as consideration for
the 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 the issuance or sale of such Convertible
Securities and the conversion or exchange thereof, by (II) 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 adjustment of the
Fixed Conversion Price shall be made upon the actual issuance of such
Common Stock or of
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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.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon such conversion or
exchange is less than the Applicable Price, then the maximum number of
shares of Common Stock issuable upon 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 price per share. For the purposes
of this Section 2(d)(i)(B), the "price per share for which Common Stock is
issuable upon such conversion or exchange" is determined by dividing (I)
the total amount received or receivable by the Company as consideration for
the issue 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 (II) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange
of all such Convertible Securities. No adjustment of the Fixed Conversion
Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of any
Options for which adjustment of the Fixed Conversion Price had been or are
to be made pursuant to other provisions of this Section 2(d)(i), no further
adjustment of the Fixed Conversion Price shall be made by reason of such
issue or sale.
(C) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If
the purchase price provided for in any Options, the additional
consideration, if any, payable upon the issue, conversion or exchange of
any Convertible Securities, or the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock change at any time,
the Fixed Conversion Price in effect at the time of such change shall be
readjusted to the Fixed 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; provided that no adjustment shall be made if such
adjustment would result in an increase of the Fixed Conversion Price then
in effect.
(D) CERTAIN DEFINITIONS. For purposes of determining
the adjusted Fixed Conversion Price under this Section 2(d)(i), the
following terms have the meanings set forth below:
(I) "APPROVED STOCK PLAN" shall mean any
contract, plan or agreement which has been approved by the Board of
Directors of the Company, pursuant to which the Company's securities may be
issued to any employee, officer, director, consultant or other service
provider.
(II) "COMMON STOCK DEEMED OUTSTANDING" means, at
any given time, the number of shares of Common Stock actually outstanding
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at such time, plus the number of shares of Common Stock deemed to be
outstanding pursuant to Sections 2(d)(i)(A) and 2(d)(i)(B) hereof
regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock issuable
upon conversion of the Preferred Shares or upon exercise of the Warrants
(as defined in the Securities Purchase Agreement referred to in Section
2(f)(v)).
(E) EFFECT ON FIXED CONVERSION PRICE OF CERTAIN
EVENTS. For purposes of determining the adjusted Fixed Conversion Price
under this Section 2(d)(i), the following shall be applicable:
(I) 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, the consideration received
therefor will be deemed to be the net amount received by the Company
therefor. In case any Common Stock, Options or Convertible Securities are
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Company will be the average of the Closing Bid Prices of such securities
for the five consecutive trading days immediately preceding the date of
receipt. In case any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of
consideration therefor will be deemed to be the fair value of such portion
of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
securities will be determined jointly by the Company and the holders of a
majority of the Preferred Shares then outstanding. If such parties are
unable to reach agreement within ten (10) days after the occurrence of an
event requiring valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within two business days of the tenth
(10th) day following the Valuation Event by an independent, reputable
appraiser selected by the Company. The determination of such appraiser
shall be binding upon all parties absent manifest error.
(II) INTEGRATED TRANSACTIONS. In case any Option
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no
specific consideration is allocated to such Options by the parties thereto,
the Options will be deemed to have been issued for a consideration of $.01.
(III) TREASURY SHARES. The number of shares of
Common Stock outstanding at any given time does not include shares owned
or held by or for the account of the Company, and the disposition of any
shares so owned or held will be considered an issue or sale of Common
Stock.
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(IV) RECORD DATE. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (1) to
receive a dividend or other distribution payable in Common Stock, Options
or in Convertible Securities, or (2) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock
deemed to have been issued or sold 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.
(ii) ADJUSTMENT OF FIXED CONVERSION PRICE UPON SUBDIVISION
OR COMBINATION OF COMMON STOCK. If the Company at any time subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater number of
shares, the Fixed Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time
combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Fixed Conversion Price in effect immediately prior to such
combination will be proportionately increased.
(iii) ADJUSTMENT OF FLOATING CONVERSION PRICE UPON
ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner issues or
sells Convertible Securities that are convertible into or exchangeable for
Common Stock at a price which varies with the market price of the Common
Stock (the formulation for such variable price being herein referred to as,
the "VARIABLE PRICE") and such Variable Price is not calculated using the
same formula used to calculate the Floating Conversion Price in effect
immediately prior to the time of such issue or sale, the Company shall
provide written notice thereof via facsimile and overnight courier to each
holder of the Preferred Shares ("VARIABLE NOTICE") on the date of issuance
of such Convertible Securities. If the holders of Preferred Shares
representing at least two-thirds (2/3) of the Preferred Shares then
outstanding provide written notice via facsimile and overnight courier (the
"VARIABLE PRICE ELECTION NOTICE") to the Company within five (5) business
days of receiving a Variable Notice that such holders desire to replace the
Floating Conversion Price then in effect with the Variable Price described
in such Variable Notice, then from and after the date of the Company's
receipt of the Variable Price Election Notice the Floating Conversion Price
will automatically be replaced with the Variable Price (together with such
modifications to this Certificate of Designations as may be required to
give full effect to the substitution of the Variable Price for the Floating
Conversion Price). A holder's delivery of a Variable Price Election Notice
shall serve as the consent required to amend this Certificate of
Designations pursuant to Section 13 below. In the event that a holder
delivers a Conversion Notice at any time after the Company's issuance of
Convertible Securities with a Variable Price but before such holder's
receipt of the Company's Variable Notice, then such holder shall have the
option by written notice to the Company to rescind such Conversion Notice
or to have the Conversion Price be equal to such Variable Price for the
conversion effected by such Conversion Notice.
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(iv) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets to another Person (as defined below) or other transaction which is
effected in such a way that holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock is referred to
herein as "ORGANIC CHANGE." Prior to the consummation of any Organic
Change, the Company will make appropriate provision (in form and substance
reasonably satisfactory to the holders of a majority of the Preferred
Shares then outstanding) to insure that each of the holders of the
Preferred Shares will thereafter have the right to acquire and receive in
lieu of or in addition to (as the case may be) the shares of Common Stock
otherwise acquirable and receivable upon the conversion of such holder's
Preferred Shares, such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such holder's Preferred
Shares had such Organic Change not taken place (without taking into account
any limitations or restrictions on the timing or amount of conversions).
In any such case, the Company will make appropriate provision (in form and
substance reasonably satisfactory to the holders of a majority of the
Preferred Shares then outstanding) with respect to such holders' rights and
interests to insure that the provisions of this Section 2(d) and Section
2(e) will thereafter be applicable to the Preferred Shares (including, in
the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is other than the Company, an immediate
adjustment of the Fixed Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, if the value
so reflected is less than the Fixed Conversion Price in effect immediately
prior to such consolidation, merger or sale and an immediate revision to
the Floating Conversion Price to reflect the price of the common stock of
the surviving entity and the market in which such common stock is traded).
The Company will not effect any such consolidation, merger or sale, unless
prior to the consummation thereof, the successor entity (if other than the
Company) resulting from consolidation or merger or the entity purchasing
such assets assumes, by written instrument (in form and substance
reasonably satisfactory to the holders of a majority of the Preferred
Shares then outstanding), the obligation to deliver to each holder of
Preferred Shares such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire. "PERSON" shall mean an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(v) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2(d) but not expressly
provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company's Board of Directors will make an
appropriate adjustment in the Conversion Price so as to protect the rights
of the holders of the Preferred Shares; provided, however, that no such
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adjustment will increase the Conversion Price as otherwise determined
pursuant to this Section 2(d).
(vi) NOTICES.
(A) Immediately upon any adjustment of the Conversion
Price, the Company will give written notice thereof to each holder of the
Preferred Shares, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(B) The Company will give written notice to each
holder of the Preferred Shares at least 15 days prior to the date on which
the Company closes its books or takes a record (I) with respect to any
dividend or distribution upon the Common Stock, (II) with respect to any
pro rata subscription offer to holders of Common Stock, or (III) for
determining rights to vote with respect to any Organic Change, dissolution
or liquidation and in no event shall such notice be provided to such holder
prior to such information being made known to the public.
(C) The Company will also give written notice to each
holder of the Preferred Shares at least 15 days prior to the date on which
any Organic Change, dissolution or liquidation will take place and in no
event shall such notice be provided to such holder prior to such
information being made known to the public.
(e) PURCHASE RIGHTS. In addition to any adjustments of the
Conversion Price pursuant to Section 2(d), if at any time after the
Issuance Date the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other
property pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then the holders of the Preferred Shares will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon
complete conversion of the Preferred Shares (without taking into account
any limitations or restrictions on the timing or amount of conversions)
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of the Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
(f) MECHANICS OF CONVERSION. Subject to the Company's inability
to fully satisfy its obligations under a Conversion Notice (as defined
below) as provided for in Section 4:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert Preferred
Shares into full shares of Common Stock on any date (the "CONVERSION
DATE"), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m. Eastern Time, on such date,
a copy of a fully executed notice of conversion in the form attached hereto
as EXHIBIT I (the "CONVERSION NOTICE") to the
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Company and its designated transfer agent (the "TRANSFER AGENT"), and
(B) surrender to a common carrier, for delivery to the Company or the
Transfer Agent as soon as practicable following such date, the original
certificate(s) representing the Preferred Shares being converted (or an
indemnification undertaking with respect to such shares in the case of
their loss, theft or destruction) (the "PREFERRED STOCK CERTIFICATE(S)")
and the originally executed Conversion Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a
facsimile copy of a Conversion Notice, the Company shall as soon as
practicable, but in any event not later than the next business day, send,
via facsimile, a confirmation of receipt of such Conversion Notice to such
holder. Upon receipt by the Company or the Transfer Agent of the Preferred
Stock Certificate(s) to be converted pursuant to a Conversion Notice,
together with the originally executed Conversion Notice, the Company or the
Transfer Agent (as applicable) shall, on the next business day following
the date of receipt, (I) issue and surrender to a common carrier for
overnight delivery to the address specified in the Conversion Notice, a
certificate, registered in the name of the holder or its designee, for the
number of shares of Common Stock to which the holder shall be entitled, or
(II) credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account
with The Depository Trust Company. If the number of Preferred Shares
represented by the Preferred Stock Certificate(s) submitted for conversion
is greater than the number of Preferred Shares being converted, then the
Company or Transfer Agent, as the case may be, shall, as soon as
practicable and in no event later than three business days after receipt of
the Preferred Stock Certificate(s) and at its own expense, issue and
deliver to the holder a new Preferred Stock Certificate representing the
number of Preferred Shares not converted.
(iii) DISPUTE RESOLUTION. In the case of a dispute as
to the determination of the Market Price or the arithmetic calculation of
the Conversion Rate, the Company shall promptly issue to the holder the
number of shares of Common Stock that is not disputed and shall submit the
disputed determinations or arithmetic calculations to the holder via
facsimile within one business day of receipt of such holder's Conversion
Notice. If such holder and the Company are unable to agree upon the
determination of the Market Price or arithmetic calculation of the
Conversion Rate within one business day of such disputed determination or
arithmetic calculation being submitted to the holder, then the Company
shall within one business day submit via facsimile (A) the disputed
determination of the Market Price to an independent, reputable investment
bank, or (B) the disputed arithmetic calculation of the Conversion Rate to
its independent, outside accountant. The Company shall cause the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holder of the
results no later than two business days from the time it receives the
disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be
binding upon all parties absent manifest error.
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(iv) RECORD HOLDER. The person or persons entitled to
receive the shares of Common Stock issuable upon a conversion of Preferred
Shares shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT. If within five
business days after the Company's or the Transfer Agent's receipt of the
Preferred Stock Certificates to be converted and the Conversion Notice the
Company shall fail (I) to issue a certificate for the number of shares of
Common Stock to which a holder is entitled or to credit the holder's
balance account with The Depository Trust Company for such number of shares
of Common Stock to which the holder is entitled upon such holder's
conversion of the Preferred Shares, or (II) to issue a new Preferred Stock
Certificate representing the number of Preferred Shares to which such
holder is entitled, pursuant to Section 2(f)(ii), in addition to all other
available remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement between the Company and the initial holders
of the Preferred Shares (the "SECURITIES PURCHASE AGREEMENT") (including
indemnification pursuant to Section 8 thereof), the Company shall pay
additional damages to such holder on each date after such fifth (5th)
business day that such conversion or delivery of such Preferred Stock
Certificates, as the case may be, is not timely effected in an amount equal
to 0.5% of the product of (A) the sum of the number of shares of Common
Stock not issued to the holder on a timely basis pursuant to Section
2(f)(ii) and to which such holder is entitled and, in the event the Company
has failed to deliver a Preferred Stock Certificate to the holder on a
timely basis pursuant to Section 2(f)(ii), the number of shares of Common
Stock issuable upon conversion of the Preferred Shares represented by such
Preferred Stock Certificate as of the last possible date which the Company
could have issued such Preferred Stock Certificate to such holder without
violating Section 2(f)(ii); and (B) the Closing Bid Price of the Common
Stock on the last possible date which the Company could have issued such
Common Stock and the Preferred Stock Certificate, as the case may be, to
such holder without violating Section 2(f)(ii).
