SILICON GAMING, INC.
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SECURITIES PURCHASE AGREEMENT
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$5,000,000 AGGREGATE PRINCIPAL AMOUNT OF
13% SENIOR SECURED NOTES
DUE NOVEMBER 24, 2004
OF
SILICON GAMING, INC.
DATED AS OF NOVEMBER 24, 1999
TABLE OF CONTENTS
SECTION PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.................................. 1
1.1 Definitions........................................................ 5
1.2 Accounting Terms................................................... 26
ARTICLE II PURCHASE AND SALE OF NOTES....................................... 26
2.1 Issuance of New Notes.............................................. 26
2.2 Sale and Purchase of New Notes..................................... 26
2.3 Closing of Sale of New Notes....................................... 27
ARTICLE III CONDITIONS TO CLOSING........................................... 27
3.1 Conditions Precedent to Obligations of the Purchaser
on the Closing Date................................................ 27
3.2 Conditions Precedent to Obligations of the Company
on the Closing Date................................................ 30
ARTICLE IV REPRESENTATIONS AND WARRANTIES, ETC.............................. 31
4.1 Organization and Qualification; Authority.......................... 31
4.2 Subsidiaries....................................................... 31
4.3 Licenses........................................................... 32
4.4 Corporate and Governmental Authorization; Contravention............ 32
4.5 Validity and Binding Effect........................................ 33
4.6 Capitalization..................................................... 33
4.7 Preemptive or Other Rights......................................... 33
4.8 Litigation; Defaults............................................... 33
4.9 Outstanding Debt................................................... 34
4.10 No Material Adverse Change......................................... 34
4.11 Employee Programs.................................................. 34
4.12 Private Offering................................................... 36
4.13 Broker's or Finder's Commissions................................... 37
4.14 Disclosure......................................................... 37
4.15 Foreign Assets Control Regulation, Etc............................. 37
4.16 Federal Reserve Regulations and Other Matters...................... 37
4.17 Investment Company Act............................................. 38
4.18 Public Utility Holding Company Act................................. 38
4.19 Interstate Commerce Act............................................ 38
4.20 Environmental Regulation, Etc...................................... 38
4.21 Properties and Assets.............................................. 39
4.22 Insurance.......................................................... 39
4.23 Employment Practices............................................... 40
4.24 Financial Statements............................................... 40
4.25 Intellectual Property.............................................. 41
4.26 Taxes.............................................................. 42
4.27 Transactions with Affiliates....................................... 43
4.28 Limitation on Subsidiary Payment Restrictions...................... 43
4.29 No Other Business.................................................. 43
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ARTICLE V PURCHASE FOR INVESTMENT; SOURCE OF FUNDS.......................... 43
5.1 Purchase for Investment............................................ 43
5.2 Authority.......................................................... 43
5.3 Broker's or Finder's Commissions................................... 43
5.4 Acknowledgment of Gaming Restrictions.............................. 44
ARTICLE VI REDEMPTIONS, OFFERS TO PURCHASE, AND CONVERSIONS................. 44
6.1 Notice of Redemption............................................... 44
6.2 Selection of New Notes to be Redeemed or Purchased................. 44
6.3 Effect of Notice of Redemption..................................... 45
6.4 Payment of Redemption Price........................................ 45
6.5 New Notes Redeemed in Part......................................... 45
6.6 Optional and Mandatory Redemption.................................. 45
6.7 Mandatory Offers................................................... 45
ARTICLE VII COVENANTS....................................................... 47
7.1 Payment of New Notes............................................... 47
7.2 Reports............................................................ 47
7.3 Compliance Certificate............................................. 48
7.4 Stay, Extension and Usury Laws..................................... 49
7.5 Limitation on Restricted Payments.................................. 49
7.6 Corporate Existence................................................ 49
7.7 Limitation on Indebtedness......................................... 49
7.8 Limitation on Transactions with Affiliates......................... 51
7.9 Limitation on Liens................................................ 51
7.10 Payment of Taxes and Other Claims.................................. 52
7.11 Restrictions Against Limitations on Upstream Payments.............. 52
7.12 Change of Control.................................................. 53
7.13 Redemption from the Proceeds of Securities Sales and
Mezzanine Debt Financings.......................................... 53
7.14 Maintenance of Properties.......................................... 54
7.15 Maintenance of Insurance........................................... 54
7.16 Compliance with Laws............................................... 54
7.17 Limitation on Issuances and Dispositions of Capital Stock
of Subsidiaries.................................................... 54
7.18 Limitation on Sale of Assets....................................... 55
ARTICLE VIII SUCCESSORS..................................................... 55
8.1 Merger or Consolidation............................................ 55
8.2 Surviving Person Substituted....................................... 55
ARTICLE IX DEFAULTS AND REMEDIES............................................ 55
9.1 Events of Default.................................................. 55
9.2 Acceleration....................................................... 56
9.3 Other Remedies..................................................... 57
9.4 Waiver of Past Defaults............................................ 57
9.5 Control by a Majority.............................................. 58
9.6 Rights of Holders to Receive Payment............................... 58
9.7 Holders May File Proofs of Claim................................... 58
9.8 Undertaking for Costs.............................................. 58
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ARTICLE X AMENDMENTS........................................................ 58
10.1 Amendments and Supplements Permitted Without Consent of Holders.... 58
10.2 Amendments and Supplements Requiring Consent of Holders;
Other Consents..................................................... 58
10.3 Revocation and Effect of Consents.................................. 59
10.4 Notation on or Exchange of New Notes............................... 60
10.5 Board Approval..................................................... 60
ARTICLE XI THE CONVERTIBLE NOTES............................................ 60
11.1 Form and Dating.................................................... 60
11.2 Execution and Authentication....................................... 60
11.3 Transfer and Exchange.............................................. 61
11.4 Replacement New Notes.............................................. 61
11.5 Outstanding New Notes.............................................. 61
11.6 Treasury New Notes................................................. 62
11.7 Temporary New Notes................................................ 62
11.8 Cancellation....................................................... 62
11.9 Defaulted Interest................................................. 62
11.10 Record Date........................................................ 62
11.11 CUSIP Number....................................................... 62
11.12 Restrictive Legends................................................ 63
11.13 Notice of Transfer; Opinions of Counsel............................ 63
11.14 Security........................................................... 64
ARTICLE XII INDEMNIFICATION................................................. 66
12.1 Indemnification; Expenses, Etc..................................... 66
ARTICLE XIII MISCELLANEOUS.................................................. 68
13.1 Survival of Representations and Warranties; Severability........... 68
13.2 Notices, Etc....................................................... 68
13.3 Successors and Assigns............................................. 69
13.4 Descriptive Headings............................................... 69
13.5 Satisfaction Requirement........................................... 69
13.6 Governing Law...................................................... 70
13.7 Service of Process................................................. 70
13.8 Counterparts....................................................... 70
13.9 Disclosure to Other Persons........................................ 70
13.10 No Adverse Interpretation of Other Agreements...................... 71
13.11 Waiver of Jury Trial............................................... 71
13.12 Merger............................................................. 71
13.13 Expenses........................................................... 71
13.14 Cooperation with Gaming Authorities................................ 71
13.15 Gaming Laws; Requisite Gaming Approvals............................ 72
13.16 Assistance with Gaming Approvals................................... 71
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SCHEDULES
Schedule 4.1 -- Qualified Jurisdictions
Schedule 4.2 -- Subsidiaries
Schedule 4.4 -- Approvals
Schedule 4.6 -- Agreements Affecting Securities
Schedule 4.7 -- Preemptive or Other Rights
Schedule 4.8 -- Litigation; Defaults
Schedule 4.9 -- Debt and Other Liabilities
Schedule 4.10 -- Material Developments
Schedule 4.11 -- ERISA
Schedule 4.20 -- Environmental
Schedule 4.21 -- Liens
Schedule 4.22 -- Insurance
Schedule 4.23 -- Employment Matters
Schedule 4.25 -- Intellectual Property
Schedule 4.26 -- Taxes
Schedule 4.27 -- Transactions with Affiliates
Schedule 4.28 -- Subsidiary Payment Restrictions
EXHIBITS
Exhibit A -- Form of New Note
Exhibit B -- Legal Opinion of Corporate Counsel
Exhibit C -- Legal Opinion of Special Counsel
Exhibit D -- Legal Opinion of Gaming Counsel
iv
SILICON GAMING, INC.
THIS SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of November
24, 1999, is entered into by and between Silicon Gaming, Inc., a California
corporation (the "COMPANY"), and the purchaser listed on the signature page
hereto (the "PURCHASER"). Unless otherwise defined, capitalized terms used in
this Agreement are defined in Article I; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement; references to a "section" or a "subdivision" are, unless
otherwise specified, to a section or a subdivision of this Agreement.
In consideration of the mutual covenants and agreements set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Purchaser and the Company agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS. In addition to any terms defined elsewhere in this
Agreement, unless otherwise specifically provided herein, the following terms
shall have the following meanings for all purposes when used in this Agreement,
and in any note, agreement, certificate, report or other document made or
delivered in connection with this Agreement:
"Additional Interest" has the meaning ascribed thereto in Section 11.14(f)
hereof.
"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of an Acquired Person existing at the time of such acquisition,
including Indebtedness issued in connection with, or in contemplation of, such
acquisition, and (b) Indebtedness incurred by such Person or its Subsidiaries
(i) the proceeds of which have been used to finance an Investment in a Related
Business, and (ii) which is secured by a Lien solely on the assets or Property
constituting such an Investment in a Related Business.
"Acquired Person" means, with respect to any specified Person, any other
Person acquired by such specified Person, whether by purchase, merger,
consolidation, other business combination or otherwise.
"Affiliate" means, with respect to any specified Person, any other Person
(a) directly or indirectly controlling (including, but not limited to, all
directors and executive officers of such Person), controlled by or under direct
or indirect common control with such specified Person, or (b) that directly or
indirectly owns more than 10% of the voting securities of such Person. A Person
shall be deemed to control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Affiliate Transaction" has the meaning ascribed thereto in Section 7.8
hereof.
5
"Agreement" means this Agreement, as amended, modified or supplemented from
time to time, together with any exhibits, schedules or other attachments
thereto.
"Amended Notes" means the $7.5 million aggregate principal amount of Senior
Discount Notes not exchanged for Series D Preferred Stock of the Company under
the Restructuring Agreement and certain terms and provisions of which were
amended pursuant to Amendment No. 2 to the Securities Purchase Agreement."
"Amended Notes Securities Purchase Agreement" means the Original Securities
Purchase Agreement, as amended by Amendment No. 1 to the Securities Purchase
Agreement and Amendment No. 2 to the Securities Purchase Agreement.
"Amendment No. 2 to the Securities Purchase Agreement" means that certain
Amendment No. 2 to the Securities Purchase Agreement initially entered into and
dated September 30, 1997 (the "Original Securities Purchase Agreement"), and as
amended by Amendment No. 1 to the Securities Purchase Agreement dated July 8,
1998 (the "Amendment No. 1 to the Securities Purchase Agreement"), by and
between the Company and BIII Capital Partners, L.P.
"Approvals" means each and every approval, consent, filing or registration
by, or with any Governmental Body, or any creditor or shareholder of the
Company, necessary (a) to authorize or permit the execution, delivery or
performance by the Company of the Transaction Documents, and (b) for the
validity or enforceability of any of such Transaction Documents against the
Company.
"Asset Disposition" means any sale, lease, transfer, conveyance or other
disposition (in one transaction or a series of related transactions), including
any such disposition by means of a merger, consolidation or similar transaction,
of shares of Capital Stock of a Subsidiary (other than directors' qualifying
shares), Property or other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its Subsidiaries, but
excluding the following: (a) a disposition by a Subsidiary to the Company or by
the Company or a Subsidiary to a Wholly Owned Subsidiary, (b) a disposition of
tangible property or assets which have become obsolete or are otherwise not used
or useful, so long as such disposition is at fair market value (as determined by
the Company in good faith) in the ordinary course of business, (c) a disposition
that constitutes a Restricted Payment or a Public Offering, in each case so long
as effected in accordance with all applicable provisions of this Agreement, and
(d) a disposition of inventory in the ordinary course of business, in each case
so long as effected in accordance with all applicable provisions of this
Agreement.
"Authorized Common Stock Amendment" means the Amendment to the Articles of
Incorporation of the Company approved by the Board of Directors of the Company
to increase the number of authorized shares of Common Stock of the Company from
50,000,000 to 750,000,000.
"Bankruptcy Law" means Xxxxx 00, Xxxxxx Xxxxxx Code, or any similar Federal
or state law for the relief of debtors.
6
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Indebtedness arrangements
conveying the right to use) real or personal property of such Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with GAAP. The stated
maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares of, or interests,
rights, participations, and/or other equivalents in (however designated),
corporate stock or equity securities of such Person, including each class of
common stock and preferred stock of such Person and partnership or limited
liability company interests, whether general or limited, of such Person, and
including any securities convertible into or exercisable or exchangeable for, or
any right to acquire, any equity interest in such Person.
"Cash Equivalents" means: (a) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.; (c) commercial paper maturing no
more than 360 days after the date of acquisition thereof, issued by a
corporation organized under the laws of any state of the United States or of the
District of Columbia and, at the time of acquisition, having a rating in one of
the two highest rating categories obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.; (d) money market funds whose
investments are made solely in securities described in clause (a) maturing
within 360 days after the date of acquisition thereof; (e) certificates of
deposit maturing within 360 days after the date of acquisition thereof, issued
by any commercial bank that is a member of the Federal Reserve System that has
capital, surplus and undivided profits (as shown on its most recent statement of
condition) aggregating not less than $100,000,000 and is rated A or better by
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation; and (f)
repurchase agreements entered into with any commercial bank of the nature
referred to in clause (e), secured by a fully perfected Lien in any obligation
of the type described in any of clauses (a) through (e), having a fair market
value at the time such repurchase agreement is entered into of not less than
100% of the repurchase obligation thereunder of such commercial bank.
7
"Change of Control" means any transaction or series of transactions in
which any of the following occurs: (a) any Person or group (within the meaning
of Rule 13d-3 under the Exchange Act and Sections 13(d) and 14(d) of the
Exchange Act) becomes the direct or indirect "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of 25% or more of the issued and outstanding
shares of Capital Stock entitled to vote in the election of directors of the
Company or the Surviving Person (if other than the Company); (b) a merger or
consolidation of the Company with or into another corporation in which less than
a majority of the outstanding voting power of the surviving or consolidated
corporation immediately following such event is held by persons or entities who
were stockholders of the Company immediately prior to such event; (c) the sale
of all or substantially all of the properties and assets of the Company and its
Subsidiaries; (d) the redemption or repurchase of shares representing a majority
of the voting power of the outstanding shares of capital stock of the Company;
or (e) individuals who at the Closing constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of the Company
was approved by a vote of at least a majority of the directors of the Company
then still in office who were either directors at the Closing or whose election
or nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
provided however, that a conversion of Series D Preferred Stock into Common
Stock, an issuance of Common Stock under the Management Incentive Plan, issuance
of the Units, an issuance of Common Stock upon exercise of Old Equity Warrants,
issuance of the Series E Warrant, an issuance of Series E Preferred Stock upon
exercise of the Series E Warrant, and an issuance of Common Stock upon
conversion of the Series E Preferred Stock, shall not, individually or in the
aggregate in and of itself, constitute a Change of Control.
"Change of Control Trigger Date" has the meaning ascribed thereto in
Section 7.12 hereof.
"Charter Documents" has the meaning ascribed thereto in Section 4.1 hereof.
"Closing" has the meaning ascribed thereto in Section 2.3 hereof.
"Closing Date" has the meaning ascribed thereto in Section 2.3 hereof.
"Code" means the Internal Revenue Code of 1986, as the same may be amended
from time to time, or any successor thereto, and the rules and regulations
issued thereunder, as from time to time in effect.
"Collateral" means all of the assets of the Company and its Subsidiaries,
excluding the Capital Stock of the Gaming Subsidiaries, and including, without
limitation, all right, title and interest of the Company and its Subsidiaries
now owned or hereafter acquired in and to the following: (a) all equipment and
fixtures (including, without limitation, furniture, vehicles and other machinery
and office equipment), together with all additions and accessions thereto and
replacements therefor; (b) all inventory (including, without limitation, (i) all
raw materials, work in progress and finished goods and (ii) all such goods which
are returned to or repossessed by the Company), together with all additions and
8
accessions thereto, replacements therefor, products thereof and documents
therefor; (c) all accounts, chattel paper, contract rights and rights to the
payment of money; (d) all general intangibles (including, without limitation,
(i) customer and supplier lists and contracts, books and records, insurance
policies, tax refunds, contracts for the purchase of real or personal property,
(ii) all copyrights, trademarks, trade names and service marks, (iii) all
patents, and all registrations, recordings, reissues, continuations,
continuations-in-part and extensions thereof, and all pending applications
therefor, (iv) all licenses to use, applications for, and other rights to, such
patents, copyrights, trademarks, trade names and service marks (other than
licenses whose terms prohibit the granting of a security interest therein), and
(v) all goodwill of the Company); (e) all deposit accounts, money, certificated
and uncertificated securities, instruments and documents; and (f) all proceeds
of the foregoing (including, without limitation, whatever is receivable or
received when Collateral or proceeds is sold, collected, exchanged, returned,
substituted or otherwise disposed of, whether such disposition is voluntary or
involuntary, including rights to payment and return premiums and insurance
proceeds under insurance with respect to any Collateral, and all rights to
payment with respect to any cause of action affecting or relating to the
Collateral).
"Commission" means the United States Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, par value $.001 per share, of the
Company.
"Company" means the party named as such above until a successor replaces it
and thereafter means the successor.
