<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 33-56806-FW
MULTIMEDIA GAMES, INC.
--------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Texas 74-2611034
- ----------------------------------------------- -------------------------------
(State or Other Jurisdiction of Incorporation (IRS Employer Identification
Number)
7335 South Lewis Avenue, Suite 302
Tulsa, Oklahoma 74136
-------------------------------------------------
(Address of Principal Executive Offices)
(918) 494-0576
----------------------------------
(Issuer's Telephone Number)
__________________________________________________
(Former name, former address and former
fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes X No_______
----
As of August 10, 1996 there were 2,743,200 shares of the Company's Common Stock,
par value $.01, outstanding.
Transitional Small Business Disclosure Format (Check one)
Yes______ No X
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MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information
- ------------------------------
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets
(June 30, 1996 and September 30, 1995)------------------------------- 3
Consolidated Statements of Operations
(Three months ended June 30, 1996 and 1995)-------------------------- 4
Consolidated Statements of Operations
(Nine months ended June 30, 1996 and 1995)--------------------------- 5
Consolidated Statements of Cash Flows
(Nine months ended June 30, 1996 and 1995)--------------------------- 6
Notes to Unaudited Consolidated Financial Statements----------------- 7
Item 2. Management's Discussion and Analysis or Plan of Operation------- 11
Part II. Other Information
- ---------------------------
Item 5. Other Information----------------------------------------------- 18
Item 6. Exhibits and Reports on Form 8-K-------------------------------- 19
Signatures ---------------------------------------------------------------- 20
</TABLE>
<PAGE>
Item 1. Consolidated financial statements
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------ --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,149,000 $ 1,537,000
Accounts Receivable:
Trade, net of allowance for doubtful accounts
of $61,000 and $66,000, respectively 322,000 264,000
Other 194,000 105,000
Inventory 11,000 -
Prepaid expenses 43,000 9,000
----------- -----------
Total current assets 1,719,000 1,915,000
----------- -----------
Restricted cash and cash equivalents 744,000 748,000
Notes receivable 869,000 510,000
Property and equipment, net 2,162,000 1,323,000
Other assets 79,000 95,000
Goodwill, net 506,000 527,000
----------- -----------
Total assets $ 6,079,000 $ 5,118,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 12,000 $ 40,000
Current portion of long-term debt 167,000 114,000
Accounts payable and accrued expenses 990,000 1,171,000
Halls' share of surplus 235,000 37,000
Prize fulfillment fees payable 137,000 261,000
----------- -----------
Total current liabilities 1,541,000 1,623,000
----------- -----------
Long-term debt 758,000 789,000
Other long-term liabilities 576,000 586,000
Stockholders' equity:
Preferred stock, Series A, $.01 par value, 2,000,000
shares authorized, 134,318 and 136,318 shares
issued and outstanding 1,000 1,000
Common stock, $.01 par value, 10,000,000 shares
authorized, 2,743,200 and 1,839,948 shares
issued and outstanding 27,000 18,000
Additional paid-in capital 6,312,000 4,765,000
Stockholder notes receivable (783,000) (200,000)
Treasury stock (13,000) -
Accumulated deficit (2,340,000) (2,464,000)
----------- -----------
Total stockholders' equity 3,204,000 2,120,000
----------- -----------
Total liabilities and stockholders' equity $ 6,079,000 $ 5,118,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Gaming revenue $ 6,019,000 $ 4,021,000
Sale of intellectual property - 500,000
Electronic player station sales
and commissions (15,000) 8,000
Other 79,000 (28,000)
---------- ----------
Total revenues 6,083,000 4,501,000
---------- ----------
Operating costs and expenses:
Bingo prizes and related costs 2,253,000 2,335,000
Allotments to hall operators 2,481,000 825,000
Cost of electronic player stations sold - (3,000)
Salaries and wages 439,000 331,000
Selling, general and administrative expenses 418,000 530,000
Legal and professional fees 96,000 89,000
Business meals and travel 137,000 130,000
Amortization and depreciation 143,000 78,000
---------- ----------
Total operating costs and expenses 5,967,000 4,315,000
---------- ----------
Operating income (loss) 116,000 186,000
Interest income 13,000 6,000
Interest expense (20,000) (28,000)
---------- ----------
Net income (loss) $ 109,000 $ 164,000
========== ==========
Earnings (loss) per common share,
primary and fully diluted $ .02 $ .08
========== ==========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Revenues:
Bingo gaming revenue $14,421,000 $ 8,860,000
MegaBingo services fee - 669,000
Electronic player station sales
and commissions 277,000 292,000
Software license revenue 500,000 500,000
Other 377,000 279,000
----------- -----------
Total revenues 15,575,000 10,600,000
----------- -----------
Operating costs and expenses:
Bingo prizes and related costs 7,310,000 4,765,000
Allotments to hall operators 4,240,000 2,191,000
Cost of electronic player stations sold 55,000 240,000
Salaries and wages 1,171,000 1,035,000
Selling, general and administrative expenses 1,550,000 1,213,000
Legal and professional fees 234,000 216,000
Business meals and travel 406,000 289,000
Amortization and depreciation 354,000 170,000
----------- -----------
Total operating costs and expenses 15,320,000 10,119,000
----------- -----------
Operating income (loss) 255,000 481,000
Interest income 45,000 16,000
Interest expense (63,000) (89,000)
----------- -----------
Net income (loss) $ 237,000 $ 407,000
=========== ===========
Earnings (loss) per common share, primary $ .05 $ .22
=========== ===========
Earnings (loss) per common share, fully diluted $ .04 $ .22
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 237,000 $ 407,000
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities:
Amortization and depreciation 354,000 170,000
Other - 11,000
(Increase) decrease in:
Accounts receivable (157,000) 30,000
Notes receivable (359,000) (500,000)
Other (24,000) (130,000)
Increase (decrease) in:
Accounts payable and accrued expenses (181,000) 44,000
Halls' share of surplus 198,000 (57,000)
Prize fulfillment fees (124,000) 141,000
Other (6,000) 359,000
----------- ---------
Net cash provided by (used for) operating activities (62,000) 475,000
----------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (1,172,000) (275,000)
Preferred stock dividends paid (113,000) (63,000)
Net cash acquired in the purchase of MegaBingo
assets - 333,000
Other - (10,000)
----------- ---------
Net cash provided by (used for) investing activities (1,285,000) (15,000)
----------- ---------
Cash flows from financing activities:
Proceeds from sale of stock, net of offering expenses 980,000 165,000
Proceeds from debt 100,000 519,000
Principal repayments of debt (106,000) (450,000)
Preferred stock acquisition (10,000)
Other (5,000) -
----------- ---------
Net cash provided by (used for) financing activities 959,000 234,000
----------- ---------
Net change in cash and cash equivalents 388,000 694,000
Cash and cash equivalents, beginning of period 1,537,000 80,000
----------- ---------
Cash and cash equivalents, end of period $ 1,149,000 $ 774,000
=========== =========
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements should be read in conjunction with
the Company's financial statements for the twelve months ended September
30, 1995 contained within the Company's Annual Report on Form 10-KSB.
The financial statements included herein as of June 30, 1996 and for each
of the three and nine month periods ended June 30, 1996 and 1995, have been
prepared by the Company, without an audit, pursuant to generally accepted
accounting principles and the rules and regulations of the Securities and
Exchange Commission. The Company believes that the disclosures are adequate
to make the information presented not misleading. The information presented
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the period. Results for the three or nine months
ended June 30, 1996, are not necessarily indicative of the results which
will be realized for the year ending September 30, 1996. The year-end
consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. Certain prior period information has been
reclassified to conform to current period presentation.
GOODWILL--The amount paid for the assets of MegaBingo plus the liabilities
assumed in excess of the fair value of the identifiable assets purchased
has been recorded as goodwill. The Company amortizes goodwill over 20 years
using the straight-line method.
The Company continually re-evaluates the carrying amount of goodwill as
well as the amortization period to determine whether current events and
circumstances warrant adjustments to the carrying value and/or estimates of
useful lives. The specific methodology of future pre-interest cash flows
associated with the assets of the MegaBingo business is used for this
evaluation. At this time, the Company believes that no impairment of
goodwill has occurred and that no reduction of the estimated useful life is
warranted.
INCOME PER COMMON SHARE--Income per common share is computed on the basis
of the weighted average shares of common stock outstanding for the three
months and nine months ended June 30, 1996 and 1995. Options and warrants
are common stock equivalents, and are considered in the computation of
income per common share using the treasury method when they are dilutive.
To determine income per common share, net income is adjusted for preferred
stock dividends, whether paid or not. Weighted average shares outstanding
were 3,100,000 and 3,831,000 on a primary and fully diluted basis,
respectively, for the three months and 2,382,000 and 3,271,000,
respectively, for the nine months ended June 30, 1996.
7
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Weighted average shares outstanding were 1,733,000 on a primary and fully
diluted basis for the three months and 1,572,000, for the nine months ended
June 30, 1995.
2. GRAFF TRANSACTIONS
In July 1995, the Company entered into a series of agreements (the
"Agreements") with Graff Pay-Per-View ("Graff") in which Graff purchased a
33% interest in certain previously developed intellectual property from the
Company for $500,000. The $500,000 was paid in the form of a note payable
to the Company which bore interest at 8% and was payable over three years.
Pursuant to the Agreements, the Company and Graff each contributed their
ownership interests in the intellectual property to a joint venture,
American Gaming Network, JV. ("AGN JV"). AGN JV was established to pursue
the development of gaming opportunities over the Internet.
In addition, Graff agreed to pay the Company an additional $450,000 to
develop a business plan for AGN JV and design certain new products for use
on the Internet. At September 30, 1995, the Company's development efforts
were substantially complete and it therefore recognized the entire amount
as revenue in fiscal year 1995. At September 30, 1995, $375,000 had been
received under such provisions, and $75,000 was due July 31, 1996.
Graff also purchased 100,000 shares of the Company's common stock for $2.75
per share. The $275,000 purchase price was paid in the form of a note, of
which $75,000 was paid prior to September 30, 1995. The remaining $200,000
was due August 1, 1996 and was shown as a reduction of equity. In
connection with the above transactions, Graff was granted a warrant to
acquire 175,000 shares of the Company's common stock at $2.50 per share.
The Company subsequently reduced the exercise price of such warrant to
$2.25 per share and upon exercise of the warrant by the payment of cash,
the Company granted an additional 175,000 warrants to Graff which are
exercisable at $3.50 per share and remain unexercised.
Pursuant to the Agreements, Graff was to provide the needed capital to
finance AGN JV. Graff indicated that it did not intend to provide further
funding for AGN JV. Further, Graff indicated that it wanted a third party
to assume its contractual obligations to AGN JV and the Company. Although
not obligated to do so, since the decision by Graff not to further fund the
efforts of AGN JV, the Company provided approximately $336,000 to AGN JV
for development activities which are to be reimbursed to the Company by AGN
JV.
At June 30, 1996, Graff was indebted to the Company for a total of
$775,000, $200,000 of which is presented as a direct reduction of equity.
Additionally, Graff owns 275,000 shares of the Company's common stock.
8
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In July 1996, the Company entered into an agreement with Graff whereby the
Company accepted the 275,000 shares of the Company's common stock owned by
Graff as payment for the $775,000 owed by Graff to the Company.
Additionally, Graff's interest in AGN was acquired for $100,000 in cash and
a note for $400,000 (the $400,000 Graff Note") payable in three years by a
new entity ("AGN Venturers LLC") established by the Company. The Company
subsequently sold AGN Venturers LLC to a group of investors ("Investors"),
one of which is a related party, for $100,000, an agreement of the
Investors to contribute $400,000 to AGN JV and an individual Investor
guarantee of AGN JV's note payable to the Company in the amount of
$336,000. The $336,000 note payable by AGN JV to the Company is in
reimbursement of amounts advanced by the Company as described above.
Simultaneously with the sale of AGN Venturers LLC, the Company and the
Investors entered into a put and call agreement pursuant to which, after
one year, the Investors can put AGN Venturers LLC's interest in AGN JV to
the Company for 278,666 shares of the Company's common stock plus a number
of common shares equal to the principal paid on the $400,000 Graff Note
divided by three. Under the call provisions of the agreement, the Company
can call one-half of AGN Venturers LLC's interest in AGN JV for 278,666
shares of the Company's common stock plus a number of common shares equal
to the principal paid on the $400,000 Graff note divided by three.
Also in July 1996, the Company entered into agreements with two investors
whereby each investor purchased 125,000 of the shares of common stock
previously owned by Graff for $2.75 per share. Notes were issued to the
Company for the purchase price of the stock bearing interest at 10.5% and
payable in one year. The notes receivable will be shown as a reduction of
equity until such time as the notes are collected.
3. DISTRIBUTION AND LICENSING AGREEMENTS WITH AI SOFTWARE, INC.
In December 1995, the Company entered into distribution and licensing
agreements with AI Software, Inc. ("AI"), a company with its principal
offices located in Vancouver, British Colombia.
For $500,000, AI purchased and was appointed the exclusive distributor of
the Company's MegaBingo(R) and MegaCash(R) systems and other game software
for use in Canada and China. The Company purchased (for $500,000) and was
appointed the exclusive distributor of all AI bingo and other game
software, including future games that are being developed or will be
developed, for use in the United States of America
9
<PAGE>
MULTIMEDIA GAMES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Native Indian market, including the "off reservation" market, and the State
of Texas.
4. FINANCING ACTIVITIES
In February and March 1996, the Company completed a private placement of
589,375 shares of its common stock at a price of $2.00 per share. The
placement generated net proceeds after offering costs of approximately
$980,000. The shares sold are subject to registration rights. Under the
terms of the placement, the Company is required to issue 1/10/th/ of a
share for each share originally issued for each 90 day period after the
closing of the placement that the Company has failed to file a registration
statement with the SEC. In August 1996, the Company will be required to
issue 117,875 shares of common stock pursuant to this provision. The
proceeds from the placement were used to acquire electronic equipment and
for working capital.
Concurrently with the above placement of common stock, the Board of
Directors authorized the exercise by the Company's Chairman and CEO of
previously issued common stock purchase warrants to acquire 291,543 shares
of the Company's common stock at $2.00 per share. Such exercise was
accomplished by the issuance to the Company of a note. The purpose of this
exercise at this time was to maintain current ownership levels in the
Company's common stock in order to avoid a change in ownership for tax
purposes which could limit the amount of net operating losses available in
any future annual period to offset taxable income of the Company.
The Company is currently in the process of a private equity placement of
1.2 million shares of the Company's common stock for $3.00 per share. Each
of the 1.2 million shares placed will be accompanied by a redeemable
warrant to acquire an additional share of the Company's common stock for $8
(a "Redeemable Warrant"). After nine months, each Redeemable Warrant may be
called by the Company for $.10 when the closing bid price of the Company's
common stock has been at least $12.00 for 20 consecutive trading days.
Redeemable Warrants totaling 300,000 will be granted to the placement agent
in connection with the private equity placement.
The private equity placement is preceded by a private placement of bridge
debt financing in the amount of $800,000 (the "Bridge Debt") which was
completed in early August 1996. Redeemable Warrants representing 360,000
shares accompanied the Bridge Debt. The Bridge Debt pays interest at 10.5%,
is due in one year and is mandatorily redeemable from the proceeds of the
private equity placement when completed. Redeemable Warrants representing
174,311 common shares were granted to the placement agreement in connection
with the private placement of the Bridge Debt.
10
<PAGE>
ITEM 2. Management's Discussion and Analysis or Plan of Operation
GENERAL
Multimedia Games, Inc. (the "Company" or "Multimedia") was incorporated
under the laws of the State of Texas on August 30, 1991. Unless the context
otherwise requires, the term the "Company" includes its subsidiaries. The
Company provides interactive, multimedia communications and data processing
services and products to the gaming and entertainment industries. MegaBingo(R),
MegaCash(R), MegaBingo Lite(TM), MegaMania(TM) and AGN(TM) are registered trade-
marks or trade-marks of the Company.
From April 1994 to August 1995, the Company's principal business was to furnish
the marketing and other operating services required in the conduct of high
stakes bingo games conducted under the names MegaBingo and MegaCash, which are
played simultaneously using a closed-circuit, television satellite link at
approximately 52 independently owned bingo halls across the United States,
operated primarily on behalf of American Indian tribes. In October 1994, the
Company introduced a new system, called MegaBingo Lite which is presently
delivering a special game to 14 additional bingo halls on the MegaBingo Network.
MegaBingo and MegaCash allow customers to enter a participating bingo hall and
purchase a bingo card for a game that will be played at a future designated
time. The Company has contracted with the Muscogee (Creek) Tribe to draw the
bingo numbers on its reservation, and to transmit the drawing of the numbers to
all participating bingo halls by satellite. The Company's revenues emanate from
the proceeds of bingo card sales, with profits derived from revenues remaining
after prizes, bingo hall commissions and operating expenses are paid. The
Company believes that its MegaBingo, MegaCash and MegaBingo Lite games are the
only regularly scheduled multi-independent-hall, high stakes bingo games in the
United States.
In August 1995, the Company's principal business was expanded to include the
manufacture, sale, distribution, and operation of an interactive high-speed
bingo game developed by the Company called MegaMania, which is played on
electronic player stations. MegaMania utilizes interconnected electronic player
stations throughout participating halls on the Company's inter-hall network. The
Company has designed MegaMania such that it (a) requires sound strategic
decisions be made rapidly and repeatedly by players in order to maximize prize
payout, (b) presents game results in a fast-action color video presentation
featuring state-of-the-art graphics and animation accompanied by sound, (c) pays
back approximately 85% of the total amount wagered in prizes to players, (d)
pits players against each other to win a common pooled prize in accordance with
the rules of class II bingo, (e) costs only a quarter per card, per cycle, (f)
pays out a must-go prize of $25 to $150+ for every completed game (which is
about 90 seconds duration), and (g) pays out other progressive jackpot prizes
based on winning within a specified number of bingo balls drawn. The average
jackpot won has been approximately $17,000, with the largest jackpot exceeding
$70,000. Currently 17 halls have over 800 electronic player stations that play
MegaMania. The Company has plans to
11
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install additional electronic player stations playing MegaMania or to install
MegaMania software on other vendors' machines within the next year (See Future
Expectations below).
TV Games, Inc. ("TVG"), a wholly owned subsidiary of the Company, has been
offering proxy play services or TV game broadcast of the MegaBingo game to off-
reservation participants since June 1994. TVG accepts orders and purchases bingo
cards at on-reservation Indian bingo halls and plays those cards at the bingo
halls on behalf of those participants.
In February 1995, TVG entered into an agreement with Graff Pay-Per-View, Inc.
("Graff") to develop a business plan and associated software and system design
for an electronic system to be used to deliver advertising, accept proxy play
requests, purchase cards at the bingo hall, deliver a receipt to the proxy play
requester showing a replica of the purchased card, play those cards on behalf of
the requester, broadcast the results of the game drawing by TV or other media
means for the benefit of the proxy play requester, and pay all prizes won and
collected during proxy play. TVG was paid a fee of $150,000 by Graff for
developing a business plan and Graff received a warrant to purchase 175,000
shares of the Company's Common stock at an exercise prize of $2.50 per share
(the "Graff Warrants"). After the completion of development of the business
plan, TVG and Graff entered into a new definitive agreement to implement the
plan under an equally-owned joint venture partnership called American Gaming
Network, J.V. ("AGN JV").
TVG sold one-third of its existing intellectual property for proxy play to Graff
for $500,000. Graff hired TVG to develop new intellectual property to be used by
the venture for an additional $300,000. The new intellectual property was
completed and delivered in the fourth quarter ending September 30, 1995. The
Company and Graff each contributed their interest in certain intellectual
property and/or the development thereof to AGN JV. Graff also agreed to provide
up to $2.5 million of financing to the AGN Joint Venture.
In July 1995, the Company agreed to reduce the exercise price of the Graff
Warrants to $2.25 per share if Graff would exercise said warrants by July 31,
1995. The Company agreed to replace the Graff warrants exercised with a
replacement warrant for 175,000 shares exercisable at $3.50 per share. On July
31, 1995, Graff exercised the 175,000 warrants at $2.25 per share. Also, under
said agreement, Graff purchased 100,000 shares of the Company's Common Stock at
$2.75 per share by delivering its promissory note due August 1, 1996. Graff
prepaid $75,000 on the note in September 1995.
Pursuant to the Agreements, Graff was to provide the needed capital to finance
AGN JV. In February 1996, Graff indicated that it did not intend to provide
further funding for AGN JV. Further, Graff indicated that it wanted a third
party to assume its contractual obligations to AGN JV and the Company. Although
not obligated to do so, since the decision by Graff not to further fund the
efforts of AGN JV, the Company provided approximately $336,000 to AGN for
operating activities which are to be reimbursed to the Company by AGN JV.
12
<PAGE>
At June 30, 1996, Graff was indebted to the Company for a total of $775,000,
$200,000 of which is presented as a direct reduction of equity. Additionally,
Graff owns 275,000 shares of the Company's common stock.
In July 1996, the Company entered into an agreement with Graff whereby the
Company accepted the 275,000 shares of the Company's common stock owned by Graff
as payment for the $775,000 owed by Graff to the Company. Additionally, Graff's
interest in AGN was acquired for $100,000 in cash and a note for $400,000 (the
"$400,000 Graff Note") payable to Graff in three years by a new entity ("AGN
Venturers LLC") established by the Company. The Company subsequently sold AGN
Venturers LLC to a group of investors ("Investors"), one of which is a related
party, for $100,000, an agreement of the Investors to invest $400,000 in AGN JV
and an individual Investor guarantee of AGN JV's note payable to the Company in
the amount of $336,000. The $336,000 note payable by AGN JV to the Company is in
reimbursement of amounts advanced by the Company as described above.
Simultaneously with the sale of AGN Venturers LLC, the Company and the Investors
entered into a put and call agreement pursuant to which, after one year, the
Investors can put AGN Venturers LLC's interest in AGN JV to the Company for
278,666 shares of the Company's common stock plus a number of common shares
equal to the principal paid on the $400,000 Graff Note divided by three. Under
the call provisions of the agreement, the Company can call one-half of AGN
Venturers LLC's interest in AGN JV for 278,666 shares of the Company's common
stock plus a number of common shares equal to the principal paid on the $400,000
Graff Note divided by three.
Also in July 1996, the Company entered into agreements with two investors
whereby each investor purchased 125,000 of the shares of common stock previously
owned by Graff for $2.75 per share. Notes were issued to the Company for the
purchase price of the stock bearing interest at 10.5% and payable in one year.
The notes receivable will be shown as a reduction of equity until such time as
the notes are collected.
FACTORS INFLUENCING PROJECTIONS OF FUTURE ACTIVITY
In the normal course of its business, the Company, in an effort to help keep its
shareholders and the public informed about the Company's operations, may, from
time to time, issue certain statements, either in writing or orally, that
contain or may contain forward looking information. Generally, these statements
relate to projections involving the anticipated revenues to be received from the
Company's gaming operations, the timing of electronic player station sales and
installations as well as the ability of the Company to obtain financing to fund
its projected growth. These statements include such statements as those
contained in "Future Expectations" below.