(g) MANDATORY CONVERSION OR REDEMPTION AT MATURITY. If any
Preferred Shares remain outstanding on the Maturity Date (as defined
below), then all such Preferred Shares, at the Company's option, either (i)
shall be converted as of such date in accordance with this Section 2 as if
the holders of such Preferred Shares had given the Conversion Notice on the
Maturity Date (a "MATURITY DATE MANDATORY CONVERSION"), or (ii) shall be
redeemed as of such date for an amount in cash per Preferred Share (the
"MATURITY DATE REDEMPTION PRICE") equal to the Conversion Amount (a
"MATURITY DATE MANDATORY REDEMPTION"); provided, however, that if the
Company has elected a Maturity Date Mandatory Conversion and a Triggering
Event has occurred and is continuing on the Maturity Date, then the Company
shall, within five calendar days following the Maturity Date (unless
otherwise notified in writing by the holder of its request to have the
Preferred Shares converted into Common Stock), pay to each holder of
Preferred Shares then outstanding, in immediately available funds, an
amount equal to the Maturity Date Redemption Price. The Company shall be
deemed to have elected a Maturity Date Mandatory Conversion unless it
delivers written notice
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to each holder of Preferred Shares at least 30 trading days prior to the
Maturity Date of its election to effect a Maturity Date Mandatory
Redemption. If the Company elects a Maturity Date Mandatory Redemption,
then on the Maturity Date the Company shall pay to each holder of
Preferred Shares outstanding on the Maturity Date, by wire transfer of
immediately available funds, an amount per Preferred Share equal to the
Maturity Date Redemption Price. All holders of Preferred Shares shall
thereupon surrender all Preferred Stock Certificates, duly endorsed for
cancellation, to the Company or the Transfer Agent, provided that the
Company has complied with its obligations under this Section 2(g). If
the Company elects a Maturity Date Mandatory Redemption and shall fail
to redeem all of the Preferred Shares outstanding on the Maturity Date
by payment of the Maturity Date Redemption Price, then in addition to
any remedy such holder of Preferred Shares may have under this
Certificate of Designations, the Securities Purchase Agreement and the
Registration Rights Agreement, the applicable Maturity Date Redemption
Price payable in respect of such unredeemed Preferred Shares shall bear
interest at the rate of 3.0% per month, prorated for partial months,
until paid in full. Notwithstanding the foregoing, if the Common Stock
is not designated for quotation on The Nasdaq National Market or listed
on NYSE but such events do not constitute a Triggering Event, then the
Maturity Date shall be extended until the Common Stock is so designated
or listed. "MATURITY DATE" means the date which is seven years after
the applicable Issuance Date, unless extended pursuant to (A) Section
3(f) of the Registration Rights Agreement, which extension shall be
equal to the aggregate number of days of all Grace Periods (as defined
in Section 3(f) of the Registration Rights Agreement), or (B) the
immediately preceding sentence.
(h) FRACTIONAL SHARES. The Company shall not issue any fraction
of a share of Common Stock upon any conversion. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one
Preferred Share by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of a
fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction of a
share of Common Stock, the Company shall round such fraction of a share of
Common Stock up or down to the nearest whole share.
(i) TAXES. The Company shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of shares of
Common Stock upon the conversion of the Preferred Shares.
(j) CONVERSION RESTRICTIONS. The right of a holder of Preferred
Shares to convert Preferred Shares pursuant to this Section 2 shall be
limited as set forth below. Without the prior consent of the Company, a
holder of Preferred Shares shall not be entitled to convert an aggregate
number of Preferred Shares from the Issuance Date of such Preferred Shares
through the date of this determination in excess of the number of Preferred
Shares which when divided by the number of Preferred Shares purchased by
such holder on such Issuance Date would exceed (i) 0.00 for the period
beginning on the Issuance Date and ending on and including the date which
is 120 days after the Issuance Date, (ii) 0.33 for the period beginning on
and including the date which is 121 days after
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the Issuance Date and ending on and including the date which is 165 days
after the Issuance Date, (iii) 0.66 for the period beginning on and
including the date which is 166 days after the Issuance Date and ending
on and including the date which is 210 days after the Issuance Date, and
(iv) 1.00 for the period beginning on and including the date which is
211 days after the Issuance Date and ending on and including the
Maturity Date. Notwithstanding the foregoing, the conversion
restrictions set forth in this Section 2(j) shall not apply (w) on and
after any date on which the Common Stock is not listed on NYSE or has
been suspended from trading (excluding suspensions of not more than one
day resulting from business announcements), or any such delisting or
suspension is threatened or pending, (x) if there shall have occurred an
event constituting a Major Transaction (as defined in Section 3(c)) or
Triggering Event (as defined in Section 3(d)), (y) with respect to any
conversion of Preferred Shares at a Conversion Price which is equal to
the Fixed Conversion Price then in effect, or (z) if there is an
announcement of a pending Major Transaction.
(k) ADJUSTMENT OF CONVERSION RESTRICTIONS UPON ISSUANCE OF
CONVERTIBLE SECURITIES. If the Company in any manner issues or sells
Convertible Securities that are convertible into Common Stock and are
subject to (i) restrictions on the amount of shares that can be converted,
or (ii) no restrictions on the amount of shares that can be converted (the
restriction on conversions or lack thereof being herein referred to as the
"CONVERSION RESTRICTION"), and such Conversion Restriction is not
formulated using the same time periods and percentages used in Section
2(j), then the Company shall provide written notice thereof via facsimile
and overnight courier to each holder of the Preferred Shares ("CONVERSION
RESTRICTION NOTICE") on the date of issuance of such Convertible
Securities. If the holders of Preferred Shares representing at least
two-thirds (2/3) of the Preferred Shares then outstanding which remain
subject to the restrictions in Section 2(j) provide written notice via
facsimile and overnight courier (the "CONVERSION RESTRICTION ELECTION
NOTICE") to the Company within five (5) business days of receiving a
Conversion Restriction Notice that such holders desire to replace the
conversion restrictions set forth in Section 2(j) then in effect with the
Conversion Restriction described in such Conversion Restriction Notice,
then from and after the date of the Company's receipt of the Conversion
Restriction Election Notice the conversion restrictions set forth in
Section 2(j) automatically will be replaced with the Conversion
Restrictions (together with such modifications to this Certificate of
Designations as may be required to give full effect to the substitution
of the Conversion Restrictions for the conversion restrictions set forth
in Section 2(j)). A holder's delivery of a Conversion Restriction Election
Notice shall serve as the consent required to amend this Certificate of
Designations pursuant to Section 13 below.
(l) COMPANY'S OPTION TO PAY ADDITIONAL AMOUNT IN CASH. Upon
conversion pursuant to Sections 2(a) or 2(g), the Company shall have the
right to elect to pay the Additional Amount in cash, in lieu of conversion
to Common Stock. If the Company elects to pay the Additional Amount in
cash, such cash shall be paid simultaneously with the delivery to the
holder of the certificates representing the Common Stock issuable upon
conversion in accordance with Section 2(f). In order to exercise its right
to pay any Additional Amount in cash, the Company must advise each
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holder of Preferred Shares in writing (the "CASH DIVIDEND NOTICE") that
the Additional Amount shall be paid in cash until such time as the
Company shall terminate the Cash Dividend Notice by providing at least
two business days prior written notice of such termination (the
"TERMINATION NOTICE"). The Cash Dividend Notice shall set forth the
effective date of the Cash Dividend Notice, which date shall be at least
five business days after the date the Cash Dividend Notice is deemed to
have been delivered pursuant to Section 18. The Termination Notice
shall be effective on the third business day after the date the
Termination Notice is deemed to have been delivered pursuant to Section
18 unless a later date shall be specified in the Termination Notice.
(3) REDEMPTION AT OPTION OF HOLDERS.
(a) REDEMPTION OPTION UPON MAJOR TRANSACTION. In addition to
all other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Major Transaction (as
defined below), each holder of Preferred Shares shall have the right, at
such holder's option, to require the Company to redeem all or a portion of
such holder's Preferred Shares at a price per Preferred Share equal to the
greater of (i) 120% of the Liquidation Value (as defined in Section 9); and
(ii) the product of (A) the Conversion Rate at such time, and (B) the
Closing Bid Price on the date of the public announcement of such Major
Transaction or the next date on which the exchange or market on which the
Common Stock is traded is open if such public announcement is made
(X) after 12:00 p.m. Eastern Time, on such date or (Y) on a date on which
the exchange or market on which the Common Stock is traded is closed (the
"MAJOR TRANSACTION REDEMPTION PRICE"); provided, however, that,
notwithstanding anything contained in Section 3(a) or 3(b) to the contrary,
no holder of Preferred Shares shall have the right to require the Company
to redeem any Preferred Shares prior to the earlier of (i) June 1, 2004,
(ii) the legal defeasance and discharge of the Indenture, or (iii) the
written consent of the Trustee under the Indenture to any such redemption.
(b) REDEMPTION OPTION UPON TRIGGERING EVENT. In addition to all
other rights of the holders of Preferred Shares contained herein,
simultaneous with or after the occurrence of a Triggering Event (as defined
below), each holder of Preferred Shares shall have the right, at such
holder's option, to require the Company to redeem all or a portion of such
holder's Preferred Shares at a price per Preferred Share equal to the
greater of (i) 120% of the Liquidation Value; and (ii) the product of (A)
the Conversion Rate on the date of such holder's delivery of a Notice of
Redemption at Option of Holder Upon Triggering Event (as defined in Section
3(f)), and (B) the greater of (I) the Closing Bid Price on the trading day
immediately preceding such Triggering Event or (II) the Closing Bid Price
on the date of the holder's delivery to the Company of a Notice of
Redemption at Option of Buyer Upon Triggering Event (as defined below) or,
if such date of delivery is not a trading day, the next date on which the
exchange or market on which the Common Stock is traded is open (the
"TRIGGERING EVENT REDEMPTION PRICE" and, collectively with the Major
Transaction Redemption Price, the "REDEMPTION PRICE"); provided, however,
that, notwithstanding anything contained in Section 3(a) or 3(b) to the
contrary, no holder of Preferred Shares shall have the right to require the
Company to redeem any Preferred Shares prior to the earlier of (i) June 1,
2004, (ii) the
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legal defeasance and discharge of the Indenture, or (iii) the written
consent of the Trustee under the Indenture to any such redemption.
(c) "MAJOR TRANSACTION". A "MAJOR TRANSACTION" shall be deemed
to have occurred at such time as any of the following events:
(i) the consolidation, merger or other business combination
of the Company with or into another Person (other than (A) a consolidation,
merger or other business combination in which holders of the Company's
voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the
surviving entity or entities necessary to elect a majority of the members
of the board of directors (or their equivalent if other than a corporation)
of such entity or entities, or (B) pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the
Company) (a "CHANGE OF CONTROL TRANSACTION");
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to and
accepted by the holders of more than 50% of the outstanding shares of
Common Stock.
(d) "TRIGGERING EVENT". A "TRIGGERING EVENT" shall be deemed to
have occurred at such time as any of the following events:
(i) the failure of the Registration Statement to be
declared effective by the Securities and Exchange Commission on or prior to
the date that is 180 days after the Initial Issuance Date;
(ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable (other than on any days during any Allowable Grace Period (as
defined in Section 3(f) of the Registration Rights Agreement)) to the
holder of the Preferred Shares for sale of the Registrable Securities (as
defined in the Registration Rights Agreement) in accordance with the terms
of the Registration Rights Agreement, and such lapse or unavailability
continues for a period of five consecutive trading days, provided that the
cause of such lapse or unavailability is not due to factors solely within
the control of such holder of Preferred Shares;
(iii) delisting or suspension from listing of the Common
Stock from NYSE or The Nasdaq National Market for a period of five
consecutive days;
(iv) the Company's notice to any holder of Preferred Shares,
including by way of public announcement, at any time, of its intention not
to comply with proper requests for conversion of any Preferred Shares into
shares of Common
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Stock, including due to any of the reasons set forth in Section 4(a)
below, or the Company's failure to deliver Conversion Shares within
fifteen days of the Conversion Date;
(v) following a Proxy Statement Trigger Date (as defined in
the Securities Purchase Agreement), the Company fails to obtain the
shareholder approval described in Section 4(l) of the Securities Purchase
Agreement in a timely manner; or
(vi) any representation or warranty by the Company was not
true and correct in any material respect at the time made (including the
applicable Issuance Date) or the Company breaches any covenant or other
material term or condition of the Securities Purchase Agreement, the
Registration Rights Agreement, this Certificate of Designations, the
Irrevocable Transfer Agent Instructions (as defined in the Securities
Purchase Agreement), or any other agreement, document, certificate or other
instrument delivered in connection with the transactions contemplated
thereby or hereby, except (i) to the extent that such breach would not have
a Material Adverse Effect (as defined in Section 3(a) of the Securities
Purchase Agreement), and (ii) in the case of a breach of a covenant which
is curable, such breach continues for a period of less than ten days.
(e) MECHANICS OF REDEMPTION AT OPTION OF HOLDER UPON MAJOR
TRANSACTION. No sooner than 15 days nor later than 10 days prior to the
consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written
notice thereof via facsimile and overnight courier (a "NOTICE OF MAJOR
TRANSACTION") to each holder of Preferred Shares. At any time after
receipt of a Notice of Major Transaction (or, in the event a Notice of
Major Transaction is not delivered at least 10 days prior to a Major
Transaction, at any time on or after the date which is 10 days prior to a
Major Transaction), any holder of the Preferred Shares then outstanding may
require the Company to redeem all or a portion of the holder's Preferred
Shares, which redemption shall be effective concurrent with the
consummation of the Major Transaction, then outstanding by delivering
written notice thereof via facsimile and overnight courier (a "NOTICE OF
REDEMPTION AT OPTION OF HOLDER UPON MAJOR TRANSACTION") to the Company,
which Notice of Redemption at Option of Buyer Upon Major Transaction shall
indicate (i) the number of Preferred Shares that such holder is submitting
for redemption, and (ii) the applicable Major Transaction Redemption Price,
as calculated pursuant to Section 3(a).