"Consolidated" or "consolidated," when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Consolidated EBIT" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person and its consolidated Subsidiaries for
such period, plus or minus (a) a provision for taxes based on income or profits,
to the extent such provision for taxes was included in computing such
Consolidated Net Income, plus (b) Consolidated Interest Expense for such period,
all as determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the Consolidated EBIT of such Person and its consolidated Subsidiaries for such
period, plus depreciation, amortization and all other non-cash charges, to the
extent such depreciation, amortization and other non-cash charges were deducted
in computing such Consolidated EBIT (including amortization of goodwill and
other intangibles), all as determined on a consolidated basis in accordance with
GAAP.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the Consolidated EBITDA for the period of the
most recent two consecutive fiscal quarters for which financial statements are
available to (b) Consolidated Interest Expense for such two fiscal quarters;
PROVIDED, HOWEVER, that (i) if the Company or any Subsidiary has issued any
9
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio is an issuance of Indebtedness, or both, Consolidated EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been issued on the first day of such period and with respect to the discharge of
any other Indebtedness refinanced, refunded, exchanged or otherwise discharged
with the proceeds of such new Indebtedness as if any such discharge had occurred
on the first day of such period, (ii) if since the beginning of such period the
Company or any Subsidiary shall have made any Asset Disposition, Consolidated
EBITDA for such period shall be reduced by an amount equal to the Consolidated
EBITDA (if positive) directly attributable to the assets which are the subject
of such Asset Disposition for such period, or increased by an amount equal to
the Consolidated EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Subsidiary refinanced, refunded, exchanged or
otherwise discharged with respect to the Company and its continuing Subsidiaries
in connection with such Asset Dispositions for such period (or if the Capital
Stock of any Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Subsidiary to the
extent the Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale), and (iii) if since the beginning of such period
the Company or any Subsidiary (by merger or otherwise) shall have made an
Investment in any Subsidiary (or any person which becomes a Subsidiary) or an
acquisition of assets or stock, including any acquisition of assets or stock
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all of an operating unit of a business,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the issuing of any
Indebtedness), as if such Investment or acquisition occurred on the first day of
such period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Indebtedness issued in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, (a) the total aggregate amount of interest expense (including
amortization of original issue discount and non-cash interest payments or
accruals and the interest component of any Capital Lease Obligations, but
excluding any intercompany interest owed by any Subsidiary to any other
Subsidiary of such Person) of such Person and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, (b) all fees,
commissions, discounts and other charges of such Person and its consolidated
Subsidiaries with respect to letters of credit and bankers' acceptances,
determined on a consolidated basis in accordance with GAAP and (c) the product
of (i) the total amount of dividends declared on Disqualified Capital Stock
other than common stock (whether accrued or paid) of such Person and its
consolidated Subsidiaries, times (ii) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local effective income tax rate of such Person, expressed as a
10
decimal, in each case, on a consolidated basis and in accordance with GAAP
(after consideration of any deferred tax assets of such Person then available
including without limitation, any amounts of available net operating loss
carryover).
"Consolidated Net Income," means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
consolidated Subsidiaries for such period, before payment or accrual of
preferred dividends, on a consolidated basis, determined in accordance with
GAAP; PROVIDED that (a) the net income of any other Person in which such Person
or any of its Subsidiaries has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of such
Person and its Subsidiaries in accordance with GAAP) shall be included only to
the extent of the amount of dividends or distributions actually paid to such
Person or such Person's Subsidiaries by such other Person in such period; (b)
the net income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a Subsidiary of such Person not subject to any
Payment Restriction, PROVIDED, HOWEVER, that with respect to the Consolidated
Net Income of the Company, the Consolidated Net Income of the Company's
Subsidiaries shall not be so excluded, notwithstanding the existence of any such
Payment Restriction, so long as the terms of any such Payment Restriction
limiting the payment of dividends by the Company's Subsidiaries are not more
restrictive at the time of determination of Consolidated Net Income than the
Payment Restrictions limiting such payment of dividends in effect on the date
hereof; (c) the net income (or loss) of any other Person shall not be included
for any periods during which such other Person is not a consolidated subsidiary
of such Person and the net income (or loss) of any successor to such Person by
consolidation or merger or transfer of all or substantially all assets shall not
be included for any periods prior to such consolidation, merger, or transfer of
all or substantially all assets; and (d) there shall be excluded the following:
(i) such Person's share, determined in accordance with GAAP, of the net loss of
any other Person in which such Person or any of its Subsidiaries has an interest
(which interest does not cause the net loss of such other Person to be
consolidated with the net income or loss of such Person and its Subsidiaries in
accordance with GAAP), (ii) the net income of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the Capital Stock of such Person or any of its
Subsidiaries, any gains on pension reversions received by such Person or any of
its Subsidiaries, or any proceeds from life insurance policies received by such
Person or any of its Subsidiaries, (iv) all gains, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person or any of its Subsidiaries during such period (including, without
limitation, dispositions pursuant to sale and leaseback transactions), (v) all
gains realized in connection with the acquisition of debt securities for a cost
less than principal plus accrued interest, (vi) all extraordinary gains,
together with any related provision for taxes, realized by such Person or any of
its Subsidiaries during such period, and (vii) the cumulative effect of a change
in accounting principles in the year of adoption of such change.
"Consolidated Net Worth" means, with respect to any Person, as of the date
of determination, the Net Worth of such Person and its consolidated
Subsidiaries, determined in accordance with GAAP, as of the end of the most
recent fiscal quarter of such Person for which financial statements are
11
available prior to the taking of any action for the purpose of which the
determination is being made.
"Current Affiliate" has the meaning ascribed thereto in Section 4.10
hereof.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets in one
transaction or a series of related transactions.
"Disqualified Capital Stock" means, (a) with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, by its terms, by the
terms of any agreement related thereto or by the terms of any security into
which it is convertible, puttable or exchangeable, is, or upon the happening of
an event or the passage of time would be, required to be redeemed or repurchased
by such Person or its Subsidiaries, including at the option of the holder, in
whole or in part, or has, or upon the happening of an event or passage of time
would have, a redemption or similar payment due, on or prior to the stated
maturity date of the New Notes, or (b) any other Capital Stock of such Person or
its Subsidiaries designated as Disqualified Capital Stock by such Person at the
time of issuance.
"Dollars" and "$" mean lawful currency of the United States of America.
"Employee Program" has the meaning ascribed thereto in Section 4.10 hereof.
"Environment" means soil, surface waters, groundwater, land, stream
sediments, surface or subsurface strata and ambient air.
"Environmental Law(s)" means and includes any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the Environment, health, safety or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time, or any successor thereto, and the rules
and regulations issued thereunder, as from time to time in effect.
"Event of Default" has the meaning ascribed thereto in Section 9.1 hereof.
12
"Excess Proceeds" has the meaning ascribed thereto in Section 7.18(b).
"Excess Proceeds Date" has the meaning ascribed thereto in Section 7.18(d).
"Exchange Act" means the Securities Exchange Act of 1934, as the same may
be amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Fair Market Value" or "fair market value" means, with respect to any
assets or properties, the amount at which such assets or properties would change
hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is reasonably determined
by (a) the Board of Directors of the Company acting reasonably and in good faith
or (b) at the request of the holders of a majority of the outstanding New Notes
an appraisal or valuation firm of national or regional standing selected by the
Company (with the reasonable consent of the holders of a majority of the
outstanding New Notes), with experience in the appraisal or valuation of
properties or assets of the type for which Fair Market Value is being
determined; PROVIDED, HOWEVER, that if the Common Stock is traded on the Nasdaq
National Market or the NYSE (or successor thereof), the Fair Market Value of the
Common Stock shall be the average of the closing prices for the 10 trading days
immediately prior to the date of determination.
"Financial Statements" has the meaning ascribed thereto in Section 4.23
hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination, as in
effect from time to time.
"Gaming Authorities" means, collectively, the Mississippi Gaming
Commission, the Nevada Gaming Commission, the Nevada State Gaming Control Board,
and any other Governmental Body that holds regulatory, licensing or permit
authority over gaming activities conducted by the Company or its Gaming
Subsidiaries within its jurisdiction.
"Gaming Laws" means, collectively, (a) the Nevada Gaming Control Act, as
codified in Chapter 463 of the Nevada Revised Statutes, as amended from time to
time, together with the regulations of the Nevada Gaming Commission promulgated
thereunder, as amended from time to time, (b) the Mississippi Gaming Control
Act, as codified in Chapter 76 of the Mississippi Code Annotated, as amended
from time to time, together with the regulations of the Mississippi Gaming
Commission promulgated thereunder, as amended from time to time, and (c) all
other laws and regulations pursuant to which any Gaming Authority possesses
regulatory, licensing or permit authority over gaming activities conducted by
the Company or its Gaming Subsidiaries within its jurisdiction.
13
"Gaming Subsidiaries" means Silicon Gaming-Nevada, Inc., Silicon
Gaming-Mississippi, Inc., and any other Subsidiary that is subject to the
regulatory, licensing or permit authority and jurisdiction of any Gaming
Authority.
"Gaming Subsidiaries Stock Restrictions" means the negative pledge (i.e.,
the agreement not to encumber pursuant to Section 7.9), and the restrictions on
transfers (i.e., pursuant to Sections 7.17 and 7.18), of the capital stock of
the Company's Gaming Subsidiaries, in each case only to the extent such negative
pledge or restrictions require the approval of any Gaming Authority pursuant to
the Gaming Laws.
"Governmental Body" means any governmental or quasi-governmental authority
including, without limitation, any federal, state, territorial, county,
municipal or other governmental or quasi-governmental agency, board, branch,
bureau, commission, court, department or other instrumentality or political unit
or subdivision, whether domestic or foreign and any of the Gaming Authorities.
"Gross Proceeds" means, when used with respect to a Public Offering or a
private offering of Capital Stock, the number of shares of Capital Stock sold by
the Company in such offering multiplied by the price paid for such shares by the
purchasers thereof.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing any Indebtedness of any other Person (the "Primary
Obligor") in any manner, whether directly or indirectly, and including, without
limitation, any obligation of such Person, (a) to purchase or pay (or advance or
supply funds, for the purchase or payment of) such Indebtedness or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (b) to purchase property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (c) to maintain working capital, equity capital or other
financial statement, condition or liquidity of the Primary Obligor so as to
enable the Primary Obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that the Guarantee by any Person shall not
include endorsements by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Hazardous Materials" means petroleum or petroleum products, by-products or
breakdown products, radioactive materials, asbestos-containing materials,
polychlorinated biphenyls and radon gas, and any other chemicals, materials or
substances designated, classified or regulated as hazardous or toxic or as a
pollutant or contaminant under any Environmental Law.
"Hazardous Waste" means and includes any hazardous waste as defined or
regulated under any Environmental Law.
"Holder" means a Person in whose name a New Note is registered.
"Illegal Transfer Notice" has the meaning ascribed thereto in Section 11.13
hereof.
14
"Incur" or "incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), suffer to exist, assume, Guarantee or otherwise become liable in
respect of such Indebtedness or other obligation, including by way of merger or
acquisition of another Person, or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet of
such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall
have meanings correlative to the foregoing).
"Indebtedness" means, with respect to any Person, (a) all liabilities,
contingent or otherwise, of such Person (i) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof and whether short-term or long-term, secured or unsecured),
(ii) evidenced by bonds, notes, debentures, drafts accepted or similar
instruments or letters of credit (including such liabilities representing the
balance deferred and unpaid of the purchase price of any property, other than
any such liability that represents an account payable or any other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business in connection with obtaining goods,
materials or services, which account is not overdue according to the original
terms of sale, unless such account payable is being contested in good faith),
(iii) for the payment of money relating to Capital Lease Obligations; or (iv)
under the terms of any amendment, renewal, extension or refunding of any
liability of the types referred to in the preceding clauses (i), (ii) or (iii);
(b) the maximum fixed repurchase price of all Disqualified Capital Stock of such
Person or, if there is no such maximum fixed repurchase price, the liquidation
preference of such Disqualified Capital Stock, plus accrued but unpaid
dividends; (c) outstanding reimbursement obligations of such Person with respect
to letters of credit or bankers' acceptances issued for the benefit of such
Person; (d) net obligations of such Person with respect to Interest Rate or
Currency Protection Agreements; (e) all liabilities of others of the kind
described in the preceding clause (a), (b), (c) or (d) that such Person has
Guaranteed or that is otherwise its legal liability; and (f) all obligations of
others secured by a Lien to which any of the Property or assets of such Person
are subject (other than obligations of a lessor under any operating lease
pursuant to which the Company or any of its Subsidiaries leases Property, if
such lessor grants a Lien on such lease to secure such lessor's Indebtedness),
whether or not the obligations secured thereby shall have been assumed by such
Person or shall otherwise be such Person's legal liability (PROVIDED that if the
obligations so secured have not been assumed by such Person or are not otherwise
such Person's legal liability, such obligations shall be deemed to be in an
amount equal to the fair market value of such Properties or assets, as
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board Resolution). For purposes of the
preceding sentence, the "maximum fixed repurchase price" of any Disqualified
Capital Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock (or any equity security for which it may be exchanged or
converted), such fair market value shall be determined in good faith by the
Board of Directors of such Person, which determination shall be evidenced by a
Board Resolution. For purposes hereof, Indebtedness incurred by any Person that
is a general partnership (other than non-recourse Indebtedness) shall be deemed
to have been incurred by the general partners of such partnership pro rata in
15
accordance with their respective interests in the liabilities of such
partnership unless any such general partner shall, in the reasonable
determination of the Board of Directors of the Company, be unable to satisfy its
pro rata share of the liabilities of the partnership, in which case the pro rata
share of any Indebtedness attributable to such partner shall be deemed to be
incurred at such time by the remaining general partners on a pro rata basis in
accordance with their interests.
"Indemnified Party" or "Indemnified Parties" has the meaning ascribed
thereto in Section 12.1(a) hereof.
"Independent Financial Advisor" means a reputable accounting, appraisal or
a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of the Company, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and independent
with respect to the Company and its Affiliates.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
(a) any insolvency or bankruptcy or similar case or proceeding, or any
reorganization, receivership, liquidation, dissolution or winding up of such
Person, whether voluntary or involuntary, or (b) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of such Person.
"Intellectual Property" means all patent, copyright, trade secret,
trademark, or other proprietary rights used in or necessary to the business of
the Company or any of its Subsidiaries and material to the Company and its
Subsidiaries on a consolidated basis.
"Interest Payment Date" means the first of each month commencing January 1,
2000, until the New Notes are paid in full.
"Interest Rate or Currency Protection Agreements" means any interest rate
swap agreement, interest rate cap agreement, currency swap agreement or other
financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in interest rates or currency exchange rates and
which shall have a notional amount no greater than the payments due with respect
to Indebtedness being hedged thereby.
"Investment" means any investment by any Person in any other Person,
whether by a purchase of assets, in any transaction or series of related
transactions, individually or in the aggregate, purchase of Capital Stock,
capital contribution, loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances, and other similar
expenses incurred, in each case in the ordinary course of business consistent
with past practice) or similar credit extension constituting Indebtedness of
such other Person, and any Guarantee of Indebtedness of such other Person.
"IRS" means the Internal Revenue Service or any successor agency.
"Issue Date" means the date of original issuance of the New Notes.
16
"Legal Holiday" means a Saturday, Sunday or a day on which banking
institutions in New York City, New York, or Boston, Massachusetts, or at such
place of payment, are not required to be open.
"License" or "Licenses" has the meaning ascribed thereto in Section 4.3
hereof.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property, or a security interest of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell which is intended to constitute or create a security
interest, mortgage, pledge or lien, and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction); PROVIDED that in no event shall an operating lease (as
opposed to a Capital Lease Obligation) or a license with respect to any
intangible asset with any Person who is not an Affiliate be deemed to constitute
a Lien hereunder.
"Losses" has the meaning ascribed thereto in Section 12.1(a) hereof.
"Management Incentive Plan" means the Silicon Gaming, Inc. 1999 Long-Term
Compensation Plan adopted by the Board of Directors of the Company,
contemporaneously with the Closing, under which grants and sales of up to
116,190,084 shares of Common Stock and options to purchase shares of Common
Stock of the Company may be made.
"Management Options" means any options to purchase the Common Stock of the
Company sold or grated to any eligible participant under the Management
Incentive Plan.
"Management Shares" means the shares issued under the Management Incentive
Plan or upon exercise of the options granted under that plan.
"Material Adverse Effect" means a material adverse effect on the business,
Property, operations or condition (financial or otherwise) or prospects of the
Company and its Subsidiaries taken as a whole.
"Mezzanine Debt Financing" means the issuance, transfer, conveyance, sale,
or other disposition for cash by the Company or any of its Subsidiaries of
unsecured Subordinated Indebtedness.
"Multiemployer Plan" has the meaning ascribed thereto in Section 4.10
hereof.
"Net Cash Proceeds" means, with respect to (a) any Mezzanine Debt
Financing, or (b) any Securities Sale, as the case may be, the aggregate amount
of cash or Cash Equivalents actually received from time to time (whether as
initial consideration or through payment or disposition of deferred
consideration) by or on behalf of the Person issuing the Indebtedness or
securities, as the case may be, in connection with such transaction after
deducting therefrom only (without duplication) (i) brokerage commissions,
17
underwriting fees and discounts, legal fees, finder's fees, accountants' fee and
expenses, printers' fees and expenses, road show expenses and other similar
transaction fees and commissions incurred in connection with such transaction,
and (ii) the amount of Taxes payable in connection with or as a result of such
transaction as determined in accordance with GAAP, but only to the extent that
the amounts so deducted are properly attributable to such transaction and are,
in the case of clause (i), at the time of receipt of such cash, actually paid to
a Person that is not an Affiliate of such Person and, in the case of clause
(ii), on the earlier of the dates on which the tax return covering such taxes is
filed or required to be filed, actually paid to a Person that is not an
Affiliate of such Person.
"Net Worth" means, with respect to any Person, the total of the amounts
shown on the balance sheet of such Person, determined in accordance with GAAP,
as of the end of the most recent fiscal quarter of such Person ending at least
45 days prior to the taking of any action for the purpose of which the
determination is being made, as (a) the par or stated value of all outstanding
Capital Stock of such Person plus (b) paid-in capital or capital surplus
relating to such Capital Stock plus (c) any retained earnings or earned surplus
less (i) any accumulated deficit, and (ii) any amounts attributable to (A)
unamortized debt discount, (B) capitalized expenses associated with the issuance
of Indebtedness if such Indebtedness is incurred after the date hereof, or (C)
write-ups of assets subsequent to the date hereof other than in connection with
the acquisitions of such assets.
"New Notes" means the 13% Senior Secured Notes of the Company issued
pursuant to this Agreement.
"Notice of Default" has the meaning ascribed thereto in Section 9.1(b)
hereof.
"Obligations" with respect to any instrument or agreement means any and all
principal, interest, penalties, premiums, fees, indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
from time to time under such instrument or agreement, whether direct or
indirect, joint or several, actual, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, including any obligations or
liabilities to repay, redeem, repurchase, retire, acquire or defease any
Indebtedness under such instrument or agreement, or any obligation to establish
a sinking fund for any such purpose.
"Offer" means an irrevocable offer by the Company to repurchase for cash
New Notes after any Change of Control Trigger Date, Repayment Trigger Date or
Excess Proceeds Date.
"Officer" means, with respect to any Person, the Chairman of the Board (if
an officer), the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer or the Secretary of such Person.
"Officers' Certificate" means a certificate executed on behalf of the
Company by an Officer of the Company or by an Assistant Secretary of the
Company.
18
"Old Equity Warrants" means the warrants to purchase the Common Stock of
the Company issuable to the stockholders of the Company as of the Record Date
set pursuant to the Restructuring Agreement, and the terms and provisions of
which are set forth in the Warrant Agreement by and between the Company and the
Warrant Agent (as defined in the Warrant Agreement).
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Purchaser.