As with any forward-looking statement, these statements are subject to a number
of factors that may tend to influence the accuracy of the statements and the
projections upon which the statements are based. As noted elsewhere in this
report, all phases of the Company's operations are subject to a number of
factors that may tend to influence the accuracy of the
13
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statements and the projections upon which the statements are based. Many of
these factors are outside the control of the Company, any one of which, or a
combination of which could materially affect the results of the Company's
operations.
In order to provide a more thorough understanding of the possible effects of
some of these influences on any projections made by the Company, the following
discussion outlines certain factors that in the future could cause the Company's
consolidated results for 1996 and beyond to differ materially from those that
may be set forth or implied in any such forward-looking statement made by or on
behalf of the Company.
Government Regulation
In doing business with Indian tribes and tribal gaming facilities, the Company
is subject to various Federal regulations and laws regarding the manner in which
business can be transacted. The National Indian Gaming Commission ("NIGC")
generally establishes rules and regulations aimed at protecting Tribal interests
involved in gaming activities. The NIGC has previously given favorable rulings
regarding the Company's Integrated Gaming Service ("IGS") Agreements with the
tribes and has determined them to be service contracts rather than management
contracts. Additionally, the NIGC has ruled that the Company's MegaMania game is
a Class II game as defined by the Indian Gaming Regulatory Act. This ruling
allows the Company's game to be played in Indian gaming facilities located in
states where certain other forms of gaming (such as video poker, slot machines
and keno) are not allowed. Most of the gaming facilities utilizing MegaMania at
this time are Class II facilities and could not use MegaMania if it were
determined to be a Class III game. There can be no assurance however, that the
NIGC will not enact additional regulations or reinterpret existing regulations
in a manner that is not favorable to the Company. Any such changes could, for
example, require the Company to restructure its arrangements with the tribes
such that the arrangements are not as profitable or even profitable at all or to
redesign MegaMania such that player appeal is lost or with significant
programming costs. The Company does not believe that any such negative
developments are currently foreseeable.
Tribal Sovereignty
Each Federally recognized Indian tribe has the standing of a sovereign nation.
As such, without approval from the tribes, the tribes cannot be sued or
otherwise held accountable under any but tribal laws. Each tribe which is a
party to the Company's integrated service agreements has waived its sovereign
immunity to the Company as it relates to equipment used in the conduct of games
under the IGS agreements or to the revenues of the gaming facility. Although the
Company has never experienced any difficulties in this regard, there can be no
assurance that a particular tribe will not invoke its sovereign immunities with
respect to obligations and/or contracts with the Company.
14
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Customer Demand
The Company's product development and marketing activities are based upon the
Company's assessment of customer demand for gaming services in establishments in
which the Company provides services. Significant changes in customer demand or
preference for gaming products in a given geography, including competing gaming
and other leisure activities, could have an impact on the Company's growth and
results of operations.
Competition
As a result of the success and popularity of the Company's high-speed MegaMania
game, the Company expects that other competitors may attempt to design and place
in the market a competing linked game. Some of these competitors may have
resources and technology which gives them a competitive advantage over the
Company.
Future Financing
The Company's future business plans are heavily dependent upon the ability to
find timely financing with which to fund the placement of additional player
stations and related equipment. Although the Company has entered into
arrangements it believes will provide sufficient capital to accomplish initial
phases of its business plan, there can be no assurance that such financing will
be consummated or that such financing will ultimately be sufficient to fulfill
the capital requirements of its business plan. Financing equipment which is to
be located on Indian lands presents certain issues to prospective lenders which
could keep the Company from locating acceptable or timely debt financing with
which to fund its growth. The Company's ability to generate equity financing to
fund growth in place of debt financing is subject to market limitations, the
economy and available potential investors. Any issuance of common stock by the
Company may result in limitations on the amount of previously generated net
operating losses which can be used for income tax purposes in any one annual
period, thereby resulting in a higher income tax expense than if there were no
limitation on the use of such net operating losses.
RESULTS OF OPERATIONS
The Three Months Ended June 30, 1996 and 1995:
The Company's total operating revenues were $6,083,000 and $4,501,000 for the
three months ended June 30, 1996 and 1995 respectively, or an increase of
$1,582,000 for the period. The increase was driven by MegaMania gaming revenues
during the three month period ended June 30, 1996, which were offset by
MegaBingo revenue decrease. There were no MegaMania revenues during fiscal 1995.
The decrease in MegaBingo revenues are reflective of attendance decreases at
Class II gaming facilities across the country.
Bingo prizes and related costs were $2,253,000 and $2,335,000 for the three
months ended June 30, 1996 and 1995 respectively, or a decrease of $82,000.
Amounts recorded as
15
<PAGE>
MegaMania revenues are recorded net of prizes, accordingly MegaMania has not
affected bingo prizes and related costs. Allotments to hall operators were
$2,481,000 and $825,000 for same comparative periods. The increase in allotments
to hall operators is attributable to MegaMania, which pays a higher commission
to the hall operators than does MegaBingo.
Salaries and wages were $439,000 and $331,000 for the three months ended June
30, 1996 and 1995 respectively, or an increase of $108,000. The increase
reflects additional personnel needed to assist with the development and
operation of MegaMania. Selling, general and administrative expense decreased by
$112,000 to $418,000 for the three months ended June 30, 1996, primarily as a
result of the net impact of the $336,000 AGN reimbursement guarantee by the
investors in AGN Venturers LLC (representing amounts previously written off) and
additional MegaMania operational costs. Business meals and travel increased as a
result of higher sales efforts and development efforts related to MegaMania.
Amortization and depreciation increased $65,000 in the current quarter over the
same period in the prior year primarily as a result of additional investments
related to the Company's MegaMania game since August 1995.
The Nine Months Ended June 30, 1996 and 1995:
The Company's total operating revenues were $15,575,000 and $10,600,000 for the
nine months ended June 30, 1996 and 1995 respectively, or an increase of
$4,975,000 for the period. The increase is a result of MegaMania gaming
revenues, the acquisition of MegaBingo in December 1994 and revenue from the
license of the MegaBingo software in the first quarter to AI Software for use in
Canada and China. Prior to the MegaBingo acquisition, the Company recognized a
services fee for operating MegaBingo under the MegaBingo Services Agreement
instead of recognizing gross gaming revenues and related expenses. Before
netting MegaBingo revenues, prizes and hall allotments as was done for
accounting purposes prior to the MegaBingo acquisition, MegaBingo revenues are
decreased from the prior year.
Bingo prizes and related costs were $7,310,000 and $4,765,000 for the nine
months ended June 30, 1996 and 1995 respectively, or an increase of $2,545,000.
Additionally, allotments to hall operators were $4,240,000 and $2,191,000 for
the same comparative periods. Such increases are due to the effect of owning
MegaBingo since December 1994 instead of merely operating under the MegaBingo
Services Agreement prior to that time. Allotments to hall operators are also
increased as a result of MegaMania. Since revenues for MegaMania are recorded
net of prizes, bingo prizes and related costs are unaffected by the activity of
MegaMania.
The cost of electronic player stations decreased from the nine months ended June
30, 1995 to 1996 and was not proportionate to electronic player station revenues
between the two periods because most of the revenues from electronic player
station sales during the nine months ended June 30, 1996 were from commissions
earned on placing the stations rather than from purchasing and selling the
machines, as was the case in 1995.
16
<PAGE>
Selling, general and administrative expense increased from $1,213,000 for the
nine months ended June 30, 1995 to $1,550,000 for the nine months ended June 30,
1996, primarily as a result of MegaMania operational and development costs in
1996 as well as the effects of acquiring MegaBingo rather than operating under
the MegaBingo Services Agreement as in the prior period.
Amortization and depreciation increased from $170,000 to $354,000 from June 30,
1995 to 1996 as a result of the Company acquiring the assets of MegaBingo in
December 1994. As a result of the timing of the acquisition during 1995, there
is depreciation of such assets and amortization of goodwill for only half of the
nine month period ended June 30, 1995 versus all of the comparative period in
the current year. Additional increases in depreciation resulted from MegaMania
related asset acquisitions during 1996.
FUTURE EXPECTATIONS
Subject to the uncertainties discussed above, the Company expects that its
gaming revenues will continue to increase over previous periods as a result of
additional player stations being added to the MegaMania network. Such additions
are substantially dependent on the availability of financing to fund the
acquisition of the related equipment (see liquidity and capital resources).
There can be no assurance that financing will be able to be obtained, obtained
on commercially acceptable terms or obtained in a timely manner. Delays in
obtaining such financing will negatively impact the above projections, as will
any other difficulties associated with the expansion of the MegaMania network.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had $1,149,000 in unrestricted cash and cash
equivalents, a decrease of $388,000 from September 30, 1995. During the nine
month period ended June 30, 1996, the Company used $62,000 in operations versus
$475,000 of cash generated by operations in the same period of the prior year.
Significant operational uses of cash were the $157,000 increase in accounts
receivable primarily attributable to MegaMania and a $181,000 reduction in
accounts payable and accrued liabilities. The Company used $1,285,000 for
investing activities, primarily on capital expenditures. The liquidation of
accounts payable in the current period and part of the capital expenditures were
funded with a private placement of 589,375 shares of the Company's common stock
in February and March 1996 which generated net proceeds after offering costs of
$980,000. Additional funding for MegaMania equipment during 1996 has been
accomplished with the proceeds of a capital lease in the amount of $100,000.
The Company believes that its current operating levels, including debt service,
can be sustained by cash flows from operations. The Company plans to expand its
electronic player station network; however, the expansion cannot be funded from
the cash flows generated by current operations. To fund this expansion, the
Company is endeavoring to
17
<PAGE>
privately place 1.2 million shares of the Company's common stock for $3.00 per
share. Each of the 1.2 million shares placed will be accompanied by a redeemable
warrant to acquire an additional share of the Company's common stock for $8 (a
"Redeemable Warrant"). After nine months, each Redeemable Warrant may be called
by the Company for $.10 when the closing bid price of the Company's common stock
has been at least $12.00 for 20 consecutive trading days. Redeemable Warrants
totaling 300,000 will be granted to the placement agent in connection with the
private equity placement.
The private equity placement was preceded by a private placement of bridge debt
financing in the amount of $800,000 (the "Bridge Debt") which was completed in
early August 1996. Redeemable Warrants representing 360,000 shares accompanied
the Bridge Debt. The Bridge Debt pays interest at 10.5%, is due in one year and
is mandatorily redeemable from the proceeds of the private equity placement when
completed. Redeemable Warrants representing 174,311 common shares were granted
to the placement agreement in connection with the private placement of the
Bridge Debt.
In June 1996, the Company extended the maturity of its existing bank debt to
October 1998. In addition, a revolving line of credit in the amount of $100,000
was established, on which there were no borrowings at June 30, 1996.
PART II. OTHER INFORMATION
Item 5. Other Information
The Company's common stock became listed on the NASDAQ SmallCap Market in
May 1996. The common stock is listed under the symbol MGAM.
On August 8, 1996, the Company completed a bridge financing arrangement in the
amount of $800,000 (the "Bridge Debt"). Warrants entitling the holder to
purchase 360,000 shares of common stock accompanied the Bridge Debt. The
warrants are excercisable for $8 per share of common stock and each warrant may
be called by the Company, after nine months, for $.10 when the closing bid price
of the Company's common stock has been at least $12.00 for 20 consecutive
trading days (a "Redeemable Warrant"). The Bridge Debt pays interest at 10.5%,
is due in one year and is mandatorily redeemable from the proceeds of a proposed
private equity placement when completed. Redeemable Warrants representing
174,311 common shares were granted to the placement agreement in connection with
the private placement of the Bridge Debt. The Company is in the process of
privately placing 1.2 million shares of the Company's common stock for $3.00 per
share. Each share in the private equity placement will be accompanied by one
Redeemable Warrant and Redeemable Warrants totaling 300,000 will be granted to
the placement agent in connection with the private equity placement.
In July 1996, the Company entered into an agreement with Graff whereby the
Company accepted the 275,000 shares of the Company's common stock owned by Graff
as payment for the $775,000 owed by Graff to the Company. Additionally, Graff's
interest in AGN JV was acquired for $100,000 in cash and a note for $400,000
(the "400,000 Graff Note")
18
<PAGE>
payable to Graff in three years by an entity established by the Company (the
"AGN Venturers LLC"). The Company subsequently sold AGN Venturers LLC to a group
of investors ("Investors"), one of which is a related party, for $100,000, an
agreement of the Investors to contribute $400,000 to AGN JV and an individual
Investor guarantee of AGN JV's note payable to the Company in the amount of
$336,000. The $336,000 note payable by AGN JV to the Company is in reimbursement
of amounts advanced by the Company as described above.
Simultaneously with the sale of AGN Venturers LLC, the Company and the Investors
entered into a put and call agreement pursuant to which, after one year, the
Investors can put AGN Venturers LLC's interest in AGN JV to the Company for
278,666 shares of the Company's common stock plus a number of common shares
equal to the principal paid on the $400,000 Graff Note divided by three. Under
the call provisions of the agreement, the Company can call one-half of AGN
Venturers LLC's interest in AGN JV for 278,666 shares of the Company's common
stock plus a number of common shares equal to the principal paid on the $400,000
Graff Note divided by three.
Also in July 1996, the Company entered into agreements with two investors
whereby each investor purchased 125,000 of the shares of common stock previously
owned by Graff for $2.75 per share. Notes were issued to the Company for the
purchase price of the stock bearing interest at 10.5% and payable one year from
issuance. The notes receivable will be shown as a reduction of equity until such
time as the notes are collected.
On July 10, 1996, the National Indian Gaming Commission ("NIGC") issued a letter
to the Company indicating that the NIGC had determined the Company's high-speed
electronic bingo game - MegaMania - to be a Class II game as defined by the
Indian Gaming Regulatory Act. Such determination allows MegaMania to be placed
in and operated by Indian gaming facilities which currently rely solely on Class
II games to generate revenue for their Tribes.
Item 6. Other Information
(a) The exhibits filed as a part of this Quarterly Report on Form 10-QSB
are listed in the attached Index to Exhibits.
(b) There were no reports filed on Form 8-K during the current quarter.
19
<PAGE>
Signatures
In accordance with the requirements of the exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Multimedia Games, Inc.
Dated August 15, 1996
/s/ Larry Montgomery
------------------------------------
Larry Montgomery, President
Chief Operating Officer
Dated August 15, 1996
/s/ Fred Roll
------------------------------------
Fred Roll, Secretary, Vice President
of Operations and Controller
20
<PAGE>
MULTIMEDIA GAMES, INC.
INDEX TO EXHIBITS
10.17 Form of Bridge Warrant
10.18 Form of Bridge Note
10.19 Bridge Registration Rights Contract
10.20 Graff Purchase Agreement
10.21 Stock Purchase Agreement for Graff Shares
10.22 Amendment Two to Revolving Credit and Term Loan Agreement
10.23 Amendment to Credit Agreement
10.24 Letter from National Indian Gaming Commission
21
<PAGE>
EXHIBIT 10.17
THE WARRANTS EVIDENCED HEREBY AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED OR SOLD EXCEPT (1) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (2) UPON THE DELIVERY BY
THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2001
NO. W- ___________ Warrants
MULTIMEDIA GAMES, INC.
THIS CERTIFIES that, for value received, _________________ or registered
assigns, is the registered holder of the number of warrants (hereinafter
referred to as the "Warrants") set forth above, each of which entitles such
--------
holder to purchase from Multimedia Games, Inc., a Texas Corporation (hereinafter
referred to as the "Company") at any time commencing with [INSERT NINE MONTHS
-------
FROM CLOSING DATE] (hereinafter referred to as the "Exercise Date") through 5:00
-------------
P.M. New York time, on the date which is the fifth anniversary of the Exercise
Date, one fully paid and nonassessable share of Common Stock, $.01 par value, of
the Company (hereinafter referred to as the "Common Stock"), as such Common
------------
Stock is constituted on the date hereof, subject to adjustment from time to time
pursuant to the provisions hereinafter set forth, at the initial price of $8.00
per share of Common Stock (hereinafter referred to as the "Exercise Price"),
--------------
subject to the conditions hereinafter set forth. The Warrants are redeemable at
the option of the Company as hereinafter provided.
This Warrant is one of a series of Warrants being issued as part of a
private offering (the "Bridge Offering") by the Company pursuant to Subscription
---------------
Agreements, dated July __, 1996, between the Company and the purchasers named
therein.
This Warrant Certificate is subject to the following provisions, terms and
conditions:
1. Exercise of Warrant. Each Warrant is initially exercisable to
-------------------
purchase one (1) share of Common Stock (each a "Warrant Share" and collectively
-------------
the "Warrant Shares") at an initial exercise price of $8.00 per Warrant Share,
--------------
subject to adjustment as
<PAGE>
set forth in Section 3 hereof (as so adjusted, the "Exercise Price"). The
--------------
Warrant may be exercised by the registered holder hereof, in whole or in part,
by the surrender of this Warrant Certificate with the annexed Form of Exercise
duly executed, at the principal executive office of the Company, 7335 S. Lewis,
Suite 302, Tulsa, OK 74136, and upon payment to the Company by check (subject to
collection) of the Exercise Price of the Warrant Shares. In the case of a
purchase of less than all of the Warrant Shares purchasable under this Warrant
Certificate, the Company shall cancel this Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the Warrant Shares.
2. Transfer of Warrant and Warrant Shares. Neither this Warrant nor the
--------------------------------------
Warrant Shares have been registered under the Act or any state securities law
and may not be sold, transferred, assigned, hypothecated or otherwise disposed
of until a registration statement with respect thereto is declared effective
under the Act or the Company receives an opinion of counsel reasonably
satisfactory to counsel to the Company that an exemption from the registration
requirements of the Act is available. If permitted by the foregoing, any such
sale, transfer, assignment, hypothecation or other disposition shall be effected
by the holder hereof surrendering this Warrant for cancellation at the office or
agency of the Company referred to in Section 1 hereof, accompanied by an opinion
of counsel satisfactory to the Company and its counsel, stating that an
exemption from the registration requirements is available with the annexed Form
of Transfer duly executed. In the case of a transfer of less than all of the
Warrants evidenced by this Warrant Certificate, the Company shall cancel this
Warrant Certificate upon the surrender thereof and shall execute and deliver (i)
to the transferee thereof a new Warrant Certificates of like tenor for the
number of Warrants so transferred and (ii) to the holder hereof a new Warrant
Certificates of like tenor for the balance of the Warrants theretofore evidenced
by this Warrant Certificate.
Each holder of this Warrant Certificate, by taking and holding the same,
consents and agrees to the terms hereof. The holder shall be entitled to the
benefits of, and shall be subject to the obligations under, the Registration
Rights Agreement between such holder and the Company dated the date hereof.
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant Certificate, and (in case of
loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant Certificate, if mutilated, the
Company, upon reimbursement to it if all reasonable expenses
-2-
<PAGE>
incidental thereto, will make and deliver a new Warrant Certificate, of like
tenor, in lieu of this Warrant Certificate.
Each Warrant Certificate and each certificate for Warrant Shares shall bear
a legend substantially similar to the following:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT
BE OFFERED OR SOLD EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (2) UPON THE DELIVERY BY THE HOLDER TO THE
COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL
FOR THE COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE
ACT IS AVAILABLE
3. Issuance of Certificates Upon Exercise of Warrants. Upon the exercise
--------------------------------------------------
of the Warrants, certificates for the Warrant Shares purchased shall be issued
and delivered to the registered holder hereof forthwith (and in any event within
three business days thereafter). Such issuance and delivery of certificates
shall be made without charge to the holder for any issuance tax in respect
thereto; provided, however, that in the event such issuance and delivery is to a
-----------------
person other than the holder the Company shall not be required to (i) pay any
tax which may be payable in respect of any such transfer, and (ii) issue or
deliver such certificates unless and until the person requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid. No
fractional shares of Common Stock or scrip or cash in respect of a fractional
share shall be issued upon exercise of the Warrants evidenced hereby. Instead
of a fractional share, all fractional interests shall be eliminated by rounding
any fraction up or down to the nearest whole number of shares of Common Stock.
4. Redemption of Warrants. The Warrants are redeemable by the Company, in
----------------------
whole or in part, on not less than thirty (30) days' prior written notice at a
redemption price of $.10 per Warrant (the "redemption price") at any time after
----------------
the Exercise Date; provided that, (i) the closing bid quotation price of the
-------------
Common Stock for the twenty (20) consecutive trading days ending not later than
the seventh day prior to the day on which the Company gives notice of redemption
has been at least 150% of the then effective Exercise Price per share, and (ii)
the Warrants and the Warrant Shares are subject to an effective registration
statement under the Act at the time a notice of redemption is given and at all
times thereafter through the date fixed for redemption; provided further that,
---------------------
the condition referred to in clause (ii)
-3-
<PAGE>
shall be deemed satisfied if the holder was afforded the right and opportunity
to include the Warrants and the Warrant Shares in any such registration
statement and declined to do so. In case of the redemption of a part only of the
outstanding Warrants, the Company shall effect such redemption pro rata among
all holders of Warrants determined by multiplying the number of Warrants
represented by each Warrant Certificate by a fraction, the numerator of which
shall be the total number of Warrants to be redeemed by the Company and the
denominator of which shall be the total number of Warrants held by all holders
of Warrants. The redemption notice shall be given by mail, postage prepaid, to
the holders of record of the Warrants to be redeemed, addressed to each such
holder at its post office address as shown by the records of the Company. On and
after the date fixed for redemption and stated in such notice, each holder of
the Warrants called for redemption shall surrender the Warrant Certificate
evidencing such Warrants to the Company at the place designated in such notice
and shall thereupon be entitled to receive payment of the redemption price. In
case less than all the Warrants represented by any such surrendered certificate
are redeemed, a new certificate shall be issued representing the unredeemed
Warrants. If such notice of redemption shall have been duly given, and if on or
before the date fixed for redemption, funds necessary for the redemption shall
be available therefor, then, notwithstanding that the Warrant Certificates
evidencing any Warrants so called for redemption shall not have been
surrendered, all rights with respect to the Warrants so called for redemption
shall forthwith after such date cease and determine, except only the right of
the holders to receive the redemption price without interest upon surrender of
the Warrant certificates therefor. Holders of Warrants shall have the right to
exercise the Warrants for the purchase of Warrant Shares until the close of
business on the date fixed for redemption.