(f) MECHANICS OF REDEMPTION AT OPTION OF BUYER UPON TRIGGERING
EVENT. Within one business day after the occurrence of a Triggering Event,
the Company shall deliver written notice thereof via facsimile and
overnight courier (a "NOTICE OF TRIGGERING EVENT") to each holder of
Preferred Shares. At any time after the earlier of a holder's receipt of a
Notice of Triggering Event and such holder becoming aware of a Triggering
Event, any holder of Preferred Shares then outstanding may require the
Company to redeem all or a portion of the holder's Preferred Shares then
outstanding by delivering written notice thereof via facsimile and
overnight courier (a "NOTICE OF REDEMPTION AT OPTION OF HOLDER UPON
TRIGGERING EVENT") to the Company, which Notice of Redemption at Option of
Holder Upon Triggering Event shall
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indicate (i) the number of Preferred Shares that such holder is submitting
for redemption, and (ii) the applicable Triggering Event Redemption Price,
as calculated pursuant to Section 3(b).
(g) PAYMENT OF REDEMPTION PRICE. Upon the Company's receipt of
a Notice(s) of Redemption at Option of Holder Upon Triggering Event or a
Notice(s) of Redemption at Option of Holder Upon Major Transaction from any
holder of Preferred Shares, the Company shall immediately notify each
holder of Preferred Shares by facsimile of the Company's receipt of such
Notice(s) of Redemption at Option of Holder Upon Triggering Event or
Notice(s) of Redemption at Option of Holder Upon Major Transaction and each
holder which has sent such a notice shall promptly submit to the Company or
its Transfer Agent such holder's Preferred Stock Certificates which such
holder has elected to have redeemed. The Company shall deliver the
applicable Triggering Event Redemption Price, in the case of a redemption
pursuant to Section 3(f), to such holder within five business days after
the Company's receipt of a Notice of Redemption at Option of Holder Upon
Triggering Event and, in the case of a redemption pursuant to Section 3(e),
the Company shall deliver the applicable Major Transaction Redemption Price
immediately prior to the consummation of the Major Transaction; provided
that a holder's Preferred Stock Certificates shall have been so delivered
to the Company; and provided further that if the Company is unable to
redeem all of the Preferred Shares to be redeemed, the Company shall redeem
an amount from each holder of Preferred Shares being redeemed equal to such
holder's pro-rata amount (based on the number of Preferred Shares held by
such holder relative to the number of Preferred Shares outstanding) of all
Preferred Shares being redeemed. If the Company shall fail to redeem all
of the Preferred Shares submitted for redemption (other than (i) due to the
payment of the Redemption Price being prohibited by the Indenture, in which
case such holder shall have the rights set forth in Section 3(h), or (ii)
pursuant to a good faith dispute as to the arithmetic calculation of the
Redemption Price), in addition to any remedy such holder of Preferred
Shares may have under this Certificate of Designations, the Securities
Purchase Agreement and the Registration Rights Agreement, the applicable
Redemption Price payable in respect of such unredeemed Preferred Shares
shall bear interest at the rate of 2.0% per month, prorated for partial
months, until paid in full. Until the Company pays such unpaid applicable
Redemption Price in full to a holder of Preferred Shares submitted for
redemption, such holder shall have the option (the "VOID OPTIONAL
REDEMPTION OPTION") to, in lieu of redemption, require the Company to
promptly return to such holder(s) all of the Preferred Shares that were
submitted for redemption by such holder(s) under this Section 3 and for
which the applicable Redemption Price has not been paid, by sending written
notice thereof to the Company via facsimile (the "VOID OPTIONAL REDEMPTION
NOTICE"). Upon the Company's receipt of such Void Optional Redemption
Notice(s) and prior to payment of the full applicable Redemption Price to
such holder, (i) the Notice(s) of Redemption at Option of Holder Upon
Triggering Event or the Notice(s) of Redemption at Option of Holder Upon
Major Transaction, as the case may be, shall be null and void with respect
to those Preferred Shares submitted for redemption and for which the
applicable Redemption Price has not been paid, (ii) the Company shall
immediately return any Preferred Shares submitted to the Company by each
holder for redemption under this Section 3(g) and for which the
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applicable Redemption Price has not been paid, (iii) the Fixed
Conversion Price of such returned Preferred Shares shall be adjusted to
the lesser of (A) the Fixed Conversion Price as in effect on the date on
which the Void Optional Redemption Notice(s) is delivered to the Company
and (B) the lowest Closing Bid Price during the period beginning on the
date on which the Notice(s) of Redemption of Option of Holder Upon Major
Transaction or the Notice(s) of Redemption at Option of Holder Upon
Triggering Event, as the case may be, is delivered to the Company and
ending on the date on which the Void Optional Redemption Notice(s) is
delivered to the Company; provided that no adjustment shall be made if
such adjustment would result in an increase of the Fixed Conversion
Price then in effect, (iv) the Conversion Percentage in effect at such
time shall be reduced by a number of percentage points equal to the
product of (A) .50 and (B) the number of days in the period beginning on
and including the date which is the last date on which the Triggering
Event Redemption Price or Major Transaction Redemption Price, as the
case may be, is required to be delivered in accordance with the
foregoing provisions of this Section 3(g) and ending on and including
the date on which the Void Optional Redemption Notice(s) is delivered to
the Company, and (v) if the redemption was caused by a Triggering Event
involving the Company's inability to issue Conversion Shares because of
the Exchange Cap (as defined in Section 12), the holders of at least
two-thirds of the Preferred Shares then outstanding, including Preferred
Shares submitted for redemption pursuant to this Section 3 with respect
to which the applicable Redemption Price has not been paid, may direct
the Company to immediately delist the Common Stock from the exchange or
automated quotation system on which the Common Stock is traded and have
the Common Stock, at such holders' option, traded in the electronic
bulletin board or the "pink sheets." Notwithstanding the foregoing, in
the event of a dispute as to the determination of the Closing Bid Price
or the arithmetic calculation of the Redemption Price, such dispute
shall be resolved pursuant to Section 2(f)(iii) above with the term
"Closing Bid Price" being substituted for the term "Market Price" and
the term "Redemption Price" being substituted for the term "Conversion
Rate". A holder's delivery of a Void Optional Redemption Notice and
exercise of its rights following such notice shall not effect the
Company's obligations to make any payments which have accrued prior to
the date of such notice. Payments provided for in this Section 3 shall
have priority to payments to other stockholders in connection with a
Major Transaction.
(h) INABILITY TO PAY REDEMPTION PRICE. If (A) upon the
occurrence of a Major Transaction or a Triggering Event a holder of
Preferred Shares does not have the right under Section 3(a) or 3(b) to
require the Company to redeem any Preferred Shares, (B) upon the Company's
failure to issue shares of Common Stock registered for resale upon receipt
of a Conversion Notice or on the Maturity Date a holder of Preferred Shares
does not have the right under Section 4(a)(i) to require the Company to
redeem any Preferred Shares, or (C) the Company is prohibited under the
Indenture from paying the Redemption Price or the Mandatory Redemption
Price (as defined in Section 4(a)(i)) to any holder, then, in addition to
any other remedy such holder of Preferred Shares may have under this
Certificate of Designations (including those in Section 3(g)), the
Warrants, the Securities Purchase Agreement and the Registration Rights
Agreement, such holder shall have the following remedies:
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(i) Such holder may elect, by providing written notice of
such election to the Company, to require that the Company deliver to such
holder within 15 business days of such notice readily marketable securities
("MARKETABLE SECURITIES") with a value (as determined by an independent,
reputable investment bank) equal to not less than the applicable Redemption
Price or Mandatory Redemption Price and a written agreement from such
investment bank to purchase such securities from the holder at any time
within two business days of such holder's receipt of the Marketable
Securities for a purchase price in cash equal to not less than the
applicable Redemption Price or Mandatory Redemption Price.
(ii) Unless such holder shall have elected and received the
Marketable Securities referred to in Section 3(h)(i) above, such holder
shall have the option (the "VOID MARKETABLE SECURITIES OPTION") to, in lieu
of redemption, require the Company to promptly return to such holder(s) all
of the Preferred Shares that were submitted for redemption by such
holder(s) under this Section 3 or Section 4(a)(i) and for which the
applicable Redemption Price or Mandatory Redemption Price has not been
paid, by sending written notice thereof to the Company via facsimile (the
"VOID MARKETABLE SECURITIES NOTICE"). Upon the Company's receipt of such
Void Marketable Securities Notice(s) and prior to payment of the full
applicable Redemption Price or Mandatory Redemption Price to such holder,
(A) the Notice(s) of Redemption at Option of Holder Upon Triggering Event
or the Notice(s) of Redemption at Option of Holder Upon Major Transaction,
as the case may be, shall be null and void with respect to those Preferred
Shares submitted for redemption pursuant to this Section 3 and for which
the applicable Redemption Price or Mandatory Redemption Price has not been
paid, (B) the Company shall immediately return any Preferred Shares
submitted to the Company by each holder for redemption under this Section 3
or Section 4(a)(i) and for which the applicable Redemption Price or
Mandatory Redemption Price has not been paid, (C) the Fixed Conversion
Price of such returned Preferred Shares shall be adjusted to the lesser of
(I) the Fixed Conversion Price as in effect on the date on which the Void
Marketable Securities Notice is delivered to the Company and (II) the
lowest Closing Bid Price during the period beginning on the date on which
the Notice of Redemption at Option of Holder Upon Major Transaction, the
Notice of Redemption at Option of Holder Upon Triggering Event or the
Conversion Notice is delivered to the Company or on the Maturity Date, as
the case may be, and ending on the date on which the Void Marketable
Securities Notice is delivered to the Company; provided that no adjustment
shall be made if such adjustment would result in an increase of the Fixed
Conversion Price then in effect, and (D) if the redemption was caused by a
Triggering Event involving the Company's inability to issue Conversion
Shares because of the Exchange Cap (as defined in Section 12), the holders
of at least two-thirds of the Preferred Shares then outstanding, including
Preferred Shares submitted for redemption pursuant to this Section 3 or
Section 4(a)(i) with respect to which the applicable Redemption Price or
Mandatory Redemption Price has not been paid, may direct the Company to
immediately delist the Common Stock from the exchange or automated
quotation system on which the Common Stock is traded and have the Common
Stock, at such holders' option, traded in the electronic bulletin board or
the "pink sheets." A holder's delivery of a Void Optional Redemption
Notice and exercise of its rights following such notice shall not effect
the Company's
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obligations to make any payments which have accrued prior to the date of
such notice. Payments provided for in this Section 3(h) shall have
priority to payments to other stockholders in connection with a Major
Transaction.
(i) EFFECT OF A FINDING OF UNSUITABILITY. If a holder or
beneficial owner of the Preferred Shares is required by any gaming
commission to be found suitable, such holder shall apply for a finding of
suitability within 30 days after a request by any gaming commission or
sooner if required by any gaming commission. If a holder or beneficial
owner of the Preferred Shares is required to be found suitable and is not
found suitable by any gaming commission, the holder shall, to the extent
required by applicable law, dispose of such holder's Preferred Shares
within 30 days or within that time prescribed by the gaming commission,
whichever is earlier. If the holder fails to dispose of such Preferred
Shares within such time period, the provisions of clause (ii) of Section
(a) of Article Eleventh of the Company's Certificate of Incorporation, as
amended, shall, to the extent and within the time period required by
applicable law, be deemed to be mandatory and the Company shall exercise
its rights under Section (a) of Article Eleventh, except that
notwithstanding anything contained in Section (c) of said Article Eleventh
to the contrary, the price for such Preferred Shares shall be (i) the
Liquidation Value, (ii) the amount the holder paid for the Preferred
Shares, (iii) the fair market value of the Preferred Shares, (iv) the
greatest of clauses (i), (ii) and (iii), or (v) such other amount as may be
determined by the appropriate gaming commission.
(4) INABILITY TO FULLY CONVERT.