"PARI PASSU" means, when used with respect to the ranking of any
Indebtedness or Capital Stock of any Person in relation to other Indebtedness or
Capital Stock of such Person, that each such Indebtedness (a) either (i) is not
subordinated or junior in right of payment to any other Indebtedness of such
Person or (ii) is subordinate in right of payment to the same Indebtedness or
Capital Stock of such Person as is the other and is so subordinate to the same
extent and (b) is not subordinate in right of payment to the other or to any
Indebtedness or Capital Stock of such Person as to which the other is not so
subordinate.
"Pari Passu Indebtedness" means any Indebtedness of the Company, other than
the New Notes, whether outstanding on the date hereof or Incurred hereafter,
which (a) ranks PARI PASSU with the New Notes and (b) by its terms, or by the
terms of any agreement or instrument pursuant to which such Indebtedness is
Incurred, (i) does not provide for payments of principal of such Indebtedness at
the final stated maturity thereof or by way of a sinking fund applicable thereto
or by way of any mandatory redemption, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue of
acceleration of such Indebtedness upon an event of default thereunder), in each
case prior to the final stated maturity of the New Notes and (ii) does not
permit redemption or other retirement (including pursuant to an offer to
purchase made by the issuer) of such other Indebtedness at the option of the
holder thereof prior to the final stated maturity of the New Notes, other than a
redemption or other retirement at the option of the holder of such Indebtedness
(including pursuant to an offer to purchase made by the issuer) which is
conditioned upon the change of control of the Company pursuant to provisions
substantially similar to those contained in Section 7.12 hereof.
"Payment Restriction" means, with respect to a Subsidiary of any Person,
any encumbrance, restriction or limitation, whether by operation of the terms of
its charter or by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (a) such Subsidiary
to (i) pay dividends or make other distributions on its Capital Stock or make
payments on any obligation, liability or Indebtedness owed to such Person or any
other Subsidiary of such Person, (ii) make loans or advances to such Person or
any other Subsidiary of such Person, or (iii) transfer any of its properties or
assets to such Person or any other Subsidiary of such Person, or (b) such Person
or any other Subsidiary of such Person to receive or retain any such (i)
dividends, distributions or payments, (ii) loans or advances, or (iii) transfers
of properties or assets.
"Permitted Disposition" means (a) any transfer, conveyance, sale, lease,
license or other disposition (a "sale") by the Company or any of its
Subsidiaries of its inventory or license of its intangible Property in the
19
ordinary course of its business; (b) any sale by the Company or any of its
Subsidiaries in the ordinary course of its business of its equipment or other
tangible or intangible Property that is obsolete or no longer useful or
necessary to its business; (c) any sale by the Company or any of its
Subsidiaries in the ordinary course of its business, and in a manner consistent
with its customary and usual cash management practices, of its Permitted
Investments of the kind described in clause (c) of the definition thereof; (d)
the creation or Incurrence of any Liens in any Property of the Company or any of
its Subsidiaries that are permitted by this Agreement and (e) any sale of
Property by or at the direction of a secured party holding a Lien on such
Property, which Lien is permitted by this Agreement, pursuant to the exercise by
such secured party of its rights as a creditor.
"Permitted Investment" by any Person means (a) any Investment in a Related
Business which becomes a Subsidiary following such Investment (including any
Investments held by such Subsidiary (or any Subsidiaries thereof) on the date
such Subsidiary is acquired), (b) Investments in securities or other Property
not constituting cash or Cash Equivalents and received in connection with any
disposition of assets not constituting an Asset Disposition, (c) Investments in
cash and Cash Equivalents, (d) Investments existing on the date hereof, (e)
Investments by any Subsidiary in other Subsidiaries, (f) Investments by the
Company in any of its Subsidiaries required by any instrument or agreement
governing Indebtedness to the extent that such Investments consist of (i)
performance under Guarantees Incurred by the Company in compliance with this
Agreement with respect to Indebtedness of its Subsidiaries not Incurred in
violation of this Agreement or (ii) Liens securing the Company's Obligations
with respect to any Guarantee described in the foregoing clause (i), (g)
Investments in the form of accounts receivable arising from sales of goods or
services in the ordinary course of business, PROVIDED that for any accounts
receivable that are more than 120 days overdue, appropriate reserves or
allowances have been established in accordance with GAAP, (h) Investments in the
form of advances or prepayments to suppliers or employees in the ordinary course
of business and (i) Strategic Investments which do not exceed an aggregate of
$5,000,000.
"Permitted Liens" shall mean (a) Liens for Taxes, assessments, and similar
governmental charges to the extent (1) not delinquent or (2) being contested in
good faith by appropriate proceedings and as to which reserves have been set
aside on the books of the Company to the extent required by GAAP; (b) statutory
Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen, or other like Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, and for which a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
on the books of the Company; (c) pledges or deposits in the ordinary course of
business to secure lease obligations or nondelinquent obligations under workers'
compensation, unemployment insurance or other social security benefits; (d)
Liens to secure the performance of public statutory obligations that are not
delinquent, appeal bonds, performance bonds or other obligations of a like
nature (other than for borrowed money); (e) zoning restrictions, easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any Subsidiary incurred in the ordinary course of
business; (f) Liens in respect of purchase money or similar acquisition
Indebtedness Incurred to acquire furniture, fixtures, equipment or other
operating assets, provided that the principal amount of the Indebtedness secured
20
by such Lien does not exceed the acquisition cost of such assets; (g) Liens
securing Indebtedness which secures assets leased pursuant to Capital Lease
Obligations; (h) Liens on any assets of any Acquired Person securing Acquired
Indebtedness which assets or Acquired Person are acquired by the Company or a
Subsidiary subsequent to the date of the Agreement, and which Liens were in
existence on or prior to the acquisition of such assets or Acquired Person (to
the extent that such Liens were not created in connection with or in
contemplation of such acquisition), provided that such Liens are limited to the
assets or Acquired Person so acquired and the proceeds thereof; (i) Liens
securing Senior Indebtedness permitted to be incurred by Section 7.7(b)(iv); (j)
Liens imposed pursuant to condemnation or eminent domain or substantially
similar proceedings; provided that in the case of clauses (f), (g) and (h), any
Indebtedness secured by such Liens was not Incurred in violation of Section 7.7;
and (k) the Securityholder Lien.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, or Governmental Body.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Stock" as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Principal" of a debt security means the principal of the security
including the premium, if any, on the security.
"Property" or "property" means any assets or property of any kind or nature
whatsoever, real, personal, or mixed (including fixtures), whether tangible or
intangible.
"Public Offering" with respect to any Person, means a firm commitment
underwritten primary public offering of Capital Stock of such Person.
"Purchase Date" has the meaning ascribed thereto in Section 6.7 hereof.
"Purchaser" has the meaning ascribed thereto in the introduction hereof.
"Qualified Capital Stock" means, with respect to any Person, any and all
Capital Stock issued by such Person after the date hereof that is not
Disqualified Capital Stock.
21
"Record Date" means a record date specified in the New Notes whether or not
such record date is a Business Day.
"Redemption Date" means, when used with respect to any New Note to be
redeemed, the date fixed for such redemption pursuant to this Agreement and the
New Notes.
"Redemption Price" means, when used with respect to any New Note to be
redeemed, the price fixed for such redemption pursuant to this Agreement and the
New Notes, which shall include, without duplication, in each case, accrued and
unpaid interest to the Redemption Date (subject to Section 6.4 hereof).
"Refinancing Indebtedness" means Indebtedness of the Company or any of its
Subsidiaries Incurred or given in exchange for, or the proceeds of which are
used to, extend, refinance, renew, replace, substitute, defease or refund any
other Indebtedness of the Company or any of its Subsidiaries (and related
interest, premium, penalties, breakage costs, fees, expenses and other amounts
owing in respect of such Indebtedness, to the extent permitted to be Incurred by
Section 7.7(c)(iii)) Incurred in accordance with the terms of this Agreement,
including Section 7.7.
"Related Business" means the businesses conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the date hereof and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses. Without limiting the generality of
the foregoing, Related Business shall include the design, development,
production, marketing and sale of interactive slot machines.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"Repayment Trigger Date" has the meaning ascribed thereto in Section
7.13(b) hereof.
"Restricted Payment" means, with respect to any Person, without
duplication: (a) any dividend or other distribution, whether in cash or in
Property or securities, declared or paid on any shares of such Person's Capital
Stock (other than (i) in the case of the Company, dividends or distributions
payable solely in shares of Qualified Capital Stock of the Company or options,
warrants or other rights to acquire Qualified Capital Stock of the Company and
(ii) any dividends, distributions or other payments in respect of any Capital
Stock made by any Subsidiary to the Company or a Wholly-Owned Subsidiary), or
the making by such Person or any of its Subsidiaries of any other distribution
in respect of such Person's Capital Stock or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock (other than
exchangeable or convertible Indebtedness of such person); (b) the redemption,
repurchase, retirement or other acquisition for value by such Person or any of
its Subsidiaries, directly or indirectly, of such Person's Capital Stock (and,
in the case of a Subsidiary, Capital Stock of the Company) other than Capital
Stock owned by the Company or a Wholly-Owned Subsidiary, or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock
(other than exchangeable or convertible Indebtedness of such Person), and other
than, in the case of the Company, through the issuance in exchange therefor
solely of Qualified Capital Stock of the Company; (c) any payment to purchase,
22
redeem, defease or otherwise acquire or retire for value any Pari Passu
Indebtedness or Subordinated Indebtedness (other than with the proceeds of
Refinancing Indebtedness permitted under this Agreement), except in accordance
with the mandatory redemption or repayment provisions set forth in the original
documentation governing such Indebtedness; and (d) any Investment other than
Permitted Investments.
"Restricted Security" has the meaning ascribed thereto in Section 11.13
hereof.
"Restructuring Agreement" shall mean that certain Restructuring Agreement
by and between the Company and BIII Capital Partners, L.P., dated as of November
24, 1999.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"Sale" means any sale, lease, conveyance, exchange, transfer, assignment,
pledge, hypothecation or other disposition of any Property.
"SEC Reports" means the Company's Annual Report on Form 10-K under the
Exchange Act for the fiscal year ended December 31, 1998, as filed with the
Commission, together with each other registration statement, periodic report,
proxy statement, and other filing made by the Company with the Commission on or
after January 1, 1999.
"Securities" means the New Notes.
"Securities Act" means the Securities Act of 1933, as the same may be
amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Securities Sale" means the issuance or sale by the Company or any of its
Subsidiaries, for cash, of shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests, or any securities convertible
into or exercisable or exchangeable for, or options, warrants, rights or any
other interests with respect to, any shares of Capital Stock or other ownership
interests of the Company or any such Subsidiary; PROVIDED, HOWEVER, that the
exercise of (a) warrants or (b) compensatory options to purchase Capital Stock
shall not constitute a Securities Sale.
"Security Date" has the meaning ascribed thereto in Section 11.14(a)
hereof.
"Security Documents" has the meaning ascribed thereto in Section 3.1(h)(iv)
hereof.
"Securityholder Lien" has the meaning ascribed thereto in Section 11.14(a)
hereof.
23
"Security Opinion Date" means the date on which the Company delivers to the
Purchaser the opinion of counsel contemplated in Section 11.14(c) hereof.
"Senior Discount Notes" means the Company's Senior Discount Notes (Series
A) and (Series B), due September 30, 2002, issued pursuant to the Securities
Purchase Agreement, dated as of September 30, 1997, by and between the Company
and the Purchaser (as defined therein), as amended by Amendment No. 1 to the
Agreement, dated as of July 8, 1999, and as amended by Amendment No. 2 to the
Agreement.
"Senior Indebtedness" means and includes all principal of, premium and
interest (including Post-Petition Interest) on and other Obligations with
respect to any Indebtedness of the Company (other than as otherwise provided in
this definition), whether outstanding on the date hereof or hereafter Incurred,
other than the New Notes and the Amended Notes; PROVIDED, HOWEVER, that the
following shall not constitute Senior Indebtedness: (a) any Indebtedness which
by the terms of the instrument creating or evidencing the same is PARI PASSU,
subordinated or junior in right of payment to the New Notes and the Amended
Notes in any respect; (b) that portion of any Indebtedness Incurred in violation
of this Agreement; (c) any Preferred Stock; or (d) any Indebtedness of the
Company which is subordinated to or junior in right of payment in any respect to
any other Indebtedness of the Company. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the New Notes and
the Amended Notes and the Senior Discount Notes, (ii) Indebtedness which when
incurred and without respect to any election under Section 1111(b) of Xxxxx 00,
Xxxxxx Xxxxxx Code, is without recourse to the Company, (iii) any liability for
foreign, Federal, state, local or other Taxes owed or owing by the Company, (iv)
Indebtedness of the Company to the extent such liability constitutes
Indebtedness to a Subsidiary or any other Affiliate of the Company or any of
such Affiliate's Subsidiaries, (v) Indebtedness for the purchase of goods or
materials in the ordinary course of business or (vi) Indebtedness owed by the
Company for compensation to employees or for services.
"Series D Certificate of Determination" means the Certificate of
Determination for the Company's Series D Preferred Stock.
"Series D Preferred Stock" means the Series D Convertible Redeemable
Preferred Stock of the Company.
"Series E Certificate of Determination" means the Certificate of
Determination for the Company's Series E Preferred Stock.
"Series E Preferred Stock" means the Series E Convertible Redeemable
Preferred Stock of the Company.
"Series E Warrant" means the Warrant to purchase shares of Series E
Preferred Stock initially issued to B III Capital Partners, L.P. pursuant to the
Restructuring Agreement.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
Closing Date of the Restructuring Agreement, by and among the Company and the
Purchaser, and certain stockholders of the Company as the same may be amended,
modified, or supplemented from time to time in accordance with the terms
thereof.
24
"Strategic Investments" means any Investment which in the good faith
judgment of the Board of Directors of the Company (a) relates to a Related
Business and (b) adds strategic value or offers a potential competitive
advantage to the Company.
"Subordinated Indebtedness" means Indebtedness of the Company which is
subordinated or junior in right and priority of payment to the New Notes.
"Subsidiary" of any Person means any other Person with respect to which
either (i) more than 50% of the interests having ordinary voting power to elect
a majority of the directors or individuals having similar functions of such
other Person (irrespective of whether at the time interests of any other class
or classes of such Person shall or might have voting power upon the occurrence
of any contingency), or (ii) more than 50% of the equity interests of such other
Person is at the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or more of
such Person's other Subsidiaries. When used herein without reference to any
Person, Subsidiary means a Subsidiary of the Company.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Taxes" any present or future federal, state, county, local, foreign or
other income, Property, excise, franchise, sales, use, value added, employees'
income withholding, social security, unemployment and other taxes, of any nature
whatsoever now or hereafter imposed, levied, collected, withheld, or assessed by
any Governmental Body, which have become due or payable by the Company or any of
its Subsidiaries, or by any predecessors thereto, including any fines or
penalties with respect thereto or interest thereon, whether disputed or not.
"Threat of Release" means a substantial likelihood of a Release which under
applicable Environmental Laws requires action to prevent or mitigate damage to
the Environment which may result from such Release.
"Transaction Documents" means, collectively, the Restructuring Agreement,
the Amended Notes, the Amendment No. 2 to the Securities Purchase Agreement, the
New Notes, the Securities Purchase Agreement for the New Notes, the Series D
Certificate of Determination, the Series E Certificate of Determination, the
Series E Warrant, the Management Incentive Plan, the Warrant Agreement, the Old
Equity Warrants, and any and all agreements, certificates, instruments and other
documents contemplated thereby or executed and delivered in connection
therewith.
"Units" means the Units consisting of one share of Common Stock and one Old
Equity Warrant that the Company intends to issue as soon as is practicable
following the Closing of the Restructuring.
"Warrant Agent" has the meaning ascribed to it in the Warrant Agreement.
25
"Warrant Agreement" means the Warrant Agreement between the Company and the
Warrant Agent (as defined in the Warrant Agreement) which sets forth the terms
and provisions of the Old Equity Warrants.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly-Owned Subsidiary" means, with respect to any Person, a Subsidiary
100% of the equity interests in which (however measured) are owned by such
Person or a Wholly-Owned Subsidiary of such Person or such Person and one or
more Wholly-Owned Subsidiaries of such Person taken together, except in any case
for the minimum equity interest required to be held by directors, if any, to
satisfy the requirements of any applicable statute requiring that directors own
qualifying shares.
1.2 ACCOUNTING TERMS. All accounting terms used and not defined in this
Agreement shall be construed in accordance with GAAP and all financial data
required to be delivered hereunder shall be prepared in accordance with such
principles.
ARTICLE II
PURCHASE AND SALE OF NOTES
2.1 ISSUANCE OF NEW NOTES. The Company has authorized the issuance and sale
of up to $5,000,000 aggregate principal amount of its 13% Senior Secured Notes,
to be issued pursuant to and in accordance with the terms of this Agreement.
Each New Note will be issued in substantially the form set forth in EXHIBIT A
hereto, with such changes thereto, if any, as may be approved by the Purchaser
and the Company and in the principal amount listed beside the name of each
Purchaser in SCHEDULE 2.1.
2.2 SALE AND PURCHASE OF NEW NOTES. The Company has agreed to issue to the
Purchaser, and the Purchaser has agreed to purchase from the Company, up to Five
Million Dollars ($5,000,000) in aggregate principal amount of 13% Senior Secured
Notes (the "NEW NOTES"). The New Notes will be issuable in tranches as follows:
2.2.1 AT CLOSING. At the Closing, the Company will issue to the
Purchaser New Notes in the aggregate principal amount of Two Million Dollars
($2,000,000) and the Purchaser will purchase such New Notes from the Company for
such aggregate principal amount of Two Million Dollars ($2,000,000) in readily
available funds.
2.2.2 UPON THE COMPANY ENTERING INTO A JOINT VENTURE. At such time
following the Closing, if the Company enters into a joint venture with a casino
operator having at least $1.0 billion in Market Capitalization and the joint
26
venture provides that the casino operator will pay at least fifty percent (50%)
of the costs of development of an Exclusive New Game, and such casino operator
purchases, or commits to purchase, at least 100 units of the Exclusive New Game,
then the Company will issue to the Purchaser additional New Notes in the
aggregate principal amount of One Million Dollars ($1,000,000) and the Purchaser
will purchase such New Notes from the Company for One Million Dollars
($1,000,000) in immediately available funds.
2.2.3 UPON THE COMPANY REACHING CERTAIN FINANCIAL GOALS. At such time
following the Closing, if the Company reaches financial hurdles, to be
determined by the Purchaser in its sole discretion, the Company will issue to
the Purchaser up to Two Million Dollars ($2,000,000) in New Notes and the
Purchaser will purchase such New Notes from the Company for Two Million Dollars
($2,000,000) in immediately available funds.