5. Change in Terms of Warrants Without the Consent of the Holders.
--------------------------------------------------------------
(a) (i) If the Company consummates the Private Placement (as defined
below), or (ii) if the Private Placement is not consummated and (A) within 12
months after the Exercise Date, the Company files a registration statement under
the Act covering the sale to the public of warrants (other than the Private
Placement Warrants)(herein called the "other warrants"), and (B) the Company
--------------
offers to include this Warrant and the Warrant Shares in such registration
statement, then anything to the contrary contained herein notwithstanding,:
(1) the Company and the holder agree that the terms and conditions of
this Warrant shall be automatically amended, without the consent of the
holder, to the extent necessary so that the terms and conditions of this
Warrant are identical to
-4-
<PAGE>
the terms and conditions of the Private Placement Warrants or the other
warrants (as the case may be); provided that, no such amendment shall
-------------
have the effect of reducing the number of Warrant Shares purchasable upon
the exercise hereof or of increasing the exercise price therefor or of
shortening the exercise period hereof without the written consent of the
holder hereof; and
(2) the holder will surrender this Warrant for a warrant in the form
of the Private Placement Warrants or other warrants (as the case may be)
and the holder shall have no further rights hereunder.
(b) If the Company at any time files a registration statement under the
Act covering the sale to the public of the Warrants and the Warrant Shares then
anything to the contrary contained herein notwithstanding, the Company and the
holder agree that the terms and conditions of this Warrant shall be
automatically amended, without the consent of the holder, to the extent
necessary to provide for a Warrant Agent and a certificated form of Warrant
suitable for trading in the public market. The Company agrees to take such
actions as are reasonably necessary to enable such Warrants and Warrants shares
to be traded such as appointing a Warrant Agent and applying for a CUSIP number.
As used herein, the term "Private Placement" shall mean the proposed
-----------------
private offering by the Company of a minimum of 50 and a maximum of 70 units,
each unit consisting of 16,667 shares of Common Stock and warrants to purchase
and additional 16,667 shares of Common Stock, at a purchase price of $50,000 per
unit.
6. Adjustments to Exercise Price and Number of Warrant Shares. The number
----------------------------------------------------------
and kind of shares of Common Stock of the Company that are subject to each
Warrant evidenced hereby, and the Exercise Price, shall be subject to adjustment
as hereinafter set forth. Upon each adjustment of the Exercise Price as
provided herein, the holder of the Warrant evidenced hereby shall thereafter be
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock (calculated to the nearest tenth of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(a) Dividend and Distributions. In case the Company shall at any time
--------------------------
after the date hereof declare a dividend payable in shares of Common Stock or
make a distribution to its shareholders generally in shares of Common Stock
then, upon such dividend or distribution, the Exercise Price in effect
immediately prior to the
-5-
<PAGE>
declaration of such dividend or distribution shall be reduced to a price
determined by dividing an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Exercise Price in effect immediately prior to such dividend of
distribution, by the total number of shares of Common Stock outstanding
immediately after such dividend or distribution.
(b) Subdivision and Combination. In case the Company shall at any time
---------------------------
subdivide its outstanding shares of Common Stock into a greater number of shares
of Common Stock, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares of Common Stock, the Exercise Price in effect
immediately prior to such combination shall be proportionately increased.
(c) Reclassification, Consolidation, Merger, Etc.. In case of any
---------------------------------------------
consolidation or merger of the Company with another corporation after the
Exercise Date, or the sale of all or substantially all of its assets to another
corporation shall be effected after the Exercise Date or in case of any capital
reorganization or reclassification of the capital stock of the Company, then, as
a condition of such consolidation, merger or sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the holder
of this Warrant Certificate shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of each Warrant evidenced hereby, such shares of
stock, securities or assets as may be issuable or payable with respect to or in
exchange for a number of outstanding shares of Common Stock of the Company equal
to the number of shares of Common Stock immediately theretofore purchasable and
receivable upon the exercise of one Warrant evidenced hereby had such
consolidation, merger, sale, reorganization, or reclassification not taken
place, and in any such case appropriate provision shall be made with respect to
the rights and interest of the registered holder of this Warrant Certificate to
the end that the provisions hereof (including without limitation provisions for
adjustment of the Exercise Price) shall thereafter be applicable, as nearly as
may be, in relation of any shares of stock, securities or assets thereafter
deliverable upon the exercise of the Warrants evidenced hereby.
For purposes of this Warrant Certificate, the term "Common Stock" shall
------------
mean shares of the Common Stock, $.01 par value, of the Company, and shall also
include any shares of capital stock
-6-
<PAGE>
into which the Common Stock may be changed, reclassified or converted.
7. Notices to Warrant Holders. If any of the following events shall
--------------------------
occur:
(a) There shall be any adjustment of the Exercise Price or the number of
shares of Common Stock subject to the Warrants evidenced hereby;
(b) The Company shall declare to the holders of its shares of Common Stock
any dividend or distribution payable otherwise than in cash or if in cash
payable otherwise than out of current or retained earnings;
(c) The Company shall declare any dividend upon its shares of Common Stock
payable in Common Stock or in securities convertible into or exchangeable for
Common Stock, or any right or option to subscribe therefore;
(d) there shall be any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of The Company with, or
sale of all or substantially all its assets to, another corporation; or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of The Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, to the holder hereof, of the date on which
(A) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of shares of Common Stock of record shall
participate in such dividend, distribution or subscription rights or shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such
written notice shall be given at least 30 days prior to the action in question
and not less than 30 days prior to the record date or the date on which The
Company's transfer books are closed in respect thereto.
8. Reservation of Shares. The Company shall at all times reserve and
---------------------
keep available out of its authorized shares of Common Stock, solely for the
purpose of its issue upon the exercise of the Warrants evidenced hereby as
herein provided, such number of shares
-7-
<PAGE>
of Common Stock as shall then be issuable upon the exercise of the Warrants
evidenced hereby. The Company shall not take any action which results in any
adjustment of the Exercise Price if the total number of shares of Common Stock
issued and issuable after such action upon exercise of the Warrants evidenced
hereby would exceed the total number of shares of Common Stock then authorized
by the Certificate of Incorporation of The Company.
9. Registered Holder; No Rights as Stockholder. The person in whose name
----------------- -------------------------
this Warrant Certificate is registered shall be deemed the owner hereof and of
the Warrant evidenced hereby for all purposes. The registered holder of this
Warrant Certificate shall not be entitled to any rights whatsoever as a
stockholder of The Company except as herein provided.
10. Notices. All notices, requests or instructions hereunder shall be in
-------
writing and delivered personally or sent by registered or certified mail,
postage prepaid as follows: (1) if to the Company: 7335 S. Lewis, Suite 302,
Tulsa, OK 74136; (2) if to the holder of the Warrants evidenced hereby, at its
address last recorded in the books of the Company. Any of the above addresses
may be changed at any time by notice given as provided above; provided, however,
that any such notice of change of address shall be effective only upon receipt.
11. Amendments. Except as other wise provided in Section 5 hereof, this
----------
Warrant Certificate may not be amended or modified without the written consent
of the holder and the Company.
12. Governing Law. This Agreement shall be deemed to have been made and
-------------
delivered in the State of New York and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York.
IN WITNESS WHEREOF, Multimedia Games, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officers and this Warrant
Certificate to be dated as of the date first written above.
ATTEST: MULTIMEDIA GAMES, INC.
By:
- ------------------------- ---------------------------------------------
-8-
<PAGE>
FORM OF EXERCISE
----------------
The undersigned hereby irrevocably exercises _____ Warrants to subscribe
for and purchase shares of Common Stock, $.01 par value("Common Stock"), of
Multimedia Games, Inc., evidenced by the within Warrant Certificate and herewith
makes payment of the purchase price in full. Kindly issue certificates for
shares of Common Stock in accordance with the instructions given below. The
certificate for the unexercised balance of the Warrants evidenced by the within
Warrants Certificate, if any, will be registered in the name of the undersigned.
DATED:
-------------------------
Instructions for Registration of stock
- --------------------------------------------------------------------------------
Name (please print)
- --------------------------------------------------------------------------------
Social Security or Other identifying Number;
ADDRESS:
- --------------------------------------------------------------------------------
Street
- --------------------------------------------------------------------------------
City, State and Zip Code
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED, _________________ hereby sells , assigns and transfers
unto
(Please print name and address of transferee)
this Warrant certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______, Attorney, to
transfer the within Warrant certificate on the books of the within named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to name
of the holder as specified in the face of the
Warrant certificate)
------------------------------------------------
Social Security or Tax I.D. No.
<PAGE>
EXHIBIT 10.18
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY
NOT BE OFFERED OR SOLD EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR (2) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY,
STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE
CONVERTIBLE PROMISSORY NOTE
$[Insert Purchase Price] Dated: [Insert Closing Date]
FOR VALUE RECEIVED, the undersigned MULTIMEDIA GAMES, INC., a Texas
corporation ("Payor" or the "Company") HEREBY PROMISES TO PAY to the order of
----- -------
[Insert name of Purchaser] (the "Payee"), the principal sum of [Insert Purchase
-----
Price] ($________). The principal amount of, and any accrued and unpaid
interest on, this Note shall be due and payable by Payor on the earlier of
[Insert first anniversary of Closing Date], or upon the occurrence of an Event
of Default (defined below)(such earlier date being hereinafter called the
"Maturity Date").
- --------------
This Note shall bear interest at a rate of ten and one-half percent (10.5%)
per annum payable on the Maturity Date.
This Note is issued pursuant to a Subscription Agreement, dated July ___,
1996 (the "Subscription Agreement"), by and between Payor and Payee; and Payee
----------------------
or any successor holder hereof is entitled to the benefits thereof, may enforce
the agreements of the Payor contained therein and may exercise the remedies
provided for thereby.
1. Prepayment. This Note may not be prepaid by Payor prior to its
----------
maturity except as provided in this Section 1. Payor shall be required to
prepay this Note, without premium or penalty, out of the net proceeds of the
Private Placement (defined below) or an underwritten public offering by the
Company of its securities for cash. Any such payment shall be applied, first,
-----
to any interest accrued but unpaid to the date of such payment and, second, to
------
the unpaid principal amount of this Note. Payee agrees to make a notation on
this Note of any such payment, as of the prepayment date, of the prepaid portion
of the principal amount hereof. All payments of principal and interest shall be
in lawful money of the United States and made to Payee at his address heretofore
provided
<PAGE>
to Payor. Any such prepayment shall be subject to the right of the holder to
convert this Note as provided in Section 2 hereof.
2. Conversion.
----------
(a) Upon Private Placement. (i) If prior to the Maturity Date the Company
----------------------
consummates the Private Placement, the holder of this Note may, at the time of
Closing of the Private Placement:
(A) convert all or any part of the principal amount of this Note (in
integral multiples of not less than such fraction of a unit of the Private
Placement Securities (defined below) as may be demanded by the holder) by
surrendering this Note to the Company together with a duly executed Notice
of Conversion in the form annexed hereto not later than five (5) business
days prior to the date of closing of the Private Placement, and
(B) apply such principal amount so converted to the purchase price of
the Private Placement Securities; provided that, such holder shall have
-------------
satisfied all other terms and conditions applicable to a purchaser of
Private Placement Securities.
The Company shall provide the holder with at least 10 business days prior
written notice of the date of closing of the Private Placement.
(ii) At the time of closing of the Private Placement, the Company shall
deliver to the holder:
(A) to the extent the holder has duly exercised its right of
conversion as provided in Section 2(a), certificates evidencing the Private
Placement Securities so purchased, plus interest to the date of such
conversion on the principal amount so converted at the rate of interest
provided in this Note; and
(B) to the extent the holder has not exercised for conversion the
entire principal amount of this Note, a certified or bank cashiers' check
in an amount equal to the principal amount of this Note that was not so
converted, plus interest thereon to the date of such payment at the rate of
interest provided in this Note.
(b) Conversion Into Conversion Units. (i) Prior to the closing of the
--------------------------------
Private Placement and at any time after the earlier of:
-2-
<PAGE>
(A) the date of any prepayment required under Section 1 hereof by
reason of the Company having consummated an underwritten public offering of
its securities for cash, or
(B) the Maturity Date (whether at the scheduled maturity or earlier by
reason of an Event of Default) unless the Company defaults in the payment
of principal and interest on the Maturity Date then until such later date
on which payment of the principal and interest is made, or
(C) commencing on and at any time after the 270th day after the date
of this Note,
the principal amount of this Note may, at the option of the holder, be converted
into units (each a "Conversion Unit" and collectively the "Conversion Units") at
--------------- ----------------
a conversion price (the "Conversion Price") of $3.00 per Conversion Unit. Each
----------------
Conversion Unit shall consist of (x) one (1) share of Common Stock and (y) one
(1) Redeemable Stock Purchase Warrant representing the right to purchase for a
period of five years from the date of issuance thereof one share of Common Stock
at $8.00 per share and otherwise in substantially the same form as a Warrant
(defined below). The Company shall provide the holder with at least 10 business
days prior written notice of an event described in Section 2(b)(i)(A) and (B)
other than the maturity of this Note upon its scheduled Maturity Date.
(ii) In order to exercise such conversion privilege, the holder of this
Note shall surrender this Note to the Company together with a duly executed
Notice of Conversion in the form annexed hereto at least two (2) business days
prior to the date of such conversion. Upon such conversion, certificates for the
Conversion Units shall be issued and delivered to the registered holder hereof
forthwith (and in any event within five business days thereafter). Such issuance
and delivery of certificates shall be made without charge to the holder for any
issuance tax in respect thereto; provided, however, that in the event such
-----------------
issuance and delivery is to a person other than the holder the Company shall not
be required to (i) pay any tax which may be payable in respect of any such
transfer, and (ii) issue or deliver such certificates unless and until the
person requesting the issuance thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid. No fractional shares of Common Stock or warrants or
scrip or cash in respect of a fraction shall be issued upon conversion of the
Notes. Instead, all fractional interests shall be eliminated by rounding any
fraction up or down to the nearest whole number of shares of Common Stock or of
warrants.
-3-
<PAGE>
(iii) In the case of a conversion of less than all of this Note, the
Company shall cancel this Note upon the surrender thereof and shall execute and
deliver a new Note of like tenor for the balance of the principal amount
thereof; provided that, if such conversion is in connection with an event
-------------
described in Section 2(b)(i)(A) and (B), to the extent the holder has not
exercised for conversion the entire principal amount of this Note, the Company
shall deliver a certified or bank cashiers' check in an amount equal to the
principal amount of this Note that was not so converted, plus interest thereon
to the date of such payment at the rate of interest provided in this Note.
3. Transfer of Note. This Note and the Conversion Units issuable upon the
----------------
conversion hereof may not be sold, transferred, assigned, hypothecated or
otherwise disposed of unless such transfer would not result in a violation of
the provisions of the Act and the rules and regulations promulgated under the
Act. No such sale or transfer shall be permitted unless a registration statement
with respect thereto is declared effective under the Act or the Company receives
an opinion of counsel satisfactory to the Company that an exemption from the
registration requirements of the Act is available. If permitted by the
foregoing, any such sale, transfer, assignment, hypothecation or other
disposition shall be effected by the holder surrendering this Note for
cancellation at the office or agency of the Company maintained for such purpose,
accompanied by an opinion of counsel satisfactory to the Company and its
counsel, stating that an exemption from the registration requirements is
available and by an annexed Form of Assignment duly executed.
Each Note and each certificate for Conversion Units shall bear a legend
substantially similar to the following:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE
OFFERED OR SOLD EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (2) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY,
STATING THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE
4. Adjustments. (a) The number and kind of Conversion Units that are
-----------
subject to the conversion of this Note, and the Conversion Price, shall be
subject to adjustment as hereinafter set forth. Upon each adjustment of the
Conversion Price as hereinafter provided herein, the holder of the Note shall
thereafter be
-4-
<PAGE>
entitled to purchase, at the new Conversion Price resulting from such
adjustment, the number of Conversion Units (calculated to the nearest tenth of a
Unit) obtained by multiplying the Conversion Price in effect immediately prior
to such adjustment by the number of Conversion Units purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Conversion Price resulting from such adjustment. In addition to any such
adjustment in the Conversion Units, appropriate adjustment shall also be made to
the exercise price of warrants comprising a part of the Conversion Units.
(b) In case the Company shall at any time after the date hereof declare a
dividend payable in shares of Common Stock or make a distribution to its
shareholders generally in shares of Common Stock then, upon such dividend or
distribution, the Conversion Price in effect immediately prior to the
declaration of such dividend or distribution shall be reduced to a price
determined by dividing an amount equal to the total number of shares of Common
Stock outstanding immediately prior to such dividend or distribution multiplied
by the Conversion Price in effect immediately prior to such dividend of
distribution, by the total number of shares of Common Stock outstanding
immediately after such dividend or distribution.
(c) In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares of Common Stock, the Conversion
Price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares of Common Stock, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(d) In case of any consolidation or merger of the Company with another
corporation after the date hereof, or the sale of all or substantially all of
its assets to another corporation shall be effected after the date hereof or in
case of any capital reorganization or reclassification of the capital stock of
the Company, then, as a condition of such consolidation, merger or sale,
reorganization or reclassification, lawful and adequate provision shall be made
whereby the holder of this Note shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified herein and in
lieu of the Conversion Units immediately theretofore purchasable and receivable
upon the conversion of this Note, such shares of stock, securities or assets as
may be issuable or payable with respect to or in exchange for a number of
outstanding shares of Common Stock of the Company equal to the number of shares
of Common Stock immediately theretofore receivable upon the conversion of this
Note had such consolidation, merger, sale, reorganization, or
-5-
<PAGE>
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interest of the registered holder
of this Note to the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation of any shares of stock, securities
or assets thereafter deliverable upon the conversion of this Note.
5. Notices to Holders. If any of the following events shall occur:
------------------
(a) there shall be any adjustment of the Conversion Price or the number of
Conversion Units issuable upon the conversion of this Note;
(b) the Company shall declare to the holders of its shares of Common Stock
any dividend or distribution payable otherwise than in cash or if in cash
payable otherwise than out of current or retained earnings;
(c) the Company shall declare any dividend upon its shares of Common Stock
payable in Common Stock or in securities convertible into or exchangeable for
Common Stock, or any right or option to subscribe therefore;
(d) there shall be any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
sale of all or substantially all its assets to, another corporation; or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, to the holder hereof, of the date on which
(a) the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights, or (b) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of shares of Common Stock of record shall
participate in such dividend, distribution or subscription rights or shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such
written notice shall be given at least 10 days prior to the action in question
and not less than 10 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
-6-
<PAGE>
6. Reservation of Common Stock. The Company shall at all times reserve
---------------------------
and keep available out of its authorized shares of Common Stock, solely for the
purpose of its issue upon the conversion of this Note, such number of shares of
Common Stock as shall then be issuable upon such conversion. The Company shall
not take any action which results in any adjustment of the Conversion Price if
the total number of shares of Common Stock issued and issuable after such action
upon the conversion of this Note would exceed the total number of shares of
Common Stock then authorized by the Certificate of Incorporation of the Company.
7. Events of Default. If any of the following events shall occur and be
-----------------
continuing (herein called "Events of Default"):
-----------------
(a) if the Company defaults in the payment of the principal of, and
interest on, the Note when the same shall become due, either by the terms
thereof or otherwise as herein provided;
(b) if for more than 30 days the Company or any majority owned subsidiary
defaults in any other obligation for borrowed money beyond any period of grace
provided with respect thereto or in the performance of any other agreement, term
or condition contained in any agreement under which any such obligation is
created if the effect of such default is to cause, or permit the holder or
holders of such obligation (or a trustee on behalf of such holder or holders) to
cause such obligation to become due prior to its stated maturity;
(c) if any material representation or warranty made by the Company herein
or in any writing furnished by the Company to the Purchaser in connection with
this Note and the Subscription Agree ment shall he false in any material
respect;
(d) if the Company defaults in the performance or observance of any other
agreement, term or condition contained herein and such default shall not have
been remedied within 30 days after written notice thereof shall have been
received by the Company from the Purchaser;
(e) if the Company or any majority owned subsidiary makes an assignment for
the benefit of creditors, or admits in writing its inability to pay its debts in
the ordinary course of business or is adjudicated bankrupt or insolvent;
(f) if the Company or any majority owned subsidiary petitions or applies to
any tribunal for the appointment of a trustee or receiver of the Company or any
subsidiary, or of any substantial part of the assets of the Company or any
subsidiary, or commences any proceedings relating to the Company or any
subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment
-7-
<PAGE>
of debt, dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect; or if any such petition or application is filed, or any
such proceedings are commenced, against the Company or any subsidiary, and the
Company or such subsidiary by any act indicates its approval thereof, consent
thereto, or acquiescence therein, or an order is entered appointing any such
trustee or receiver, or approving the petition in any such proceedings, and such
order remains in effect for more than 60 days; or
(g) if any order is entered in any proceedings against the Company
decreeing the dissolution or liquidation of the Company, and such order remains
in effect for more than 60 days;
then the holder may, at its option, by notice in writing to the Company declare
the Note to be, and the Note shall (subject to the right of the holder to
convert the Note as provided in Section 2(b)) thereupon be and become, forthwith
due and payable together with all accrued but unpaid interest thereon.
8. Definitions. As used in this Note, the following terms have the
-----------
meanings indicated:
"Placement Agent" shall mean as such term is defined in the Subscription
---------------
Agreement.
"Private Placement" shall mean the proposed private offering by the Company
-----------------
of a minimum of 50 and a maximum of 70 units, each unit consisting of 16,667
shares of Common Stock and warrants to purchase and additional 16,667 shares of
Common Stock, at a purchase price of $50,000 per unit.
"Private Placement Securities" shall mean the securities of the Company
----------------------------
issued pursuant to the Private Placement.
"Warrant" shall mean the warrant issued to the holder as part of a unit
-------
that includes this Note.
9. Miscellaneous. (a) The rights and obligations of Payor may not be
-------------
assigned to any other person without the express written consent of Payee.
(b) Upon receipt of evidence satisfactory to Payor of the loss, theft,
destruction or mutilation of the Note and, in the case of any such loss, theft,
or destruction, upon delivery of a bond of indemnity satisfactory to Payor, or
in the case of any such mutilation, upon surrender and cancellation of the Note,
Payor will issue a new Note in lieu of such lost, stolen, destroyed or mutilated
Note.
-8-
<PAGE>
(c) The person in whose name this Note is registered shall be deemed the
owner hereof for all purposes. The registered holder of this Note shall not be
entitled to any rights whatsoever as a stockholder of the Company except as
herein provided.
(d) No course of dealing between Payor and the holder hereof or any delay
or failure on the part of the holder of this Note in exercising any rights
hereunder shall operate as a waiver of any rights hereunder, except to the
extent expressly waived in writing by the holder hereof.
(e) Should any dispute arise between Payor and Payee with respect to this
Note, the party prevailing in such dispute as determined by a court of competent
jurisdiction shall be entitled to recover the reasonable fees and expenses of
his legal counsel.
(f) All the covenants, stipulations, promises and agreements in this Note
contained by or on behalf of Payor shall bind his successors and assigns,
whether so expressed or not.
(g) This Note shall be governed by the laws of the State of New York.
MULTIMEDIA GAMES, INC.
By:____________________________________
-9-
<PAGE>
NOTICE OF CONVERSION
TO MULTIMEDIA GAMES, INC.