(a) HOLDER'S OPTION IF COMPANY CANNOT FULLY CONVERT. If, upon
the Company's receipt of a Conversion Notice or on the Maturity Date, the
Company cannot issue shares of Common Stock registered for resale under the
Registration Statement (or which are exempt from the registration
requirements under the 1933 Act pursuant to Rule 144(k) under the 1933 Act)
for any reason, including, without limitation, because the Company (x) does
not have a sufficient number of shares of Common Stock authorized and
available, (y) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Company or its
Securities, including without limitation the Exchange Cap, from issuing all
of the Common Stock which is to be issued to a holder of Preferred Shares
pursuant to a Conversion Notice or (z) fails to have a sufficient number of
shares of Common Stock registered for resale under the Registration
Statement, then the Company shall issue as many shares of Common Stock as
it is able to issue in accordance with such holder's Conversion Notice and
pursuant to Section 2(f) and, with respect to the unconverted Preferred
Shares, the holder, solely at such holder's option, can elect to:
(i) require the Company to redeem from such holder those
Preferred Shares for which the Company is unable to issue Common Stock in
accordance with such holder's Conversion Notice ("MANDATORY REDEMPTION") at
a price per Preferred Share (the "MANDATORY REDEMPTION PRICE") equal to the
Triggering Event Redemption Price as of such Conversion Date; provided,
however, that notwithstanding
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anything contained in this Section 4(a)(i) to the contrary, no holder of
Preferred Shares shall have the right to require the Company to redeem
any Preferred Shares prior to the earlier of (i) June 1, 2004, (ii) the
legal defeasance and discharge of the Indenture or (iii) the written
consent of the Trustee under the Indenture to any such redemption;
(ii) if the Company's inability to fully convert Preferred
Shares is pursuant to Section 4(a)(z), require the Company to issue
restricted shares of Common Stock in accordance with such holder's
Conversion Notice and pursuant to Section 2(f);
(iii) void its Conversion Notice and retain or have
returned, as the case may be, the nonconverted Preferred Shares that were
to be converted pursuant to such holder's Conversion Notice (provided that
a holder's voiding its Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of
such notice); or
(iv) if the Company's inability to fully convert Preferred
Shares is pursuant to the Exchange Cap described in Section 4(a)(y),
require the Company to issue shares of Common Stock in accordance with such
holder's Conversion Notice and pursuant to Section 2(f) at a Conversion
Price equal to the average of Closing Bid Prices of the Common Stock for
the five consecutive trading days preceding such holder's Notice in
Response to Inability to Convert (as defined below).
(b) MECHANICS OF FULFILLING HOLDER'S ELECTION. The Company
shall immediately send via facsimile to a holder of Preferred Shares, upon
receipt of a facsimile copy of a Conversion Notice from such holder which
cannot be fully satisfied as described in Section 4(a), a notice of the
Company's inability to fully satisfy such holder's Conversion Notice (the
"INABILITY TO FULLY CONVERT NOTICE"). Such Inability to Fully Convert
Notice shall indicate (i) the reason why the Company is unable to fully
satisfy such holder's Conversion Notice, (ii) the number of Preferred
Shares which cannot be converted and (iii) the applicable Mandatory
Redemption Price. Such holder shall notify the Company of its election
pursuant to Section 4(a) above by delivering written notice via facsimile
to the Company ("NOTICE IN RESPONSE TO INABILITY TO CONVERT").
(c) PAYMENT OF MANDATORY REDEMPTION PRICE. If such holder shall
elect to have its shares redeemed pursuant to Section 4(a)(i), the Company
shall pay the Mandatory Redemption Price in cash to such holder within ten
days of the Company's receipt of the holder's Notice in Response to
Inability to Convert. If the Company shall fail to pay the applicable
Mandatory Redemption Price to such holder on a timely basis as described in
this Section 4(c) (other than pursuant to a dispute as to the determination
of the arithmetic calculation of the Redemption Price), in addition to any
remedy such holder of Preferred Shares may have under this Certificate of
Designations, the Securities Purchase Agreement and the Registration Rights
Agreement, such unpaid amount shall bear interest at the rate of 2.0% per
month, prorated for partial months, until paid in full. Until the full
Mandatory Redemption Price is paid in full to such holder, such holder may
void the Mandatory Redemption with respect to those Preferred Shares for
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which the full Mandatory Redemption Price has not been paid and (i) receive
back such Preferred Shares and (ii) the Fixed Conversion Price of such
returned Preferred Shares shall be adjusted to the lesser of (A) the Fixed
Conversion Price in effect on the date on which the holder voided the
Mandatory Redemption and (B) the lowest Closing Bid Price during the Period
beginning on the Conversion Date and ending on the date the holder voided
the Mandatory Redemption. Notwithstanding the foregoing, if the Company
fails to pay the applicable Mandatory Redemption Price within such ten-day
period due to a dispute as to the determination of the Mandatory Redemption
Price, such dispute shall be resolved pursuant to Section 2(f)(iii) with
the term "Mandatory Redemption Price" being substituted for the term
"Conversion Rate".
(d) PRO-RATA CONVERSION AND REDEMPTION. In the event the
Company receives a Conversion Notice, Notice of Redemption at Option of
Buyer Upon Major Transaction or Notice of Redemption at Option of Buyer
Upon Triggering Event from more than one holder of Preferred Shares on the
same day and the Company can convert and/or redeem some, but not all, of
the Preferred Shares pursuant to this Section 4, the Company shall convert
and/or redeem from each holder of Preferred Shares electing to have
Preferred Shares converted and/or redeemed at such time an amount equal to
such holder's pro-rata amount (based on the number of Preferred Shares held
by such holder relative to the number of Preferred Shares outstanding) of
all Preferred Shares being converted and redeemed at such time.
(5) CONVERSION OR REDEMPTION AT COMPANY'S ELECTION. At any time or
times on or after the Issuance Date of the applicable Preferred Shares, the
Company shall have the right, in its sole discretion, to require that any or all
of the outstanding Preferred Shares be (i) converted ("CONVERSION AT COMPANY'S
ELECTION") at the Conversion Rate; or (ii) redeemed ("REDEMPTION AT COMPANY'S
ELECTION") at the Company Election Redemption Price (as defined below); provided
that the Conditions to Company's Election (as set forth below) are satisfied.
(a) MECHANICS OF COMPANY'S ELECTION. The Company shall exercise
its right to Conversion at Company's Election or Redemption at Company's
Election by providing each holder of Preferred Shares written notice
("NOTICE OF COMPANY'S ELECTION") at least 30 days prior to the date
selected by the Company for conversion ("COMPANY'S ELECTION CONVERSION
DATE") or redemption ("COMPANY'S ELECTION REDEMPTION DATE"), as the case
may be. If the Company elects to require conversion or redemption of some,
but not all, of such Preferred Shares, the Company shall convert or redeem,
as the case may be, an amount from each holder of Preferred Shares equal to
such holder's pro rata amount (based on the number of such Preferred Shares
held by such holder relative to the number of such Preferred Shares
outstanding on the date of the Company's delivery of the Notice of
Company's Election) of all Preferred Shares the Company is requiring to be
converted or redeemed. The Notice of Company's Election shall indicate
(x) whether the Notice of Company's Election relates to a conversion or a
redemption, (y) the number of Preferred Shares the Company has selected for
conversion or redemption and each holder's pro rata share of such amount,
and (z) the Company's Election Conversion Date or Company's Election
Redemption Date, as the case may be (the "APPLICABLE ELECTION DATE"), which
Applicable Election Date shall be
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not less than 30 or more than 45 days after each holder's receipt of the
Notice of Company's Election. All Preferred Shares selected for
conversion in accordance with the provisions of this Section 5 shall be
converted as of the Company's Election Conversion Date in accordance
with Section 2 as if the holders of such Preferred Shares selected by
the Company to be converted had given the Conversion Notice on the
Company's Election Conversion Date. All Preferred Shares selected for
redemption in accordance with the provisions of this Section 5 shall be
redeemed as of the Company's Election Redemption Date in accordance with
this Section 5 at the Company Election Redemption Price. All holders of
Preferred Shares shall thereupon and within two trading days after the
Applicable Election Date surrender all Preferred Stock Certificates
selected for conversion or redemption, as the case may be, duly endorsed
for cancellation, to the Company, provided the Company has complied with
its obligations under this Section 5.
(b) CONDITIONS TO COMPANY'S ELECTION. "CONDITIONS TO COMPANY'S
ELECTION" means the following conditions: (i) on each day during the
period beginning on and including the date which is 20 trading days prior
to the Applicable Election Date and ending on and including the Applicable
Election Date (the "APPLICABLE ELECTION PERIOD"), the Registration
Statement shall be effective and available for the sale of no less than
125% of the sum of (A) the number of Conversion Shares then issuable upon
the conversion of all outstanding Preferred Shares (without regard to any
limitations on conversion), including the Conversion Shares to be issued
pursuant to this Conversion at Company's Election or the Conversion Shares
which would have been issuable upon conversion of the Preferred Shares
subject to the Redemption at Company's Election, (B) the number of Warrant
Shares then issuable upon conversion of all outstanding Warrants (without
regard to any limitations on exercise), and (C) the number of Conversion
Shares and Warrant Shares that are then held by the holders of the
Preferred Shares; (ii) on each day during the Applicable Election Period,
the Common Stock is designated for quotation on The Nasdaq National Market
or listed on NYSE and is not suspended from trading; (iii) on each day
during the Applicable Election Period, the Closing Bid Price of the Common
Stock is at least 150% of the Fixed Conversion Price then in effect (giving
effect to any adjustment to the Fixed Conversion Price under Sections
2(c)(i), 2(d)(ii) and 2(d)(iv), but not giving effect to any adjustment
under Sections 2(c)(ii), 2(c)(iii), 2(d)(i) and 2(d)(v)) of the Preferred
Shares being converted; (iv) during the period beginning on the first
Issuance Date of any Preferred Shares and ending on and including the
Applicable Election Date, the Company shall have delivered Conversion
Shares upon conversion of the Preferred Shares and Warrant Shares upon
exercise of the Warrants to the holders on a timely basis as set forth in
Section 2(f)(ii) of this Certificate of Designations and Sections 2(a) and
2(b) of the Warrant, respectively; and (v) the Company otherwise has
satisfied in all material respects its obligations and is not in default in
any material respect under this Certificate of Designations, the Warrants,
the Securities Purchase Agreement and the Registration Rights Agreement.
Notwithstanding the above, any holder of Preferred Shares may convert such
shares (including Preferred Shares selected for conversion or redemption)
into Common Stock pursuant to Section 2(a) on or prior to the date
immediately preceding the Applicable Election Date.
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(c) COMPANY ELECTION REDEMPTION PRICE. The "COMPANY ELECTION
REDEMPTION PRICE" shall be an amount per Preferred Share equal to the
product of (i) the Conversion Rate of the Preferred Shares on the Company's
Election Redemption Date, and (ii) the Closing Bid Price of the Common
Stock on the trading day immediately preceding the Company's Election
Redemption Date.
(d) PAYMENT OF COMPANY ELECTION REDEMPTION PRICE. The Company
shall pay the applicable Company Election Redemption Price to the holders
of the Preferred Shares being redeemed pursuant to this Section 5 in cash
within two trading days after the Company Election Redemption Date, but not
prior to such holders' delivery to the Company of the Preferred Stock
Certificates representing the Preferred Shares being redeemed pursuant to
this Section 5. If the Company shall fail to pay the Company Election
Redemption Price to the holders on a timely basis as described in this
Section 5(d), in addition to any remedy the holders of Preferred Shares may
have under this Certificate of Designations, the Warrants, the Securities
Purchase Agreement and the Registration Rights Agreement, such unpaid
amount shall bear interest at the rate of 2.0% per month (prorated for
partial months) until paid in full. Until the Company pays such unpaid
Company Election Redemption Price in full to each holder, each holder of
Preferred Shares being redeemed pursuant to this Section 5 and for which
the Company Election Redemption Price has not been paid, shall have the
option (the "VOID COMPANY REDEMPTION OPTION") to, in lieu of redemption,
require the Company to promptly return to each holder all of the Preferred
Shares that were submitted by such holder for Redemption at Company's
Election and for which the Company Election Redemption Price has not been
paid, by sending written notice thereof to the Company via facsimile (the
"VOID COMPANY REDEMPTION NOTICE"). Upon the Company's receipt of the Void
Company Redemption Notice(s) prior to payment of the Company Election
Redemption Price to each holder, (i) the Notice of Company's Election with
respect to a Redemption at Company's Election shall be null and void with
respect to those Preferred Shares submitted to the Company by each holder
for Redemption at Company's Election and for which the Company Election
Redemption Price has not been paid, (ii) the Company shall immediately
return any Preferred Shares submitted to the Company by each holder for
redemption under this Section 5 and for which the Company Election
Redemption Price has not been paid and (iii) the Fixed Conversion Price of
such returned Preferred Shares shall be adjusted to the lesser of (A) the
Conversion Price applicable to such Preferred Shares on the Company's
Election Redemption Date and (B) the Conversion Price applicable to such
Preferred Shares on the date of such holder's delivery of its Void Company
Redemption Notice. Notwithstanding the foregoing, if the Company fails to
pay the Company Election Redemption Price to the holders within the time
period described in this Section 5(d) due to a dispute as to the arithmetic
calculation of the Company Election Redemption Price, such dispute shall be
resolved pursuant to Section 2(f)(iii) with the term "Company Election
Redemption Price" being substituted for the term "Conversion Rate." If the
Company fails to timely effect a Redemption at Company's Election in
accordance with this Section 5, the Company shall not be allowed to submit
another Notice of Company Election without the prior written consent of the
holders of at two-thirds (2/3) of the Preferred Shares then outstanding.
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(e) COMPANY MUST HAVE IMMEDIATELY AVAILABLE FUNDS OR CREDIT
FACILITIES. The Company shall not be entitled to send any Notice of
Company Election with the respect to a Redemption at Company's Election
pursuant to this Section 5 and begin the redemption procedure under this
Section 5, unless it (A) is permitted under the Indenture to timely pay the
Company Election Redemption Price, and (B) it has:
(i) the full amount of the Company Election Redemption
Price in cash, available in a demand or other immediately available account
in a bank or similar financial institution;
(ii) credit facilities, with a bank or similar financial
institutions that are immediately available and unrestricted for use in
redeeming the Preferred Shares, in the full amount of the Company Election
Redemption Price;
(iii) a written agreement with a standby underwriter or
qualified buyer ready, willing and able to purchase from the Company a
sufficient number of shares of stock to provide proceeds necessary to
redeem any Preferred Shares that is not converted prior to a Redemption at
Company's Election; or
(iv) a combination of the items set forth in the preceding
clauses (i), (ii) and (iii), aggregating the full amount of the Company
Election Redemption Price.