2.3 CLOSING OF SALE OF NEW NOTES. The purchase and delivery of the New
Notes to be purchased by the Purchaser shall take place at 10:00 a.m., Arizona
Time, at the offices of Squire, Xxxxxxx & Xxxxxxx L.L.P., 00 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxx, Arizona, at a closing (the "CLOSING") on the date hereof, or at
such other place or on such other date as the Purchaser and the Company may
agree upon (such date on which the Closing shall have actually occurred, the
"CLOSING DATE"). At the Closing, the Company will deliver or cause to be
delivered to the Purchaser the New Notes to be purchased by it against payment
of the purchase price therefor. Unless the Purchaser otherwise notifies the
Company at least two Business Days prior to the Closing Date, the New Notes to
be purchased hereunder shall be in the form of a single New Note dated the date
of the Closing and registered in the Purchaser's name or that of its nominee as
set forth on the signature page hereto. If at the Closing the Company shall fail
to tender to the Purchaser any of the New Notes to be purchased by it as
provided in this Article II, or any of the conditions specified in Article III
for the benefit of the Purchaser or the Company, as the case may be, shall not
have been satisfied or waived in writing by the Purchaser or the Company, as
applicable, the Purchaser or the Company, as the case may be, shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights it may have by reason of such failure or such
non-fulfillment.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER ON THE CLOSING
DATE. The Purchaser's obligation to purchase and pay for the New Notes to be
sold to it at the Closing is subject to the fulfillment to its satisfaction,
prior to or at the Closing, of the following conditions, provided that any or
all of the following conditions may be waived, in whole or in part, by the
Purchaser with respect to this Agreement in its sole and absolute discretion:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and its Subsidiaries contained in this Agreement and in the other
Transaction Documents shall be correct in all respects when made and at the time
of the Closing, after giving effect to the sale of the New Notes, except that
any representations and warranties that relate to a particular date or period
shall be correct in all respects only as of such date or for such period.
27
(b) PERFORMANCE; NO DEFAULT. The Company shall have performed and
complied in all respects with all agreements and conditions contained in this
Agreement and the other Transaction Documents required to be performed or
complied with prior to or at the Closing, and at the time of the Closing, after
giving effect to the sale of the New Notes, no Default or Event of Default shall
have occurred and be continuing.
(c) COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser an Officers' Certificate, dated the Closing Date, certifying on behalf
of the Company that the conditions specified in Sections 3.1(a) and (b) have
been fulfilled.
(d) OPINION OF COUNSEL. The Purchaser shall have received (i) from
Xxxx, Xxxx, Xxxx and Freidenrich, corporate counsel to the Company, a favorable
opinion substantially in the form set forth in EXHIBIT B, addressed to the
Purchaser, dated as of the Closing Date, and otherwise satisfactory in substance
and form to the Purchaser, (ii) from Squire, Xxxxxxx & Xxxxxxx L.L.P., a
favorable opinion substantially in the form set forth in EXHIBIT C addressed to
the Purchaser, dated as of the Closing Date, and otherwise satisfactory in
substance and form to the Purchaser, and (iii) from special gaming counsel to
the Company, favorable opinions, each substantially in the form set forth in
EXHIBIT D, addressed to the Purchaser, dated as of the Closing Date, and
otherwise satisfactory in substance and form to the Purchaser.
(e) LEGAL INVESTMENT. On the Closing Date, the Purchaser's purchase of
the New Notes shall be permitted by the laws and regulations of the jurisdiction
to which the Purchaser is subject (including, without limitation, Section 5 of
the Securities Act and Regulations G, T, U, or X of the Board of Governors of
the Federal Reserve System), and credit controls (whether voluntary or
mandatory) or similar restraints applicable to the Purchaser and shall not
subject the Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation (other than
applicable securities law restrictions on resale of the New Notes), and shall
not be enjoined (temporarily or permanently) under, prohibited by or contrary to
any injunction, order or decree applicable to the Purchaser.
(f) COMPLIANCE WITH SECURITIES LAWS. The offering, issuance and sale
of the New Notes under this Agreement shall have complied with all applicable
requirements of the Federal securities laws and the Purchaser shall have
received evidence, if any, of such compliance in form and substance reasonably
satisfactory to the Purchaser.
(g) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
contemplated by this Agreement, including, without limitation, the matters set
forth in the Transaction Documents and all of the other documents and
instruments incident thereto, shall be reasonably satisfactory to the Purchaser,
and the Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as the Purchaser may reasonably
request.
(h) COMPLETION OF OTHER TRANSACTIONS. Simultaneously with or prior to
the issuance and sale to the Purchaser of the New Notes to be purchased by the
Purchaser at the Closing:
28
(i) the Company and the Purchaser shall have duly entered into
the Restructuring Agreement, such agreement shall be in full force and
effect, and all conditions precedent to the consummation of the
transaction contemplated thereby set forth in Section 6.2 thereof
shall have been satisfied or waived;
(ii) the Company and the Purchaser shall have duly entered into
the Amendment No. 2 to the Securities Purchase Agreement, and such
agreement shall be in full force and effect;
(iii) each of the other Transaction Documents and any other
agreements and documents contemplated thereby and in connection
therewith shall have been executed and delivered by all respective
parties thereto and shall be in full force and effect; and
(iv) the Company shall have executed and delivered any security
agreements, mortgages, financing statements, pledge agreements or
security documents (the "SECURITY DOCUMENTS") as Purchaser shall
reasonably require or request in order to grant a security interest to
the Holders in the Collateral other than the Capital Stock of the
Gaming Subsidiaries.
(i) RELATED MATTERS. As of the Closing, the Company's Charter
Documents shall not have been modified or amended since the date delivered to
the Purchaser by the Company, except as contemplated under the Restructuring
Agreement and the Transaction Documents.
(j) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No legislation,
order, rule, ruling or regulation shall have been enacted or made by or on
behalf of any governmental body, department or agency of the United States, nor
shall any decision of any court of competent jurisdiction within the United
States have been rendered which, in the Purchaser's reasonable judgment, could
materially and adversely affect any of the New Notes or any part thereof as an
investment. There shall be no action, suit, investigation or proceeding pending
or threatened against or affecting the Purchaser, any of its properties or
rights, or any of its Affiliates, associates, officers or directors (in such
capacity), before any court, arbitrator or administrative or governmental body
which (i) seeks to restrain, enjoin, prevent the consummation of or otherwise
affect the transactions contemplated by this Agreement and the other Transaction
Documents, or (ii) questions the validity or legality of any such transactions
or seeks to recover damages or to obtain other relief in connection with any
such transactions, and, to the Purchaser's knowledge, there shall be no valid
basis for any such action, proceeding or investigation.
(k) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC. Except as set
forth on SCHEDULE 4.4, the Company and its Subsidiaries shall have duly applied
for and obtained all Approvals from each Governmental Body, or pursuant to any
agreement to which the Company or any of its Subsidiaries is a party or to which
any of them or any of their assets is subject, which are required in connection
with this Agreement, the other Transaction Documents or any other agreements and
documents contemplated thereby and in connection therewith.
29
(l) SECRETARY'S CERTIFICATE. The Purchaser shall have received a
certificate, dated the Closing Date, of the Secretary or Assistant Secretary of
each of the Company and each of its Subsidiaries, on behalf of such entity, (i)
certifying as true, complete and correct its Charter Documents and in the case
of the Company, resolutions relating to the transactions contemplated hereby
attached thereto, (ii) in the case of the Company, as to the absence of
proceedings or other action for dissolution, liquidation or reorganization of
the Company, (iii) in the case of any Subsidiary, as to the absence of
proceedings or other action for dissolution, liquidation or reorganization of
such Subsidiary, (iv) as to the incumbency and specimen signatures of officers
who shall have executed instruments, agreements and other documents in
connection with the transactions contemplated hereby, (v) in the case of the
Company, as to the effect that certain agreements, instruments and other
documents are in the form approved in the resolutions referred to in clause (i)
above, and (vi) covering such other matters, and with such other attachments
thereto, as Purchaser's legal counsel may reasonably request at least one
Business Day before the Closing Date, which certificates and attachments thereto
shall be reasonably satisfactory in form and substance to such Purchaser.
(m) PAYMENT OF FEES. The Company shall have paid contemporaneously
with the Closing, the fees, expenses and disbursements of the Purchaser's legal
counsel reflected in statements of such counsel rendered prior to or on the
Closing Date and agreed to pay such additional fees, expenses and disbursements
reflected in statements of such counsel rendered after the Closing Date.
3.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY ON THE CLOSING DATE.
The Company's obligation to issue the New Notes at the Closing is subject to the
fulfillment to its satisfaction, prior to or at the Closing, of the following
conditions, provided that any or all of the following conditions may be waived,
in whole or in part, by the Company with respect to this Agreement in its sole
and absolute discretion:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Purchaser contained in this Agreement and in the other Transaction
Documents shall be correct in all respects when made and at the time of the
Closing, after giving effect to the sale of the New Notes, except that any
representations and warranties that relate to a particular date or period shall
be correct in all respects only as of such date or for such period.
(b) PERFORMANCE; NO DEFAULT. The Purchaser shall have performed and
complied in all respects with all agreements and conditions contained in this
Agreement and the other Transaction Documents required to be performed or
complied with prior to or at the Closing, and at the time of the Closing, after
giving effect to the sale of the New Notes, no Default or Event of Default shall
have occurred and be continuing.
(c) RELATED MATTERS. Contemporaneously with the Closing, the Company
shall have received payment in full for the New Notes to be issued pursuant to
this Agreement.
(d) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No legislation,
order, rule, ruling or regulation shall have been enacted or made by or on
behalf of any Governmental Body, nor shall any decision of any court of
competent jurisdiction within the United States have been rendered which, in the
Company's reasonable judgment, could materially and adversely affect any of the
30
New Notes or any part thereof as an investment. There shall be no action, suit,
investigation or proceeding pending or threatened in writing, against or
affecting the Company, any of its properties or rights, or any of its
Affiliates, associates, officers or directors, before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement and the other Transaction Documents, or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions, and, to the Company's
knowledge, there shall be no valid basis for any such action, proceeding or
investigation.
(e) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC. The Purchaser
and its Subsidiaries shall have duly applied for and obtained all prior
Approvals from each Governmental Body, or pursuant to any agreement to which the
Purchaser is a party or to which its assets are subject, which may be required
in connection with this Agreement, the other Transaction Documents or any other
agreements and documents contemplated thereby and in connection therewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES, ETC.
In order to induce the Purchaser to purchase the New Notes, the Company
represents and warrants that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made at and as of the date of this
Agreement and as though the Closing Date were substituted for the date of this
Agreement throughout Article IV):
4.1 ORGANIZATION AND QUALIFICATION; AUTHORITY. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and authority to own
and lease its properties and carry on its business as presently conducted, is
duly qualified, registered or licensed as a foreign corporation to do business
and is in good standing in each jurisdiction in which the ownership or leasing
of its properties or the character of its present operations makes such
qualification, registration or licensing necessary, except where the failure so
to qualify or be in good standing would not have a Material Adverse Effect. The
Company has heretofore delivered, or prior to the Closing Date will deliver, to
Purchaser complete and correct copies of the Articles of Incorporation, the
Certificate of Determination for the Series D Preferred Stock, and the by-laws
of the Company and the Articles of Incorporation and the by-laws of each of its
Subsidiaries, each as amended to date and as presently in effect (collectively,
with respect to any such Person, "CHARTER DOCUMENTS"). A list of all
jurisdictions in which the Company is qualified, registered or licensed to do
business as a foreign corporation is attached hereto as Schedule 4.1. 4.2
SUBSIDIARIES. The Company's Subsidiaries are set forth on SCHEDULE 4.2 hereto.
Each of the Subsidiaries is a corporation, limited liability company or
partnership duly incorporated or formed, validly existing and in good standing
31
under the laws of the jurisdiction of its organization, has full corporate,
limited liability company or partnership power and authority, as the case may
be, to own and lease its properties, and carry on its business as presently
conducted, is duly qualified, registered or licensed as a foreign corporation,
limited liability company or partnership to do business and is in good standing
in each jurisdiction in which the ownership or leasing of its properties or the
character of its present operations make such qualification, registration or
licensing necessary, except where the failure so to qualify or be in good
standing would not have a Material Adverse Effect. A list of all jurisdictions
in which each of the Subsidiaries is qualified, registered or licensed to do
business as a foreign corporation, limited liability company or partnership is
attached hereto as SCHEDULE 4.2. Except as disclosed on SCHEDULE 4.2, the
Company owns, directly or indirectly, all of the outstanding shares of Capital
Stock or other evidences of equity ownership of each of its Subsidiaries free of
any Lien, restriction (other than restrictions generally applicable to
securities under federal, provincial or state securities laws) or encumbrance,
and said shares have been duly issued and are validly outstanding.
4.3 LICENSES. The Company and its Subsidiaries hold all material licenses,
franchises, permits, consents, registrations, certificates and other approvals
(including, without limitation, those relating to environmental matters, public
and worker health and safety, buildings, highways or zoning) (individually, a
"License" and collectively, "Licenses") required for the conduct of its business
as now being conducted, and is operating in substantial compliance therewith,
except where the failure to hold any such License or to operate in compliance
therewith would not have a Material Adverse Effect. The Company and its
Subsidiaries are in compliance with all laws, regulations, orders and decrees
applicable to it, except in each case where the failure so to comply would not
have a Material Adverse Effect, or a material adverse effect on the ability of
the Company or any of its Subsidiaries to perform on a timely basis any
obligation that it has or will have under any Transaction Document to which it
is a party.
4.4 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. Except as set
forth on SCHEDULE 4.4, the execution, delivery and performance by the Company of
the Transaction Documents to which it is a party and all other instruments or
agreements to be executed at the Closing Date in connection therewith, and the
issuance and sale to the Purchaser of the New Notes pursuant to this Agreement,
are within the Company's corporate power, having been duly authorized by all
necessary corporate action on the part of the Company; do not require any
License, authorization, consent, registration, permit, certificate, franchise,
approval, qualification or formal exemption from, or other action by or in
respect of, or filing of a declaration or registration with, any court,
Governmental Body, agency or official or other Person (except such as have been
obtained or as may be required under the Securities Act or state securities or
Blue Sky laws); do not contravene or constitute a default under or violation of
(a) any provision of applicable law or regulation of any Governmental Body, or
(b) the respective Charter Documents of the Company or any of its Subsidiaries,
(c) any agreement (or require the consent of any Person under any agreement that
has not been obtained) to which the Company or any of its Subsidiaries is a
party, or (d) any judgment, injunction, order, decree or other instrument
binding upon the Company, and of its Subsidiaries or any of their respective
properties, except where such contravention, default or violation would not have
a Material Adverse Effect; and do not and will not result in the creation or
imposition of any Lien on any asset of the Company or any of its Subsidiaries,
other than Permitted Liens.
32
4.5 VALIDITY AND BINDING EFFECT. Each of the Transaction Documents will be
duly executed and delivered by the Company and will be the valid and binding
agreement of the Company, enforceable against the Company in accordance with
their respective terms, except for (a) the effect upon the Transaction Documents
of bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally, (b) limitations
imposed by a court of competent jurisdiction under general equitable principles
upon the specific enforceability of any of the remedies, covenants or other
provisions of the Transaction Documents and upon the availability of injunctive
relief or other equitable remedies, and (c) any applicable laws relating to the
maximum permissible rate of interest.
4.6 CAPITALIZATION. SCHEDULE 4.6 hereto sets forth the authorized, issued
and outstanding Capital Stock (including any options, warrants and convertible
securities, the exercise or conversion price of such options, warrants and
convertibles securities, and indicating the record owners thereof) of the
Company (i) as of the date hereof and (ii) immediately after giving effect to
the consummation of the transactions contemplated hereby (including, without
limitation, the exchange of Senior Discount Notes for Series D Preferred Stock
and the Series E Warrant contemplated by the Restructuring Agreement, the
issuance of the Units, conversion of the Series B1 Preferred Stock and the
adoption of the Management Incentive Plan). Except as set forth on SCHEDULE 4.6
hereto, there are no outstanding subscriptions, options, warrants, rights,
convertible or exchangeable securities or other agreements or commitments of any
character obligating the Company or its Subsidiaries to issue any securities.
Except as set forth on SCHEDULE 4.6, there are no voting trusts or other
agreements or understandings to which the Company or its Subsidiaries is a party
with respect to the voting of the Capital Stock of the Company or the
Subsidiaries. Except as set forth on SCHEDULE 4.6 or as contemplated by the
Stockholders Agreement, neither the Company nor any of its Subsidiaries has
entered into any agreement to register its equity or debt securities under the
Securities Act.
4.7 PREEMPTIVE OR OTHER RIGHTS. Except as set forth on SCHEDULE 4.7 hereto,
as of the Closing and after giving effect to the transactions contemplated
hereby, other than rights set forth herein or in the Transaction Documents,
there are (i) no preemptive rights, rights of first refusal, put or call rights
or obligations or anti-dilution rights with respect to the issuance, sale or
redemption of the New Notes, and (ii) no rights to have the New Notes registered
for sale to the public in connection with the laws of any jurisdiction.
4.8 LITIGATION; DEFAULTS. Except as set forth on SCHEDULE 4.8 or SCHEDULE
4.20, there is no action, suit, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, any of
its Subsidiaries, or any properties of any of the foregoing, before or by any
court or arbitrator or any Governmental Body which (individually or in the
aggregate) could reasonably be expected to (i) have a Material Adverse Effect,
or (ii) impair the ability of the Company or any Subsidiary to perform fully on
a timely basis any material obligation which the Company or such Subsidiary has
or will have under any Transaction Document to which the Company or such
Subsidiary is a party. Except as set forth on SCHEDULE 4.8 or SCHEDULE 4.20,
neither the Company nor any of its Subsidiaries is in violation of, or in
default under (and there does not exist any event or condition which, after
notice or lapse of time or both, would constitute such a default under), any
term of its respective Charter Documents, or of any term of any agreement,
instrument, judgment, decree, order, statute, injunction, governmental
regulation, rule or ordinance (including, without limitation, those relating to
33
zoning, city planning or similar matters) applicable to the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries is bound, or
to any properties of the Company or any of its Subsidiaries, except in each case
to the extent that such violations or defaults, individually or in the
aggregate, could not reasonably be expected to (a) affect the validity or
enforceability of any Transaction Document, (b) have a Material Adverse Effect,
or (c) impair the ability of the Company or any Subsidiary to perform fully on a
timely basis any material obligation which the Company or any Subsidiary has or
will have under any Transaction Document to which the Company is a party.