The undersigned owner of this Note hereby irrevocably exercises the
option to convert this Note, or portion hereof as designated below, into:
CHECK ONE
___ If the Private Placement has been consummated, Units consisting
of shares of Common Stock and Redeemable Stock Purchase Warrants
issued pursuant to the Private Placement
___ Conversion Units
in each case in accordance with the terms of this Note, and directs that the
securities issuable and deliverable upon the conversion and any Notes
representing any unconverted principal amount hereof, be issued and delivered to
the undersigned unless a different name has been indicated below. If securities
or Notes are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Dated _________, 19___
_______________________________________
Signature
Fill in for registration of securities or Notes if different from
registered owner.
________________________ ______________________________
(Name) SS or Tax ID No.
________________________
(Address)
________________________ ______________________________
Please Print Name and Principal Amount Converted
Address
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Note)
FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers
unto
(Please print name and address of transferee)
this Note, together with all right, title and interest therein, and does hereby
irrevocably constitute and appoint __________________, Attorney, to transfer
this Note on the books of the within named Company, with full power of
substitution.
Dated: Signature:
(Signature must conform in all respects to name
of the holder as specified in the face of the
Note)
____________________________________________
Social Security or Tax I.D. No.
<PAGE>
EXHIBIT 10.19
MULTIMEDIA GAMES, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated to be
---------
effective as of the closing of the Bridge Offering (as defined below), by and
among MULTIMEDIA GAMES, INC., a Texas corporation (the "Company"), each Holder
-------
(as defined below) and WALSH, MANNING SECURITIES, INC., as a Holder and as Agent
for the Holders,
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, simultaneously with the execution and delivery of this Agreement,
the Holders are purchasing from the Company (the "Bridge Offering") 16 Units,
---------------
each Unit consisting of (i) a promissory note of the Company in the principal
amount of $50,000 (each a "Note" and collectively, the "Notes"), and (ii) 22,500
---- -----
Redeemable Common Stock Purchase Warrants (collectively the "Bridge Warrants"),
---------------
each entitling the holder thereof to purchase one share of Common Stock
(collectively the "Bridge Warrant Shares");
---------------------
WHEREAS, the Notes are, under certain circumstances, convertible into units
(a "Conversion Unit") at the rate of one Conversion Unit for each $3.00
---------------
principal amount of Note so converted, each Conversion Unit consisting of one
share of Common Stock (collectively, the "Conversion Stock") and one redeemable
----------------
Common Stock Purchase Warrant (collectively the "Conversion Warrants"), each
-------------------
entitling the holder thereof to purchase one share of Common Stock (collectively
the "Conversion Warrant Shares")
-------------------------
WHEREAS, in connection with the Bridge Offering, the Company has issued to
the Agent 173,310 Redeemable Common Stock Purchase Warrants (collectively the
"Bridge Placement Warrants") each entitling the holder thereof to purchase one
- --------------------------
share of Common Stock (collectively the "Bridge Placement Warrant Shares");
-------------------------------
WHEREAS, the Company is contemplating a private offering (the "Offering")
--------
of units, each unit consisting of (i) 16,667 shares of Common Stock
(collectively the "Offering Stock", and (ii) 16,667 Redeemable Common Stock
--------------
Purchase Warrants (collectively the "Offering Warrants"), each entitling the
-------- --------
holder thereof to purchase one share of Common Stock (collectively the "Offering
--------
Warrant Shares");
- --------------
WHEREAS, in connection with the Offering, the Company contemplates issuing
to the Agent 350,000 Redeemable Common Stock Purchase Warrants (collectively the
"Offering Placement Warrants") each entitling the holder thereof to purchase one
---------------------------
share of Common Stock (collectively the "Offering Placement Warrant Shares");
---------------------------------
<PAGE>
WHEREAS, the Company is willing to register the Registerable Securities
under the 1933 Act upon the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
-------------------
For the purposes of this Agreement, the following terms have the following
meanings:
"Affiliate", with respect to any Person, means any other Person
---------
directly or indirectly controlling, controlled by or under common control
with, such Person. For purposes of this definition, "control" (including
-------
with correlative meanings, the terms "controlling", "controlled by" or
----------- -------------
"under common control with"), as used with respect to any Person, shall
-------------------------
mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Beneficial owner" or "beneficially own" has the meaning given such
---------------- ----------------
term in Rule 13d-3 under the 1934 Act.
"Business Day" means any day, excluding Saturday, Sunday and any
------------
other day on which commercial banks in Boston, Massachusetts or New York,
New York are authorized or required by law to close.
"Commission" means the Securities and Exchange Commission, and any
----------
successor commission or agency having similar powers.
"Common Stock" means the shares of Common Stock, $.01 par value, of
------------
the Company.
"Holder" means the Holder, any Permitted Transferee of a Holder (and
------
any subsequent Permitted Transferee) that, in each case, holds Registrable
Securities.
"1933 Act" means the Securities Act of 1933, as amended, and the
--------
rules and regulations thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and
--------
the rules and regulations thereunder.
-2-
<PAGE>
"Permitted Transferee" means any Person that (i) shall be the
--------------------
registered owner of Registerable Securities in accordance with the terms
thereof, and (ii) shall have executed and delivered to the Company an
executed counterpart of this Agreement and shall have agreed to be bound
hereunder in the same manner and to the same extent as the Holder is bound
hereunder.
"Person" means an individual, a partnership, a joint venture, a
------
corporation, an association, a trust, an individual retirement account or
any other entity or organization, including a government or any department
or agency thereof.
"Registrable Securities" means the Bridge Warrants, the Bridge Warrant
----------------------
Shares, the Bridge Placement Warrants, the Bridge Placement Warrant Shares,
the Conversion Stock, the Conversion Warrants, the Conversion Warrant
Shares, the Offering Stock, the Offering Warrants, the Offering Warrant
Shares, the Offering Placement Warrants and the Offering Placement Warrant
Shares, in each case as adjusted pursuant to the provisions of the
applicable instrument evidencing such securities. Registrable Securities
shall cease to be Registrable Securities when (i) a registration statement
(other than a registration statement on Form S-8) with respect to the sale
of such securities shall have become effective under the 1933 Act and such
securities shall have been disposed of under such registration statement,
(ii) they shall have been distributed to the public pursuant to Rule 144,
(iii) they shall have been otherwise transferred or disposed of other than
to a Permitted Transferee, or (iv) any transfer or disposition of them to
the public shall not require their registration or qualification under the
1933 Act or any similar state law then in force, or (v) they shall have
ceased to be outstanding.
"Registration Expenses" means all out-of-pocket expenses incident to
---------------------
the Company's performance of or compliance with Article II of this
Agreement, including, without limitation, all registration and filing fees
(including filing fees with respect to the National Association of
Securities Dealers, Inc.), all fees and expenses of complying with state
securities or "blue sky" laws (including reasonable fees and disbursements
of underwriters' counsel in connection with any "blue sky" memorandum or
survey), all printing expenses, all listing fees, all registrars' and
transfer agents' fees, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses
of any special audits and/or "cold comfort" letters required by or incident
to such performance and compliance; provided that, "Registration Expenses"
-------------
shall not include underwriting
-3-
<PAGE>
discounts and disbursements of counsel commissions and applicable transfer
taxes, if any, and any fees and retained by the Holders of Registrable
Securities being registered, which shall be borne by the sellers of the
Registrable Securities being registered in all cases.
"Rule 144" means Rule 144 (or any successor provision) under the 1933
--------
Act.
"Rule 144 Transaction" means any Sale of Shares made in reliance upon
--------------------
Rule 144 (as in effect on the date hereof) that complies with paragraphs
(e), (f) and (g) thereof (as in effect on the date hereof), regardless of
whether at the time of such Sale the seller is entitled to rely upon
paragraph (k) of Rule 144 in connection with the Sale of such Shares.
"Share" means any share of Common Stock and, unless the context
-----
otherwise requires, any Bridge Warrant Shares and Warrant Shares. Share
shall also mean any equity securities received in exchange for or with
respect to the Common Stock by way of merger, consolidation, exchange,
stock dividend or reorganization or recapitalization involving the Company
in which the Company is the surviving or resulting entity.
"Warrants" means, collectively, the Bridge Warrants, the Bridge
--------
Placement Warrants, the Offering Warrants, the Offering Placement Warrants
and the Conversion Warrants.
ARTICLE II
Registration Rights
-------------------
SECTION 2.1 Registration Upon Demand.
------------------------
(a) At any time after the later of (i) six months from the date of this
Agreement, or (ii) if the Offering is consummated, six months from the date of
final closing of the Offering, the Agent on behalf of the Holders or the Holders
of a majority in interest of the Registerable Securities, may make a written
demand of the Company for registration with the Commission under and in
accordance with the provisions of the 1933 Act of all or part of their
Registrable Securities (a "Demand Registration"); provided, however, that the
------------------- -------- -------
Company need only effect one Demand Registration. Such request shall specify the
aggregate number of the Registrable Securities proposed to be sold and shall
also specify the intended method of disposition thereof. Within ten (10) days
after receipt of such request, the Company shall give written notice (the
"Notice") of such registration request to all other Holders stating that the
- -------
Company will include in such registration all Registrable Securities as to which
the Company has received written requests
-4-
<PAGE>
for inclusion therein within twenty (20) Business Days after the giving of the
Notice. Each Notice shall also specify the number of Registrable Securities
requested to be registered and the intended method of disposition thereof.
Within five (5) Business Days after the expiration of such twenty (20) Business
Days, the Company will notify all the Holders to be included in such
registration of the other Holders and the number of Registrable Securities
requested to be included therein.
(b) Participation by Other Parties. No Person other than a Holder shall
------------------------------
be permitted to offer any securities under any Demand Registration unless (x)
such Person is entitled to exercise "piggyback" or incidental registration
rights pursuant to an existing contractual commitments with the Company and (y)
if such contractual commitments permit, the Holders participating in such Demand
Registration and their underwriters, if any, in their sole discretion, determine
that such Demand Registration can accommodate such additional participation.
(c) Effective Registration and Expenses. The Company shall use its best
-----------------------------------
efforts to cause any registration made pursuant to this Section 2.1 to be
declared effective as soon as possible; provided that, the Agent or the Holders
-------------
of a majority in interest of the Registerable Securities to be included in such
registration may, by written notice to the Company prior to such registration
being declared effective, withdraw such demand without prejudice to any future
demand made by the Agent or such Holders pursuant to this Section 2.1. A
registration will not count as a Demand Registration until it has become
effective and has remained effective for the longer of (i) such time as the
Warrants are no longer outstanding, or (ii) a Holder has disposed of its
Registerable Securities pursuant to such registration, or (iii) nine (9) months
from the effective date of such registration. The Company shall pay all
Registration Expenses in connection with a registration made pursuant to this
Section 2.1, whether or not such registration becomes effective or Registrable
Securities are sold thereunder.
(d) Selection of Underwriters. If any Demand Registration is an
-------------------------
underwritten offering, the Agent or the Holders holding a majority of the
Registrable Securities to be registered by the Holders may, at their option,
select and obtain the investment banker or bankers and managing underwriter or
underwriters that will administer the offering, such investment banker or
bankers and managing underwriter or underwriters to be reasonably satisfactory
to the Company.
SECTION 2.2. Incidental Registration.
-----------------------
-5-
<PAGE>
(a) If the Company at any time proposes to register for its own account or
for the account of a selling shareholder, securities under the 1933 Act on a
form and in a manner that would permit registration of Registrable Securities
for sale to the public under the 1933 Act, it will each such time give prompt
written notice to all Holders of Registrable Securities of its intention to do
so, describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration (including, without
limitation, whether or not such registration will be in connection with an
underwritten offering of its Common Stock and, if so, the identity of the
managing underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting). Upon the written request of any
such Holder of Registrable Securities delivered to the Company within 20
days after such notice shall have been given to such Holder (which request shall
specify the Registrable Securities intended to be disposed of by such Holder and
the intended method of disposition thereof), the Company will use its best
efforts to effect the registration under the 1933 Act, as expeditiously as is
reasonable, of all Registrable Securities that the Company has been so requested
to register by the Holders of Registrable Securities, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered; provided, however,
-------- -------
that:
(i) if, at any time after giving such written notice of its intention
to register any of such securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to each Holder of
Registrable Securities that has requested to register Registrable Securities and
thereupon the Company shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith to the
extent provided in Section 2.1(b));
(ii) if the registration so proposed by the Company involves an
underwritten offering of the securities to be registered and the managing
underwriter thereof advises the Company that, in its opinion, the number of
securities proposed to be included in such offering by the Company and the
number of shares of Registrable Securities proposed to be included in such
offering by the Holder or Holders thereof should be limited due to market
conditions, the Company may require, by written notice to each such Holder that,
to the extent necessary to meet such limitation on the number of shares of
Registrable Securities that the Holders are permitted to sell, all Holders of
Registrable Securities proposing to sell shares of Registrable Securities in
such offering shall
-6-
<PAGE>
share pro rata in the number of shares of Registrable Securities to be excluded
from such offering, such sharing to be based on the respective numbers of shares
of Registrable Securities as to which registration has been requested by such
Holders. To the extent any Registerable Securities are required to be excluded
from such underwritten offering (the "Excluded Securities"), such Excluded
-------------------
Securities shall nevertheless be included in such registration for sale to the
public (but shall not be a part of the securities sold to the underwriter of
such offering) and the Holders shall agree not to offer or sell the Excluded
Securities for a period of 90 days following the effective date of any such
registration; provided further, that such 90 day period shall be reduced to such
----------------
shorter period as shall be necessary to enable the Holder to exercise the
Warrant and sell the underlying warrant shares prior to any redemption of the
Warrant pursuant to the terms thereof.
(iii) the Company shall not be obligated to effect any registration
of Registrable Securities under this Section 2.2 that is incidental to the
registration of any of its securities in connection with any merger,
acquisition, exchange offer, dividend reinvestment plan or stock option or other
employee benefit plan.
(iv) the company shall maintain the effectiveness of any registration
of Registerable Securities effected pursuant to this Section 2.2 until the
Bridge Warrants and the Warrants are no longer outstanding.
(b) The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities effected by it pursuant to this Section
2.2.
SECTION 2.3 Registration Procedures.
-----------------------
(a) If and whenever the Company is required to use its best efforts to
effect the registration of any Registrable Securities under the 1933 Act as
provided in Section 2.1 and 2.2, the Company will as expeditiously as is
reasonable:
(i) subject to the terms and conditions of this Agreement, use its
best efforts to cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the 1933
Act with respect to the disposition of all Registrable Securities and other
securities covered by such registration statement until the earlier of (A) such
time as all such Registrable Securities and other
-7-
<PAGE>
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement and (B) the expiration of 270 days from the date such registration
statement first becomes effective;
(iii) furnish to each seller of such Registrable Securities such
number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the 1933 Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request in order to facilitate the sale
or disposition of such Registrable Securities;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or "blue sky" laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things that may be
necessary to enable such seller to consummate the disposition in such
jurisdictions of its Registrable Securities covered by such registration
statement, except that the Company shall not for any such purpose be required to
-----------
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in respect of
doing business in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(v) immediately notify each seller of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing or if it
is necessary to amend or supplement such prospectus to comply with law, and at
the request of any such seller prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such Registrable
Securities or securities, such prospectus shall not include an 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 not misleading in the light
of the circumstances then existing and shall otherwise comply in all material
respects with law and so that such prospectus, as amended or supplemented, will
comply with law;
-8-
<PAGE>
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
Holders, as soon as reasonably practicable, an earnings or financial statement
which shall satisfy the provisions of Section 11(a) of the 1933 Act;
(vii) use its best efforts to list such securities (including the
Warrants) on NASDAQ and each securities exchange on which shares of Common Stock
are then listed, if such securities are not already so listed and if such
listing is then permitted under the rules of such exchange, and provide a
transfer agent and registrar for such Registrable Securities not later than the
effective date of such registration statement; and
(viii) issue to any underwriter to which any Holder of Registrable
Securities may sell such Registrable Securities in connection with any such
registration (and to any direct or indirect transferee of any such underwriter)
certificates evidencing shares of Common Stock or Warrants without any
restrictive legends. The Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish the Company
with such information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in writing
and as shall be required by law or by the Commission in connection therewith.
(b) If requested by the underwriters for any underwritten offering of
Registrable Securities on behalf of a Holder or Holders of Registrable
Securities, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities to the effect and to
the extent provided in Section 2.5.
(c) If any registration shall be in connection with an underwritten public
offering, each Holder of Registrable Securities agrees (whether or not such
Holder has registered Shares in such offering), if so required by the managing
underwriters, not to effect any public sale or distribution (including any sale
pursuant to Rule 144) of Registrable Securities (other than as part of such
underwritten public offering) within 7 days prior to the effective date of the
registration statement with respect to such underwritten public offering or 120
days after the effective date of such registration statement (which 120-day
period shall be extended to 180 days at the request of the managing underwriter
selected by the Company).
-9-
<PAGE>
(d) The Company agrees, if so required by the managing underwriters in
connection with an underwritten offering of Registrable Securities, not to
effect any public sale or distribution of any of its equity securities or
securities convertible into or exchangeable or exercisable for any of such
equity securities during the 7 days prior to and the 120 days after the
effective date of any registration statement with respect to such underwritten
public offering, except as part of such underwritten offering or except in
connection with a stock option plan, stock purchase plan, savings or similar
plan, or an acquisition, merger or exchange offer.
(e) It is understood that in any underwritten offering of Registrable
Securities in addition to the shares (the "initial shares") the underwriters
--------------
have committed to purchase, the underwriting agreement may grant the
underwriters an option to purchase a number of additional shares (the "option
------
shares") equal to up to 15% of the initial shares (or such other maximum amount
- ------
as the National Association of Securities Dealers, Inc. may then permit), solely
to cover over-allotments. Shares proposed to be sold by the Company and the
Holders shall be allocated between initial shares and option shares as agreed
or, in the absence of agreement, pro rata in relation to the number of initial
shares sold by each.
SECTION 2.4. Preparation; Reasonable Investigation.
-------------------------------------
In connection with the preparation and filing of each registration
statement registering Registrable Securities under the 1933 Act, the Company
will give the Holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered and their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have issued a report on its financial
statements as shall be necessary, in the opinion of such Holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the 1933 Act. Without limiting the foregoing, each
registration statement, prospectus, amendment, supplement or any other document
filed with respect to a registration under this Agreement shall be subject to
review and reasonable approval by the holders registering Registrable Securities
in such registration and by their counsel.
SECTION 2.5. Indemnification.
---------------
-10-
<PAGE>
(a) In the event of any registration of any Registerable Securities under
the 1933 Act, the Company will, and hereby does, indemnify and hold harmless,
the seller of any Registrable Securities covered by such registration statement,
its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities, each officer and
director of each such underwriter, and each other Person, if any, who controls
such seller or any such underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act, against any losses, claims, damages,
liabilities and expenses, including legal and other expenses incurred in
investigating and defending any such claim, joint or several, to which such
seller or any such director or officer or participating or controlling Person
may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the 1933 Act, any preliminary
prospectus, final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, or any document incorporated by reference
therein, (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse such seller, and each such director,
officer, underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding or (iii) any violation of any
rule or regulation promulgated under the 1933 Act or any other applicable
federal or state securities law and relating to any action or inaction of the
Company in connection with such registration; provided, however, that the
-------- -------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company for use in the preparation thereof by such seller or underwriter,
as the case may be. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such seller.
(b) The Company may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to this Agreement, that
the Company shall have received an undertaking satisfactory to it from (i) the
prospective seller of
-11-
<PAGE>
such securities, to indemnify and hold harmless the Company in the same manner
and to the same extent as set forth in Section 2.5(a) to the extent that the
Company incurs any loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arising out of or based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company for use in the preparation
thereof by such prospective seller, except that any such prospective seller
-----------
shall not in any event be liable to the Company pursuant thereto for an amount
in excess of the net proceeds of sale of such prospective seller's Registrable
Securities so to be sold) the Company, each such underwriter of such securities,
each officer and director of each such underwriter and each other Person, if
any, who controls the Company or any such underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, and (ii) each such
underwriter of such securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 2.6(a)) the Company, each
officer and director of the Company, each prospective seller, each officer and
director of each prospective seller (and, if such prospective seller is a
portfolio or investment fund, its investment advisors and the directors and
officers thereof) and each other Person, if any, who controls the Company or any
such prospective seller within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act, with respect to any statement in or omission from
such registration statement, any preliminary prospectus, final prospectus or
summary prospectus included therein, or any amendment or supplement thereto, if
such statement or omission was made in reliance upon and in conformity with
written information furnished by such prospective seller or such underwriter, as
the case may be, to the Company for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding (including any governmental
investigation) involving a claim referred to in Section 2.5(a) or (b), such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
-------- -------
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding provisions of this Section 2.5, except to the
extent that the indemnifying party is
-12-
<PAGE>
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim (in which case, the
indemnifying party shall not be liable for the fees and expenses of more than
one counsel for all sellers of Registrable Securities, or more than one counsel
for the underwriters in connection with any one action or separate but similar
or related actions), the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that it may wish with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof. The indemnifying party shall not, without the consent
of the indemnified party, settle or compromise any claim or consent to the entry
of any judgment which settlement, compromise or judgment would materially and
adversely affect the indemnified party other than as a result of money damages
or other money payments; provided, that, if the indemnified party shall fail or
-------- ----
refuse to consent to such settlement, compromise or judgment proposed by the
indemnifying party and approved by the person asserting such claim, and a
judgment thereafter shall be entered or a settlement or compromise thereafter
shall be effected on terms less favorable in the aggregate to the indemnified
party than the settlement, compromise or judgment so proposed, the indemnifying
party shall have no liability with respect to money or other damages in excess
of those provided for in the settlement, compromise or judgment so proposed or
any costs or expenses related to such claim arising after the date such
settlement, compromise or judgment was so proposed.
SECTION 2.6. Contribution.
------------
If the indemnification provided for in Section 2.5 is unavailable to the
indemnified party or parties in respect of any losses, claims, damages or
liabilities referred to therein, then each such indemnified party and the
Company shall contribute to the amount of such losses, claims, damages or
liabilities (a) as between the Company and the Holders of Registrable Securities
covered by a registration statement, on the one hand, and the underwriters, on
the other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and such Holders, on the one hand, and the underwriters,
on the other, from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the
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<PAGE>
relative fault of the Company and such Holders, on the one hand, and of the
underwriters, on the other, in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations, and (b) as between the Company, on the one
hand, and each Holder of Registrable Securities covered by a registration
statement, on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of each such Holder in connection with such
statements or omissions, as well as any other relevant equitable considerations.