(6) REISSUANCE OF CERTIFICATES. In the event of a conversion or
redemption pursuant to this Certificate of Designations of less than all of the
Preferred Shares represented by a particular Preferred Stock Certificate, the
Company shall promptly cause to be issued and delivered to the holder of such
Preferred Shares a preferred stock certificate representing the remaining
Preferred Shares which have not been so converted or redeemed.
(7) RESERVATION OF SHARES. The Company shall, so long as any of the
Preferred Shares are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all of the
Preferred Shares then outstanding (without regard to any limitations on
conversions); provided that the number of shares of Common Stock so reserved
shall at no time be less than 150% of the number of shares of Common Stock for
which the Preferred Shares are at any time convertible. The initial number of
shares of Common Stock reserved for conversions of the Preferred Shares and each
increase in the number of shares so reserved shall be allocated pro rata among
the holders of the Preferred Shares based on the number of Preferred Shares held
by each holder at the time of issuance of the Preferred Shares or increase in
the number of reserved shares, as the case may be. In the event a holder shall
sell or otherwise transfer any of such holder's Preferred Shares, each
transferee shall be allocated a pro rata portion of the number of reserved
shares of Common Stock reserved for such transferor. Any shares of Common Stock
reserved and which remain allocated to any person or entity which does not hold
any Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holder.
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<PAGE>
(8) VOTING RIGHTS. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the General
Corporation Law of the State of Delaware, and as expressly provided in this
Certificate of Designations.
(9) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "PREFERRED FUNDS"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
the distributions and payments on the liquidation, dissolution and winding up of
the Company, an amount per Preferred Share equal to the sum of (i) $10,000 and
(ii) an amount equal to the product of (Dividend Rate) (N/365) ($10,000) (such
sum being referred to as the "LIQUIDATION VALUE"); provided that, if the
Preferred Funds are insufficient to pay the full amount due to the holders of
Preferred Shares and holders of shares of other classes or series of preferred
stock of the Company that are of equal rank with the Preferred Shares as to
payments of Preferred Funds (the "PARI PASSU SHARES"), then each holder of
Preferred Shares and Pari Passu Shares shall receive a percentage of the
Preferred Funds equal to the full amount of Preferred Funds payable to such
holder as a liquidation preference, in accordance with their respective
Certificate of Designations, Preferences and Rights, as a percentage of the full
amount of Preferred Funds payable to all holders of Preferred Shares and Pari
Passu Shares. The purchase or redemption by the Company of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other Person, nor the
sale or transfer by the Company of less than substantially all of its assets,
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company. No holder of Preferred Shares shall be entitled to
receive any amounts with respect thereto upon any liquidation, dissolution or
winding up of the Company other than the amounts provided for herein; provided
that a holder of Preferred Shares shall be entitled to all amounts previously
accrued with respect to amounts owed hereunder.
(10) PREFERRED RANK; PARTICIPATION. (i) All shares of Common Stock
shall be of junior rank to all Preferred Shares in respect to the preferences as
to distributions and payments upon the liquidation, dissolution and winding up
of the Company. The rights of the shares of Common Stock shall be subject to
the preferences and relative rights of the Preferred Shares. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares, the Company shall not hereafter authorize or
issue additional or other capital stock that is of senior rank to the Preferred
Shares in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
then outstanding Preferred Shares, the Company shall not hereafter authorize or
make any amendment to the Company's Certificate of Incorporation or bylaws, or
file any resolution of the board of directors of the Company with the Secretary
of State of the State of Delaware containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of the
holders of the Preferred Shares relative to the holders of the Common Stock or
the holders of any other class of capital stock. In the event of the merger or
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<PAGE>
consolidation of the Company with or into another corporation, the Preferred
Shares shall maintain their relative powers, designations and preferences
provided for herein and no merger shall result inconsistent therewith.
(ii) Subject to the rights of the holders, if any, of the Pari Passu
Shares, the holders of the Preferred Shares shall, as holders of Preferred
Stock, be entitled to such dividends paid and distributions made to the
holders of Common Stock to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard
to any limitations on conversion herein or elsewhere) and had held such
shares of Common Stock on the record date for such dividends and
distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.
(11) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS WITH RESPECT TO
OTHER CAPITAL STOCK. Until all of the Preferred Shares have been converted
or redeemed as provided herein, the Company shall not, directly or
indirectly, redeem, or declare or pay any cash dividend or distribution on,
its Common Stock without the prior express written consent of the holders of
not less than two-thirds (2/3) of the then outstanding Preferred Shares.
(12) LIMITATION ON NUMBER OF CONVERSION SHARES. Notwithstanding
any other provision herein, the Company shall not be obligated to issue any
shares of Common Stock upon conversion of the Preferred Shares if the
issuance of such shares of Common Stock would exceed that number of shares of
Common Stock which the Company may issue upon Conversion of the Preferred
Shares (the "EXCHANGE CAP") without breaching the Company's obligations under
the rules or regulations of NYSE, except that such limitation shall not apply
in the event that the Company (a) obtains the approval of its stockholders as
required by applicable rules and regulations of NYSE for issuances of Common
Stock in excess of such amount or (ii) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the holders of a majority of the
Preferred Shares then outstanding. Until such approval or written opinion is
obtained, no purchaser of Preferred Shares pursuant to the Securities
Purchase Agreement (the "PURCHASERS") shall be issued, upon conversion of
Preferred Shares, shares of Common Stock in an amount greater than the
product of (i) the Exchange Cap amount multiplied by (ii) a fraction, the
numerator of which is the number of Preferred Shares issued to such Purchaser
pursuant to the Securities Purchase Agreement and the denominator of which is
the aggregate amount of all the Preferred Shares issued to the Purchasers
pursuant to the Securities Purchase Agreement (the "CAP ALLOCATION AMOUNT").
In the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Preferred Shares, the transferee shall be allocated a pro rata
portion of such Purchaser's Cap Allocation Amount. In the event that any
holder of Preferred Shares shall convert all of such holder's Preferred
Shares into a number of shares of Common Stock which, in the aggregate, is
less than such holder's Cap Allocation Amount, then the difference between
such holder's Cap Allocation Amount and the number of shares of Common Stock
actually issued to such holder shall be allocated to the respective Cap
Allocation Amounts of the remaining holders of Preferred Shares on a pro rata
basis in proportion to the number of Preferred Shares then held by each such
holder.
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<PAGE>
(13) VOTE TO CHANGE THE TERMS OF OR ISSUE PREFERRED SHARES. The
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3)
of the then outstanding Preferred Shares, shall be required for (a) any
change to this Certificate of Designations or the Company's Certificate of
Incorporation which would amend, alter, change or repeal any of the powers,
designations, preferences and rights of the Preferred Shares, or (b) any
issuance of Preferred Shares other than pursuant to the Securities Purchase
Agreement.
(14) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of any indemnification
undertaking by the holder to the Company and, in the case of mutilation, upon
surrender and cancellation of the Preferred Stock Certificate(s), the Company
shall execute and deliver new preferred stock certificate(s) of like tenor and
date; provided, however, the Company shall not be obligated to re-issue
preferred stock certificates if the holder contemporaneously requests the
Company to convert such Preferred Shares into Common Stock.
(15) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Certificate of Designations
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designations. The Company covenants to each holder of Preferred Shares that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the
Preferred Shares and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the holders of the Preferred Shares shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or
other security being required.
(16) SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in this Certificate of Designations shall limit or modify
any more general provision contained herein. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and the initial holders of
the Preferred Shares and shall not be construed against any person as the
drafter hereof.
(17) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of a holder of Preferred Shares in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.
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<PAGE>
(18) NOTICES. Any notice required to be delivered pursuant to the
terms of this Certificate of Designations shall be delivered, unless otherwise
provided in this Certificate of Designations, in accordance with the terms, and
subject to the notice provisions of, the Securities Purchase Agreement.
* * * * * *
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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by ________________________, its ____________, as of ____________
__, 1998.
ARGOSY GAMING COMPANY
By:______________________________
Name:____________________________
Its:_____________________________
<PAGE>
EXHIBIT E
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. ANY SUCH OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO
COMPLY WITH THE APPLICABLE STATE SECURITIES LAWS.
ARGOSY GAMING COMPANY
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: _____________________ Number of Shares: _________
Date of Issuance: ____________ __, 199_
Argosy Gaming Company, a Delaware corporation (the "COMPANY"), hereby certifies
that, for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) ( ) [500/WARRANT VALUE FOR EACH PREFERRED SHARE]
fully paid nonassessable shares of Common Stock (as defined in Section 1(b)) of
the Company (the "WARRANT SHARES") at the purchase price per share provided in
Section 1(b) below (the "WARRANT EXERCISE PRICE"); provided, however, that in no
event shall the holder be entitled to exercise this Warrant for a number of
Warrant Shares in excess of that number of Warrant Shares which, upon giving
effect to such exercise, would cause the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which
<PAGE>
the determination of such proviso is being made, but shall exclude shares of
Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised Warrants beneficially owned by the holder and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by the holder and its
affiliates (including, without limitation, any convertible notes or preferred
stock) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence,
for purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. The holder may waive the foregoing limitations by written notice to
the Company upon not less than 61 days prior notice (with such waiver taking
effect only upon the expiration of such 61 day notice period).
Section 1.
(a) SECURITIES PURCHASE AGREEMENT. This Warrant is one of the
warrants (the "PREFERRED SHARE WARRANTS") issued pursuant to Section 1 of that
certain Securities Purchase Agreement dated as of June 12, 1998, among the
Company and the Buyers referred to therein (the "PURCHASE AGREEMENT").
(b) DEFINITIONS. The following words and terms as used in this
Warrant shall have the following meanings:
"MARKET PRICE" means, with respect to any security for any date,
the average of the Closing Bid Prices (as defined below) for such security
during the five consecutive trading days immediately preceding such date.
"CLOSING BID PRICE" means, for any security as of any date,
the last closing bid price for such security on The New York Stock Exchange,
Inc. ("NYSE") as reported by Bloomberg Financial Markets ("BLOOMBERG"), or,
if NYSE is not the principal trading market for such security, the last
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price for
such security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market
value as mutually determined by the Company and the holders of the Preferred
Shares. If the Company and the holders of the Preferred Shares are unable to
agree upon the fair market value of the Common Stock, then such dispute shall
be resolved pursuant to Section 2(a) of this Warrant with the term "Closing
Bid Price" being substituted for the term "Market Price." (All such
determinations to be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period.)
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"APPROVED STOCK PLAN" shall mean any plan which has been approved
by the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, director or consultant for
services provided to the Company.
"CERTIFICATE OF DESIGNATIONS" means the Certificate of
Designations, Preferences and Rights of the Preferred Shares (as defined below).
"COMMON STOCK" means (i) the Company's common stock, par value
$.01 per share, and (ii) any capital stock into which such Common Stock shall
have been changed or any capital stock resulting from a reclassification of such
Common Stock.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to Sections
9(b)(i) and 9(b)(ii) hereof regardless of whether the Options (as defined in
Section 9(b)(i)) or Convertible Securities (as defined in Section 9(b)(i)) are
actually exercisable or convertible at such time, but excluding any shares of
Common Stock issuable upon exercise of the Preferred Share Warrants.
"EXPIRATION DATE" means the date five years from the original
date of this Warrant or, if such date falls on a Saturday, Sunday or other day
on which banks are required or authorized to be closed in the City of New York
or the State of New York (a "HOLIDAY"), the next preceding date that is not a
Holiday.
"OTHER SECURITIES" means (i) those warrants, options or
convertible securities of the Company issued prior to, and outstanding on, the
date of issuance of this Warrant, (ii) the Preferred Shares (as defined below)
and (iii) the shares of Common Stock issued upon conversion of the Preferred
Shares.
"PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"PREFERRED SHARES" means the shares of the Company's Series A
Convertible Preferred Stock issued pursuant to the Purchase Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated June 12, 1998 among the Company and the Buyers named therein
entered into in connection with the Purchase Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"WARRANT" means this Warrant and all Warrants issued in
exchange, transfer or replacement of any thereof.
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<PAGE>
"WARRANT EXERCISE PRICE" shall be $_____ [INSERT 120% OF THE
MARKET PRICE OF THE COMMON STOCK ON THE DATE OF ISSUANCE OF THE RELATED
PREFERRED SHARES], subject to adjustment as hereinafter provided.
(c) OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references herein
(A) to the Company shall be deemed to include the Company's successors and
(B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "HEREIN," "HEREOF,"
and "HEREUNDER," and words of similar import, shall refer to this Warrant as a
whole and not to any provision of this Warrant, and the words "SECTION,"
"SCHEDULE," and "EXHIBIT" shall refer to Sections of, and Schedules and Exhibits
to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time during normal business hours on any business day
on or after the opening of business on the date hereof and prior to 9:00 P.M.