4.9 OUTSTANDING DEBT. Except as set forth on SCHEDULE 4.9 hereto, neither
the Company nor any of its Subsidiaries has outstanding Indebtedness other than
short-term debt incurred in the ordinary course of business. SCHEDULE 4.9
contains a complete and accurate list of all material guarantees, assumptions,
purchase agreements and similar agreements and arrangements whereby the Company
or any of its Subsidiaries is or may become directly or indirectly liable or
responsible for the Indebtedness or other obligations of a Person other than the
Company or any of its Subsidiaries, except for negotiable instruments endorsed
for collection or deposit in the ordinary course of its business, identifying,
with respect to each of the respective parties, amounts and maturities.
4.10 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 4.10 or in
the SEC Reports, since September 30, 1999, there has been (a) no material
adverse change in the condition (financial or other), assets, business, results
of operations or prospects of the Company or any of its Subsidiaries, (b) no
obligation or liability (contingent or other) incurred by the Company or any of
its Subsidiaries, other than obligations and liabilities incurred in the
ordinary course of business, and no Lien placed on any of the properties of the
Company or any of its Subsidiaries which remains in existence on the date
hereof, other than Permitted Liens and liabilities and Liens described on
SCHEDULE 4.21 hereto, and (c) no acquisition or disposition of any material
assets by the Company or any of its Subsidiaries (or any contract or arrangement
therefor), or any other material transaction, other than (i) for fair value in
the ordinary course of business, or (ii) Permitted Dispositions.
4.11 EMPLOYEE PROGRAMS. SCHEDULE 4.11 sets forth a list of every Employee
Program maintained by the Company or any Current Affiliate (as defined below) at
any time during the five-year period ending on the Closing Date or with respect
to which a liability of the Company or an Affiliate (as defined below) exists.
Each Employee Program (other than a Multiemployer Plan) which has been
maintained by the Company during the five-year period ending on the Closing Date
and which has been intended to qualify under Section 401(a) or Section 501(c)(9)
of the Code has received a favorable determination or approval letter from the
Internal Revenue Service regarding its qualification under such section or the
remedial amendment period under Section 401(b) of the Code has not yet expired
with respect to such Employee Program and, to the knowledge of the Company,
nothing has occurred that would adversely affect such qualification since the
date of such letter or application for a determination or approval letter has
been timely made and to the knowledge of the Company, no reason exists why a
favorable determination or approval shall not be granted. Except as set forth on
SCHEDULE 4.11, the Company has no knowledge of any failure of any party to
comply with any laws applicable with respect to the Employee Programs that have
been maintained by the Company or any Current Affiliate, and no such failure
will result from completion of the transactions contemplated hereby. With
34
respect to any Employee Program ever maintained by the Company or an Affiliate,
there has been no "prohibited transaction," as defined in Section 406 of ERISA
or Code Section 4975, or breach of any duty under ERISA or other applicable law
or any agreement which in any such case could subject the Company to material
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or threatened with
respect to any such Employee Program (other than a Multiemployer Plan).
Neither the Company nor any of its Current Affiliates have incurred any
liability under title IV of ERISA which has not been paid in full prior to the
Closing. Neither the Company nor any of its Current Affiliates is liable for any
material "accumulated funding deficiency" (whether or not waived) with respect
to any Employee Program ever maintained by the Company or any Affiliate and
subject to Code Section 412 or ERISA Section 302. With respect to any Employee
Program subject to title IV of ERISA, there has been no (and the transactions
contemplated by this Agreement will not result in any) (a) "reportable event,"
within the meaning of ERISA Section 4043 or the regulations thereunder (for
which the notice requirement is not waived under 29 C.F.R. Part 2615) or (b)
other event or condition which presents a material risk of plan termination or
any other event that may cause the Company or any Current Affiliate to incur
material liability or have a material Lien imposed on its assets under title IV
of ERISA. All payments and/or contributions required to have been made by the
Company and its Current Affiliates (under the provisions of any agreements or
other governing documents or applicable law) with respect to all Employee
Programs subject to title IV of ERISA ever maintained by the Company or any
Affiliate, for all periods prior to the Closing, have been timely made. Except
as described on SCHEDULE 4.11, no Employee Program maintained by the Company or
an Affiliate and subject to title IV of ERISA (other than a Multiemployer Plan)
has any "unfunded benefit liabilities" within the meaning of ERISA Section
4001(a)(18), as of the Closing Date. With respect to Multiemployer Plans
maintained by the Company or any Affiliate, SCHEDULE 4.11 states the aggregate
amount of withdrawal liability or other termination liability that would be
incurred by the Company or any Affiliate if there were a withdrawal from any
such plan as determined by the most recent withdrawal liability calculation
prepared by such plan. Except as disclosed on SCHEDULE 4.11, none of the
Employee Programs which is a welfare plan maintained by the Company or any
Affiliate provides health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA or comparable statutes or regulations) or has
ever promised to provide such post-termination benefits.
For purposes of this section:
(i) "Employee Program" means (A) any employee benefit plan within the
meaning of Section 3(3) of ERISA and employee benefit plans (such as
foreign or excess benefit plans) which are not subject to ERISA, and (B)
any stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation arrangements, supplemental
income arrangements, vacation plans, and all other employee benefit plans,
agreements, and arrangements not described in (A) above, and (C) any trust
used to fund benefits under the foregoing maintained by the Company or any
Affiliate.
35
(ii) For purposes of this Section 4.11, an entity is an "Affiliate" of
the Company if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C); an entity
is a "Current Affiliate" if it currently would be considered a single
employer with the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA Section
302(d)(8)(C); and each reference to the Company includes its Subsidiaries.
(iii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee Program,
or has any obligation (by agreement or under applicable law) to contribute
to or provide benefits under such Employee Program, or if such Employee
Program provides benefits to or otherwise covers employees of such entity
(or, in respect of such employees, their spouses, dependents, or
beneficiaries).
(iv) "Multiemployer Plan" means a (pension or non-pension) employee
benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
4.12 PRIVATE OFFERING. No form of general solicitation or general
advertising, including, but not limited to, advertisements, articles, notices or
other communications, published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising, was used
by the Company or any of its Subsidiaries or any of the Company's or such
Subsidiary's representatives, or, to the knowledge of the Company, any other
Person acting on behalf of the Company or any of its Subsidiaries, in connection
with the offering of the New Notes being purchased under this Agreement. Except
for the Amended Notes, the Series D Preferred Stock, the Units, and the Old
Equity Warrants, during the six months prior to the Closing, neither the
Company, any of its Subsidiaries nor any Person acting on the Company's or such
Subsidiary's behalf has directly or indirectly offered the New Notes, or any
part thereof or any other similar securities, for sale to, or sold or solicited
any offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with any Person or Persons other than the Purchaser. The Company
further represents to the Purchaser that, assuming the accuracy of the
representations of the Purchaser as set forth in Section 5 hereof, neither the
Company, any of its Subsidiaries nor any Person acting on the Company's or such
Subsidiary's behalf has taken or will take any action which would subject the
issue and sale of the New Notes to the provisions of Section 5 of the Securities
Act, except as contemplated by the Stockholders Agreement. The Company has not
sold the New Notes to anyone other than the Purchaser designated in this
Agreement. Except for the Amended Note issued pursuant to the Restructuring
Agreement and the Amendment No. 2 to the Securities Purchase Agreement, during
the six months prior to the Closing, no securities of the same class or series
as the securities comprising the New Notes have been issued and sold by the
Company. Each New Note certificate shall bear substantially the same legend set
forth in Section 11.12 hereof, as applicable, for at least so long as such
restrictions apply.
36
4.13 BROKER'S OR FINDER'S COMMISSIONS. Neither the Company nor any of its
Subsidiaries has engaged any broker or finder or has incurred or become liable
for any broker's commission or finder's fee relating to or in connection with
the transactions contemplated by this Agreement. In addition to and not in
limitation of any other rights hereunder, the Company and its Subsidiaries agree
that they will indemnify and hold harmless the Purchaser from and against any
and all claims, demands or liabilities for broker's, finder's, placement agent's
or other similar fees or commissions and any and all liabilities with respect to
any taxes (including interest and penalties) payable or incurred or alleged to
have been incurred by the Company or any of its Subsidiaries or any Person
acting or alleged to have been acting on the Company's or such Subsidiary's
behalf, in connection with this Agreement, the issuance or sale of the New Notes
or any other transaction contemplated by any of the Transaction Documents.
4.14 DISCLOSURE.
(a) The historical financial and operating information delivered to
the Purchaser has been derived from the consolidated books and records of the
Company and its Subsidiaries prepared in accordance with GAAP.
(b) There is no fact known to the Company which the Company has not
disclosed to the Purchaser in writing which has or, insofar as the Company can
reasonably foresee, may have or will have a Material Adverse Effect or a
material adverse effect on the ability of the Company to perform its obligations
under any of the Transaction Documents or in respect of the New Notes or any
document contemplated hereby or thereby or which, insofar as the Company can
reasonably foresee, may or will cause any of the representations and warranties
herein to be untrue.
4.15 FOREIGN ASSETS CONTROL REGULATION, ETC. Neither the issue and sale of
the New Notes by the Company nor its use of the proceeds thereof as contemplated
by this Agreement will violate the Foreign Assets Control Regulations, the
Transaction Control Regulations, the Cuban Assets Control Regulations, the
Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the South African Transactions Control
Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin Regulations,
the Panamanian Transactions Regulations, the Haitian Transactions Regulations,
or the Iraqi Sanctions Regulations of the United States Treasury Department (31
C.F.R., Subtitle B, Chapter V, as amended) or Executive Orders 12722 and 12724
(transactions with Iraq).
4.16 FEDERAL RESERVE REGULATIONS AND OTHER MATTERS. Neither the Company nor
any of its Subsidiaries will, directly or indirectly, use any of the proceeds
from the sale of the New Notes for the purpose, whether immediate, incidental or
ultimate, of buying any "margin stock," or of maintaining, reducing or retiring
any indebtedness originally incurred to purchase any stock that is currently a
"margin stock," or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit," in each case within the meaning of
Regulations G or U of the Board of Governors of the Federal Reserve System (12
C.F.R. 207 and 221, as amended, respectively), or otherwise take or permit to be
taken any action which would involve a violation of such Regulation G or
Regulation U or of Regulations T or X of the Board of Governors of the Federal
Reserve System (12 C.F.R. 220 and 224, as amended, respectively) or any other
regulation of such Board. No indebtedness that may be maintained, reduced or
37
retired with the proceeds from the sale of the New Notes was incurred for the
purpose of purchasing or carrying any "margin stock" and neither the Company nor
any of its Subsidiaries own any such "margin stock" or have any present
intention of acquiring, directly or indirectly any such "margin stock."
4.17 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
4.18 PUBLIC UTILITY HOLDING COMPANY ACT. To the Company's knowledge,
neither the Company nor any of its Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.
4.19 INTERSTATE COMMERCE ACT. To the Company's knowledge, neither the
Company nor any of its Subsidiaries is, nor will be, a "rail carrier," or a
Person controlled by or affiliated with a "rail carrier," within the meaning of
Title 49, U.S.C. Neither the Company nor any of its Subsidiaries is a "carrier"
or other Person to which 49 U.S.C. Section 11301(b)(1) is applicable.
4.20 ENVIRONMENTAL REGULATION, ETC.
(a) Except as set forth on SCHEDULE 4.20, to the knowledge of the
Company, each of the Company and its Subsidiaries (i) has no liability under any
Environmental Law or common law cause of action relating to or arising from
environmental conditions which could have a Material Adverse Effect, and any
property owned, operated, leased, or used by the Company and its Subsidiaries
and any facilities and operations thereon comply with all applicable
Environmental Laws except to the extent that failure to comply could have a
Material Adverse Effect; (ii) has not entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental; and (iii) has no reason
to believe that any of the items enumerated in clause (ii) of this paragraph
will be forthcoming.
(b) Except as set forth on SCHEDULE 4.20, to the knowledge of the
Company: (i) neither the Company nor any of its Subsidiaries has ever generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste,
except in accordance with applicable Environmental Laws; (ii) no Release or
Threat of Release of a Hazardous Material at any site presently or formerly
owned, operated, leased, or used by the Company or any of its Subsidiaries has
occurred; (iii) neither the Company nor any of its Subsidiaries has ever had
Hazardous Material transported from any site presently or formerly owned,
operated, leased, or used by the Company or any of its Subsidiaries for
treatment, storage, or disposal at any other place, except in accordance with
applicable Environmental Laws except such noncompliance which could not
reasonably be expected to have a Material Adverse Effect; (iv) neither the
Company nor any of its Subsidiaries presently owns, operates, leases or uses any
site on which underground storage tanks are or were located; (v) neither the
Company nor any of its Subsidiaries has ever placed underground storage tanks on
38
any site owned, operated, leased or used by the Company or any of its
Subsidiaries; (vi) neither the Company nor any of its Subsidiaries has ever
removed underground storage tanks from any site presently or formerly owned,
operated, leased or used by the Company or any of its Subsidiaries; and (vii)
neither the Company nor any its Subsidiaries has ever had a Lien imposed by any
Governmental Body on any property, facility, machinery, or equipment owned,
operated, leased, or used by the Company or any of its Subsidiaries in
connection with the presence of any Hazardous Material.
4.21 PROPERTIES AND ASSETS. The Company and its Subsidiaries have good
record and marketable fee title to (or, in the case of licensed Property, valid
licenses to) all real Property and all other Property and assets, whether
tangible or intangible, owned by or licensed to them and reasonably necessary in
the conduct of business of the Company or such Subsidiaries, except defects in
title which do not and will not have a Material Adverse Effect. All of the
leases necessary in any material respect for the operation of their respective
properties and assets, under which the Company or any of its Subsidiaries holds
any Property or assets, real or personal, are valid, subsisting and enforceable
and afford peaceful and undisturbed possession of the subject matter of the
lease, and no material default by the Company or any of its Subsidiaries exists
under any of the provisions thereof. All buildings, machinery and equipment of
the Company and its Subsidiaries are in good repair and working order, except
for ordinary wear and tear, and except as would have a Material Adverse Effect.
All material current and proposed uses of such Property or assets of the Company
and its Subsidiaries are permitted as of right and no regulation or ordinance
interferes with such current or proposed uses. To the knowledge of the Company,
there is no pending or formally proposed change in any such laws, regulations
and ordinances which would have a Material Adverse Effect. Except as set forth
on SCHEDULE 4.21, no condemnation proceeding is pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries. All
Property and assets of any kind (real or personal, tangible or intangible) of
the Company and its Subsidiaries are free from all Liens except for (a) Liens
which would not have a Material Adverse Effect; (b) Liens disclosed on SCHEDULE
4.21 hereto; and (c) Permitted Liens. Except as set forth on SCHEDULE 4.21
hereto, neither the Company nor any of its Subsidiaries has signed any material
financing statement, as debtor or lessee, or any security agreement authorizing
any secured party thereunder to file any such financing statement.
4.22 INSURANCE. A list of all insurance policies and fidelity bonds
maintained by or on behalf of the Company covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company and under which the Company or any of its Subsidiaries or any of their
employees, officers and directors may derive any material benefit is set forth
on SCHEDULE 4.22 hereof. There is no claim by the Company or any of its
Subsidiaries pending under any of such policies or bonds as to which coverage
has been questioned, reserved, denied or disputed by the underwriters of such
policies or bonds or their agents where such question, reservation, denial or
dispute would have a Material Adverse Effect. All premiums due and payable under
all such policies and bonds have been paid, and the Company and its Subsidiaries
are otherwise in full compliance with the terms and conditions of all such
policies and bonds. Except as set forth on SCHEDULE 4.22, such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) are and have been in full force and effect for at least the
last year or since the inception of the Company or any of its Subsidiaries, as
the case may be, and remain in full force and effect. Such policies of insurance
39
and bonds are of the type and in amounts customarily carried by Persons
conducting business similar to that presently conducted by the Company and its
Subsidiaries. The Company knows of no threatened termination of any such
policies or bonds.
4.23 EMPLOYMENT PRACTICES. Except as set forth on SCHEDULE 4.23 hereto,
neither the Company nor any of its Subsidiaries is a party to or in the process
of negotiating any collective bargaining or labor agreement or union contract.
As of the date of this Agreement, there is no (a) charge, complaint or suit
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries respecting employment, hiring for employment,
terminating from employment, employment practices, employment discrimination,
terms and conditions of employment, safety, wrongful termination, or wages and
hours, (b) unfair labor practice charge or complaint pending or, to the
knowledge of the Company, threatened against, or decision or order in effect and
binding on, the Company or any of its Subsidiaries before or of the National
Labor Relations Board, (c) grievance or arbitration proceeding arising out of or
under collective bargaining agreements pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (d) strike,
labor dispute, slow-down, work stoppage or other interference with work pending
or, to the knowledge of the Company, threatened against the Company or its
Subsidiaries, or (e) to the knowledge of the Company, union organizing
activities or union representation question threatened or existing with respect
to any groups of employees of the Company or any of its Subsidiaries, which in
the case of (a)-(e) above could be reasonably expected to have a Material
Adverse Effect.
4.24 FINANCIAL STATEMENTS.
(a) The consolidated financial statements contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999
together with the notes thereto (the "FINANCIAL STATEMENTS") fairly present in
all material respects the financial position of the Company and its Subsidiaries
on a consolidated basis on the dates of such statements and the results of their
operations on the applicable basis for the periods covered thereby in accordance
with GAAP, except, with respect to unaudited financial statements, the absence
of notes thereto and statements of cash flows and subject to customary year-end
adjustments; and have been prepared in accordance with GAAP consistently
applied, except as otherwise stated therein.
(b) As of September 30, 1999 and as of the date hereof and the Closing
Date, and except as set forth in the Schedules hereto, there are no material
liabilities or claims or obligations relating to the Company or its Subsidiaries
of any nature, whether accrued, absolute, contingent or otherwise, asserted or,
to the Company's knowledge, unasserted, except liabilities or claims stated or
adequately reserved against in the Financial Statements or liabilities or claims
incurred in the ordinary course of the Company's and its Subsidiaries'
operations which are not required to be reflected in the Financial Statements or
in the notes thereto under GAAP. Nothing has come to the attention of the
Company since the date of the Financial Statements which would indicate that the
Financial Statements did not fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the respective
dates thereof.
40
4.25 INTELLECTUAL PROPERTY.
(a) Except as described on SCHEDULE 4.25, the Company and its
Subsidiaries have exclusive ownership of, or exclusive license to use, all
patent, copyright, trade secret, trademark, or other proprietary rights used in
the business of the Company or any of its Subsidiaries and material to the
Company and its Subsidiaries on a consolidated basis (collectively,
"INTELLECTUAL PROPERTY"). There are no claims or demands of any other Person
pertaining to any of such Intellectual Property and no proceedings have been
instituted, or are pending or, to the knowledge of the Company, threatened,
which challenge the rights of the Company or any of its Subsidiaries in respect
thereof. The Company and its Subsidiaries have the right to use, free and clear
of claims or rights of other Persons, all customer lists, designs, manufacturing
or other processes, computer software systems, data compilations, research
results and other information required for or incident to their products or
their business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to the Company or any of its Subsidiaries or used or to be used by the
Company or any of its Subsidiaries in their business as presently conducted, and
which are material to the Company and its Subsidiaries on a consolidated basis
are listed on SCHEDULE 4.25. All of such patents, patent applications,
trademarks, trademark applications and registrations and registered copyrights
have been duly registered in, filed in or issued by the United States Patent and
Trademark Office, the United States Register of Copyrights, or the corresponding
offices of other jurisdictions as identified on SCHEDULE 4.25, and have been
properly maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States and each such
jurisdiction.