The relative benefits received by the Company and such Holders, on the one hand,
and the underwriters, on the other, shall be deemed to be in the same proportion
as the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and such
Holders bear to the total underwriting discounts and commissions received by the
underwriters. The relative fault of the Company and such Holders, on the one
hand, and of the underwriters, on the other, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and such Holders or by the
underwriters. The relative fault of the Company, on the one hand, and of each
such Holder, on the other, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this Section 2.6 were
determined by pro rata allocation (even if the underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the next preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 2.6, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such underwriter has otherwise paid by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Holder of Registrable
Securities shall be required to contribute any amount in excess of the amount by
which the total price at which the
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<PAGE>
Registrable Securities of such Holder were offered to the public exceeds the
amount of any damages that such Holder has otherwise paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Each Holder's obligation to
contribute pursuant to this Section 2.5 is several in the proportion that the
proceeds of the offering received by such Holder bears to the total proceeds of
the offering received by all Holders and not joint.
SECTION 2.7 Nominees of Beneficial Owners.
-----------------------------
In the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election, be
treated as the Holder of such Registrable Securities for purposes of any request
or other action by any Holder or Holders of Registrable Securities pursuant to
this Agreement or any determination of any number or percentage of shares of
Registrable Securities held by any Holder or Holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
ARTICLE III
Miscellaneous
-------------
SECTION 3.1. Termination. This Agreement shall terminate on the fifth
-----------
anniversary of the execution and delivery hereof.
SECTION 3.2. Representations. Each of the parties hereto represents that
---------------
this Agreement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 3.3. Certain Remedies. Without intending to limit the remedies
----------------
available to any of the parties hereto, each of the parties hereto agrees that
damages at law will be an insufficient remedy in the event such party violates
the terms hereof and each of the parties hereto further agrees that each of the
other parties hereto may apply for and have injunctive or other equitable relief
in any court of competent jurisdiction to restrain the breach or threatened
breach of, or otherwise specifically to enforce, any of such party's agreements
set forth herein.
SECTION 3.4. Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any such term may be
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<PAGE>
waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and a majority in
interest of the holders of the Registrable Securities. Each Holder shall be
bound by any amendment or waiver authorized by this Section 3.4, whether or not
such Holder shall have consented thereto.
SECTION 3.5. Notices. All notices and other communications provided for
-------
herein shall be in writing and shall be delivered by telecopy, by hand or sent
by certified or registered mail, return receipt requested, postage prepaid,
addressed, if to any Holder, to such Holder at such address as such Holder shall
have specified in writing to the party giving any such notice or sending any
such communication), and, if to the Company, to Multimedia Games, Inc., 7335
South Lewis Avenue, Tulsa, Oklahoma 74136, Attention: Vice President-Finance,
(or to such other address as the Company shall have specified in writing to the
party giving any such notice or sending any such communication). All such
notices shall be conclusively deemed to be received and shall be effective, (i)
if sent by hand delivery, upon receipt, (ii) if sent by telecopy, upon dispatch
thereof, or (iii) if sent by registered or certified mail, on the third day
after the day on which such notice is mailed.
SECTION 3.6. Benefit; Successors and Assigns. Except as otherwise provided
-------------------------------
herein, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns;
provided, however, that this Agreement shall not inure to the benefit of any
- -------- -------
Permitted Transferee unless such Permitted Transferee shall have executed and
delivered to the Company an executed counterpart of this Agreement and shall
have agreed to be bound hereunder in the same manner and to the same extent as
Holder is bound hereunder. Holder may not assign any of its rights hereunder to
any Person other than a Permitted Transferee that has complied with the
requirements of the preceding sentence in all respects. Nothing in this
Agreement either express or implied is intended to confer on any person other
than the parties hereto and their respective successors and permitted assigns,
any rights, remedies or obligations under or by reason of this Agreement.
SECTION 3.7 Attorneys' Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees and expenses in addition to any other available
remedy.
SECTION 3.8. Miscellaneous. This Agreement sets forth the entire agreement
-------------
and understanding among the parties hereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof. All representations
and warranties
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<PAGE>
contained herein shall survive the execution and delivery of this Agreement,
regardless of any investigation made by any party hereto or on such party's
behalf. This Agreement shall be construed and enforced in accordance with and
governed by the law of the State of Oklahoma without regard to the conflict of
laws provisions thereof. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized signatories thereunto duly
authorized as of the day and year first above written.
MULTIMEDIA GAMES, INC.
By: ____________________________
HOLDER
By:_____________________________
Address:
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<PAGE>
EXHIBIT 10.20
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT, dated this 25th day of June, 1996 (this
"Agreement"), by and among each of the MMG Parties, each of the Graff Parties
---------
and the Venture (as these and certain other capitalized terms used herein are
defined in Article I hereof),
W I T N E S S E T H:
-------------------
WHEREAS, on June 28, 1995, TVG and AGNI entered into the Joint Venture
Agreement for the purpose of forming the AGNJV to own and operate the TV
MegaBingo Business, the AGN Charity Hall Bingo Business, the AGN On-Line
Services and the AGN Web Site and to conduct other activities related thereto;
WHEREAS, in connection with the Joint Venture Agreement, (i) MMG issued to
Graff a warrant (the "Initial Warrant") to purchase 175,000 shares of MMG's
---------------
Common Stock, $.01 par value, at an exercise price of $2.50 per share, and (ii)
Graff, AGNI, MMG and TVG entered into the Technology Transfer Agreement,
pursuant to which MMG and TVG sold to Graff a one-third interest in the TV
MegaBingo Business Intellectual Property in consideration of the delivery to MMG
of the Graff IP Purchase Note;
WHEREAS, in connection with the Joint Venture Agreement, Graff, AGNI, MMG
and TVG entered into the Side Letter Agreement as later amended by the Amendment
to Side Letter Agreement, pursuant to which (i) MMG sold 100,000 shares of its
Common Stock to Graff at $2.75 per share in consideration of the delivery to MMG
of the Graff Stock Purchase Note, (ii) the terms of the Initial Warrant were
amended to reduce the exercise price to $2.25 per share, and (iii) Graff agreed
to (and did) exercise the Initial Warrant (as so amended) and MMG issued to
Graff (A) the Replacement Warrant, and (B) the 175,000 shares of the Company's
Common Stock issuable upon exercise of the Initial Warrant (such 175,000 shares
of Common Stock together with the 100,000 shares of Common Stock referred to in
clause (i) of this WHEREAS paragraph, being herein collectively called the "MMG
---
Shares");
- ------
WHEREAS, subject to the terms of the Joint Venture Agreement, (i) AGNI
agreed to provide financing to the Venture which AGNI discontinued doing in
December 1995, (ii) since December 1995, MMG has advanced $336,000 to the
Venture which is evidenced by the Venture Note;
WHEREAS, pursuant to the December Agreement, MMG accepted the Graff JV Note
as the final payment due by Graff pursuant to Section 1.5 of the Joint Venture
Agreement;
<PAGE>
WHEREAS, the parties hereto desire to terminate any and all interests of
Graff and AGNI in the Venture and, in connection therewith, Newco (or its
Permitted Designee) has agreed to purchase all of AGNI's right, title and
interest in the AGNI Venture Interest, and AGNI has agreed to sell its AGNI
Venture Interest to Newco (or its Permitted Designee), upon the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, MMG (or its Permitted Designee) desires to purchase all of the MMG
Shares from Graff and Graff desires to sell all the MMG Shares to MMG (or its
Permitted Designee), upon the terms and subject to the conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
"Accounts" shall mean all accounts and other rights of AGNI to receive
--------
payments or distributions from the Venture.
"Additional Products" shall mean as such term is defined in the Joint
-------------------
Venture Agreement.
"Affiliate" shall have the meaning prescribed by Rule 12b-2 of the
---------
regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended.
"AGN Charity Hall Bingo Business" shall mean as such term is defined in the
-------------------------------
Joint Venture Agreement.
"AGNI" shall mean American Gaming Network, Inc., a Delaware corporation
----
wholly owned by CVS.
"AGNJV" or the "Venture" shall mean American Gaming Network, JV, a joint
----- -------
venture formed pursuant to the general partnership laws of the State of New York
comprised of TVG and AGNI, as Venturers,
"AGN On-Line Services" shall mean as such term is defined in the Joint
--------------------
Venture Agreement.
"AGN Web Site" shall mean as such term is defined in the Joint Venture
------------
Agreement.
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<PAGE>
"AGNI Venture Interest" shall mean all right, title and interest owned by
---------------------
AGNI in or related to the Venture, including without limitation, all Contract
Rights, all Accounts and all Intellectual Property.
"Amendment to Side Letter Agreement" shall mean the Letter Agreement, dated
----------------------------------
September 26, 1995, by and among Graff, AGNI, MMG and TVG that amends the Side
Letter Agreement.
"Business Day" shall mean any day other than Saturday, Sunday, Federal
------------
holiday or day on which the banks in New York are required or permitted by law
to be closed.
"Claim" shall mean any demand, claim, action or cause of action based on
-----
any Loss.
"Closing" shall mean the closing referred to in Section 4.01 of this
-------
Agreement.
"Commercial Efforts" shall mean such efforts as shall not require the
------------------
performing party (i) to do any act that is unreasonable under the circumstances,
(ii) to make any capital contribution not expressly contemplated hereunder,
(iii) to amend or waive any rights under this Agreement, or (iv) to incur or
expend any funds other than reasonable out-of-pocket expenses incurred in
satisfying its obligation hereunder, including the fees, expenses and
disbursements of accountants, counsel and other professionals.
"Contract Rights" shall mean all right, title and interest of the Graff
---------------
Parties in and to all contracts, arrangements and agreements relating to the
Venture Business, including without limitation the Joint Venture Agreement, the
Technology Transfer Agreement, the Side Letter Agreement and the December
Agreement; provided that, "Contract Rights" shall not include (i) the rights of
-------------
Graff under the Replacement Warrants, (ii) the rights of Graff under the
Registration Rights Agreement,(iii) the rights of Graff, CVS and AGNI under and
pursuant to this Agreement, and (iv) the rights of Graff under each of the
Graves Guaranty, the MMG Guaranty and the Venture Guaranty (each of the rights
referred to in the foregoing clauses (i) through (iv) being herein called the
"Retained Contract Rights").
- -------------------------
"CVS" shall mean Cable Video Store, Inc., a Delaware corporation wholly
---
owned by Graff.
"December Agreement" shall mean the Letter Agreement, dated December 11,
------------------
1995, by and among MMG, TVG, AGNI and Graff.
-3-
<PAGE>
"GPPV-Developed Products" shall mean as such term is defined in the Joint
-----------------------
Venture Agreement.
"Graff" shall mean Graff Pay-Per-View Inc., a Delaware corporation.
-----
"Graff IP Purchase Note" shall mean the promissory note of Graff in the
----------------------
principal amount of $500,000.00 payable to MMG and/or TVG, and issued pursuant
to the Technology Transfer Agreement.
"Graff JV Note" shall mean the promissory note of Graff payable to MMG in
-------------
the principal amount of $75,000.00 and delivered by Graff pursuant to the
December Agreement.
"Graff Parties" shall mean, individually and collectively as the context
-------------
requires, Graff, AGNI and CVS.
"Graff Stock Purchase Note" shall mean the promissory note of Graff payable
-------------------------
to MMG in the original principal amount of $275,000.00 of which $75,000.00
principal amount has been paid as of the date of this Agreement.
"Graves Guaranty" shall mean the Guaranty (Graves) of Gordon Graves, to be
---------------
dated the Closing Date, in substantially the form attached hereto as Exhibit E.
---------
"Intellectual Property" shall mean:
---------------------
(i) all of the intellectual property acquired by any Graff Party from
MMG or TVG pursuant to the LOI, the Joint Venture Agreement and the
Technology Transfer Agreement, including without limitation, all property
and assets listed in paragraphs 1 and 2 of Schedule C to the Joint Venture
Agreement, in each case to the extent the same has not been effectively
transferred and contributed by the Graff Parties to the Venture; and
(ii) all right, title and interest of AGNI in and to the name "American
Gaming Network, Inc.", and any and all derivations thereof (including all
trade names, trade name licenses and applications, if any, related
thereto).
"Joint Venture Agreement" shall mean the Joint Venture Agreement, dated
-----------------------
June ___, 1995, by and among AGNI and TVG.
"Lien" shall mean any mortgage, pledge, security interest, lien, charge,
----
encumbrance, equity, claim, option, tenancy, right or restriction on transfer of
any nature whatsoever.
-4-
<PAGE>
"LOI" shall mean the letter of understanding dated March 15, 1995, between
---
Graff and MMG.
"Loss" shall mean any loss, damage, liability, cost, assessment and expense
----
including, without limitation, any interest, fine, court cost and reasonable
investigation cost, penalty and attorneys' and expert witnesses' fees,
disbursements and expenses, after taking into account any insurance proceeds
actually received by or paid on behalf of any party incurring a Loss which are
not required to be remitted by such party to the other party pursuant to the
terms hereof.
"MMG" shall mean Multimedia Games, Inc., a Texas corporation.
---
"MMG Guaranty" shall mean the Guaranty (MMG) of MMG, to be dated the
------------
Closing Date, in substantially the form attached hereto as Exhibit F.
---------
"MMG Retained Contract Rights" shall mean (i) the rights of MMG under the
----------------------------
Replacement Warrants, (ii) the rights of MMG under the Registration Rights
Agreement,(iii) the rights of the MMG Parties under and pursuant to this
Agreement, (iv) the rights of Gordon Graves under the Graves Guaranty, (v) the
rights of MMG under the MMG Guaranty, and (vi) the rights of AGNJV under the
Venture Guaranty.
"MMG Parties" shall mean, individually and collectively as the context
-----------
requires, MMG, TVG and Newco.
"Newco" shall mean AGN Venturer L.L.C., a Delaware limited liability
-----
company wholly owned by TVG.
"Off-Reservation Bingo Play" shall mean as such term is defined in the
--------------------------
Joint Venture Agreement.
"Person" shall mean an individual, a partnership, a joint venture, a
------
corporation, a trust, an unincorporated organization, a governmental entity or
any other entity.
"Products" shall mean as such term is defined in the Joint Venture
--------
Agreement.
"Registration Rights Agreement" shall mean in this Agreement and for
-----------------------------
purposes of Section 9 of the Replacement Warrant, the Registration Rights
Agreement between MMG and Graff in substantially the form attached hereto as
Exhibit C.
- ---------
-5-
<PAGE>
"Replacement Warrant" shall mean the Warrant Certificate (No. W-43), dated
-------------------
July 31, 1995, issued by MMG to Graff evidencing the right of Graff to purchase
175,000 shares of MMG's Common Stock at a purchase price of $3.50 per share.
"Side Letter Agreement" shall mean the Letter Agreement, dated June 28,
---------------------
1995, by and among Graff, AGNI, MMG and TVG.
"Technology Transfer Agreement" shall mean the agreement so captioned by
-----------------------------
and among Graff, AGNI, MMG and TVG entered into simultaneously with the Joint
Venture Agreement.
"TVG" shall mean TV Games Inc., a Texas corporation wholly owned by MMG.
---
"TV MegaBingo Business" shall mean as such term is defined in the Joint
---------------------
Venture Agreement.
"TV MegaBingo Business Intellectual Property" shall mean as such term is
-------------------------------------------
defined in the Technology Transfer Agreement.
"Venture Business" shall mean all business and activities conducted or
----------------
contemplated to be conducted by the Venturers pursuant to the Joint Venture
Agreement, including without limitation owning and operating the TV MegaBingo
Business, the AGN Charity Hall Bingo Business, the AGN On-Line Services, and the
AGN Web Site.
"Venture Guaranty" shall mean the Guaranty (Venture) of AGNJV, to be dated
----------------
the Closing Date, in substantially the form attached hereto as Exhibit F.
---------
"Venture Note" shall mean the promissory note of the Venture to MMG in the
------------
principal amount of $336,000 which evidences all advances to the Venture made by
MMG and TVG since December 1, 1995, to the Closing Date.
1.2 Plurals; Etc. As used herein, the plural form of any noun shall
------------
include the singular and the singular shall include the plural, unless the
context otherwise requires. Each of the masculine, neuter and feminine forms of
any pronoun shall include all such forms unless the context otherwise requires.
ARTICLE II
PURCHASE AND SALE OF AGNI VENTURE INTEREST
------------------------------------------
2.1 Purchase and Sale. Upon the terms and subject to the conditions of
-----------------
this Agreement, at the Closing Newco (which for
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<PAGE>
purposes of this Article II shall include its Permitted Designee) will purchase
the AGNI Venture Interest from AGNI and AGNI will sell all of its right, title
and interest in the AGNI Venture Interest to Newco, free and clear of all Liens.
2.2 Purchase Price. In consideration of Graff's and AGNI's performance of
--------------
this Agreement and the sale of the AGNI Venture Interest, at the Closing:
(a) Newco will deliver to AGNI the promissory note of Newco in the
principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) in substantially
the form attached hereto as Exhibit A (the "Newco A Note"); and
--------- ------------
(b) Newco will deliver to AGNI the promissory note of Newco in the
principal amount of FOUR HUNDRED THOUSAND DOLLARS ($400,000.00) in substantially
the form attached hereto as Exhibit B (the "Newco B Note").
--------- ------------
ARTICLE III
PURCHASE AND SALE OF MMG SHARES
-------------------------------
3.1 Purchase and Sale. Upon the terms and subject to the conditions of
-----------------
this Agreement, at the Closing MMG (which for purposes of this Article III shall
include its Permitted Designee) will purchase the MMG Shares from Graff and
Graff will sell all right, title and interest in the MMG Shares to MMG, free and
clear of all Liens.
3.2 Purchase Price. In consideration of the sale of the MMG Shares, at
--------------
the Closing:
(a) MMG will deliver to Graff the Graff Stock Purchase Note marked
"canceled" and thereupon the Graff Stock Purchase Note shall be of no further
force or effect and Graff shall have no obligation or liability thereunder
including, without limitation, any obligation to pay principal or accrued
interest thereon; and
(b) MMG will deliver to Graff the Graff IP Purchase Note and the Graff JV
Note, each marked "canceled" and thereupon each of the Graff IP Purchase Note
and the Graff JV Note shall be of no further force or effect and Graff shall
have no obligation or liability thereunder including, without limitation, any
obligation to pay principal or accrued interest thereon.
(c) Notwithstanding the foregoing, MMG may, at its sole option, direct
Graff to sell the MMG Shares to a Permitted Designee
-7-
<PAGE>
for such consideration (whether in cash or property, or both) as MMG may direct.
In such event:
(i) Graff agrees to sell the MMG Shares to such Permitted Designee for
such consideration and to deliver such consideration to MMG in the same
form and amount as received by Graff, without recourse to Graff and without
any representation or warranty of Graff other than as to Graff's own
actions; and
(ii) MMG agrees to accept such consideration in the form delivered by
Graff and, in consideration thereof, to deliver to Graff each of the Graff
Stock Purchase Note, the Graff IP Purchase Note and the Graff JV Note, each
marked "canceled" and thereupon each of the Graff Stock Purchase Note, the
Graff IP Purchase Note and the Graff JV Note shall be of no further force
or effect and Graff shall have no obligation or liability thereunder
including, without limitation, any obligation to pay principal or accrued
interest thereon.
ARTICLE IV
CLOSING
-------
4.1 Closing. Subject to Section 9.01 hereof, the Closing of the sale and
-------
purchase of the AGNI Venture Interest and the MMG Shares hereunder shall take
place at 10:00 A.M., on the second business day following the receipt by the
Graff Parties of the consent referred to in Section 8.2(d) hereof, or at such
other date and time as the parties hereto may mutually agree. The Closing shall
be conducted by the mutual exchange of documents and instruments delivered at
the respective offices of the parties by overnight courier.
4.2 Deliveries at Closing.
---------------------
(a) At the Closing, MMG or Newco (or their respective Permitted Designees),
as appropriate, shall deliver or cause to be delivered the following:
(i) the Newco A Note to AGNI;
(ii) the Newco B Note to AGNI;
(iii) the Graff IP Note marked "canceled" to Graff;
(iv) the Graff Stock Purchase Note marked "canceled" to Graff;
-8-
<PAGE>
(v) the Graff JV Note marked "canceled" to Graff;
(vi) the Registration Rights Agreement to Graff;
(vii) the MMG Guaranty to Graff;
(viii) the Graves Guaranty to Graff;
(ix) the Venture Guaranty to Graff; and
(x) such other documents and instruments as reasonably may be
requested by Graff not less than five Business Days prior to the Closing.
(b) At the Closing, Graff or AGNI, as appropriate, shall deliver or cause
to be delivered the following:
(i) a certificate or certificates evidencing the MMG Shares to MMG
(or its Permitted Designee);
(ii) in the event Section 3.02(c) of this Agreement is applicable,
such consideration as was received by Graff from such Permitted Designee;
(iii) an assignment of the AGNI Venture Interest, in substantially the
form attached hereto as Exhibit D, to Newco (or its Permitted Designee);
---------
(iv) evidence of the satisfaction of the condition set forth in
Section 8.2(d); and
(v) such other documents and instruments as reasonably may be
requested by MMG not less than five Business Days prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GRAFF PARTIES
-----------------------------------------------
Each Graff Party hereby represents and warrants, jointly and severally, to
each MMG Party and the Venture as follows:
5.1 Organization; Qualification; Authority. Each Graff Party is a
--------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and each has the power and authority to make, execute,
deliver and perform this Agreement and to incur and perform the obligations
provided for herein, all of which have been duly authorized by all necessary and
proper corporate action, including shareholder action. Neither the
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<PAGE>
execution, delivery and performance of this Agreement by any Graff Party nor the
consummation by any Graff Party of the transactions contemplated hereby conflict
with or will result in any breach or default of any provision of the Certificate
of Incorporation or Bylaws of any Graff Party. This Agreement has been duly and
validly executed and delivered by the duly authorized officers of each Graff
Party and constitutes the valid, legally binding and enforceable obligations of
each Graff Party in accordance with the terms of this Agreement.
5.2 Consents and Approvals; No Violation. Neither the execution, delivery
------------------------------------
and performance of this Agreement by any Graff Party (a) requires any consent,
approval, authorization or permit of, or filing with or notification to, any
Person including any governmental or regulatory authority; (b) constitutes a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation of any kind to which any Graff Party is a
party or by which any Graff Party may be bound; or (c) violates any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or governmental
permit or license applicable to any Graff Party, the Venture or the Venture
Business.
5.3 Title, Etc. AGNI is the sole owner of the AGNI Venture Interest and
----------
has good and valid title thereto, free and clear of all Liens. Graff is the
sole owner of the MMG Shares and has good and valid title thereto, free and
clear of all Liens.
5.4 Venture Property. Each Graff Party has validly and effectively
----------------
transferred and contributed to the Venture all property, rights and assets
acquired by any Graff Party from MMG and TVG pursuant to the LOI, the Joint
Venture Agreement and the Technology Transfer Agreement, in each case in such
form and in such condition as was received by such Graff Party. Such transfer
and contribution was (and is) made by such Graff Party free and clear of any
Liens created or permitted by any Graff Party but without recourse (except as to
such Graff Party's own actions) and without any representation or warranty as
to title or fitness for use. No Graff Party has or claims any interest in any
such property, rights or assets. The representation and warranty of each Graff
Party made in this Section 5.4 includes, but is not limited to, all right, title
and interest of any Graff Party in and to the following property, rights and
assets:
(a) All Products and Additional Products.