Eastern Time on the Expiration Date by (i) delivery of a written notice, in the
form of the subscription notice attached as EXHIBIT A hereto, of such holder's
election to exercise this Warrant, which notice shall specify the number of
Warrant Shares to be purchased, (ii) payment to the Company of an amount equal
to the Warrant Exercise Price multiplied by the number of Warrant Shares as to
which the Warrant is being exercised (plus any applicable issue or transfer
taxes) (the "AGGREGATE EXERCISE PRICE") by wire transfer of immediately
available funds, and (iii) the surrender of this Warrant, at the principal
office of the Company; provided, that if such Warrant Shares are to be issued in
any name other than that of the registered holder of this Warrant, such issuance
shall be deemed a transfer and the provisions of Section 8 shall be applicable.
In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2(a), a certificate or certificates for the Warrant
Shares so purchased, in such denominations as may be requested by the holder
hereof and registered in the name of, or as directed by, the holder, shall be
delivered at the Company's expense to, or as directed by, such holder as soon as
practicable after such rights shall have been so exercised, and in any event no
later than three business days after such exercise. In the case of a dispute as
to the determination of the Warrant Exercise Price of a security or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the holder the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to the
holder via facsimile within one business day of receipt of the holder's
subscription notice. If the holder and the Company are unable to agree upon the
determination of the Warrant Exercise Price or arithmetic calculation of the
Warrant Shares within two business days of such disputed determination or
arithmetic calculation
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<PAGE>
being submitted to the holder, then the Company shall immediately submit via
facsimile (i) the disputed determination of the Warrant Exercise Price to an
independent, reputable investment banking firm or (ii) the disputed
arithmetic calculation of the Warrant Shares to its independent, outside
accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than two
business days from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five business days after any exercise and at its own
expense, issue a new Warrant identical in all respects to the Warrant exercised
except (i) it shall represent rights to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under the Warrant exercised, less
the number of Warrant Shares with respect to which such Warrant is exercised,
and (ii) the holder thereof shall be deemed for all corporate purposes to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of certificates evidencing such Warrant
Shares, except that, if the date of such surrender and payment is a date when
the stock transfer books of the Company are properly closed, such person shall
be deemed to have become the holder of such Warrant Shares at the opening of
business on the next succeeding date on which the stock transfer books are open.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(d) If the Company shall fail for any reason or for no reason to
issue to the holder on a timely basis as described in this Section 2, a
certificate for the number of shares of Common Stock to which the holder is
entitled upon the holder's exercise of this Warrant or a new Warrant for the
number of shares of Common Stock to which such holder is entitled pursuant to
Section 2(b) hereof, the Company shall, in addition to any other remedies under
this Warrant or the Securities Purchase Agreement or otherwise available to such
holder, including any indemnification under Section 8 of the Securities Purchase
Agreement, pay as additional damages in cash to such holder on each date after
the fifth business day following receipt by the Company of the exercise notice
that such exercise is not timely effected in an amount equal to 1% of the
product of (A) the sum of the number of shares of Common Stock not issued to the
holder on a timely basis and to which the holder is entitled and, in the event
the Company has failed to timely deliver a new Warrant, the number of shares
represented by the portion of this Warrant which is not being converted, as the
case may be, and (B) the average of the Closing Bid Prices for the three
consecutive trading days immediately preceding the last possible date which the
Company could have issued such Common Stock to the holder without violating this
Section 2.
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(e) Notwithstanding anything contained herein to the contrary, the
holder of this Warrant may, at its election exercised in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula:
Net Number = (A x B) - (A x C)
-----------------
B
For purposes of the foregoing formula:
A= the total number shares with respect to which this
Warrant is then being exercised.
B= the last reported sale price (as reported by Bloomberg)
of the Common Stock on the date immediately preceding the
date of the subscription notice.
C= the Warrant Exercise Price then in effect at the time of
such exercise.
Section 3. Intentionally omitted.
Section 4. COVENANTS AS TO COMMON STOCK. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, and any Preferred Share Warrants issued in
substitution for or replacement of this Warrant will upon issuance be, duly
authorized and validly issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to
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time issuable upon the exercise of this Warrant; and the Company shall so
list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of
capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(e) The Company will not, by amendment of its Charter 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 to be observed or performed by it
hereunder, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of this Warrant in order to protect the
exercise privilege of the holder of this Warrant against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. No
impairment of the designations, preferences and rights of the Preferred Shares
contained in the Company's Articles Supplementary or any waiver thereof which
has an adverse effect on the rights granted hereunder shall be given effect
until the Company has taken appropriate action (satisfactory to the holders of
Preferred Share Warrants representing a majority of the shares of Common Stock
issuable upon the exercise of such Preferred Share Warrants then outstanding) to
avoid such adverse effect with respect to this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the Warrant Exercise Price then in effect, and (ii) will take all such actions
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(f) This Warrant will be binding upon any entity succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets.
Section 5. TAXES. The Company shall pay any and all taxes which may
be payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 6. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities or as a stockholder of the Company,
whether such liabilities are asserted by the Company or by creditors of the
Company. Notwithstanding this Section 6, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
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Section 7. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment and not with a view to, or for
sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. The holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such
holder is an "ACCREDITED INVESTOR" as such term is defined in Rule 501(a) of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act (an "ACCREDITED INVESTOR"). Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale other
than pursuant to an effective registration statement or an exemption under the
Securities Act and that such holder is an Accredited Investor. Notwithstanding
the foregoing, by making the representations herein, the holder does not agree
to hold the Warrant or the Warrant Shares for any minimum or other specified
term and reserves the right to dispose of the Warrant and the Warrant Shares at
any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act. If such holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to such holder's exercise of the Warrant that the Company receive such
other representations as the Company considers reasonably necessary to assure
the Company that the issuance of its securities upon exercise of the Warrant
shall not violate any United States or state securities laws.
Section 8. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee. The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.
(b) This Warrant and the rights granted to the holder hereof are
transferable to affiliates or associates of the holder hereof, without the
written consent of the Company, and to other Persons, with the consent of the
Company, which consent shall not be unreasonably withheld, in whole or in part,
upon surrender of this Warrant, together with a properly executed warrant power
in the form of EXHIBIT B attached hereto; provided, however, that any transfer
or assignment shall be subject to the conditions set forth in Section 8(c) below
and the gaming laws, rules and regulations of the jurisdictions within which the
Company or one of its Subsidiaries is licensed.
(c) The holder of this Warrant understands that this Warrant has not
been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel,
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<PAGE>
reasonably satisfactory in form, scope and substance to the Company, to the
effect that the securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration;
provided that (i) any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that
term is defined in the Securities Act) may require compliance with some other
exemption under the Securities Act or the rules and regulations of the
Securities and Exchange Commission thereunder; and (ii) neither the Company
nor any other person is under any obligation to register the Preferred Share
Warrants under the Securities Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.
(d) The Company is obligated to register the Warrant Shares for
resale under the Securities Act pursuant to the Registration Rights Agreement
and the initial holder of this Warrant (and certain assignees thereof) is
entitled to the registration rights in respect of the Warrant Shares as set
forth in the Registration Rights Agreement.
Section 9. ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES.
In order to prevent dilution of the rights granted under this Warrant, the
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:
(a) ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the date of issuance of
this Warrant, the Company issues or sells, or is deemed to have issued or sold,
any shares of Common Stock (other than shares of Common Stock deemed to have
been issued by the Company in connection with an Approved Stock Plan or upon
exercise or conversion of the Other Securities) for a consideration per share
less than a price (the "APPLICABLE PRICE") equal to the Warrant Exercise Price
in effect immediately prior to such issuance or sale, then immediately after
such issue or sale the Warrant Exercise Price then in effect shall be reduced to
an amount equal to the product of (x) the Warrant Exercise Price in effect
immediately prior to such issue or sale and (y) the quotient determined by
dividing (1) the sum of (I) the product of the Applicable Price and the number
of shares of Common Stock Deemed Outstanding immediately prior to such issue or
sale, and (II) the consideration, if any, received by the Company upon such
issue or sale, by (2) the product of (I) the Applicable Price and (II) the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale. Upon each such adjustment of the Warrant Exercise Price hereunder, the
number of shares of Common Stock acquirable upon exercise of this Warrant shall
be adjusted to the number of shares determined by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock acquirable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.
(b) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Warrant Exercise Price under Section 9(a), the
following shall be applicable:
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(i) ISSUANCE OF OPTIONS. If the Company in any manner grants
any rights or options to subscribe for or to purchase Common Stock (other than
pursuant to an Approved Stock Plan or Other Securities) or 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
Applicable Price, 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 Section
9(b)(i), the "price per share for which Common Stock is issuable upon exercise
of such Options or upon conversion or exchange of such Convertible Securities"
is determined by dividing (A) the total amount, if any, received or receivable
by the Company as consideration for the 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 the 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 adjustment of the Warrant Exercise 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.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Applicable Price, then the maximum number of shares of Common Stock issuable
upon 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 price per
share. For the purposes of this Section 9(b)(ii), the "price per share for
which Common Stock is issuable upon such conversion or exchange" is determined
by dividing (A) the total amount received or receivable by the Company as
consideration for the issue 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 adjustment of the Warrant Exercise Price shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Warrant Exercise Price had been or are to be made pursuant to other provisions
of this Section 9(b), no further adjustment of the Warrant Exercise Price shall
be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible
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Securities are convertible into or exchangeable for Common Stock change at
any time, the Warrant Exercise Price in effect at the time of such change
shall be readjusted to the Warrant Exercise 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 shares of Common Stock
acquirable hereunder shall be correspondingly readjusted; provided that no
adjustment shall be made if such adjustment would result in an increase of
the Warrant Exercise Price then in effect.
(c) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Warrant Exercise Price under Sections 9(a) and 9(b),
the following shall be applicable:
(i) 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, the consideration received therefor will be deemed
to be the net amount received by the Company therefor. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Market Price of such securities on the date
of receipt. In case any Common Stock, Options or Convertible Securities are
issued to the owners of the non-surviving entity in connection with any merger
in which the Company is the surviving entity the amount of consideration
therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving entity as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined jointly by
the Company and the holders of Warrants representing a majority of the shares of
Common Stock issuable upon exercise of such Warrants then outstanding. If such
parties are unable to reach agreement within ten (10) days after the occurrence
of an event requiring valuation (the "VALUATION EVENT"), the fair value of such
consideration will be determined within two business days of the tenth day
following the Valuation Event by an independent, reputable appraiser selected by
the Company. The determination of such appraiser shall be binding upon all
parties absent manifest error.
(ii) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Options will be deemed to
have been issued for a consideration of $.01.
(iii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company, and the disposition of any shares so owned or held
will be considered an issue or sale of Common Stock.
(iv) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution
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payable in Common Stock, Options or in Convertible Securities or (2) to
subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date will be deemed to be the date of the issue or sale of
the shares of Common Stock deemed to have been issued or sold 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.
(d) 270 DAY ADJUSTMENT TO WARRANT EXERCISE PRICE. In the event that
neither (A) the Closing Bid Price of the Common Stock on each day during any
period of 20 consecutive trading days during the period beginning on and
including the date which is 21 trading days after the date of this Warrant and
ending on the trading day immediately preceding the date which is 270 days after
the date of this Warrant (a "WARRANT ADJUSTMENT DATE"), nor (B) the Closing Bid
Price of the Common Stock on the trading day immediately preceding the Warrant
Adjustment Date is greater than the Warrant Exercise Price in effect on the date
of this Warrant; then on and after the Warrant Adjustment Date, the Warrant
Exercise Price shall be equal to the lesser of (x) the average of the Closing
Bid Prices of the Common Stock for the 20 consecutive trading days immediately
preceding the Warrant Adjustment Date, and (y) the Warrant Exercise Price in
effect on the Warrant Adjustment Date. Upon an adjustment of the Warrant
Exercise Price pursuant to this Section 9(d), the number of shares of Common
Stock acquirable upon exercise of this Warrant shall be adjusted to the number
of shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to the Warrant Adjustment Date by the number of shares of
Common Stock acquirable upon exercise of this Warrant immediately prior to the
Warrant Adjustment Date and dividing the product thereof by the Warrant Exercise
Price resulting from the adjustment made pursuant to this Section 9(d).
(e) ADJUSTMENT OF WARRANT EXERCISE PRICE UPON SUBDIVISION OR
COMBINATION OF COMMON STOCK. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.
(f) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another Person (as
defined below) or other transaction which is effected in such a way that holders
of Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as "ORGANIC CHANGE." Prior to the
consummation of any Organic Change, the Company will make appropriate provision
(in form and substance reasonably satisfactory to the holders of the Preferred
Share Warrants representing a majority of the shares of Common Stock issuable
upon exercise of such Preferred Share
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Warrants then outstanding) to insure that each of the holders of the
Preferred Share Warrants will thereafter have the right to acquire and
receive in lieu of or in addition to (as the case may be) the shares of
Common Stock immediately theretofore acquirable and receivable upon the
exercise of such holder's Preferred Share Warrants, such shares of stock,
securities or assets as may be issued or payable in the Organic Change with
respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon the exercise of such
holder's Preferred Share Warrants had such Organic Change not taken place
(without taking into account any limitations or restrictions on exercise).