(c) All material licenses or other agreements under which the Company
or any of its Subsidiaries is granted rights in Intellectual Property are listed
on SCHEDULE 4.25. Except as set forth on SCHEDULE 4.25, all said licenses or
other agreements are in full force and effect and there is no material default
by any party thereto.
(d) The Company and its Subsidiaries have taken all steps required in
accordance with sound business practice and business judgment to establish and
preserve their ownership of all material copyright, trade secret and other
proprietary rights with respect to their products and technology. The Company
and its Subsidiaries regularly require all professional and technical employees,
and other employees having access to valuable non-public information of the
Company or any of its Subsidiaries, to execute agreements under which such
employees are required to convey to the Company or any of its Subsidiaries, as
applicable, ownership of all inventions and developments conceived or created by
them in the course of their employment and to maintain the confidentiality of
all such information of the Company and its Subsidiaries. To the Company's
knowledge, neither the Company nor its Subsidiaries made any such information
available to any Person other than employees of the Company or any of its
Subsidiaries except pursuant to written agreements requiring the recipients to
maintain the confidentiality of such information and appropriately restricting
the use thereof. To the knowledge of the Company, there are no infringements by
others of any of its or any Subsidiary's Intellectual Property rights.
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(e) To the knowledge of the Company, the present business, activities
and products of the Company or any of its Subsidiaries do not infringe any
intellectual property of any other Person, except where such infringement would
not have a Material Adverse Effect. No proceeding charging the Company or any of
its Subsidiaries with infringement of any adversely held Intellectual Property
has been filed or is, to the knowledge of the Company, threatened to be filed.
To the Company's knowledge, there exists no unexpired patent or patent
application which includes claims that would be infringed by or otherwise have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is
making unauthorized use of any confidential information or trade secrets of any
Person, including without limitation any former employer of any past or present
employee of the Company or any of its Subsidiaries, except where such use would
not have a Material Adverse Effect. Except as set forth on SCHEDULE 4.25,
neither the Company or any of its Subsidiaries nor, to the knowledge of the
Company, any of its or any Subsidiary's employees have any agreements or
arrangements with any Persons other than the Company or any of its Subsidiaries
related to confidential information or trade secrets of such Persons or
restricting any such employee's engagement in business activities of any nature.
The activities of the Company or any of its Subsidiaries or any of its or any
Subsidiary's employees on behalf of the Company or any of its Subsidiaries do
not violate any such agreements or arrangements known to the Company which any
such employees have with other Persons (to the extent that such agreements and
arrangements are enforceable under applicable law).
4.26 TAXES. The Company and its Subsidiaries, and any predecessors to the
Company and any of its Subsidiaries, have filed or obtained extensions of all
Tax returns heretofore required by law to be filed by any of them. All material
Taxes have been paid in full or are adequately provided for in accordance with
GAAP on the financial statements of the applicable Person. All material
deposits, Taxes and other assessments and levies required by law to be made,
withheld, collected or provided for by the Company or any of its Subsidiaries
including deposits with respect to Taxes constituting employees' income
withholding taxes, have been duly made, withheld, collected or provided for and
have been paid over to the proper federal, state or local authority, or are held
by the applicable Person for such payment. No Liens arising from or in
connection with Taxes have been filed and are currently in effect against the
Company or any of its Subsidiaries, except for Liens for Taxes which are not yet
due. Except as set forth on SCHEDULE 4.26 hereto, neither the Company nor any of
its Subsidiaries, nor any predecessors thereto, has executed or filed with the
IRS or any other taxing authority any agreement or document extending, or having
the effect of extending, the period for assessment or collection of any Taxes.
The federal income tax returns of the Company and each of its Subsidiaries, and
any predecessors thereto, have been examined by the IRS, or the statute of
limitations with respect to federal income taxes has expired, for all tax years
to and including the fiscal year ended December 31, 1994 and, except as set
forth on SCHEDULE 4.26, any deficiencies have been paid in full or are being
contested in good faith by appropriate action or appropriate reserves therefor
in accordance with GAAP have been established on the Company's or applicable
Subsidiaries' books. Except as set forth on SCHEDULE 4.26, neither the Company
nor any of its Subsidiaries is a party to any tax sharing agreement or
arrangement. Except as set forth on SCHEDULE 4.26, no audits or investigations
are pending or, to the knowledge of the Company, threatened with respect to any
tax returns or taxes of the Company or any of its Subsidiaries, or any
predecessor thereto.
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4.27 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 4.27,
and the Management Incentive Plan, there are no material transactions,
agreements or understandings, existing or presently contemplated between or
among the Company or any of its Subsidiaries and any of its officers or
directors or stockholders or any of their Affiliates or associates.
4.28 LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS. Except as set forth on
SCHEDULE 4.28 hereto, neither the Company nor any of its Subsidiaries is subject
to any consensual restriction on the ability of any such Subsidiary (a) to pay
dividends or make any other distributions on such Subsidiary's Capital Stock to,
or pay any indebtedness owing to, or repurchase or redeem any of such
Subsidiary's Capital Stock from, the Company or any other Subsidiary of the
Company, (b) to make any loans or advances to the Company or any other
Subsidiary of the Company, or (c) to transfer any of its Property or assets to
the Company or any other Subsidiary.
4.29 NO OTHER BUSINESS. The Company has not and is not engaged in any
material respect in any business other than the design, development, production,
marketing and sale of interactive slot machines.
ARTICLE V
PURCHASE FOR INVESTMENT; SOURCE OF FUNDS
5.1 PURCHASE FOR INVESTMENT. The Purchaser represents that (a) by reason of
its business and financial experience, and the business and financial experience
of those persons, if any, retained by it to advise it with respect to its
investment in the New Notes, it together with such advisers have such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risk of the prospective investment, (b) it is an
accredited investor as defined in Regulation D under the Securities Act and (c)
it is purchasing the New Notes for its own account or for one or more separate
accounts maintained by it or for the account of one or more institutional
investors on whose behalf the Purchaser has authority to make this
representation for investment and not with a view to the distribution or other
disposition thereof or with any present intention of distributing or selling any
of the New Notes except in compliance with the Securities Act and except to one
or more such institutional investors, provided that the disposition of the
Purchaser's or such investor's property shall at all times be within its
control. The Purchaser understands and agrees that the New Notes have not been
registered under the Securities Act and may be resold (which resale is not now
contemplated) only if registered pursuant to the provisions thereunder or if an
exemption from registration is available.
5.2 AUTHORITY. The Purchaser represents that it has full power and
authority and has taken all action necessary to authorize it to enter into and
perform its obligations under this Agreement and all other Transaction Documents
and other documents or instruments contemplated hereby or thereby. This
Agreement is the legal, valid and binding obligation of such Purchaser, and is
enforceable against it in accordance with its terms.
5.3 BROKER'S OR FINDER'S COMMISSIONS. In addition to and not in limitation
of any other rights hereunder, the Purchaser agrees that it will indemnify and
hold harmless the Company and its Subsidiaries from and against any and all
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claims, demands or liabilities for broker's, finder's, placement agent's or
other similar fees or commissions and any and all liabilities with respect to
any taxes (including interest and penalties) payable or incurred or alleged to
have been incurred by the Purchaser or any Person acting or alleged to have been
acting on the Purchaser's behalf, in connection with this Agreement, the
issuance or sale of the New Notes or any other transaction contemplated by any
of the Transaction Documents.
5.4 ACKNOWLEDGMENT OF GAMING RESTRICTIONS. The Purchaser acknowledges that
pursuant to the Gaming Laws approvals from the Gaming Authorities shall be
required in order for the Purchaser or any Holder to acquire control (as defined
in the Gaming Laws) of the Company.
ARTICLE VI
REDEMPTIONS, OFFERS TO PURCHASE, AND CONVERSIONS
6.1 NOTICE OF REDEMPTION. If the Company elects to redeem New Notes
pursuant to Section 6.6 hereof, at least 30 days but not more than 60 days
before any Redemption Date, the Company shall mail by first class mail a notice
of redemption to the registered address of each Holder of New Notes or portions
thereof that are to be redeemed. With respect to any redemption of New Notes,
the notice shall identify the New Notes or portions thereof to be redeemed and
shall state: (i) the Redemption Date; (ii) the Redemption Price for the New
Notes and the amount of unpaid and accrued interest on such New Notes as of the
date of redemption; (iii) if any New Note is being redeemed in part, the portion
of the principal amount of such New Note to be redeemed and that, after the
Redemption Date, upon surrender of such New Note, a new New Note or New Notes in
principal amount equal to the unredeemed portion will be issued; (iv) that New
Notes called for redemption must be surrendered to the Company to collect the
Redemption Price for such New Notes; (v) that, unless the Company defaults in
paying the Redemption Price, interest on New Notes called for redemption ceases
to accrue on and after the Redemption Date and the only remaining right of the
Holders of such New Notes is to receive payment of the Redemption Price upon
surrender to the Company of the New Notes redeemed; and (vi) if fewer than all
the New Notes are to be redeemed, the identification of the particular New Notes
(or portion thereof) to be redeemed, as well as the aggregate principal amount
of New Notes to be redeemed and the aggregate principal amount of New Notes to
be outstanding after such partial redemption.
6.2 SELECTION OF NEW NOTES TO BE REDEEMED OR PURCHASED. If less than all
outstanding New Notes are to be redeemed or if less than all New Notes tendered
pursuant to an Offer are to be accepted for payment, the Company shall select
the outstanding New Notes to be redeemed or accepted for payment in compliance
with the requirements of the principal national securities exchange, if any, on
which the New Notes are listed or, if the New Notes are not listed on a
securities exchange, on a pro rata basis, by lot or by any other method that the
Company deems fair and appropriate. The Company shall select for redemption or
purchase New Notes or portions of New Notes in principal amounts of $1,000 or
integral multiples thereof; except that if all of the New Notes of a Holder are
selected for redemption or purchase, the aggregate principal amount of the New
Notes held by such Holder, even if not a multiple of $1,000, may be redeemed or
purchased. Except as provided in the preceding sentence, provisions of this
44
Agreement that apply to New Notes called for redemption or tendered pursuant to
an Offer also apply to portions of New Notes called for redemption or tendered
pursuant to an Offer.
6.3 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed to
the Holders, New Notes called for redemption become due and payable on the
Redemption Date at the Redemption Price. Upon surrender to the Company, the New
Notes called for redemption shall be paid at the Redemption Price on the
Redemption Date.
6.4 PAYMENT OF REDEMPTION PRICE. On or prior to any Redemption Date, the
Company shall segregate money sufficient to pay the Redemption Price of all New
Notes to be redeemed on that date. Unless the Company defaults in the payment of
such Redemption Price, interest on the New Notes to be redeemed will cease to
accrue on such New Notes on the applicable Redemption Date, whether or not such
New Notes are presented for payment. If a New Note is redeemed on or after an
interest Record Date but on or prior to the related Interest Payment Date, then
any accrued and unpaid interest shall be paid to the Person in whose name such
New Note was registered at the close of business on such Record Date. If any New
Note called for redemption shall not be so paid upon surrender for redemption,
interest will be paid on the unpaid principal, premium, if any, and interest
from the Redemption Date until such principal, premium and interest is paid, at
the rate of interest provided in the New Notes and Section 7.1. If a Redemption
Date is a non-Business Day, payment shall be made on the next succeeding
Business Day and no interest shall accrue for the period from the Redemption
Date to such succeeding Business Day.
6.5 NEW NOTES REDEEMED IN PART. Upon surrender of a New Note that is
redeemed in part, the Company shall issue to the Holder thereof at the Company's
expense a new New Note equal in principal amount to the unredeemed portion of
the New Note surrendered.
6.6 OPTIONAL AND MANDATORY REDEMPTION.
(a) The New Notes will be subject to redemption, in whole or from time
to time in part (in multiples of $1,000 of principal amount) at the option of
the Company at a purchase price equal to 100% of the principal amount thereof,
plus any accrued and unpaid interest to the Redemption Date, plus a premium
which when taken together with the interest earned on the New Notes results in
an annualized rate of return to the Holder from the Closing Date through and
including the Redemption Date equal to 25%.
(b) Upon any partial prepayment or redemption of the New Notes, the
principal amount so prepaid or redeemed shall be allocated to all New Notes at
the time outstanding in proportion to the respective outstanding principal
amounts thereof, and a corresponding pro rata adjustment shall be made in the
minimum denomination of a New Note pursuant to Section 11.1.
6.7 MANDATORY OFFERS.
(a) Within 10 Business Days after any Change of Control Trigger Date,
any Repayment Trigger Date or any Excess Proceeds Date, the Company shall mail a
notice to each Holder containing all instructions and materials necessary to
enable such Holders to tender New Notes pursuant to the Offer and stating: (i)
that an Offer is being made pursuant to Section 7.12, or 7.13, as the case may
45
be, the length of time the Offer shall remain open, and the maximum aggregate
principal amount of New Notes that the Company is required to purchase pursuant
to such Offer; (ii) the purchase price for the New Notes (as set forth in
Section 7.12 or 7.13, as the case may be), the amount of accrued and unpaid
interest on such New Notes as of the purchase date, and the purchase date (which
shall be no earlier than 30 days nor later than 40 days from the date such
notice is mailed (the "Purchase Date")); (iii) that any New Note not tendered
will continue to accrue interest if interest is then accruing; (iv) that, unless
the Company defaults in the payment of the purchase price on the Purchase Date,
interest shall cease to accrue on such New Notes on the Purchase Date; (v) that
Holders electing to tender any New Note or portion thereof will be required to
surrender their New Note, with a form entitled "Option of Holder to Elect
Purchase" completed, to the Company at the address specified in Section 13.2
hereof prior to the close of business on the Business Day preceding the Purchase
Date, PROVIDED that Holders electing to tender only a portion of any New Note
must tender a principal amount of $1,000 or integral multiples thereof; (vi)
that Holders will be entitled to withdraw their election to tender New Notes if
the Company receives, not later than the close of business on the second
Business Day preceding the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of New Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have such New Notes purchased; (vii) that Holders
whose New Notes are accepted for payment in part will be issued new New Notes
equal in principal amount to the unpurchased portion of New Notes surrendered,
PROVIDED that only New Notes in a principal amount of $1,000 or integral
multiples thereof will be accepted for payment in part and (viii) if the Offer
is made with respect to a Change of Control, the circumstances and relevant
facts regarding such Change of Control.
(b) On the Purchase Date for any Offer, the Company shall (i) in the
case of an Offer resulting from a Change of Control, accept for payment all New
Notes or portions thereof tendered pursuant to such Offer, and (ii) in the case
of an Offer resulting from one or more Securities Sales or Mezzanine Debt
Financings accept for payment all New Notes or portions thereof tendered
pursuant to such Offer that are required to be purchased pursuant to Section
7.13 hereof.
(c) With respect to any Offer, (i) if less than all of the New Notes
tendered pursuant to an Offer are to be accepted for payment by the Company for
any reason, the Company shall select on or prior to the Purchase Date the New
Notes or portions thereof to be accepted for payment pursuant to Section 6.2;
and (ii) unless the Company defaults in the payment of the purchase price for
such New Notes on the Purchase Date, interest shall cease to accrue on such New
Notes on the Purchase Date; PROVIDED, HOWEVER, that if the Company fails to
purchase all New Notes accepted for payment, the Company shall purchase on a pro
rata basis all New Notes accepted for payment and interest shall continue to
accrue on all New Notes not purchased.
(d) Promptly after the Purchase Date with respect to an Offer, (i) the
Company shall mail to each Holder of New Notes or portions thereof accepted for
payment an amount equal to the purchase price for, plus any accrued and unpaid
interest on, such New Notes, (ii) with respect to any tendered New Note not
accepted for payment in whole or in part, the Company shall return such New Note
to the Holder thereof, and (iii) with respect to any New Note accepted for
46
payment in part, the Company shall authenticate and mail to each such Holder a
new New Note equal in principal amount to the unpurchased portion of the
tendered New Note.
(e) The Company will (i) publicly announce the results of the Offer on
or as soon as practicable after the Purchase Date, and (ii) comply with Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws and regulations are applicable to any Offer.
(f) Notwithstanding Section 7.12 and Section 6.7, upon the occurrence
of a Change in Control Trigger Date, in lieu of repurchasing New Notes as
required by Section 7.12, the Company may elect, instead, to call for redemption
all New Notes pursuant to Section 6.1 provided that the related Notice of
Redemption is mailed to all holders not later than the last date that it would
be required to commence a Mandatory Offer pursuant to Section 6.7 in respect of
such Change in Control.
ARTICLE VII
COVENANTS
7.1 PAYMENT OF NEW NOTES. The Company shall pay the principal of, and
premium, if any, and interest on, the New Notes on the dates and in the manner
provided in the New Notes. Holders must surrender their New Notes to the Company
to collect principal payments. Principal, premium, or interest shall be
considered paid on the date due if, by 2:00 p.m., Boston, Massachusetts time, on
such date, the Company shall have executed wire transfers in immediately
available funds designated for and sufficient to pay such principal, premium or
interest. To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on overdue principal, premium and interest (without
regard to any applicable grace period) at a rate equal to 1.5% per annum in
excess of the then applicable interest rate on the New Notes.
7.2 REPORTS.
(a) To the extent permitted by applicable law or regulation, whether
or not the Company is subject to the requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Commission all quarterly and
annual reports and such other information, documents or other reports (or copies
of such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) required to be filed pursuant to such provisions of the
Exchange Act. The Company shall mail to the holders of the New Notes at their
addresses appearing in the register of New Notes at the time of such mailing,
within 10 days after it files the same with the Commission, all information,
documents and reports that it is required to file with the Commission pursuant
to this Section 7.2. If the Company is not permitted by applicable law or
regulations to file the aforementioned reports, the Company (at its own expense)
shall mail to the holders of the New Notes at their addresses appearing in the
register of New Notes, at the time of such mailing within 5 days after it would
have been required to file such information with the Commission, all information
and financial statements, including any notes thereto and with respect to annual
reports, an auditors' report by an accounting firm of established national
reputation, and a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," comparable to the disclosure that the Company would
47
have been required to include in annual and quarterly reports, information,
documents or other reports, including, without limitation, reports on Forms
10-K, 10-Q and 8-K, if the Company was subject to the requirements of such
Section 13 or 15(d) of the Exchange Act.