(b) All of the property and assets listed in paragraphs 1 and 2 of
Schedule C to the Joint Venture Agreement.
-10-
<PAGE>
(c) All intellectual property created by MMG or TVG for any Graff
Party as work made for hire and any modifications, developments or enhancements
thereto.
(d) All ownership and proprietary rights to Off-Reservation Bingo
Play and any modifications, developments, or enhancements thereto, including
Proxy Play software, telephone order entry software, TV Bingo game shows,
subcontracts for proxy service and TV Bingo market research.
(e) All ownership and proprietary rights to the TV MegaBingo
Business, the AGN Charity Hall Bingo Business, the AGN Web Site and the AGN On-
Line Services, and any modification, developments or enhancements thereto.
(f) All ownership and proprietary rights to TV MegaBingo Business
Intellectual Property and any modifications, developments or enhancements
thereto.
Notwithstanding the foregoing, the MMG Parties and the Venture acknowledge
and agree that the Graff Parties have no further obligation to transfer or
contribute to the Venture any GPPV-Developed Products.
5.5 Legal Proceedings, Etc. There is no claim, action, proceeding or
----------------------
investigation pending or, to the knowledge of any Graff Party, threatened
against or relating to or involving any Graff Party or AGNJV with respect to the
Venture, the Venture Business, the AGNI Venture Interest or the MMG Shares
before any court or governmental or regulatory authority or body or which
questions or challenges the validity of this Agreement or any action taken or to
be taken pursuant to this Agreement or in connection with the transactions
contemplated hereby. No Graff Party or AGNJV is subject to any outstanding
order, writ, judgment, injunction or decree of any court or governmental or
regulatory authority or body.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MMG Parties
---------------------------------------------
Each MMG Party, jointly and severally, represents and warrants to each
Graff Party as follows:
6.1 Organization; Qualification; Authority. Each MMG Party is a
--------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and each has the power and authority to make,
execute, deliver and perform this Agreement and to incur and perform the
obligations provided
-11-
<PAGE>
for herein, all of which have been duly authorized by all necessary and proper
corporate action, including shareholder action. Neither the execution, delivery
and performance of this Agreement by any MMG Party nor the consummation by them
of the transactions contemplated hereby conflict with or will result in any
breach or default of any provision of the Certificate of Incorporation or Bylaws
of any MMG Party. This Agreement has been duly and validly executed and
delivered by the duly authorized officers of each MMG Party and constitutes the
valid, legally binding and enforceable obligations of each of them in accordance
with the terms of this Agreement.
6.2 Consents and Approvals; No Violation. Neither the execution, delivery
------------------------------------
and performance of this Agreement by any MMG Party (a) requires any consent,
approval, authorization or permit of, or filing with or notification to, any
Person including any governmental or regulatory authority; (b) constitutes a
breach or will result in a default under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract, agreement
or other instrument or obligation of any kind to which MMG Party is a party or
by which any of them may be bound; or (c) violates any order, writ, injunction,
judgment, decree, law, statute, rule, regulation or governmental permit or
license applicable to any Graff Party.
6.3 Legal Proceedings, Etc. There is no claim, action, proceeding or
----------------------
investigation pending or, to the knowledge of the MMG Parties, threatened
against or relating to the MMG Parties before any court or governmental or
regulatory authority or body or against or involving any MMG Party which
questions or challenges the validity of this Agreement or any action taken or to
be taken by the MMG Parties pursuant to this Agreement or in connection with the
transactions contemplated hereby.
ARTICLE VII
COVENANTS OF THE PARTIES
------------------------
7.1 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby will be paid by the party
incurring such costs and expenses, whether or not the transactions contemplated
hereby are consummated.
7.2 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto will use its Commercial Efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. On and from time to time after the Closing
Date,
-12-
<PAGE>
without further consideration, each Graff Party will, at its own expense,
execute and deliver such documents to the MMG Parties as the MMG Parties may
reasonably request in order to consummate the transactions contemplated by the
Agreement. On and from time to time after the Closing Date, without further
consideration, each MMG Party will, at its own expense, execute and deliver such
docu ments to the Graff Parties as the Graff Parties may reasonably request in
order to consummate the transactions contemplated by this Agreement.
7.3 Filing.
------
(a) The MMG Parties promptly will make, or cause to be made, all such
filings and submissions under laws and regulations applicable to the MMG
Parties, if any, as may be required of the MMG Parties for the consummation of
the transactions contemplated hereby. The Graff Parties promptly will make, or
cause to be made, all such filings and submissions under laws and regulations
applicable to the Graff Parties, as may be required of the Graff Parties, for
consummation of the transactions contemplated hereby. The parties hereto will
coordinate and cooperate with one another in exchanging such information and
reasonable assistance as may be requested in connection with all of the
foregoing.
(b) To the extent that the approval, consent or permission of any
governmental entity or other Person is necessary or desirable for the MMG
Parties to obtain in connection with the conduct of the Venture Business after
the Closing, including the issuance of such new permits as may be required for
the MMG Parties to conduct the Venture Business, the Graff Parties shall, at the
MMG Parties's request and expense, reasonably cooperate with the MMG Parties in
obtaining all such approvals, consents or permis sions.
7.4 Transfer Taxes. The Graff Parties shall pay the cost of any
--------------
conveyance, deed, transfer, excise, stamp, sales, use, recording or similar
taxes or fees, arising out of the sale, transfer, conveyance or assignment of
the AGNI Venture Interest and the MMG Shares as contemplated hereby. The
covenants contained in this Section 7.4 shall survive the Closing Date until
fully discharged.
7.5 Public Announcements. Neither the Graff Parties nor the MMG Parties
--------------------
shall issue any press release or make any other public disclosure or
announcement concerning the transactions contemplated by this Agreement without
the prior written consent of the other parties hereto as to both the timing and
content of such press release or public disclosure, which consent shall not be
unreasonably withheld; provided that any party may make such
-------------
-13-
<PAGE>
disclosure as in the opinion of counsel to such party is required by applicable
law.
7.6 Confidentiality; Absence of Covenant Not To Compete. (a) The Graff
---------------------------------------------------
Parties shall hold and shall cause each of their Affiliates to hold in strict
confidence (unless compelled to disclose by judicial or administrative process
or in making any filings with governmental entities with respect to the
transactions contemplated hereby or, in the written reasonable opinion of its
counsel, by other requirements of law) all documents and informa tion concerning
any MMG Party, AGNJV or the Venture Business obtained or furnished to or
acquired or developed by it in connection with the Venture Business and the
transactions contemplated by the Joint Venture Agreement (except to the extent
that such information can be shown to have been (i) previously known by the
party to which it was furnished, (ii) in the public domain through no fault of
such party, or (iii) later lawfully acquired by the party to which it was
furnished from other sources not bound by a confidentiality obligation with
respect to such information), and no Graff Party will use, release or disclose
such information to any other Person, except its auditors and attorneys who need
to know such information in the ordinary course of their representation of the
Graff Parties.
(b) The MMG Parties shall hold and shall cause each of their Affiliates to
hold in strict confidence (unless compelled to disclose by judicial or
administrative process or in making any filings with governmental entities with
respect to the transactions contemplated hereby or, in the written reasonable
opinion of its counsel, by other requirements of law) all documents and informa
tion concerning any Graff Party obtained or furnished to or acquired or
developed by it in connection with the Venture Business and the transactions
contemplated by the Joint Venture Agreement (except to the extent that such
information can be shown to have been (i) previously known by the party to which
it was furnished, (ii) in the public domain through no fault of such party, or
(iii) later lawfully acquired by the party to which it was furnished from other
sources not bound by a confidentiality obligation with respect to such
information), and no MMG Party will use, release or disclose such information to
any other Person, except its auditors and attorneys who need to know such
information in the ordinary course of their representation of the MMG Parties.
(c) The Graff Parties acknowledge and agree that, because of the nature
and subject matter of the provisions of Section 7.06(a), it would be impractical
and extremely difficult to determine actual damages in the event of the breach
of any such provisions. Accordingly, if any Graff Party or any Affiliate of any
Graff Party commits a breach, or threatens to commit a breach, of any
-14-
<PAGE>
matter set forth in Section 7.06(a), MMG shall have the right to have the
provisions of Section 7.06(a) specifically enforced by any court having equity
jurisdiction, it being further acknowledged and agreed by the Graff Parties that
any such breach or threatened breach will cause irreparable injury to MMG and
that an injunction may be issued against the breaching Graff Party to stop or
prevent such breach or threatened breach. If any such action shall be
instituted, the breaching Graff Party agrees to waive, and does hereby waive to
the fullest extent permitted by law, the defense that MMG has an adequate remedy
at law and agrees to interpose no opposition, legal or otherwise, as to the
propriety of pursuing specific performance as a remedy and agrees not to request
any bonding for the issuance of the relief sought.
(d) The MMG Parties acknowledge and agree that, because of the nature and
subject matter of the provisions of Section 7.06(b), it would be impractical and
extremely difficult to determine actual damages in the event of the breach of
any such provisions. Accordingly, if any MMG Party or any Affiliate of any MMG
Party commits a breach, or threatens to commit a breach, of any matter set forth
in Section 7.06(b), Graff shall have the right to have the provisions of Section
7.06(b) specifically enforced by any court having equity jurisdiction, it being
further acknowledged and agreed by the MMG Parties that any such breach or
threatened breach will cause irreparable injury to Graff and that an injunction
may be issued against the breaching MMG Party to stop or prevent such breach or
threatened breach. If any such action shall be instituted, the breaching MMG
Party agrees to waive, and does hereby waive to the fullest extent permitted by
law, the defense that Graff has an adequate remedy at law and agrees to
interpose no opposition, legal or otherwise, as to the propriety of pursuing
specific performance as a remedy and agrees not to request any bonding for the
issuance of the relief sought.
(e) Anything to the contrary contained in this Agreement, the LOI or the
Joint Venture Agreement (or in any other agreement between the parties whether
or not related thereto) notwithstanding, each of the Graff Parties and each of
the MMG Parties and each of their respective Affiliates shall be free to engage
in any business whatsoever including, but not limited to, a business that
competes, directly or indirectly, with the Venture Business or any other
business or activity currently conducted, proposed to be conducted or hereafter
conducted by any such person.
7.7 Releases. (a) In consideration of the promises and payments of the
--------
MMG Parties made in this Agreement, and provided that the Closing shall have
occurred, each of the Graff Parties, for and on behalf of their respective
Affiliates, officers, subsidiaries and affiliated companies, successors and
assigns,
-15-
<PAGE>
hereby release and forever discharge each of the MMG Parties and its
subsidiaries and affiliated companies (including AGNJV), successors and assigns,
and the officers, directors, shareholders, employees and agents of each of the
MMG Parties, and its and their respective officers, directors, shareholders,
employees and agents, including, in each case, any of the foregoing in their
individual as well as corporate capacities, of and from all liabilities,
obligations, manner of actions, causes of action, suits, debts, sums of money,
accounts, damages, judgments, executions, claims, counterclaims and demands
whatsoever, whether in law, equity or otherwise, known or unknown, that relate
to the period of time on and prior to the Closing Date including, but not
limited to, any claims arising under or with respect to the Joint Venture
Agreement and the other agreements and transactions entered into in connection
therewith; provided that the foregoing release does not release any right of the
-------------
Graff Parties under this Agreement or with respect to any of the other Retained
Contract Rights.
(b) In consideration of the promises and payments of the Graff Parties
made in this Agreement, and provided that the Closing shall have occurred, each
of the MMG Parties and the Venture, for and on behalf of their respective
affiliates, officers, subsidiaries and affiliated companies, successors and
assigns, hereby release and forever discharge each of the Graff Parties and its
subsidiaries and affiliated companies, successors and assigns, and the officers,
directors, shareholders, employees and agents of each of the Graff Parties, and
its and their respective officers, directors, shareholders, employees and
agents, including, in each case, any of the foregoing in their individual as
well as corporate capacities, of and from all liabilities, obligations, manner
of actions, causes of action, suits, debts, sums of money, accounts, damages,
judgments, executions, claims, counterclaims and demands whatsoever, whether in
law, equity or otherwise, known or unknown, that relate to the period of time on
and prior to the Closing Date including, but not limited to, any claims arising
under or with respect to the Joint Venture Agreement and the other agreements
and transactions entered into in connection therewith; provided that the
-------------
foregoing release does not release any right of the MMG Parties under this
Agreement or with respect to any of the other MMG Retained Contract Rights.
ARTICLE VIII
CLOSING CONDITIONS
------------------
8.1 Conditions to Each Party's Obligations. The respective obligations of
--------------------------------------
the parties to consummate the transactions con templated by this Agreement shall
be subject to each of the following conditions:
-16-
<PAGE>
(a) No party shall be subject to any order, judgment, decree or
injunction of a court of competent jurisdiction or governmental body, agency or
official nor any applicable law or regulation or executive order which prevents
consummation of the transactions contemplated hereby.
(b) All filings required by applicable law shall have been made and
all consents thereunder with respect to the trans actions contemplated by this
Agreement shall have been obtained.
8.2 Conditions to the Obligations of Graff Parties. The obligation of the
----------------------------------------------
Graff Parties to consummate the transaction contemplated hereby shall be further
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions:
(a) Each MMG Party shall have performed and complied in all material
respects with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing Date.
(b) The representations and warranties of the MMG Parties set forth
in this Agreement shall be true and correct in all material respects as of the
date made and as of the Closing Date as though made at and as of the Closing
Date (except as otherwise contemplated by this Agreement).
(c) The Graff Parties shall have received a certificate, dated the
Closing Date, certifying to the fulfillment of the conditions set forth in
paragraphs (a) and (b) of this Section 8.2 and signed on behalf of the MMG
Parties by an authorized officer of the MMG Parties.
(d) The Graff Parties shall have received the consent of Midlantic
Bank, N.A., Graff's senior secured lender, to the transactions contemplated by
this Agreement.
8.3 Conditions to the Obligations of the MMG Parties. The obligation of
------------------------------------------------
the MMG Parties to consummate the transactions contemplated hereby shall be
further subject to the fulfillment on or prior to the Closing Date of each of
the following conditions:
(a) Each Graff Party shall have performed and complied in all
material respects with the agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing Date.
(b) The representations and warranties of the Graff Parties set forth
in this Agreement shall be true and correct in all material respects as of the
date made and as of the Closing
-17-
<PAGE>
Date as though made at and as of the Closing Date (except as otherwise
contemplated by this Agreement).
(c) The MMG Parties shall have received a certificate, dated the
Closing Date, signed by an authorized officer of Graff Parties certifying to the
fulfillment of the conditions set forth in paragraphs (a) and (b) of this
Section 8.3.
ARTICLE IX
TERMINATION
-----------
9.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) By mutual written consent of MMG and Graff.
(b) By written notice by either MMG or Graff to the other party if
the Closing shall not have occurred on or before 5:00 p.m., local time in Tulsa,
Oklahoma, on July 10, 1996, unless such failure to occur is due to the failure
of the party seeking to terminate this Agreement to perform in all material
respects each of its obligations under this Agreement required to be performed
by it or its affiliate at or before the Closing Date.
(c) By the MMG Parties if there has been a material violation or
breach by any of the Graff Parties of any agreement, representation or warranty
contained in this Agreement which has rendered the satisfaction of any condition
to the obligations of the MMG Parties specified in Section 8.3 impossible and
such violation or breach has not been waived by the MMG Parties or cured by the
Graff Parties within 15 days after written notice to the Graff Parties of such
violation or breach.
(d) By the Graff Parties if there has been a material violation or
breach by any of the MMG Parties of any agreement, representation or warranty
contained in this Agreement which has rendered the satisfaction of any condition
to the obligations of the Graff Parties specified in Section 8.2 impossible and
such violation or breach has not been waived by the Graff Parties or cured by
the MMG Parties within 15 days after written notice to the MMG Parties of such
violation or breach.
9.2 Procedure and Effect of Termination.
-----------------------------------
(a) In the event of termination of this Agreement pursuant to Section
9.1, this Agreement shall terminate, and in each case the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto, and there
-18-
<PAGE>
shall be no liability on the part of the parties, except as set forth in Section
7.1, which Section shall survive the termination of this Agreement and except
that the foregoing shall not relieve any party from liability for damages
actually incurred as a result of breach by it of this Agreement.
(b) If this Agreement is terminated as provided in Section 9.1, all
filings, applications and other submissions made pursuant to this Agreement
shall, to the extent practicable, be withdrawn from the agency or other person
to which they were made.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
----------------------------
10.1 Survival. The representations, warranties, covenants and agreements
--------
of the parties hereto shall survive the execution and delivery hereof and the
delivery of all of the documents executed in connection herewith and shall
continue in full force and effect after the date hereof and after the Closing
Date for a period of one (1) year after the Closing Date, except that (i) the
-----------
representation and warranty of the Graff Parties and the MMG Parties contained
in Section 5.1 and Section 6.1, respectively, shall survive without limitation
or until the expiration of any applicable statute of limitations, and (ii) any
covenants or agreements contained herein or made pursuant hereto which by their
terms are to be performed after the Closing Date shall survive until fully
discharged. The date until which the representations, warranties, covenants and
agreements of the parties hereto survive, as set forth herein, is known as the
"Expiration Date". From and after the Expiration Date, no party shall be under
- ----------------
any liability whatsoever with respect to any such representation or warranty or
any obligation or liability based upon such representation or warranty, except
for breaches as to which a party shall have given notice (specifying, with
reasonable particularity, facts establishing such breach) to the other party or
parties prior to the applicable Expiration Date. The respective representations
and warranties contained herein or in any certificates delivered pursuant to
this Agreement prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto.
10.2 Indemnification. Subject to the limitation set forth in Section
---------------
10.1:
(a) Each Graff Party, jointly and severally, hereby agrees to
indemnify, defend and hold harmless each MMG Party and any subsidiary or
Affiliate of any MMG Party, and any officer, director, stockholder, employee,
representative or agent of any
-19-
<PAGE>
thereof and their respective successors and assigns from and against all Losses
and Claims based upon, arising out of or resulting from, any breach of any
representation or warranty of such Graff Party that survives the Closing as
provided in Section 10.1 and any covenant or agreement of such Graff Party
contained in this Agreement.
(b) Each MMG Party, jointly and severally, hereby agrees to
indemnify, defend and hold harmless each Graff Party and any subsidiary or
Affiliate of any Graff Party, and any officer, director, stockholder, employee,
representative or agent of any thereof and their respective successors and
assigns, from and against all Losses and Claims based upon, arising out of or
resulting from, any breach of any representation or warranty of such MMG Party
that survives the Closing as provided in Section 10.1 and any covenant or
agreement of such MMG Party contained in this Agreement.
10.3 Notice of Claim. If any party hereto has suffered or incurred any
---------------
Loss or Expense or a third-party claim, whether pursuant to an administrative
proceeding, action at law, suit in equity, or otherwise ("Third-Party Claim") is
-----------------
instituted which, if decided adversely to a party, would result in such party
suffering or incurring any Loss, such party shall give prompt written notice to
the party against which a claim for indemnification may be made pursuant to this
Agreement ("indemnifying party"), setting forth: (a) the facts or events, in
------------------
reasonable detail which indicate that such party has suffered or incurred such
Loss, (b) the Section or Sections of this Agreement (in addition to this Article
X) under which such party has suffered or incurred such Loss and Expense, (c)
the amount of such Loss and Expense (estimated, if necessary) or, in the case of
a Third-Party Claim, such party's then good faith estimate of the reasonably
foreseeable estimated amount of its claim for indemnification for such Loss and
Expense, and (d) the method of computation of the amount of such Loss and
Expense, any of which information shall be promptly amended by such party when
its knowledge of the facts or events and any resulting liability so warrant. No
party shall be liable for indemnification pursuant to Section 10.2 unless notice
of claim for such indemnifi cation has been given in accordance with this
Section 10.3 and on or prior to the applicable Expiration Date.
10.4 Defense of Third-Party Claim. The indemnifying party shall have the
----------------------------
right to conduct and control, at its expense and through counsel of its own
choosing, the defense of any Third-Party Claim, action or suit, but the
indemnified party may, at its election, participate in the defense of such
claim, action or suit at its sole cost and expense; provided that if (a) the
-------------
indemnifying party shall fail to defend any such claim, action or suit, (b) the
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<PAGE>
indemnifying party and indemnified party mutually agree or (c) the named parties
to such claim, action or suit (including any impeded parties) include both the
indemnifying party and the indemnified party and representation of both parties
by the same counsel would be inappropriate due to actual or potential differing
interests between them, then the indemnified party may defend, through counsel
of its own choosing, such claim, action or suit and settle such claim, action or
suit, and recover from the indemnifying party the amount of any settlement to
which the indemnifying party consents or of any resulting judgment and the costs
and expenses of such defense, provided that the indemnified party shall not
compromise or settle any third-party claim, action or suit without the prior
written consent of the indemnifying party, which consent will not be
unreasonably withheld, continued or delayed.
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1 Amendment and Modification. This Agreement may be amended, modified
--------------------------
or supplemented only by a subsequent written agreement of the Graff Parties and
the MMG Parties.
11.2 Waiver of Compliance. Except as otherwise provided in this
--------------------
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
11.3 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by facsimile or
three days after mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof):
(a) if to The Graff Parties to:
Graff Pay-Per-View Inc.
536 Broadway, 7th Floor
New York, New York 10012
Attention: President
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<PAGE>
and by telecopy to: (212) 941-4746
(b) if to The MMG Parties, to:
Multimedia Games, Inc.
7335 So. Lewis, Suite 204
Tulsa, Oklahoma 74136
and by telecopy to: (918) 494-0177
with a copy to:
Hall, Estill, Hardwick, Gable,
Golden & Nelson, P.C.
320 South Boston, Suite 400
Tulsa, Oklahoma 74103-3708
Attention: Larry W. Sandel, Esq.
and by telecopy to: (918) 594-0505
11.4 Assignment. This Agreement may not be assigned, in whole or in part,
----------
by the parties hereto without the prior written consent of the parties; provided
--------
that MMG or Newco, as the case may be, may assign its right to purchase the MMG
- ----
Shares or the AGNI Venture Interest to a person and in a manner that does not
involve a public offering (a "Permitted Designee").
-------------------
11.5 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Oklahoma, without reference to principles of conflicts of law which
require that the substantive laws of another jurisdiction apply.
11.6 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Interpretation. The article and section headings contained in this
--------------
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
11.8 Severability. The invalidity or unenforceability of any particular
------------
provision of this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted. All provisions of this
Agreement shall be enforced to the full extent permitted by law.
-22-
<PAGE>
11.9 No Third-Party Beneficiaries. Nothing contained in this Agreement,
----------------------------
expressed or implied, is intended or shall be construed to confer upon or give
to any Person other than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
11.10 Entire Agreement. This Agreement, including the documents,
----------------
schedules, certificates and instruments referred to herein, is the entire
agreement and understanding of the parties hereto in respect of the transactions
contemplated by this Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein or therein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MULTIMEDIA GAMES, INC.