In any such case, the Company will make appropriate provision (in form and
substance reasonably satisfactory to the holders of the Preferred Share
Warrants representing a majority of the shares of Common Stock issuable upon
exercise of such Preferred Share Warrants then outstanding) with respect to
such holders' rights and interests to insure that the provisions of this
Section 9 and Section 10 will thereafter be applicable to the Preferred Share
Warrants (including, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Warrant Exercise Price to the value for the
Common Stock reflected by the terms of such consolidation, merger or sale,
and a corresponding immediate adjustment in the number of shares of shares of
Common Stock acquirable and receivable upon exercise of the Preferred Share
Warrants, if the value so reflected is less than the Warrant Exercise Price
in effect immediately prior to such consolidation, merger or sale). The
Company will not effect any such consolidation, merger or sale, unless prior
to the consummation thereof, the successor entity (if other than the Company)
resulting from consolidation or merger or the entity purchasing such assets
assumes, by written instrument (in form and substance reasonably satisfactory
to the holders of Preferred Share Warrants representing a majority of shares
of Common Stock issuable upon exercise of the Preferred Share Warrants then
outstanding), the obligation to deliver to each holder of Preferred Share
Warrants such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
(g) DISTRIBUTION OF ASSETS. If the Company shall declare or make any
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way or return of capital or
otherwise (including any dividend or distribution to the Company's stockholders
of cash or shares (or rights to acquire shares) of capital stock of a
subsidiary) (a "DISTRIBUTION"), at any time after the issuance of this Warrant,
then the holder of this Warrant shall be entitled upon exercise of this Warrant
for the purchase of any or all of the shares of Common Stock subject hereto,
after the record date for determining shareholders entitled to receive such
Distribution, to receive the amount of such assets (or rights) which would have
been payable to the holder had such holder been the holder of such shares of
Common Stock on the record date for determination of stockholders entitled to
such Distribution.
(h) CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 9 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Preferred
Share Warrants; provided that no such adjustment will increase the Warrant
Exercise Price or decrease
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the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 9.
(i) NOTICES.
(i) Immediately upon any adjustment of the Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail and certifying the calculation of
such adjustment.
(ii) The Company will give written notice to the holder of this
Warrant at least 15 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation and in no event shall such notice be provided
to such holder prior to such information being made known to the public.
(iii) The Company will also give written notice to the holder of
this Warrant at least 15 days prior to the date on which any Organic Change,
dissolution or liquidation will take place and in no event shall such notice be
provided to such holder prior to such information being made known to the
public.
Section 10. PURCHASE RIGHTS. In addition to any adjustments pursuant
to Section 9 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then the holder of this Warrant will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete exercise
of this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
Section 11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall, on receipt
of an indemnification undertaking, issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed.
Section 12. NOTICE. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) upon receipt, when delivered by a
delivery
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service, in each case properly addressed to the party to receive the same.
The addresses and facsimile numbers for such communications shall be:
If to the Company:
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002-6232
Telephone: (618) 474-7500
Facsimile: (618) 474-7636
Attention: President
With copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Telephone: (312) 558-5600
Facsimile: (312) 558-5700
Attention: Joseph A. Walsh, Jr.
If to a holder of this Warrant, to it at the address set forth
below such holder's signature on the signature page hereof.
Each party shall provide five days' prior written notice to the other party of
any change in address or facsimile number.
Section 13. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the
laws of the State of New York
Section 14. DATE. The date of this Warrant is __________, 199__. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
ARGOSY GAMING COMPANY
By: ____________________________________________
Name: __________________________________________
Title: _________________________________________
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of June 12,
1998, by and among ARGOSY GAMING COMPANY, a Delaware corporation, with
headquarters located at 219 Piasa Street, Alton, Illinois 62002-6232 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyers (i) shares of the Company's
Series A Convertible Preferred Stock (the "PREFERRED SHARES"), which will be
convertible into shares of the Company's common stock, par value $.01 per share
(the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in accordance with
the terms of the Company's Certificate of Designations, Preferences and Rights
of Series A Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS"); and
(ii) warrants to acquire shares of Common Stock (the "WARRANTS") (the shares of
Common Stock issuable upon exercise of the Warrants are referred to herein as
the "WARRANT SHARES"); and
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee thereof
to whom a Buyer assigns its rights under this Agreement in accordance with
Section 9 and who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.
b. "PERSON" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
<PAGE>
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Conversion Shares and the
Warrant Shares issued or issuable upon conversion of the Preferred Shares or the
exercise of the Warrants, as the case may be, the Registration Delay Payment
Shares (as defined in Section 2(h)) and any shares of capital stock issued or
issuable with respect to the Conversion Shares, the Preferred Shares, the
Warrant Shares, the Warrants or the Registration Delay Payment Shares as a
result of any stock split, stock dividend, recapitalization, exchange or similar
event or otherwise, regardless of any limitation on conversions of Preferred
Shares or on exercise of the Warrants.
e. "REGISTRATION STATEMENT" means a registration statement of the
Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as soon
as practicable but in no event later than 60 days after the date of issuance of
the relevant Preferred Shares, file with the SEC a Registration Statement or
Registration Statements (as is necessary) on Form S-3 (or, if such form is
unavailable for such a registration, on such other form as is available for such
a registration, subject to the consent of the Investors holding a majority of
the Registrable Securities and the provisions of Section 2(c), which consent
will not be unreasonably withheld), covering the resale of all of the
Registrable Securities, which Registration Statement(s) shall state that, in
accordance with Rule 416 promulgated under the 1933 Act ("RULE 416"), such
Registration Statement(s) also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Shares (i) to prevent dilution resulting from stock splits, stock dividends or
similar transactions, and (ii) if permitted by law, by reason of changes in the
Conversion Price or Conversion Rate of the Preferred Shares in accordance with
the terms thereof. Such Registration Statement shall initially register for
resale at least 4,897,215 shares of Common Stock, subject to adjustment as
provided in Section 3(b). Such registered shares of Common Stock shall be
allocated among the Investors pro rata based on the total number of Registrable
Securities issued or issuable as of each date that a Registration Statement, as
amended, relating to the resale of the Registrable Securities is declared
effective by the SEC. The Company shall use its best efforts to have the
Registration Statement(s) declared effective by the SEC as soon as practicable,
but in no event later than 120 days after the issuance of the relevant Preferred
Shares.
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b. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time of such establishment or increase, as the case may be.
In the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any person or entity
which does not hold any Registrable Securities shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors. For the avoidance of doubt, the number of Registrable
Securities held by any Investor shall be determined as if all Preferred Shares
and Warrants then outstanding were converted into or exercised for Registrable
Securities.
c. COUNSEL AND INVESTMENT BANKERS. Subject to Section 5 hereof, in
connection with any offering pursuant to this Section 2, the Investors shall
have the right to select one legal counsel and an investment banker or bankers
and manager or managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel and investment bankers.
d. PIGGY-BACK REGISTRATIONS. If at any time prior to the expiration
of the Registration Period (as hereinafter defined) the Company proposes to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any shares of Common
Stock (other than on Form S-4 or Form S-8 or their then equivalents relating to
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) the Company shall promptly send to each Investor
who is entitled to registration rights under this Section 2(d) written notice of
the Company's intention to file a Registration Statement and of such Investor's
rights under this Section 2(d) and, if within ten days after receipt of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, subject to the priorities set forth in
Section 2(e) below. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this Section 2(d) may be
waived by Investors holding a majority of the Registrable Securities. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.
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<PAGE>
e. PRIORITY IN PIGGY-BACK REGISTRATION RIGHTS IN CONNECTION WITH
REGISTRATIONS FOR COMPANY ACCOUNT. If the registration referred to in
Section 2(d) is to be an underwritten public offering and the managing
underwriter(s) advise the Company in writing that, in their reasonable good
faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement is necessary to facilitate and not adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up
to the full number of securities proposed to be registered for the account of
the holders of securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights, and (3)
third, the securities requested to be registered by the Investors and other
holders of securities entitled to participate in the registration, as of the
date hereof, drawn from them pro rata based on the number each has requested
to be included in such registration.
f. ELIGIBILITY FOR FORM S-3. The Company represents, warrants and
covenants that on and after the date hereof it meets and will meet the
requirements for the use of Form S-3 for registration of the sale by the
Investors of the Registrable Securities and the Company has filed and shall file
all reports required to be filed by the Company with the SEC in a timely manner
so as to obtain and maintain such eligibility for the use of Form S-3. In the
event that Form S-3 is not available for sale by the Investors of the
Registrable Securities, then the Company (i) with the consent of the Investors
holding a majority of the Registrable Securities pursuant to Section 2(a), shall
register the sale of the Registrable Securities on another appropriate form, and
(ii) the Company shall undertake to register the Registrable Securities on Form
S-3 as soon as such form is available, provided that the Company shall maintain
the effectiveness of the Registration Statement then in effect until such time
as a Registration Statement on Form S-3 covering the Registrable Securities has
been declared effective by the SEC.
g. RULE 416. The Company and the Investors each acknowledge that an
indeterminate number of Registrable Securities shall be registered pursuant to
Rule 416 under the 1933 Act so as to include in such Registration Statement any
and all Registrable Securities which may become issuable (i) to prevent dilution
resulting from stock splits, stock dividends or similar transactions, and (ii)
if permitted by law, by reason of reductions in the Conversion Price (as defined
in the Certificate of Designations) of the Preferred Shares in accordance with
the terms thereof, including, without limitation, the terms which cause the
Floating Conversion Price (as defined in the Certificate of Designations) to
decrease as the price of the Common Stock decreases (collectively, the "RULE 416
SECURITIES"). In this regard, the Company agrees to use all reasonable efforts
to ensure that the maximum number of Registrable Securities which may be
registered pursuant to Rule 416 under the 1933 Act are covered by the
Registration Statement and, absent guidance from the SEC or other definitive
authority to the contrary, the Company shall use all reasonable efforts to
affirmatively support and to not take any position adverse to the position that
the Registration Statement filed hereunder covers all of the Rule 416
Securities. If the Company takes a position adverse to the position that the
Registration Statement filed hereunder covers all of the Rule 416 Securities,
then the Company shall
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<PAGE>
immediately provide to each Investor written notice setting forth the basis
for the Company's position and the authority therefor.
h. EFFECT OF FAILURE TO OBTAIN AND MAINTAIN EFFECTIVENESS OF
REGISTRATION STATEMENT. If (i) the Registration Statement is not filed on or
before 60 days after the first Issuance Date (as defined in the Certificate of
Designations) of any Preferred Shares (the "SCHEDULED FILING DATE") and such
failure is not solely a result of an act or omission of an Investor of which the
Company has promptly notified the holders of Preferred Shares and the Company is
in compliance with Section 3(h); (ii) the Registration Statement is not declared
effective by the SEC on or before 120 days after the first Issuance Date of any
Preferred Shares (the "SCHEDULED EFFECTIVE DATE") and such failure is not solely
a result of an act or omission of an Investor of which the Company has promptly
notified the holders of Preferred Shares and the Company is in compliance with
Section 3(h); or (iii) after the Registration Statement has been declared
effective by the SEC, sales cannot be made (other than on any days during any
Allowable Grace Period (as defined in Section 3(f)) pursuant to the Registration
Statement (whether because of a failure to keep the Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to the Registration Statement, to register sufficient shares of Common
Stock or otherwise) and such failure is not solely a result of an act or
omission of an Investor of which the Company has promptly notified the holders
of Preferred Shares and the Company is in compliance with Section 3(h); then, as
partial relief for the damages to any holder by reason of any such delay in or
reduction of its ability to sell any of the Registrable Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each holder of Preferred Shares an amount in cash per
Preferred Share held equal to the product of (i) $10,000 multiplied by (ii) the
sum of (A) .025, if the Registration Statement is not filed by the Scheduled
Filing Date, plus (B) .025, if the Registration Statement is not declared
effective by the SEC by the Scheduled Effective Date, plus (C) the product of
(I) .00067 multiplied by (II) the sum of (x) the number of days after the
Scheduled Filing Date and prior to the date that the relevant Registration
Statement has not been filed with the SEC, (y) the number of days after the
Scheduled Effective Date and prior to the date that the relevant Registration
Statement has not been declared effective by the SEC, and (z) the number of days
after the Registration Statement has been declared effective by the SEC that the
Registration Statement is not available (other than on any days during any
Allowable Grace Period) for sales of at least all of the Registrable Securities.
The payments to which a holder shall be entitled pursuant to this Section 2(h)
are referred to herein as "REGISTRATION DELAY PAYMENTS." Registration Delay
Payments shall be paid within five business days of the earlier of (A) the first
day of the month following the occurrence of the event resulting in the
requirement to make Registration Delay Payments, or (B) the date on which the
event resulting in the requirement to make Registration Delay Payments is cured.
In the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of 2.0%
per month (or the maximum rate permitted by law), prorated for partial months,
until paid in full. If the Company fails to pay the Registration Delay
Payments, including any interest thereon, within 15 business days of the
applicable payment date, then the holder entitled to such payments shall have
the right at any time, so long as the Company continues to fail to make such
payments, to require the
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<PAGE>
Company, upon written notice, to immediately issue, in lieu of the
Registration Delay Payments, including any interest thereon, the number of
shares of Common Stock (the "REGISTRATION DELAY PAYMENT SHARES") equal to the
quotient of (X) the sum of the Registration Delay Payments and all interest
accrued thereon, divided by (Y) the lowest Closing Bid Price on any day
during the period beginning on and including the date the Registration Delay
Payments were due and payable and ending on and including the date the holder
delivers written notice to the Company of its election to receive shares of
Common Stock in lieu of the Registration Delay Payments. Notwithstanding the
foregoing, the Company shall not be obligated to pay the Registration Delay
Payments if such payments would be prohibited by the Indenture (as defined in
the Certificate of Designations).