(b) At any time when the Company is not permitted by applicable law or
regulations to file the aforementioned reports, upon the request of a holder of
a New Note, the Company will promptly furnish or cause to be furnished such
information as is specified pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) to such holder or to a prospective
purchaser of such New Note designated by such holder, as the case may be, in
order to permit compliance by such holder with Rule 144A under the Securities
Act.
7.3 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Holders, within 135 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that (i) a review of the activities of the Company and its Subsidiaries during
the preceding fiscal year has been made to determine whether the Company has
kept, observed, performed and fulfilled all of its obligations under this
Agreement and the New Notes, (ii) such review was supervised by the Officers of
the Company signing such certificate, and (iii) that to the best knowledge of
each Officer signing such certificate, (A) the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Agreement and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Agreement (or, if a Default or Event of
Default occurred, describing all such Defaults or Events of Default of which
each such Officer may have knowledge and what action the Company has taken or
proposes to take with respect thereto), and (B) no event has occurred and
remains in existence by reason of which payments on account of the principal of,
or premium, if any, or interest on, the New Notes are prohibited or if such
event has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the Officers' Certificate
delivered pursuant to Section 7.3(a) shall be accompanied by a written statement
of Deloitte & Touche LLP, the Company's independent public accountants (or
another independent accounting firm of established national reputation
reasonably satisfactory to the Holders), that in making the examination
necessary for certification of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Sections 7.1, 7.5, 7.7, 7.10, 7.13, or Article VIII, or if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company will, so long as any of the New Notes are outstanding,
deliver to the Holders, promptly after any Officer of the Company becomes aware
of (i) any Default or Event of Default, or (ii) any default or event of default
under any other mortgage, agreement or instrument that could result in an Event
of Default under Section 9.1, an Officers' Certificate specifying such Default,
Event of Default or default and what action the Company is taking or proposes to
take with respect thereto.
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7.4 STAY, EXTENSION AND USURY LAWS. The Company covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that might affect the covenants or the performance of its obligations under this
Agreement and the New Notes; and the Company (to the extent it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impede
the execution of any power granted to the Holders pursuant to this Agreement,
but will suffer and permit the execution of every such power as though no such
law has been enacted.
7.5 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, make any Restricted Payment, except payments,
prepayments, repurchases, redemptions and acquisitions with respect to
Indebtedness not incurred in violation of Section 7.7.
(b) Notwithstanding Section 7.5(a), the following Restricted Payments
may be made: (i) the redemption of the Series D Preferred Stock, the Amended
Notes, and the New Notes under the terms and provisions of the relevant
agreement controlling each instrument; (ii) repurchase of any Common Stock
pursuant to the provisions of the Management Incentive Plan at a redemption
price no greater than the price at which such shares were originally sold; (iii)
the issuance of the Units; and (iv) the issuance of the Series E Warrant.
7.6 CORPORATE EXISTENCE. Subject to Article VIII, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate or similar existence of each of
its Subsidiaries in accordance with the respective organizational documents of
each of its Subsidiaries and the rights (charter and statutory), licenses and
franchises of the Company and each of its Subsidiaries; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate or similar existence of any Subsidiary, if the
Company's Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof is not adverse in any
material respect to the holders of the New Notes and the Warrants.
7.7 LIMITATION ON INDEBTEDNESS.
(a) Except as set forth in this Section 7.7, the Company shall not,
and shall not permit any Subsidiary, after the date hereof, directly or
indirectly, to Incur any Indebtedness (including Acquired Indebtedness) without
the prior written consent of the holders of a majority of the then outstanding
New Notes. For purposes of this Agreement, Indebtedness of any Acquired Person
that is not a Subsidiary, which Indebtedness is outstanding at the time such
Person is acquired by the Company or a Subsidiary or becomes, or is merged into
or consolidated with, a Subsidiary, shall be deemed to have been Incurred by the
Company or the acquiring Subsidiary at the time such Acquired Person becomes, or
is merged into or consolidated with, a Subsidiary.
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(b) Notwithstanding Section 7.7(a) the Company and its Subsidiaries
may Incur, after the date hereof, any of the following Indebtedness:
(i) Indebtedness outstanding at the date hereof as set forth on
SCHEDULE 4.8, including the Indebtedness evidenced by the New Notes
and the Amended Notes, including any Indebtedness evidenced by notes
issued as payment-in-kind for interest payments due and payable under
the Amended Notes and the New Notes;
(ii) Indebtedness to any Wholly-Owned Subsidiary of the Company
or Indebtedness of any Subsidiary to the Company (provided that such
Indebtedness is at all times held by the Company or a Wholly-Owned
Subsidiary of the Company); PROVIDED, HOWEVER, that for purposes of
this Section 7.7, upon either (A) the transfer or other disposition by
any such Wholly-Owned Subsidiary of any Indebtedness so permitted to a
Person other than the Company or another Wholly-Owned Subsidiary of
the Company or (B) the issuance, sale, lease, transfer or other
disposition of shares of Capital Stock (including by consolidation or
merger) of such Wholly-Owned Subsidiary to a Person other than the
Company or another such Wholly-Owned Subsidiary, the provisions of
this clause (ii) shall no longer be applicable to such Indebtedness
and such Indebtedness shall be deemed to have been Incurred by the
Company at the time of such transfer or other disposition;
(iii) Refinancing Indebtedness with respect to Indebtedness that
was Incurred prior to the date hereof or, if incurred after the date
hereof, was Incurred in compliance with the provisions of this
Agreement; PROVIDED, HOWEVER, that (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount (or
accreted value, in the case of Indebtedness issued at a discount) of
the Indebtedness so extended, refinanced, renewed, replaced,
substituted, defeased or refunded (plus the amount of fees, costs and
expenses incurred and the amount of any premium, penalties, breakage
costs and other similar amounts required to be paid in connection with
such refinancing pursuant to the terms of the instrument governing the
Indebtedness so extended, refinanced, renewed, replaced, substituted,
defeased or refunded or the amount of any premium reasonably
determined by the Company as necessary to accomplish a refinancing by
means of a tender offer or privately negotiated repurchase, which
determination shall be supported by a fairness opinion from an
Independent Financial Advisor, plus the fees, costs and expenses of
such tender offer or repurchase); and (B) the Refinancing Indebtedness
shall (1) have a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being
extended, refinanced, renewed, replaced, substituted, defeased or
refunded; (2) not have a final scheduled maturity earlier than the
final scheduled maturity of the Indebtedness being extended,
refinanced, replaced, renewed, substituted, defeased or refunded; (3)
not permit redemption at the option of the holder earlier than the
earliest date of redemption at the option of the holder of the
Indebtedness being extended, refinanced, renewed, replaced,
substituted, defeased or refunded; and (4) rank no more senior or be
at least as subordinated, as the case may be, in right of payment to
the New Notes, the Series D Preferred Stock and the Senior Discount
Notes as the Indebtedness being extended, refinanced, replaced,
renewed, substituted, defeased or refunded;
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(iv) Senior Indebtedness of the Company not to exceed an
aggregate of $4,000,000 (inclusive of amounts outstanding as of the
date of this Agreement), including without limitation, Indebtedness
owed to Silicon Valley Bank under the Company's secured credit
facility, or any successor or similar secured credit facility.
7.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) Neither the Company nor any of its Subsidiaries shall enter into
any transaction or series of transactions to sell, lease, transfer, exchange or
otherwise dispose of any of its properties or assets to or to purchase any
property or assets from, or for the direct or indirect benefit of, an Affiliate
of the Company or of any Subsidiary of the Company, make any Investment in or
enter into any contract, agreement, understanding, loan, advance or Guarantee
with, or for the direct or indirect benefit of, an Affiliate of the Company or
of any Subsidiary of the Company (each, including any series of transactions
with one or more Affiliates, an "Affiliate Transaction"), unless (i) the Board
of Directors of the Company or the relevant Subsidiary determines, as evidenced
by a Board Resolution, that the terms of such Affiliate Transaction are fair and
reasonable to the Company and no less favorable to the Company or the relevant
Subsidiary than those that could have been obtained at that time in a comparable
arms-length transaction by the Company or such Subsidiary with an unrelated
Person, (ii) such transaction has been approved by a majority of the Board of
Directors of the Company or the relevant Subsidiary who have no direct or
indirect interest in the Affiliate Transaction or in the Affiliate that is a
party to the Affiliate Transaction, or in any other party that is an Affiliate
of any such Affiliate, and (iii) the Company shall have delivered to the Holders
an Officers' Certificate certifying that the conditions set forth in clauses (i)
and (ii) above have been satisfied.
(b) Neither the Company nor any of its Subsidiaries shall enter into
an Affiliate Transaction involving or having a potential aggregate value of more
than $1,000,000 unless, in addition to the requirements of (a) above, the Board
of Directors of the Company or the relevant Subsidiary shall first have received
a written opinion from an Independent Financial Advisor for the benefit of the
Company and the Holders, which firm is not receiving any contingent fee or other
consideration directly or indirectly related to the successful completion of the
Affiliate Transaction, to the effect that the proposed Affiliate Transaction is
fair to the Company from a financial point of view.
(c) The provisions of this Section 7.8 shall not apply to (i) any
Restricted Payment that is made in compliance with the provisions of Section
7.5, (ii) the reasonable and customary fees and compensation paid to or
indemnity provided on behalf of, officers, directors, employees or consultants
of the Company or any Subsidiary, as determined by the Board of Directors of the
Company or such Subsidiary or the senior management thereof in good faith, (iii)
transactions exclusively between or among the Company and any Wholly-Owned
Subsidiary or exclusively between or among Wholly-Owned Subsidiaries provided
such transactions are not otherwise prohibited by this Agreement, and (iv) any
Affiliate Transaction in existence as of the date hereof (including but not
limited to the Management Incentive Plan), the terms of which are listed on
SCHEDULE 4.27.
7.9 LIMITATION ON LIENS. The Company shall not, and shall not permit any of
its Subsidiaries to, Incur, assume, suffer to exist, create or otherwise cause
to be effective any Lien on any asset now owned or hereafter acquired, or any
51
income or profits therefrom or assign or convey any right to receive income
therefrom to secure any Indebtedness except: (a) Permitted Liens (other than
Permitted Liens described in clause (i) of the definition thereof), (b) Liens
existing as of the date hereof (and any extension, renewal or replacement Liens
upon the same Property subject to such Liens, provided the principal amount of
Indebtedness secured by each Lien constituting such an extension, renewal or
replacement Lien shall not exceed the principal amount of Indebtedness secured
by the Lien theretofore existing, plus amounts described in Section
7.7(b)(iii)(A) with respect to permitted Refinancing Indebtedness), (c) after
the Security Opinion Date, Liens securing Indebtedness of any Subsidiary of the
Company, PROVIDED that (i) such Liens are limited to Property or assets of such
Subsidiary, (ii) the Indebtedness secured by such Liens was not Incurred in
violation of this Agreement and (iii) the Indebtedness secured by such Liens is
not subordinated to or junior in right or priority of payment in any respect to
any other Indebtedness of such Subsidiary; (d) after the Security Opinion Date,
Liens as defined in clause (i) of the definition of Permitted Liens; and (e)
Liens replacing, extending or renewing, in whole or in part, any Lien described
in the foregoing clauses (a) through (d), including in connection with any
refinancing of the Indebtedness, in whole or in part, secured by any such Lien
effected in accordance with Section 7.7, PROVIDED that if any such clauses limit
the amount secured by or the Property or assets subject to such Liens, no such
replacement, extension or renewal shall increase the amount of Indebtedness or
the Property or assets subject to such Liens.
7.10 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall, and shall cause
each of its Subsidiaries to, pay or discharge, before the same shall become
delinquent, (a) all Taxes, assessments and governmental charges (including
withholding taxes and penalties, interest and additions to taxes) levied or
imposed upon it or any of its Subsidiaries or properties of the Company or any
of its Subsidiaries and (b) all lawful claims for labor, materials and supplies
that, if unpaid might by law become a Lien upon the Property of it or any of its
Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such Tax, assessment, charge
or claim if either (i) the amount, applicability or validity thereof is being
contested in good faith by appropriate proceedings and an adequate reserve has
been established therefor to the extent required by GAAP or (ii) the failure to
make such payment or effect such discharge (together with all other such
failures) would not have a Material Adverse Effect.
7.11 RESTRICTIONS AGAINST LIMITATIONS ON UPSTREAM PAYMENTS. The Company
shall not, and shall not permit any Subsidiary of the Company to, create or
otherwise cause or suffer to exist or to become effective any Payment
Restriction or other encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary
of the Company, (b) make loans or advances to the Company or a Subsidiary of the
Company, or (c) transfer any of its Properties or assets to the Company or any
Subsidiary of the Company, except for such Payment Restrictions or encumbrances
existing under or by reason of: (i) applicable law; (ii) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was Incurred in contemplation of or in connection
with such acquisition), PROVIDED, that such restriction is not applicable to any
Person, or the Property or assets of any Person, other than the Acquired Person;
(iii) non-assignment provisions in leases entered into in the ordinary course of
52
business and consistent with past practices; (iv) instruments governing purchase
money Indebtedness for Property acquired in the ordinary course of business that
only impose restrictions on the Property so acquired; (v) any agreement for the
sale or disposition of the Capital Stock or assets of such Subsidiary, PROVIDED
that such restriction is only applicable to such Subsidiary or assets, as
applicable; or (vi) Refinancing Indebtedness permitted under this Agreement with
respect to Indebtedness described in clauses (ii), (iii) or (iv), PROVIDED that
the restrictions contained in the agreements governing such Refinancing
Indebtedness are no more restrictive in the aggregate than those contained in
the instrument governing the Indebtedness being refinanced immediately prior to
such refinancing.
7.12 CHANGE OF CONTROL. Upon the occurrence of a Change of Control (such
date being the "Change of Control Trigger Date"), each Holder will have the
right to require the Company to repurchase all or any part of such Holder's New
Notes pursuant to the Offer (but, with respect to any partial tender of New
Notes, the Company shall only be required to purchase principal amounts in
integral multiples of $1,000) at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest to the
Purchase Date. The Offer shall be effected in accordance with Section 6.7 and
Article VI (to the extent applicable) and the provisions of this Section 7.12;
provided, however, that this Section 7.12 shall not apply if the Company instead
elects to redeem all New Notes as provided in Section 6.7(f).
7.13 REDEMPTION FROM THE PROCEEDS OF SECURITIES SALES AND MEZZANINE DEBT
FINANCINGS.
(a) The Company will not, and will not permit any of its Subsidiaries
to, undertake any Securities Sale or any Mezzanine Debt Financing, unless: (i)
the Company or the applicable Subsidiary receives consideration, which, at the
time of such Securities Sale or Mezzanine Debt Financing, is at least equal to
the fair market value of the Capital Stock or other equity or debt securities
sold or otherwise disposed of (as determined in good faith by the Board of
Directors of the Company evidenced by a Board Resolution); and (ii) the Net Cash
Proceeds received by the Company or such Subsidiary, as the case may be, from
such Securities Sale or Mezzanine Debt Financing are applied in accordance with
this Section 7.13.
(b) As soon as practicable, but in no event later than 10 Business
Days after any date (with respect to both a Securities Sale or a Mezzanine Debt
Financing, a "Repayment Trigger Date") that the aggregate amount of Net Cash
Proceeds from all such Securities Sales or Mezzanine Debt Financings occurring
on or after the date hereof, then:
(i) if such Net Cash Proceeds exceed $5,000,000, but are less
than or equal to $10,000,000, then the Company shall commence an Offer
to purchase the maximum principal amount of Amended Notes (and if no
Amended Notes remain outstanding then New Notes) that may be purchased
using Fifty Percent (50%) of any such Net Cash Proceeds in excess of
$5,000,000 but less than or equal to $10,000,000; or
(ii) if such Net Cash Proceeds exceed $10,000,000, then the
Company shall commence an Offer to purchase the maximum principal
amount of Amended Notes (and if no Amended Notes remain outstanding
than New Notes) that may be purchased using One Hundred (100%) of any
such Net Cash Proceeds in excess of $10,000,000;
53
in any case, subject to reduction in the event holders of New Notes or Amended
Notes tender such Notes for redemption pursuant to Section 6.7 of this Agreement
or the Amended Notes Securities Purchase Agreement, as applicable, at an offer
price of $1.00 for every $1.00 of principal amount, plus accrued and unpaid
interest to the Purchase Date. The Offer shall be effected in accordance with
Section 6.7 and Article VI (to the extent applicable) and the provisions of this
Section 7.13. To the extent that any such Net Cash Proceeds remain after
completion of an Offer, the Company may use the remaining amount for any purpose
permitted by this Agreement.
7.14 MAINTENANCE OF PROPERTIES. The Company will cause all properties used
or useful in the conduct of its business or the business of any Subsidiary of
the Company to be maintained and kept in good condition, repair and working
order, subject to normal wear and tear, and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 7.14 shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Company in good faith, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
7.15 MAINTENANCE OF INSURANCE. The Company shall, and shall cause its
Subsidiaries to, (a) keep at all times all of their properties which are of an
insurable nature insured against loss or damage with financially sound and
reputable insurers to the extent that property of similar character is usually
so insured by corporations similarly situated and owning like properties in
accordance with good business practice, and (b) will maintain with financially
sound and reputable insurers insurance against other hazards and risks and
liability to persons and property to the extent and in a manner customary for
corporations in similar business similarly situated. The Company shall, and
shall cause its Subsidiaries to, use the proceeds from any such insurance policy
to repair, replace or otherwise restore the property to which such proceeds
relate, except to the extent that a different use of such proceeds is, as
determined by the Company, in good faith, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
7.16 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause each
of its Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of their
respective properties, except such as are being contested in good faith and by
appropriate proceedings and except for such noncompliance as would not in the
aggregate have a Material Adverse Effect.
7.17 LIMITATION ON ISSUANCES AND DISPOSITIONS OF CAPITAL STOCK OF
SUBSIDIARIES. The Company (a) shall not, and shall not permit any Subsidiary to,
transfer, convey, sell, or otherwise dispose of any Capital Stock, or securities
convertible into or exercisable or exchangeable for, or options, warrants,
rights or any other interest with respect to, Capital Stock of a Subsidiary to
54
any Person (other than the Company or a Wholly-Owned Subsidiary) unless such
transfer, conveyance, sale, lease or other disposition is of 100% of the Capital
Stock of such Subsidiary held by the Company and the Net Cash Proceeds from such
transfer, conveyance or sale are applied in accordance with Section 7.18 hereof
and (b) shall not permit any Subsidiary to issue shares of its Capital Stock
(other than directors' qualifying shares), or securities convertible into or
exercisable or exchangeable for, or options, warrants, rights or any other
interest with respect to, its Capital Stock to any Person.