By:___________________________
TV GAMES, INC.
By:___________________________
AGN VENTURER L.L.C.
By:___________________________
AMERICAN GAMING NETWORK, INC.
By:___________________________
CABLE VIDEO STORE, INC.
By:___________________________
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<PAGE>
GRAFF PAY-PER-VIEW, INC.
By:___________________________
AMERICAN GAMING NETWORK, JV.
By:___________________________
Exhibits
- --------
A - Newco A Note
B - Newco B Note
C - Registration Rights Agreement
D - Assignment of AGNI Venture Interest
E - Graves Guaranty
F - MMG Guaranty
G - Venture Guaranty
-24-
<PAGE>
EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
------------------------
August 5, 1996
Multimedia Games, Inc.
7335 South Lewis Avenue
Suite 204
Tulsa, Oklahoma 74136
Gentlemen:
Each of the persons whose signature appears on the signature page hereof
under the caption "Purchasers" (each a "Purchaser" and collectively, the
---------
"Purchasers"), desire to subscribe for and purchase the number of shares of
- -----------
Common Stock, $.01 par value, of Multimedia Games, Inc., a Texas corporation
(the "Company") set forth opposite the signature of such Purchaser on the
-------
signature page to this Agreement at a purchase price of $2.75 per Share. The
number of shares so subscribed for are hereinafter called the "Purchased
---------
Shares."
- ------
The terms and conditions of the purchase and sale of the Purchased Shares
are set forth below. These include representations and warranties by the
parties which are being relied upon in connection with the transactions
contemplated herein, including representations and warranties by the Purchaser
necessary to enable the Company to satisfy its obligations under applicable
Federal and State securities laws.
NEITHER THIS AGREEMENT AND THE EXHIBITS ANNEXED HERETO (COLLECTIVELY, THE
"OFFERING MATERIALS") NOR THE SECURITIES OFFERED HEREBY HAVE BEEN FILED OR
REGISTERED WITH OR APPROVED BY THE SEC NOR HAS THE SEC PASSED UPON THE ACCURACY
OR ADEQUACY OF THE OFFERING MATERIALS. NO STATE SECURITIES LAW ADMINISTRATOR
HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR THE
ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THE OFFERING MATERIALS HAVE NOT BEEN REVIEWED BY THE ATTORNEY GENERAL PRIOR TO
ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
THE OFFERING MATERIALS DO NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR
OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE IN LIGHT OF
THE CIRCUMSTANCES UNDER WHICH THEY
<PAGE>
WERE MADE, NOT MISLEADING. THEY CONTAIN A FAIR SUMMARY OF THE MATERIAL TERMS
AND DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN.
The Purchaser acknowledges having received from the Company the following:
A. The Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1995, attached hereto as Exhibit A.
---------
B. The Company's Quarterly Report on Form 10-QSB for the six months
ended March 31, 1996, attached hereto as Exhibit B.
---------
C. The Company's press release dated July 2, 1996, issued in
connection with a recent event, attached hereto as Exhibit C.
---------
D. The form of Registration Rights Agreement attached hereto as
Exhibit D.
---------
E. The form of Note to be issued by the Purchaser as consideration for
the Purchased Shares, attached hereto as Exhibit E.
---------
Considering the foregoing, and in consideration of the mutual covenants and
agreements of the parties herein contained, the Purchaser and the Company do
hereby agree as follows:
1. Sale and Purchase of Purchased Shares. (a) Subject to the terms and
-------------------------------------
conditions hereof:
(i) the Company will, in reliance upon the representations and
warranties of the Purchaser contained herein, issue and sell the Purchased
Shares to the Purchaser for an aggregate purchase price (the "Purchase
--------
Price") of $2.75 multiplied by the number of Purchased Shares; and
-----
(ii) the Purchaser will, in reliance upon the representations and
warranties of the Company contained herein, purchase the Purchased Shares
from the Company for the Purchase Price.
(b) The Purchase Price shall be paid by the Purchaser delivering to the
Company the promissory note of the Purchaser in substantially the form attached
hereto as Exhibit E (the "Note") in the principal amount equal to the Purchase
--------- ----
Price.
-2-
<PAGE>
2. Closing and Closing Date. The Closing shall be at 10:00 A.M., local
------------------------
New York time, on the third business day following the satisfaction of all of
the conditions set forth in Section 5 of this Agreement (unless waived by the
party in whose favor the condition runs), or at such other time and date as is
mutually agreed upon between the Purchaser and the Company (the "Closing Date").
------------
The Closing hereunder shall take place by facsimile (original execution copies
to follow) or by such other means as the parties shall mutually agree. At the
Closing on the Closing Date, the Company will deliver to the Purchaser the
Purchased Shares against payment of the Purchase Price thereof by delivery of
the Note in the principal amount of the Purchase Price. The Purchased Shares to
be delivered to the Purchaser at the Closing will be registered in the name of
the Purchaser as set forth on the signature page of this Agreement.
3. Representations and Warranties by the Company. The Company represents
---------------------------------------------
and warrants to the Purchaser that, except as otherwise set forth in Schedule A
----------
hereto:
(a) Organization, Existence, Etc. The Company is a corporation duly
----------------------------
organized and validly existing and in good standing under the laws of the State
of Texas, and has all requisite corporate power and authority to carry on its
business as now conducted, to enter into this Agreement, to issue and sell the
Purchased Shares as contemplated herein and to carry out the other terms and
conditions of this Agreement. Each subsidiary of the Company is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Delaware, and each has all requisite corporate power and authority to
carry on its business as now conducted. The Company and each subsidiary of the
Company is duly qualified to do business and is in good standing in every
jurisdiction in which the ownership, leasing, licensing or use of its property
and assets or the conduct of its business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the Company's business. The Company and each subsidiary has all
consents, authorizations, approvals, orders, permits, licenses and the like
(collectively, the "Permits") from, and has made all filings with, all federal,
-------
state, Indian and local authorities, necessary to own, lease, license and use
its properties and assets and to conduct its business as presently conducted.
All such Permits are in full force and effect and the Company is in compliance
with the terms and conditions thereof and is not in breach or default
thereunder.
(b) Financial Statements.
--------------------
(i) Since September 30, 1995, the Company has filed all forms,
reports, statements and other documents required to be
-3-
<PAGE>
filed with the Securities and Exchange Commission (the "SEC"), including,
---
without limitation, all Annual Reports on Form lO-KSB, all Quarterly
Reports on Form lO-QSB, all Current Reports on Form 8-K, and all required
amendments and supplements thereto (collectively the "Company Reports").
---------------
The Company Reports, including all Company Reports filed after the date
hereof and prior to the Closing Date, (A) were or will be prepared in all
material respects in accordance with the requirements of applicable Law
(including the Act, the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC thereunder applicable to such Company
Reports), and (B) did not at the time they were filed, or will not at the
time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(ii) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company Reports filed
prior to or after the date hereof (A) have been or will be prepared in
accordance with the published rules and regulations of the SEC and
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and (B) fairly present or will fairly
present the consolidated financial position of the Company and its
subsidiaries, as the case may be, as of the respective dates thereof and
the consolidated results of operations, changes in stockholders' equity
(deficit) and cash flows for the periods indicated.
(c) No Material Adverse Change. Since the date of the most recent balance
--------------------------
sheet contained in the Company's report on Form 10-QSB for the period ended
March 31, 1996 (the "March 31 Report"), there has not been any change which has
---------------
had a material adverse effect on the business or financial condition of the
Company.
(d) Litigation. There is no action, suit, or arbitration proceeding
----------
pending, or to the knowledge of the officers of the Company threatened, against
the Company or its subsidiaries before any court or administrative agency which
is reasonably expected to result in any material adverse change in the business
or condition (financial or other) of the Company or its subsidiaries or which
questions the validity of any action taken or to be taken pursuant to or in
connection with this Agreement or the Purchased Shares.
(e) Compliance with Instruments, Etc. Neither the Company nor any
---------------------------------
subsidiary is (A) in default under any indenture or material contract or
agreement to which it is a party (and the
-4-
<PAGE>
other contract party or parties are not in breach or default thereunder), (B) in
violation of its charter or by-laws, or to its knowledge, of any applicable law,
(C) in default with respect to any order, writ, injunction or decree of any
court, or (D) in default under any order, license, regulation or demand of any
governmental agency, in each case where such default or violation might have
consequences which would materially and adversely affect the business or
property of the Company and its subsidiaries (taken as a whole).
(f) Authorization of Agreements. The execution, delivery and performance
---------------------------
of this Agreement by the Company, and the consummation of the transactions
contemplated herein, including the execution, delivery and performance of the
Registration Rights Agreement and the issuance of the Shares, have been duly
authorized by all necessary corporate action. Each of this Agreement and the
Registration Rights Agreement (when executed and delivered) constitutes the
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms. The Shares (when issued and paid for
upon delivery of the Note pursuant to the terms of this Agreement), will be duly
authorized, validly issued, fully paid and nonassessable.
(g) Use of Proceeds. The Company will use the proceeds of the sale of the
---------------
Shares for general working capital purposes.
(h) Capitalization; Indebtedness. The authorized capital stock of the
----------------------------
Company consists of (A) 10,000,000 shares of Common Stock, of which 2,734,200
shares of Common Stock are issued and outstanding, 1,507,560 shares of Common
Stock are reserved for issuance upon the exercise of outstanding rights, options
and warrants as described in Part I of Schedule B hereto, and 4,526,366 are
----------
reserved for issuance pursuant to commitments and expected commitments described
in Part II of Schedule B hereto, and (B) 2,000,000 shares of Preferred Stock,
----------
$10 par value, of which 134,318 shares of Series A Preferred Stock are issued
and outstanding. Except as set forth in Schedule B, there are outstanding no
----------
options, warrants or other rights to subscribe for or acquire any capital stock
of the Company or its subsidiaries. The Company and its subsidiaries have
outstanding no indebtedness for borrowed money other than as set forth in the
consolidated balance sheet as at March 31, 1996 referred to in the March 31
Report or incurred since such date in the ordinary course of business ($932,720
outstanding at July 19, 1996). Of such shares of issued and outstanding Common
Stock (2,734,200) and shares of Common Stock reserved for issuance upon the
exercise of outstanding rights, options and warrants described in Part I of
Schedule B (1,507,560), 1,642,557 shares have rights that entitle the holder
- ----------
thereof to include such shares in a Registration Statement filed by
-5-
<PAGE>
the Company under the Act as described in Part III of Schedule B hereto. The
----------
Common Stock is properly listed on the small cap market of the NASDAQ Stock
Market ("NASDAQ") under the symbol MGAM and the Company has received no notice
------
from NASDAQ that questions the validity of such listing or the eligibility of
the Company to maintain such listing.
(i) Governmental Consent, Etc. No consent, approval or authorization of,
--------------------------
or registration, declaration or filing with, any federal, state, Indian or local
governmental authority is required in connection with the execution and delivery
of this Agreement and none shall be required in connection with the offer,
issue, sale or delivery to the Purchaser of the Purchased Shares or the carrying
out of any other transaction contemplated hereby or thereby.
4. Representations and Warranties by Purchaser. The Purchaser represents
-------------------------------------------
and warrants to the Company that:
(a) Authorization. The Purchaser is duly authorized to enter into this
-------------
Agreement and to carry out the terms and conditions of this Agreement.
(b) Accredited Investor. The Purchaser is an Accredited Investor.
-------------------
(c) Purchase Entirely for Own Account. The Shares to be purchased by the
---------------------------------
Purchaser will be acquired for investment for the Purchaser's own account, not
as a nominee or agent, and not with a view to the Purchaser's distribution of
any part thereof; and the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. The
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of the Purchased Shares.
(d) Reliance Upon Investors' Representations. The Purchaser understands
----------------------------------------
that the Purchased Shares have not been registered under the Securities Act on
the basis that the sale provided for in this Agreement is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof and that
the Company's reliance on such exemption is predicated on the Purchaser's
representations set forth herein.
(e) Receipt of Information. The Purchaser believes it has received all the
----------------------
information it considers necessary or appropriate for deciding whether to
purchase the Purchased Shares. The Purchaser further represents that it has had
an opportunity to ask questions and receive answers from the Company and its
officers
-6-
<PAGE>
regarding the terms and conditions of the offering of the Purchased Shares and
the business, properties, prospects, and financial condition of the Company and
to obtain additional information necessary to verify the accuracy of any
information furnished to the Purchaser or to which the Purchaser otherwise had
access. Except as contained in this Agreement and in the information expressly
referred to in this Agreement as having been delivered to the Purchaser, no
representations or warranties have been made to the Purchaser by the Company or
any agent, employee or affiliate of the Company; and in entering into this
transaction the Purchaser is not relying on any information other than that
contained in this Agreement, or delivered to the Purchaser pursuant to this
Agreement, and the results of the Purchaser's own independent investigation.
(f) Restricted Securities. The Purchaser understands that it must bear the
---------------------
economic risk of an investment in the Shares for an indefinite period of time
and that there is a thinly traded public market for the Common Stock. The
Purchaser understands that the Shares may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Shares or an available exemption from registration, the Shares must
be held indefinitely.
(g) Legends. Each certificate evidencing the Shares shall be endorsed with
-------
a legend in substantially the following form, and the Purchaser covenants that,
except to the extent waived by the Company, the Purchaser shall not transfer the
Shares represented by any such certificate without complying with the
restrictions on transfer described in the legend endorsed on such certificate:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. NO REGISTRATION OF TRANSFER OF
SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS SUCH
TRANSFER IS MADE IN CONNECTION WITH AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH ACT DOES NOT APPLY.
5. Conditions to Closing. (a) The obligation of the Purchaser to
---------------------
purchase and pay for the Purchased Shares at the Closing is subject to the
satisfaction of the following conditions:
(i) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 3 shall be true on and as of
the Closing Date with the same effect as
-7-
<PAGE>
though such representations and warranties had been made on and as of such
date.
(ii) Performance. The Company shall have performed and complied with
-----------
all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing Date including, without
limitation, the issuance and delivery of the Purchased Shares to the
Purchaser.
(iii) Proceedings. All corporate proceedings to be taken by the
-----------
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in substance and form to
the Purchaser and Purchaser shall receive all such counterpart originals or
certified or other copies of such documents as Purchaser may reasonably
request.
(iv) Registration Rights Agreement. The Company shall have executed
-----------------------------
and delivered to the Purchaser the Registration Rights Agreement.
(v) Certificate. The Company shall have delivered a certificate
-----------
signed by its President (or a vice President) and by its Chief Financial
Officer (or Vice President of Finance) as to the matters set forth in
Sections 5(a)(i) and (ii) hereof.
(vi) Legal Opinion. The Purchaser shall have received an opinion of
-------------
Hall, Estill, Hardwick, Gable, Golden & Nelson, counsel to the Company, in
form and substance satisfactory to such Purchaser, as to the matters set
forth in the first two sentences of Section 3(a) and the matters set forth
in Section 3(f) of this Agreement.
(b) The obligation of the Company to issue and sell the Purchased Shares to
the Purchaser at the Closing is subject to the satisfaction of the following
conditions:
(i) Representations and Warranties. The representations and
------------------------------
warranties of the Purchaser contained in Section 4 shall be true on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
(ii) Performance. The Purchaser shall have performed and complied
-----------
with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the Closing Date including,
without limitation, the delivery of the Note as payment of the Purchase
Price.
-8-
<PAGE>
6. Acceptance and Rejection of Subscription. The Purchaser acknowledges
----------------------------------------
and agrees that the subscription of the Purchaser contained in this Agreement is
not binding on the Company until the Company accepts such subscription, which
acceptance is at the sole discretion of the Company and is to be evidenced by
the Company's execution of this Agreement where indicated. This Agreement shall
be of no force or effect unless and until accepted by the Company.
7. Definitions. The following terms when used in this Agreement or in
-----------
any other agreement or instrument entered into in connection with this
Agreement, shall have the meanings indicated below. Unless the context
otherwise requires, all personal pronouns used in this Agreement, whether in the
masculine, feminine or neuter gender, shall include all other genders, and the
plural form of any noun shall include the singular and the singular shall
include the plural.
"Accredited Investor" shall mean as such term is defined in Rule 501
-------------------
promulgated by the SEC under the Act.
"Common Stock" shall mean the shares of Common Stock, $.01 par value per
------------
share, of the Company.
"Note" shall mean the promissory note of the Purchaser in substantially the
----
form attached hereto as Exhibit E.
---------
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement in substantially the form attached hereto as Exhibit D.
---------
8. Miscellaneous.
-------------
(a) Amendments and Waiver. This Agreement may only be amended or waived in
---------------------
a written instrument signed by the Company and the Purchaser.
(b) Parties in Interest. This Agreement may not be assigned by either the
-------------------
Purchaser or the Company without the prior written consent of the other party
hereto. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not, and, in particular,
shall inure to the benefit of and be enforceable by the holder or holders at any
time of any of the Notes.
(c) Law Governing. This Agreement shall be governed by and interpreted
-------------
under the laws of the State of New York, without regard to the conflict of law
rules thereof.
-9-
<PAGE>
(d) Notices. Any notice or request herein required or permitted to be
-------
given by the Company shall be given in writing and shall be sent to the
Purchaser at the address set forth on the signature page of this Agreement
unless another address is specified in writing by Purchaser in which case notice
shall be sent to the last known address of the Purchaser furnished to the
Company. Any notice required or permitted to be given to the Company shall be
given to the Company at the address set forth on page 1 of this Agreement, or at
such other address as the Company may designate by written communication to the
Purchaser. All such notices shall be conclusively deemed to be received and
shall be effective, (i) if sent by hand delivery, upon receipt, (ii) if sent by
telecopy, upon dispatch thereof, or (iii) if sent by registered or certified
mail, on the third day after the day on which such notice is mailed.
(e) Headings. The headings of the sections and subsections of this
--------
Agreement have been inserted for convenience of reference only and shall in no
way restrict or modify any of the terms or provisions hereof.
(f) Entire Agreement. This Agreement embodies the entire agreement and
----------------
understanding between the Purchaser and the Company with respect to the subject
matter hereof and supersedes all prior agreements and understandings relating to
the subject matter hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall he deemed to be
an original, but such counterparts together shall constitute but one and the
same instrument.
IN WITNESS WHEREOF, the Purchaser has executed this Agreement this __ day
of ______________, 1996.
Number of Shares Subscribed INDIVIDUAL PURCHASER:
for: _______________
-------------------------------------------
Signature(s)
-------------------------------------------
Print Name(s)
Number of Shares Subscribed ENTITY PURCHASER:
for: _______________
-------------------------------------------
Print Name of Entity
-10-
<PAGE>
By:
----------------------------------------
Print Name and Title of
Person Signing
-------------------------------------------
Social Security Number of
Individual or Tax I.D. Number
of Entity
Address:
-------------------------------------------
Number and Street
-------------------------------------------
City State Zip Code
Address for notices if different:
-------------------------------------------
Number and Street
-------------------------------------------
City State Zip Code
The foregoing Stock Purchase
Agreement is hereby accepted
and agreed to as of the
date hereof.
MULTIMEDIA GAMES, INC.
By ____________________________
EXHIBITS
- --------
A - Form 10-KSB
B - Form 10-QSB
C - Press Release
D - Registration Rights Agreement
E - Note
-11-
<PAGE>
SCHEDULES
- ---------
A - Company Disclosure
B - Options and Rights
-12-
<PAGE>
EXHIBIT 10.22
AMENDMENT TWO TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Amendment Two to Revolving Credit and Term Loan Agreement
("Amendment"), is dated effective as of June ___, 1996, between MULTIMEDIA
GAMES, INC., a Texas corporation ("Borrower"), and BANK OF OKLAHOMA, NATIONAL
ASSOCIATION, a national banking association ("Bank").
RECITALS
A. Reference is made to the Revolving Credit and Term Loan Agreement
dated March 15, 1995, and the Amendment One to Revolving Credit and Term Loan
Agreement dated August 24, 1995, between Borrower and Bank, pursuant to which
Bank established a $912,930 Term Loan and a $50,000 Revolving Line in favor of
Borrower (collectively, the "Loan Agreement").
B. Borrower has requested Bank to (i) increase the $50,000 Revolving Line
to $100,000, and (ii) reduce the $912,930 Term Loan to $836,850 and modify the
payment amount on maturity date; and Bank has agreed to accommodate Borrower's
request, subject to the terms and conditions set forth in this Amendment.
AGREEMENT
For valuable consideration received, and as an additional inducement for
Bank to increase the Revolving Line and modify the Term Loan, the parties agree
to the following:
1. Amendment to Loan Agreement. The Loan Agreement is amended as
---------------------------
follows:
1.1. Recital A of the Loan Agreement is amended to evidence and
shall now read "(i) a $836,850 term loan ("$836,850 Term Loan"); and (ii) a
$100,000 revolving line of credit ("$100,000 Revolving Line")."
1.2. Section 1.19 shall now read as follows:
"1.19. "$836,850 Term Note" shall mean the $836,850
------------------
Promissory Note in the form and content as set forth on
Schedule "1.19" attached hereto."
---------------
The form of the $836,850 Term Note shall be as set forth on Schedule "1.2"
--------------
attached to this Amendment.
1.3. Section 1.27 is hereby amended to evidence that the term "Loan"
shall now mean, separately and collectively, "advances under the $100,000
Revolving Line and/or the $836,850 Term Note."
1.4. Section 1.31 is hereby amended to evidence that the term
"Notes" shall now mean to read "separately and collectively, the $836,850
Term Note and the $100,000 Line Note."
<PAGE>
1.5. Section 1.44 is hereby amended to evidence that the term
"$50,000 Line Note" shall now mean to read "$100,000 Line Note."
The form of the $100,000 Line Note shall be as set forth on Schedule "1.5"
--------------
attached to this Amendment.
1.6. Section 2.1 is hereby substituted with the following:
"2.1 $836,850 Term Loan. Subject to the terms and
------------------
conditions of this Agreement, the Bank agrees to loan
Borrower $836,850 to be further evidenced by the $836,850
Term Note. Borrower acknowledges and agrees the Bank has no
obligation to advance any further funds or make any other
loans to Borrower, notwithstanding anything to the
contrary."
1.7. Section 2.2 is hereby substituted with the following:
"2.2 $100,000 Revolving Line. Subject to the terms of this
-----------------------
Agreement, and so long as no Initial Default or Matured Default has
occurred, Bank agrees to loan to Borrower such amount up to $100,000
as Borrower may request from time to time on or before the maturity of
the $100,000 Line Note. Within the limits set forth in this Section
2.2, Borrower may borrow, repay and reborrow at any one time and from
time to time."
1.8. Section 4.1 is hereby amended to evidence that the term
"$50,000 Line Note" shall now mean to read "$100,000 Line Note" and the
term "$912,930 Term Note" shall now mean to read "$836,850 Term Note."
1.9. Section 8.1 is hereby amended and shall read as follows:
"8.1 Minimum Net Worth. Maintain at all times a tangible net worth
-----------------
of not less than Two Million Four Hundred Thousand Dollars
($2,400,000) commencing June 30, 1996."