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable Securities be
registered pursuant to Section 2(d) or at such time as the Company is obligated
to file a Registration Statement with the SEC pursuant to Section 2(a), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the sixtieth day after the date of issuance of the relevant Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)) and use
its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible after such filing
(but in no event later than 120 days after the issuance of the relevant
Preferred Shares for the registration of Registrable Securities pursuant to
Section 2(a)), and keep such Registration Statement effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date
which is at least 540 days after the Initial Closing Date and on which (A) the
Investors shall have sold all the Registrable Securities and (B) none of the
Preferred Shares is outstanding (the "REGISTRATION PERIOD"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended
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<PAGE>
methods of disposition by the seller or sellers thereof as set forth in such
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to
cover all of the Registrable Securities, the Company shall amend such
Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to cover all of the
Registrable Securities for all Investors, in each case, as soon as
practicable, but in any event within 15 days after the necessity therefore
arises (based on the market price of the Common Stock). The Company shall
use its best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to
cover all of the Registrable Securities" if at any time the number of
Registrable Securities issued upon conversion of the Preferred Shares or upon
exercise of the Warrants or issuable upon conversion of the then outstanding
Preferred Shares or upon exercise of the then outstanding Warrants is greater
than the quotient determined by dividing (i) the number of shares of Common
Stock available for resale under such Registration Statement by (ii) 1.5.
For purposes of the calculation set forth in the foregoing sentence, any
restrictions on the convertibility of the Preferred Shares or on the
exercisability of the Warrants shall be disregarded and such calculation
shall assume that the Preferred Shares and Warrants are then convertible and
exercisable, respectively, into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Certificate of Designations) or Exercise
Price (as defined in the Warrants), as the case may be.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one copy of such Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits, the prospectus included in such Registration
Statement (including each preliminary prospectus) and, with regards to such
Registration Statement(s), any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives, (ii) promptly after the
effectiveness of any Registration Statement, ten copies of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other number of copies as such Investor may reasonably
request), and (iii) such other documents, including copies of any preliminary or
final prospectus, as such Investor may reasonably request from time to time in
order to facilitate the disposition of the Registrable Securities owned by such
Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the
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<PAGE>
Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during
the Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be required in
connection therewith or as a condition thereto to (x) qualify to do business
in any jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process in any such
jurisdiction. The Company shall promptly notify each Investor who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of
any jurisdiction in the United States or its receipt of actual notice of the
initiation or threatening of any proceeding for such purpose.
e. In the event Investors who hold a majority of the Registrable
Securities being offered in the offering select underwriters for the offering,
the Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations (only with respect to violations
which occur in reliance upon and in conformity with information furnished in
writing to the Company by such Investor expressly for use in the Registration
Statement for such underwritten public offering), with the underwriters of such
offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor in writing of the happening of any event
as a result of which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact or omission to
state a 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 promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate. Notwithstanding anything to the contrary in
this Section 3(f), at any time after the Registration Statement has been
declared effective, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (I) notify the Investors in writing of the existence of material
non-public information giving rise to a Grace Period and the date on which the
Grace Period will begin, and (II) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that during any consecutive
365-day period, the Grace Period shall not exceed 30 calendar days in the
aggregate (an
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"ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the
holders receive the notice referred to in clause (I) and shall end on and
include the date the holders receive the notice referred to in clause (II).
The provisions of Section 2(h) of this Agreement and Sections 2(c)(ii) and
3(d)(ii) of the Certificate of Designations shall not be applicable during
the period of any Grace Period. Upon expiration of the Allowable Grace
Period, the Company shall again be bound by the first sentence of this
Section 3(f) with respect to the information giving rise thereto. In the
event there is a Grace Period, the Maturity Date (as defined in the
Certificate of Designations) shall be delayed two days for each day in the
Grace Period as provided in Section 2(g) of the Certificate of Designations.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(and, in the event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its receipt of actual
notice of the initiation or threat of any proceeding for such purpose.
h. The Company shall permit each Investor and a single firm of
counsel, initially Katten Muchin & Zavis or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold a majority
of the Registrable Securities being sold, to review and comment upon a
Registration Statement and all amendments and supplements thereto at least seven
business days prior to their filing with the SEC, and shall not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
such counsel, which consent shall not be unreasonably withheld.
i. At the request of any Investor, the Company shall use its best
efforts to furnish to such Investor, on the date of the effectiveness of the
Registration Statement (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters and the
Investors.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the
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Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably
request; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use
of any Record or other information which the Company determines in good faith
to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is
otherwise required under the 1933 Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the
Records deemed confidential.
k. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by a Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq SmallCap Market, or the Nasdaq National
Market or The New York Stock Exchange, Inc., as the case may be, and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities. The Company shall
pay all fees and expenses in connection with satisfying its obligation under
this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend)
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representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or, if there is no managing underwriter or
underwriters, the Investors may reasonably request and registered in such
names as the managing underwriter or underwriters, if any, or the Investors
may request.
n. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or an Investor, the
Company shall (i) immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and
the Investors agree should be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold
to such underwriters, the purchase price being paid therefor by such
underwriters and any other terms of the underwritten (or best efforts
underwritten) offering of the Registrable Securities to be sold in such
offering; (ii) make all required filings of such prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement or the
related prospectus if requested by an Investor or any underwriter of such
Registrable Securities.
q. The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
r. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.
s. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.
t. Within two (2) business days after the Registration Statement
which includes the Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Investors whose Registrable Securities are included in
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such Registration Statement) confirmation that the Registration Statement has
been declared effective by the SEC in the form attached hereto as EXHIBIT A.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven days prior to the first anticipated filing date of
a Registration Statement, the Company shall notify each Investor in writing of
the information the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in an
underwritten public offering pursuant to Section 2(d), each such Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations (only with
respect to violations which occur in reliance upon and in conformity with
information furnished in writing to the Company by such Investor expressly
for use in the Registration Statement for such underwritten public offering),
with the managing underwriter of such offering and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities, unless such Investor notifies the Company in
writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3(g)
or 3(f), such Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Investor's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of Section 3(f), or until, in the case of a Grace Period,
after the date on which the Allowable Grace Period ended.
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e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the Investors entitled hereunder to approve such arrangements, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors (up to a maximum amount of $10,000 for fees and
disbursements of one counsel for the Investors), shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each Person, if any, who controls, any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
and any underwriter (as defined in the 1933 Act) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several, (collectively, "CLAIMS") incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
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prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements
therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to the
restrictions set forth in Section 6(d) with respect to the number of legal
counsel, the Company shall reimburse each Indemnified Person promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i)
shall not apply to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in
writing to the Company by any Indemnified Person or underwriter for such
Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company pursuant
to Section 3(c); (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject thereof
(or to the benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the preliminary
prospectus was corrected in the prospectus, as then amended or supplemented,
if such prospectus was timely made available by the Company pursuant to
Section 3(c), and the Indemnified Person was promptly advised in writing not
to use the incorrect prospectus prior to the use giving rise to a violation
and such Indemnified Person, notwithstanding such advice, used it; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available
by the Company; and (iv) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Person and shall survive the transfer or
disposition of the Registrable Securities by the Investors.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject
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to Section 6(d), such Investor will reimburse any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) and the agreement with respect to contribution contained in
Section 7 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor,
which consent shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds
to such Investor as a result of the sale of Registrable Securities pursuant
to such Registration Statement. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything
to the contrary contained herein, the indemnification agreement contained in
this Section 6(b) with respect to any preliminary prospectus shall not inure
to the benefit of any Indemnified Party if the untrue statement or omission
of material fact contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates, if the Investors are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The Indemnified Party or
Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all
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<PAGE>
information reasonably available to the Indemnified Party or Indemnified
Person which relates to such action or claim. The indemnifying party shall
keep the Indemnified Party or Indemnified Person fully apprised at all times
as to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay
or condition its consent. No indemnifying party shall, without the consent
of the Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or Indemnified Person of a release from
all liability in respect to such claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 6, except
to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
e. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
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<PAGE>
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long
as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of
the Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable
by the Investors to any transferee of all or any portion of Registrable
Securities if: (i) the Investor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment; (ii) any such
transfer is done in compliance with all applicable gaming laws, rules and
regulations of the jurisdictions in which the Company or any Subsidiary is
licensed; (iii) the Company is, within a reasonable time after such transfer
or assignment, furnished with written notice of (a) the name and address of
such transferee or assignee, and (b) the securities with respect to which
such registration rights are being transferred or assigned; (iv) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws; (v) at or before the time the Company
receives the written notice contemplated by clause (iii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein; and (vi) such transfer shall have been
made in accordance with the applicable requirements of the Securities
Purchase Agreement.
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<PAGE>
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and Investors who hold two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section
10 shall be binding upon each Investor and the Company. No such amendment
shall be effective to the extent that it applies to less than all of the
holders of the Registrable Securities. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of this Agreement unless the same consideration also is
offered to all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically generated and kept on file by the sending
party); (iii) upon receipt, when delivered by a delivery service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002-6232
Telephone: 618-474-7500
Facsimile: 618-474-7636
Attention: President
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<PAGE>
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Telephone: 312-558-5600
Facsimile: 312-558-5700
Attention: Joseph A. Walsh, Jr.
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers attached hereto, with copies to such Buyer's counsel as set forth on
the Schedule of Buyers.
Each party shall provide five days prior notice to the other party of any change
in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. The corporate laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
e. This Agreement and the Securities Purchase Agreement constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement and the Securities Purchase Agreement
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<PAGE>
supersede all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made, unless otherwise specified in this
Agreement, by Investors holding a majority of the Registrable Securities,
determined as if all of the Preferred Shares then outstanding have been
converted into Registrable Securities (without regard to any limitations on
conversion).
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
ARGOSY GAMING COMPANY THEMIS PARTNERS L.P.
By: Promethean Investment Group L.L.C.
Its: General Partner
By: __________________________
Name:
Its:
By: __________________________
Name: James F. O'Brien, Jr.
Its: President
HERACLES FUND
By: Promethean Investment Group L.L.C.
Its: Investment Advisor
By: _________________________
Name: James F. O'Brien, Jr.
Its: President
AGR HALIFAX FUND, LTD
By: AG Ramius Partners, LLC
Its: Investment Advisor
By: _________________________
Name:
Its: Managing Officer
<PAGE>
[Signature Page to Registration Rights Agreement - p. 2 of 3]
LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: ______________________________
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: ______________________________
Name: Michael L. Gordon
Its: Chief Operating Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By:______________________________
Name: Michael L. Gordon
Its: Managing Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By:______________________________
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE>
[Signature Page to Registration Rights Agreement - p. 3 of 3]
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By:______________________________
Name: Michael L. Gordon
Its: Chief Operating Officer
<PAGE>
EXHIBIT 99
PRESS RELEASE
FOR IMMEDIATE RELEASE Contact: G. Dan Marshall
(618) 474-7666
ARGOSY GAMING COMPANY RAISES $8.0 MILLION
OF EQUITY THROUGH PRIVATE PLACEMENT
Alton, IL, June 16, 1998, --Argosy Gaming Company (NYSE:AGY) announced
today the closing of a private placement of $8.0 million of Convertible
Preferred Stock together with Warrants representing an additional five
percent of the amount of funding received by the Company. The Convertible
Preferred Shares provide for a 4% per annum dividend, payable in cash and/or
in kind at the time of conversion or maturity, at the Company's option. The
Convertible Preferred Shares and Warrants have a fixed initial strike price
of $3.89 per share. However, the strike price of the Convertible Preferred
Shares and the Warrants may be reset downward in 270 days depending on market
conditions and is subject to adjustment upon the occurrence of certain
events. The Convertible Preferred Shares will become convertible in
increments in 120 days, and in full in 210 days, at a floating price. At the
time of the funding, the floating price would have been $3.24 per share. The
Convertible Preferred Shares mature in seven years, and the Company has the
right to force conversion and/or to redeem the Holder(s) at maturity.
Additionally, this transaction provides for put and call options which,
subject to certain restrictions and limitations, allows for up to an
additional $8.0 million of Convertible Preferred Shares and Warrants to be
issued.
The securities were sold in a transaction exempt from registration under
the Securities Act of 1933. The Company has agreed to file a registration
statement covering the common shares underlying the preferred shares and
warrants under the Securities Act of 1933.
<PAGE>
James B. Perry, President and Chief Executive Officer, stated, "This
transaction is the result of a financial strategy which the Company has
adopted to improve its capital structure by reducing financial leverage.
Proceeds from this transaction will be used to fund certain anticipated
capital expenditures over the next eighteen months."
Argosy Gaming Company is a leading multi-jurisdictional owner and
operator of riverboat casinos and related entertainment facilities in the
midwestern and southern United States. The Company, through its subsidiaries
and joint ventures, owns and operates the Alton Belle Casino in Alton, IL,
serving the St. Louis metropolitan market; the Argosy Casino in Riverside,
MO, serving the Kansas City metropolitan market; and the Belle of Baton Rouge
in Baton Rouge, LA. The Company is also a majority partner and operator of
the Belle of Sioux City in Sioux City, IA and the Argosy Casino Lawrenceburg
in Lawrenceburg, IN, serving the southeast tri-state Cincinnati, OH
metropolitan market, including Dayton and Columbus, OH, Lexington and
Louisville, KY and Columbus and Indianapolis, IN.