1.10. The following Section is hereby added to Section 8:
"8.3 Gross Gaming Revenue Requirement. Borrower must maintain gross
--------------------------------
gaming revenues by not allowing quarterly gross gaming revenues to
decrease in excess of fifteen percent (15%) per fiscal quarter from
the immediately preceding fiscal quarter; in addition, Borrower
-2-
<PAGE>
must not allow annual gross gaming revenues to decrease in
excess of ten percent (10%) from the immediately preceding
fiscal year-end gross revenue figure.
2. Borrower Ratification of Documents. Borrower hereby ratifies and
----------------------------------
confirms the Loan Agreement, and all instruments, documents and/or agreements
executed and/or delivered by Borrower to Bank in connection therewith, and
Borrower represents to Bank that (i) they remain in full force and effect, and
Borrower is in full and complete compliance therewith; (ii) all representations
and warranties made thereunder are true and correct as of the date hereof; and
(iii) no Initial Default or Matured Default has occurred. Furthermore, and as
additional inducement for Bank to enter into this Amendment, Borrower hereby
amends the Security Agreement executed and delivered to Bank in connection with
the Loan Agreement, and agrees that it is amended to evidence that Section
1.1.12 thereof is hereby amended to evidence that the term "$912,930 Promissory
Note" shall now mean and read the "$836,850 Promissory Note" and that the
"$50,000 Promissory Note" shall now mean and read the "$100,000 Promissory
Note."
3. MegaBingo(R) Ratification of Documents. MegaBingo(R), Inc., by
--------------------------------------
execution of this Amendment, hereby ratifies and confirms the Security Agreement
dated March 15, 1995, executed and delivered by MegaBingo(R), Inc. to Bank in
connection with the Loan Agreement. MegaBingo(R), Inc. represents to Bank that
(i) the Security Agreement remains in full force and effect; (ii) all
representations and warranties made thereunder remain true and correct as of the
date hereof; and (iii) no Event of Default, as defined therein, has occurred.
As additional inducement for Bank to enter into this Amendment, MegaBingo(R),
Inc., hereby amends Section 1.1.12 thereof to evidence that the term "$912,930
Promissory Note" shall now mean and read the "$836,850 Promissory Note" and that
the "$50,000 Promissory Note" shall now mean and read the "$100,000 Promissory
Note."
4. Guaranty Agreement Ratification. Gordon T. Graves, by his execution
-------------------------------
of this Amendment, hereby ratifies and confirms the Guaranty Agreement dated
March 15, 1995, executed and delivered by Gordon T. Graves to Bank in connection
with the Loan Agreement and he represents and warrants that it is in full force
and effect. As additional inducement for Bank to enter into this Amendment,
Gordon T. Graves hereby amends the Guaranty Agreement to evidence that the last
sentence of Recital A is deleted and replaced with the following:
"A. Borrower's obligation to repay the Loan is evidenced by
the Borrower's two (2) promissory notes payable to Bank,
one in the sum of $100,000 of even date herewith and the
other in the sum of $836,850 of even date herewith,
together with extensions, renewals and changes in form
thereof."
5. Conditions Precedent. The effectiveness of this Amendment, and the
--------------------
obligations of Bank's commitments hereunder, are conditioned upon satisfaction
of the following at or before closing:
-3-
<PAGE>
5.1. Borrower shall executed and deliver this Amendment, with all
schedules attached, to Bank.
5.2. Borrower shall execute and deliver the $836,850 Term Note to
Bank.
5.3. Borrower shall execute and deliver the $100,000 Line Note to
Bank.
5.4. Borrower shall provide Bank with chattel checks with respect to
all locations where inventory and/or equipment of either Borrower and/or
MegaBingo(R), Inc. are located, evidencing only such exceptions which are
satisfactory to Bank.
5.5. Borrower shall deliver a legal opinion to Bank, substantially
in the form and content of the opinion rendered to Bank in connection
herewith the Loan Agreement.
5.6. MegaBingo(R), Inc. shall deliver certified Resolutions from the
Secretary of Borrower, authorizing securitization of loans in form and
content as set forth on Schedule "5.6" attached hereto.
--------------
6. Governing Law and Binding Effect. This Amendment shall be governed
--------------------------------
by and construed in accordance with the laws of the State of Oklahoma, and shall
inure to the benefit of and be binding upon the parties hereto, their successors
and assigns.
7. No Change. Except as expressly amended hereby, the Loan Agreement,
---------
and all instruments, documents and agreements executed and/or delivered by
Borrower to Bank in connection therewith, shall remain in full force and effect
and unchanged.
8. Default. The failure of Borrower to comply with the terms of this
-------
Amendment shall constitute an Event of Default under the Loan Agreement.
9. Counterparts. This Amendment may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
"Borrower"
MULTIMEDIA GAMES, INC.
By _____________________________________
Mike Howard, Chief Financial Officer
-4-
<PAGE>
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing instrument was acknowledged before me on this ____ day of
June, 1996, by Mike Howard, as Chief Financial Officer of MULTIMEDIA GAMES, INC.
My Commission Expires: _________________________________
Notary Public
___________________________
[S E A L]
-5-
<PAGE>
"Bank"
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION, a national banking association
By _____________________________________
Edward E. Conn, Jr., Vice President
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing instrument was acknowledged before me on this ____ day of
June, 1996, by Edward E. Conn, Jr., as Vice President of BANK OF OKLAHOMA,
NATIONAL ASSOCIATION.
My Commission Expires: _________________________________
Notary Public
___________________________
[S E A L]
-6-
<PAGE>
MEGABINGO(R), INC.
By _____________________________________
Mike Howard, Chief Financial Officer
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing instrument was acknowledged before me on this ____ day of
June, 1996, by Mike Howard, as Chief Financial Officer of MEGABINGO(R), INC.
My Commission Expires: _________________________________
Notary Public
___________________________
[S E A L]
-7-
<PAGE>
________________________________________
Gordon T. Graves, Guarantor
STATE OF OKLAHOMA )
) ss.
COUNTY OF TULSA )
The foregoing instrument was acknowledged before me on this ____ day of
June, 1996, by Gordon T. Graves.
My Commission Expires: _________________________________
Notary Public
___________________________
[S E A L]
<PAGE>
EXHIBIT 10.23
July 26, 1996
Multimedia Games, Inc.
7335 South Lewis, Suite 204
Tulsa, Oklahoma 74136
Re: Amendment to Credit Agreement
Gentlemen:
Reference is made to the Credit Agreement dated March 15, 1995, amended by
the Amendment One To Revolving Credit And Term Loan Agreement dated August 24,
1995, and by the Amendment Two To Revolving Credit And Term Loan Agreement dated
June 25, 1996, between Multimedia Games, Inc., a Texas corporation ("Borrower")
and Bank of Oklahoma, National Association ("BOk") (as amended, the "Credit
Agreement"), pursuant to which BOk made certain loans evidenced by a (i)
$836,850 Promissory Note dated June 25, 1996 ("$836,850 Term Note"), and (ii)
$100,000 Promissory Note dated June 25, 1996 ("$100,000 Revolving Note").
You have requested BOk to make the following limited waivers and amendments
to the Credit Agreement, and BOk has agreed to accommodate your request, subject
to the terms and conditions described below. For valuable consideration
received, the parties agree to the following:
1. Amendments to the Credit Agreement. The Credit Agreement is amended
----------------------------------
as follows:
1.1 Section 1.15 is hereby deleted and replaced with the following:
"1.15 "Debt Service Coverage Ratio" shall mean the
---------------------------
ratio of (i) net income plus depreciation, amortization
and interest expense for any four (4) of Borrower's
consecutive fiscal quarters, to (ii) Borrower's Debt
Service Requirement for the same four (4) consecutive
fiscal quarters."
1.2 Section 7.4 (Leases) shall now read to additionally include the
following exception from requiring BOk's prior written approval: "(3)
leases for electronic gaming equipment which do not in the aggregate
require Borrower to
<PAGE>
Multimedia Games, Inc.
July 26, 1996
Page 2
make payments (including taxes, insurance, maintenance, and similar
expenses which the Borrower is required to pay under the terms of any
lease) in excess of $1,000,000."
1.3 Section 7.5 (Sale and Leaseback) is deleted and replaced with the
following:
"7.5 Sale and Leaseback. Sell, transfer, or otherwise
------------------
dispose of any real or personal property (tangible or
intangible) to any Person and thereafter directly or
indirectly lease back the same or similar property;
provided, however, that Borrower may sell electronic gaming
machines and lease the machines back, so long as the leases
comply with section 7.4 limitations."
1.4 Section 8.1 (Minimum Net Worth) is deleted and replaced with the
following:
"8.1 Minimum Consolidated Tangible Net Worth. Maintain until
---------------------------------------
March 31, 1997, at all times a consolidated tangible net
worth, excluding goodwill, of not less than TWO MILLION ONE
HUNDRED THOUSAND AND NO/100THS DOLLARS ($2,100,000), and
commencing April 1, 1997, Borrower must maintain at all
times a consolidated tangible net worth, excluding goodwill,
of not less than TWO MILLION SIX HUNDRED THOUSAND AND
NO/100THS DOLLARS ($2,600,000).
1.5 Section 9 (Events of Default) shall now include the following
additional section:
"(12) Borrower shall fail to pay any indebtedness or fail to perform
or observe any term, covenant, or condition required to be performed under
any agreement or instrument relating to the Bridge Financing."
2. BOk Consent. BOk hereby agrees and consents to the following:
-----------
<PAGE>
Multimedia Games, Inc.
July 26, 1996
Page 3
2.1 Section 6.8.4. (Certificate of No Default). BOk hereby consents
------------------------------------------
and agrees to waive the Event of Default due to Borrower's failure to
provide the quarterly certificate prior to March 31, 1996, as required by
Section 6.8.4. This waiver does not prevent BOk from asserting an Event of
Default under this section if Borrower fails to provide the quarterly
certificate at any time subsequent to March 31, 1996, as required under the
Loan Agreement. Furthermore, this waiver is strictly limited to no Event of
Default being asserted as to the certificates themselves and does not
contemplate or imply BOk's waiver of any possible Initial or Matured
Defaults which Borrower should have reported under such waived quarterly
certificates.
2.2 Section 7.2 (Debt). BOk hereby consents and agrees to Borrower
------------------
obtaining bridge financing, not to exceed $800,000 for the primary purpose
of purchasing and installing electronic gaming equipment and related
expenses ("Bridge Financing"), conditioned upon providing BOk with all
Bridge Financing documents for BOk review and approval prior to Borrower
execution, including prior BOk approval of any proposed subsequent
amendments. It is BOk's understanding that all Bridge Financing is
unsecured debt.
2.3 Section 7.4 (Leases). BOk hereby consents and agrees to waive as
--------------------
an Event of Default the leasing arrangements Borrower has already
established for electronic gaming equipment, so long as the aggregate
leases do not exceed $1,000,000.
2.4 Section 7.8 (Guaranties, etc.). BOk hereby consents and agrees
------------------------------
to waive an Event of Default for Borrower's guaranty of a certain $100,000
note payable by AGN Venturers L.L.C., a subsidiary of Borrower, to Graff
Pay-Per-View, Inc. Borrower shall provide BOk with a copy of all related
loan documents within fifteen (15) days of Borrower executing the guaranty.
All waivers in sections 2.1, 2.2, 2.3, and 2.4 are strictly limited to the terms
expressed herein and such waivers shall not be expanded by implication to
include a waiver of any other Initial or Matured Defaults which may presently
exist or subsequently arise, and such waivers shall not prohibit BOk from
declaring an Event of Default under the referenced sections unrelated to these
specifically identified situations.
<PAGE>
Multimedia Games, Inc.
July 26, 1996
Page 4
3. Representations and Warranties. Borrower, to its best knowledge and
------------------------------
belief, subject to the matters expressly waived herein, represents and warrants
to BOk that all representations and warranties under the Credit Agreement and
related loan documents remain true and correct as of the date hereof, and that
Borrower is in full and complete compliance therewith to the extent provided by
this Amendment.
4. Ratification by Borrower. Except as expressly modified hereby,
------------------------
Borrower ratifies and confirms that the Credit Agreement and all other
instruments, documents, and agreements executed in connection herewith remain in
full force and effect.
5. Costs. Borrower agrees to pay all costs, expenses and fees incurred
-----
by BOk in connection therewith, including but not limited to all cost, expenses
and fees of Riggs, Abney, Neal, Turpen, Orbison & Lewis.
Should the foregoing properly reflect your agreement, please sign below as
indicated.
Very truly yours,
BANK OF OKLAHOMA, NATIONAL
ASSOCIATION
By _______________________________________
Edward E. Conn, Jr., Vice President
"Borrower"
MULTIMEDIA GAMES, INC.
By _______________________________________
Mike Howard, Chief Financial Officer
<PAGE>
EXHIBIT 10.24
NATIONAL
INDIAN
GAMING
COMMISSION
Mr. Larry Montgomery
President & C.O.O.
Multimedia Games, Inc.
7335 S. Lewis, Suite 204
Tulsa, OK 74136
Dear Mr. Montgomery,
Thank you for your letter of February 2, 1996, on behalf of Multimedia Games,
Inc., requesting an advisory opinion on whether the "MegaMania System" is a
Class II or Class III game under the Indian Gaming Regulatory Act (IGRA).
Specifically, Multimedia Games, Inc. has requested the National Indian Gaming
Commission (NIGC) To determine whether the game as presented below is consistent
with he definition of "Bingo" as a form of Class II gaming. As you know, the
game of bingo is defined in the IGRA. In addition, IGRA requires that all Class
II gaming be conducted on Indian lands. 25 U.S.C. (S) 2710 (b) (1). We have
reviewed the materials submitted. For the reasons outlined below, we conclude
that the Megamania System is a Class II game.
MegaMania is generally understood to be a bingo game whereby not less that four
players, situated in one or more of several Indian bingo halls, each of which
have paper cards or Electronic Player Stations (EPS) which are electronically
interconnected, may simultaneously play the same game of bingo. Using paper or
an EPS, each play pays the same entry fee or price per bingo card played
therein, and the players compete against one another for the same prizes.
Individual features of this game will be addressed further during the course of
this opinion.
As shown and described in the informational packet provided by Multimedia Games,
Inc., an EPS unit consists of a computer and a computer monitor. The player of
MegaMania must purchase bingo cards to play the game. Cards are purchased from a
clerk at the bingo hall. The clerk enters the amount paid by the player into the
computer system and gives the player a PIN number er to enter into the EPS. The
play then sits in front of the EPS computer monitor. The monitor indicates when
the bingo game will start, the amount of credit remaining, the game pattern to
be played, and
<PAGE>
displays up to four bingo cards. The monitor also display images of the three
balls drawn and the corresponding numbers are automatically daubed on each card.
The monitor also shows how many card are in play and previous numbers that have
been drawn. In addition, the monitor will indicate that a bingo has occurred, at
what site the bingo has occurred, the serial number of the winning cards, and
the amount won.
The IGRA, 25 (S) 2703, defines Class II bingo games as follows:
(7) (A) The term "Class II gaming" means-
(i) The game of change commonly known as bingo (whether or not
electronic, computer, or other technological aides are used in connection
therewith)-
(I) Which is play for prizes, including monetary prizes, with cards
bearing numbers or other designations,
(II) In which the holder of the card covers such numbers or
designations when objects, similarly numbered or designated, are
drawn, or electronically determined, and
(III) In which the game is won by the first person covering a
previously designated arrangement of numbers or designations on such
cards.
The IGRA defines Class III games as all forms of gaming that are not Class I
gaming or Class II gaming. 25 U.S.C. (S) 2703 (8).
Your company provided the NIGC with a packet of information which contains
printed material and exhibits explaining the specific features and
characteristics or the MegaMania System. As described in the literature
provided, the Magamania System unable s Indian bingo halls to offer an
enhancement to the chip-up and ante-up bingo game. The MegaMania System also
allows customers to have the choice of playing on paper or using EPS'S.
Further, MegaMania allows the EPS to be used during regular bingo sessions, or
immediately preceding or following the regular bingo session. MegaMania also
used the multi-hall linking technology of the MegaBingo was determined to be a
Class II game by the NIGC on July 26, 1995.
The information you submitted describes the specific features of MegaMania. The
system is set to require a minimum of 12 players before the EPS's can be
utilized. Thus players play against each other and not a machine. In the
legislative history of IGRA, the
-2-
<PAGE>
Senate Select Committee on Indian Affairs discussed the definition of Class II
gaming:
"The Committee intends that tribes be given the opportunity to take
advantage of modern methods of conducting class II games and the language
regarding technology is designed to provide maximum flexibility. In this
regard, the Committee recognizes that tribes may wish to join with other
tribes to coordinate their class II operations and thereby enhance the
potential of increasing revenues. . .simultaneous games participation
between and among reservations can be made practical by use of computers
and telecommunications technology as long as the use of such technology
does not change the fundamental characteristics of the bingo or lotto games
and as long as such games are otherwise operated in accordance with
applicable Federal communications law. In other words, such technology
would merely broaden the potential participation levels and is readily
distinguishable from the use of electronic facsimiles in which a single
participant plays a game with or against a machine rather than with or
against other players."
Senate Report No. 100-446 at 9.
The integrated system of linking multiple halls enables the MegaMania to be
plays with no less than 48 card faces in play. This ensures that the winning of
any low-tier prizes will be funded by the players in that low-tier game. The
system also ensures that all players in any of the halls located throughout the
country will be playing for the same prizes based on umbers being drawn at one
location. Thus each player simultaneously is playing the same game.
Utilization of the EPS does not transform the MegaMania system into a gambling
device which would be prohibited pursuant to the Johnson Act. 25 U.S.C. (S)
1171(a). The EPS merely links participant players located at various Indian
casinos into a bingo game played live at another location. While Johnson Act
machines, e.g. slot machines, may be linked together to build large jackpot
prizes, in MegaMania the bingo numbers or designations are selected at one
location and are downloaded simultaneously to all participating EPS's. The EPS
is merely a screen projecting the game that is conducted live at Creek Nation
where actual bingo halls are being drawn. The EPS displays the numbers being
drawn, marks the numbers matched, and records the amount of winnings received
when a jackpot or consolation prize is won. This does not change the fact that
one bingo games is being played and does not alter the fundamental
characteristics of that bingo game.
-3-
<PAGE>
As noted by the NIGC in explaining 25 C.F.R. (S) 502, regarding Electronic,
Computer or Other Technologic Aid:
"In the view of the Commission, Congress intended to classify as Class II
gaming such technology that would enhance the playing of Class II theme
games, but not technology that would constitute a gambling device under the
Johnson Act. For example, the Commission recognizes as falling within the
scope of Class II technology devices that allow bingo players to keep track
of cards, bingo blowers, or similar devices that may help in performing on
function of bingo."
Definition under the Indian Gaming Regulatory Act; Rule, 57 Fed. Reg. 12,386
(1992).
Bingo card minders, on which MegaMania and other bingo games are played, are
designed specifically to ensure that all participating players are playing from
the same numbers or designations that are downloaded simultaneously to all
EPS's. Players can not play different numbers than are being played by others
in that game. As stated before, MegaBingo has already been determined to be a
Class II game by the NIGC.
The game plays to a jackpot or consolation winner every time, based on a pregame
announced number of balls called. Although the game is fast, the players are
playing toward a straight-line bingo and the requirement of covering the
designated number or pattern is present.
Additionally, the player at any EPS is only allowed to play four cards per game.
If the player decides not to ante-up on a particular card, that card is
irreclaimable for play for the remainder of that specific game. The prize is
paid to the first person covering the announced numbers or patterns.
Bingo, defined as Class III gaming in 25 U.S.C. (S) 2703 (7)(A)(i), also allows
games which are "commonly known as bingo." MegaMania includes tow-tier prizes
which are awarded during the ascension to the high-tier prizes which are awarded
during the ascension to the high-tier straight bingo game. There are many
examples of random number games being played in bingo (similar to the first 10,
5 or first number covered being a winner) which meet the definition of the IGRA
and the NIGC regulations.
As exhibited in bingo manuals, catalogs, and handbooks which predate the IGRA,
many games designate a winner of a pregame consolation if such play has the
first designation of numbers
-4-
<PAGE>
called. As explained in the Bingo King Idea Book, Copyright 1979, while playing
toward a regular predetermined pattern on the bingo card, the bingo manager may
add the possibilities of pregame consolations for players "who get the first
series of numbers covered on one card as a winner, and this pregame is for the
players who cannot make a straight Bingo." See Bingo King Idea.
---
Another example is taken from the Bingo Manager's Textbook, Copyright 1984.
This textbook describes a method that bingo managers can add variety and
excitement to a regular bingo game. One such game is described as "Odd or Even":
"If the first ball pulled from the machine is an even number, then the
caller tells the players to cover all numbers ending in even numbers. The
players then go on to play for a 3-line Bingo or a coverall."
See Bingo Manager's Textbook at 88.
- ---
Further, the 1996 Bingo King, Inc. catalog indicates a single random number
"Star" game which can be utilized by bingo halls in a variety of ways to enhance
the game of bingo. See Bingo King, Inc. Catalog No. 991 at 13. There is also a
---
description of a "Quick Shot" game which can potentially award a prize to the
player who has no numbers on his card called during the regular bingo game. Id.
---
at 21: Indisputably, these types of designations have been a part of the game of
bingo well before the IGRA was enacted and continue to be utilized today.
Therefore, the feature of the MegaMania System which awards the player $.25 if
two of the three balls drawn matches any two numbers on a single card in play,
or awards the player $2.50 if three of the balls drawn match any three numbers
on a single card in play, conforms to these pregame prizes which are part of the
game commonly known as bingo.
For the above mentioned reasons, we conclude that the MegaMania system conforms
with the IGRA definition of "bingo." Therefore, MegaMania is a Class II game.
Further, the EPS utilized to link players and bingo halls is a technologic aid
as defined in 25 C.P.R. (S) 502. If you have any questions regarding this
letter please feel free to contact our office.
Sincerely,
Harold A. Monteau
Chairman
National Indian Gaming Commission
-5-
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,149,000
<SECURITIES> 0
<RECEIVABLES> 577,000
<ALLOWANCES> 61,000
<INVENTORY> 11,000
<CURRENT-ASSETS> 1,719,000
<PP&E> 2,704,000
<DEPRECIATION> 542,000
<TOTAL-ASSETS> 6,079,000
<CURRENT-LIABILITIES> 1,541,000
<BONDS> 0
0
1,000
<COMMON> 27,000
<OTHER-SE> 3,176,000
<TOTAL-LIABILITY-AND-EQUITY> 6,079,000
<SALES> 277,000
<TOTAL-REVENUES> 15,575,000
<CGS> 55,000
<TOTAL-COSTS> 11,550,000
<OTHER-EXPENSES> 3,715,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,000
<INCOME-PRETAX> 237,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 237,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,000
<EPS-PRIMARY> .05
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</TABLE>