7.18 LIMITATION ON SALE OF ASSETS. The Company shall not, and shall not
permit any of its Subsidiaries to undertake any Asset Disposition.
ARTICLE VIII
SUCCESSORS
8.1 MERGER OR CONSOLIDATION.
(a) The Company shall not (i) consolidate with or merge into any other
Person; (ii) permit any other Person to consolidate with or merge into the
Company; (iii) permit any other Person to consolidate with, merge into or be
merged into by, any Subsidiary (in a transaction in which such Subsidiary (or
successor Person) remains (or becomes) a Subsidiary); and (iv) directly or
indirectly, transfer, convey, sell, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety (except for any
Permitted Disposition, or the merger or consolidation of any Subsidiary of the
Company with or into, or the disposition of all or substantially all of the
assets of any Subsidiary of the Company to, the Company or any Wholly-Owned
Subsidiary of the Company).
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries, the
Capital Stock of which constitutes all or substantially all of the properties
and assets of the Company, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
8.2 SURVIVING PERSON SUBSTITUTED. Upon any consolidation or merger, or any
transfer of assets in accordance with Section 8.1, the Surviving Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Agreement
with the same effect as if such Surviving Person had been named as the Company
herein. When a Successor Company assumes all of the obligations of the Company
hereunder and under the Convertible Notes and agrees to be bound hereby and
thereby, the predecessor shall be released from such obligations.
ARTICLE IX
DEFAULTS AND REMEDIES
9.1 EVENTS OF DEFAULT.
(a) Each of the following constitutes an "Event of Default": (i) the
Company shall fail to make any payment in respect of (A) the principal of or
premium, if any, on the New Notes or the Senior Discount Notes as the same shall
55
become due, whether at maturity, upon acceleration, redemption or otherwise, or
(B) interest on or in respect of any New Notes or the Senior Discount Notes as
the same shall become due, and such failure shall continue for a period of 15
Business Days; (ii) failure by the Company for 30 days after receipt of notice
from the Holders of at least 25% of the principal amount of the outstanding New
Notes to comply with any other provisions of this Agreement, the Amendment No. 2
to the Securities Purchase Agreement, the Restructuring Agreement, the Senior
Discount Notes or any New Notes; (iii) default under any mortgage, agreement or
instrument under which there may be Incurred or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Subsidiaries) whether such Indebtedness now exists, or is created after the date
hereof if (A) such default results in the acceleration of such Indebtedness
prior to its express maturity or shall constitute a default in the payment of
such Indebtedness at final maturity of such Indebtedness, and (B) the principal
amount of any such Indebtedness that has been accelerated or not paid at
maturity, when added to the aggregate principal amount of all other such
Indebtedness that has been accelerated or not paid at maturity, exceeds
$250,000, (iv) failure by the Company or any of its Subsidiaries to pay final
judgments, the uninsured portion of which exceeds $250,000, which judgments are
not paid, discharged, bonded or stayed for a period of 90 days after the date of
entry thereof; (v) if under any Bankruptcy Law, (A) the Company or any
Subsidiary commences a voluntary case, consents to the entry of an order for
relief against it in an involuntary case, consents to the appointment of a
Custodian of it or for all or substantially all of its Property, or makes a
general assignment for the benefit of its creditors, or (B) a court of competent
jurisdiction enters an order or decree, and such order or decree remains
unstayed and in effect for 60 days, that is for relief against the Company or
any Subsidiary in an involuntary case, appoints a Custodian of the Company or
any Subsidiary or for all or substantially all of the Property of the Company or
any Subsidiary, or orders the liquidation of the Company or any Subsidiary; (vi)
any of the Transaction Documents shall cease, for any reason, to be in full
force and effect in any material respect, except as a result of an amendment,
waiver or termination thereof as contemplated or permitted hereby, or the
Company shall so assert in writing; and (vii) if the Secretary of State for the
State of California fails to accept, within twenty (20) days after the initial
submission thereof, the Series D Certificate of Determination or the Series E
Certificate of Determination (each as defined in the Agreement) in the forms
attached to the Restructuring Agreement (as defined in the Agreement) as EXHIBIT
A and EXHIBIT B, respectively, or with such changes as would not individually or
in the aggregate, in the reasonable opinion of the Purchaser, adversely affect
the rights, privileges or preferences of the holders of the Series D Preferred
Stock or the Series E Preferred Stock.
(b) Any notice of default delivered to the Company by the Holders of
New Notes must be in writing and must specify the Event of Default, demand that
it be remedied and state that the notice is a "Notice of Default."
9.2 ACCELERATION.
(a) If an Event of Default (other than an Event of Default under
Section 9.1(a)(v)) occurs and is continuing, the Holders of at least 25% in
principal amount of the then outstanding New Notes may declare all outstanding
New Notes to be due and payable immediately and, upon such declaration, the
56
principal amount of, and premium, if any, and any accrued and unpaid interest
on, all such New Notes, to the date of payment shall be due and payable
immediately.
(b) Notwithstanding anything to the contrary in this Agreement, if an
Event of Default arises under Section 9.1(a)(v) the principal amount of, and
premium, if any, and any accrued and unpaid interest on, all outstanding New
Notes shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of any Holder.
(c) To the extent permitted under Section 10.2(b), the Holders of a
majority in aggregate principal amount of the then outstanding New Notes by
notice to the Company may rescind any declaration of acceleration of such New
Notes and its consequences if (i) the rescission would not conflict with any
judgment or decree, (ii) if all existing Defaults and Events of Default (other
than the nonpayment of principal of, or premium, if any, or interest on, the New
Notes which shall have become due by such declaration) shall have been cured or
waived, and (iii) the Company has delivered to the Holders an Officers'
Certificate to the effect of clauses (i) and (ii) above.
(d) In the event of a declaration of acceleration under this Agreement
because an Event of Default set forth in Section 9.1(a)(iii) has occurred and is
continuing, such declaration of acceleration shall be automatically rescinded
and annulled if either (i) the holders of the Indebtedness which is the subject
of such Event of Default have waived such failure to pay at maturity or have
rescinded the acceleration in respect of such Indebtedness within 10 days of
such maturity or declaration of acceleration, as the case may be, and no other
Event of Default has occurred during such 10-day period which has not been cured
or waived, or (ii) such Indebtedness shall have been discharged or the maturity
thereof shall have been extended such that it is not then due and payable, or
the underlying default has been cured within 10 days of such maturity or
declaration of acceleration as the case may be.
9.3 OTHER REMEDIES. If an Event of Default occurs and is continuing, the
Holders may pursue any available remedy to collect the payment of principal of,
or premium, if any, or interest on the New Notes or to enforce the performance
of any provision of the New Notes or this Agreement. A delay or omission by any
Holder in exercising any right or remedy accruing upon an Event of Default shall
not impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
9.4 WAIVER OF PAST DEFAULTS. Subject to the provisions of Sections 9.6 and
10.2 hereof, the Holders of a majority in aggregate principal amount of the then
outstanding New Notes by notice to the Company may on behalf of all Holders
waive any existing Default or Event of Default and its consequences under this
Agreement, except a continuing Default or Event of Default in the payment of the
principal of, or premium, if any, or interest on, any Note (which may only be
waived with the consent of each Holder affected). Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Agreement; PROVIDED that
no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
57
9.5 CONTROL BY A MAJORITY. The Holders of a majority in principal amount of
the New Notes may direct the time, method and place of conducting any proceeding
for any remedy available to the Holders.
9.6 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other
provision of this Agreement, the right of any Holder of a New Note to receive
payment of principal of, and premium, if any, and interest on such New Note, on
or after the respective dates expressed in such New Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
9.7 HOLDERS MAY FILE PROOFS OF CLAIM. The Holders may file such proofs of
claim and other papers or documents as may be necessary or advisable to have the
claims of the Holders allowed in any Insolvency or Liquidation Proceeding or
other judicial proceeding relative to the Company (or any other obligor upon the
New Notes), its creditors or its property.
9.8 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or
remedy under this Agreement, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant.
ARTICLE X
AMENDMENTS
10.1 AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 10.2, the Company may amend or supplement this Agreement
or the New Notes without the consent of any Holder to: (i) cure any ambiguity,
defect or inconsistency; provided that such amendment does not adversely affect
the rights of any Holder; (ii) provide for uncertificated New Notes in addition
to or in place of certificated New Notes; (iii) provide for the assumption of
the Company's obligations to the Holders in the event of any Disposition
involving the Company that is permitted under Article VIII in which the Company
is not the Surviving Person; or (iv) make any change that would (A) provide any
additional rights or benefits to Holders or (B) not adversely affect the legal
rights under this Agreement of any Holder.
10.2 AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS; OTHER
CONSENTS.
(a) Except as otherwise provided in Sections 10.1 and 10.2(c), this
Agreement and the New Notes may be amended or supplemented with the written
consent of the Holders of at least a majority of the aggregate principal amount
of the then outstanding New Notes (including consents obtained in connection
with a tender offer or exchange offer for the New Notes), and any existing
Default or Event of Default or compliance with any provision of this Agreement
or the New Notes may be waived with the consent of Holders of at least a
majority of the aggregate principal amount of the then outstanding New Notes
(including consents obtained in connection with a tender offer or exchange offer
for the New Notes).
58
(b) Without the consent of each Holder affected, no amendment,
supplement or waiver to this Agreement shall: (i) reduce the principal amount of
New Notes whose Holders must consent to an amendment, supplement or waiver; (ii)
reduce the principal of or change the fixed maturity of any New Note, or alter
the provisions with respect to the redemption of the New Notes in a manner
adverse to the Holders; (iii) reduce the rate of or change the time for payment
of interest on any New Note; (iv) waive a Default or Event of Default in the
payment of principal of, or premium, if any, or interest on, the New Notes
(except that Holders of at least a majority in aggregate principal amount of the
then outstanding New Notes may (A) rescind an acceleration of the New Notes that
resulted from a non-payment default, and (B) waive the payment default that
resulted from such acceleration); (v) make any New Note payable in money other
than that stated in the New Notes; (vi) make any change in the provisions of
this Agreement relating to waivers of past Defaults or the rights of Holders to
receive payments of principal of, or premium, if any, or interest on, the New
Notes; (vii) waive a redemption payment with respect to any New Note; or (viii)
make any change in Section 9.4, Section 9.6 or this sentence.
(c) It shall not be necessary for the consent of the Holders under
this Section 10.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to each Holder affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Agreement or waiver.
(d) Except as otherwise specified in this Agreement, if any consent or
approval of the Holders is required pursuant to the terms of this Agreement,
such consent or approval shall be deemed to have been given if given by at least
a majority of the aggregate principal amount of then outstanding New Notes.
10.3 REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a New Note is a continuing consent by the Holder
and every subsequent holder of a New Note or portion of a New Note that
evidences the same Indebtedness as the consenting Holder's New Note, even if
notation of the consent is not made on any such New Note. However, any such
Holder or subsequent Holder may revoke the consent as to his or her New Note or
portion of a New Note if the Company receives the notice of revocation before
the date on which the Company mails to the Holders an Officers' Certificate
certifying that the Holders of the requisite principal amount of New Notes have
consented (and not theretofore revoked such consent) to the amendment or waiver.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the holders of New Notes entitled to consent to
any amendment or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
holders of New Notes at such record date (or their duly designated proxies), and
only those Persons, shall be entitled to consent to such amendment or waiver or
to revoke any consent previously given, whether or not such Persons continue to
59
be holders of New Notes after such record date. No consent shall be valid or
effective for more than 90 days after such record date.
(c) After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in Section 10.2(b), in which case the
amendment or waiver shall only bind each Holder that consented to it and every
subsequent holder of a New Note that evidences the same debt as the consenting
Holder's New Note.
10.4 NOTATION ON OR EXCHANGE OF NEW NOTES. The Company may place an
appropriate notation about an amendment, supplement or waiver on any New Note
thereafter issued in exchange for any New Note issued as of the date of such
amendment, supplement or waiver. The Company in exchange for all New Notes may
issue new New Notes that reflect the amendment, supplement or waiver. Failure to
make the appropriate notation or issue a new New Note shall not affect the
validity and effect of such amendment, supplement or waiver. 10.5 BOARD
APPROVAL. The Company may not sign an amendment, supplement or waiver with
respect to this Agreement until the Board of Directors of the Company approves
it.
ARTICLE XI
THE NEW NOTES
11.1 FORM AND DATING. The New Notes shall be substantially in the form of
EXHIBIT A hereto, which exhibit is part of this Agreement. The New Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the New Notes and any notation,
legend or endorsement on them. Subject to adjustment as provided in Section
6.6(b) hereof, the New Notes shall be issued, and may be transferred only, in
denominations of $100,000 and integral multiples thereof. The terms and
provisions contained in the New Notes shall constitute, and are hereby expressly
made, a part of this Agreement and to the extent applicable, the Company, by its
execution and delivery of this Agreement, expressly agrees to such terms and
provisions and to be bound thereby. 11.2 EXECUTION AND AUTHENTICATION. Two
Officers of the Company (each of whom shall have been duly authorized by all
requisite corporate actions) shall sign each New Note for the Company by manual
or facsimile signature. If an Officer whose signature is on a New Note no longer
holds that office at the time the New Note is issued, the New Note shall
nevertheless be valid. The Company's seal shall be reproduced on each New Note.
With respect to the sale and issuance of the New Notes, the Company shall
authorize for issuance, upon the execution and delivery of this Agreement, New
Notes in an aggregate principal amount up to $5,000,000. In no case shall the
aggregate principal amount of outstanding New Notes exceed $5,000,000 at any
time, except as provided in Section 11.5.
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11.3 TRANSFER AND EXCHANGE.
(a) When New Notes are presented to the Company with a request to
register a transfer or to exchange them for an equal principal amount of New
Notes of other authorized denominations, the Company shall register the transfer
or make the exchange if its requirements for such transaction are met; PROVIDED,
HOWEVER, that any New Note presented or surrendered for registration of transfer
or exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company or duly executed by the Holder of
such New Note or by its attorney duly authorized in writing.
(b) The Company shall not be required to issue, register the transfer
of or exchange any New Note (i) selected for redemption, in whole or in part,
except the unredeemed portion of any New Note being redeemed in part may be
transferred or exchanged, or (ii) during an Offer if such New Note is tendered
pursuant to such Offer and not withdrawn.
(c) No service charge shall be made for any registration of transfer
or exchange (except as otherwise expressly permitted herein), but the Company
may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 10.4 or 11.7 which the Company shall pay).
(d) Prior to due presentment for registration of transfer of any New
Note, the Company may deem and treat the Person in whose name any New Note is
registered as the absolute owner of such New Note (whether or not such New Note
shall be overdue and notwithstanding any notation of ownership or other writing
on such New Note made by anyone other than the Company) for the purpose of
receiving payment of principal of, and premium, if any, and interest on, such
New Note and for all other purposes, and notice to the contrary shall not affect
the Company.
11.4 REPLACEMENT NEW NOTES. If any mutilated New Note is surrendered to the
Company, or if the Company receives evidence to its satisfaction of the
destruction, loss or theft of any New Note, the Company shall issue a
replacement New Note and each such replacement New Note shall be an additional
obligation of the Company. If the Company requires, the Holder must supply an
indemnity bond that is sufficient in the judgment of the Company to protect the
Company from any loss that any of them may suffer if a New Note is replaced. The
Company may charge for its reasonable expenses in replacing a New Note.
11.5 OUTSTANDING NEW NOTES. The New Notes outstanding at any time are all
the New Notes the Company has issued except for those it has canceled, those
delivered to it for cancellation, and those described in this Section 11.5 as
not outstanding. If a New Note is replaced pursuant to Section 11.4 (other than
a mutilated Note surrendered for replacement), it ceases to be outstanding
unless the Company receives proof satisfactory to it that a bona fide purchaser
holds the replaced New Note. A mutilated New Note ceases to be outstanding upon
surrender of such New Note and replacement thereof pursuant to Section 11.4
hereof. If the entire principal of, and premium, if any, and accrued interest
on, any New Note is considered paid under Section 6.1, it ceases to be
outstanding and interest on it ceases to accrue. Subject to Section 11.6, a New
61
Note does not cease to be outstanding because the Company or any Affiliate of
the Company holds such New Note.
11.6 TREASURY NEW NOTES. In determining whether the Holders of the required
principal amount of New Notes have concurred in any directions, waiver or
consent, New Notes owned by the Company or any Subsidiary or Affiliate of the
Company shall be considered as though they are not outstanding. Notwithstanding
the foregoing, New Notes that the Company or any Affiliate of the Company offers
to purchase or acquires pursuant to an exchange offer, tender offer or otherwise
shall not be deemed to be owned by the Company or any Affiliate of the Company
until legal title to such New Notes passes to the Company or such Affiliate, as
the case may be.
11.7 TEMPORARY NEW NOTES. Until definitive New Notes are ready for
delivery, the Company may prepare and issue temporary New Notes. Temporary New
Notes shall be substantially in the form of definitive New Notes but may have
variations that the Company considers appropriate for temporary New Notes.
Without unreasonable delay, the Company shall prepare and issue definitive New
Notes in exchange for temporary New Notes. Until such exchange, temporary New
Notes shall be entitled to the same rights, benefits and privileges as
definitive New Notes.
11.8 CANCELLATION. The Company shall cancel any New Notes surrendered to it
for registration of transfer, exchange, replacement, payment (including all New
Notes called for redemption and all New Notes accepted for payment pursuant to
an Offer) or cancellation. The Company may not issue new New Notes to replace
any New Notes that have been canceled. If the Company or any Affiliate of the
Company acquires any New Notes (other than by redemption pursuant to Section 6.6
or an Offer pursuant to Section 6.7), such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such New Notes
unless and until such New Notes are canceled pursuant to this Section 11.8.
11.9 DEFAULTED INTEREST. If the Company defaults in a payment of interest
on the New Notes, it shall pay the defaulted interest in any lawful manner plus,
to the extent lawful, interest payable on the defaulted interest, to Holders on
a subsequent special record date, in each case at the rate provided in the New
Notes and Section 7.1. The Company shall fix or cause to be fixed each such
special record date and payment date. At least 15 days before the special record
date, the Company shall mail a notice that states the special record date, the
related payment date and the amount of interest (including interest, if any, on
the defaulted interest) to be paid.
11.10 RECORD DATE. The record date for purposes of determining the identity
of Holders of New Notes entitled to vote or consent to any action by vote or
consent authorized or permitted under this Agreement shall be 10 days prior to
the first solicitation of such vote or consent.
11.11 CUSIP NUMBER. A "CUSIP" number will be printed on the New Notes, and
the Company shall use the CUSIP number in notices of redemption, purchase or
exchange as a convenience to Holders, provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the New Notes and that reliance may be placed
only on the other identification numbers printed on the New Notes. The Company
will promptly notify the Holders of any change in the CUSIP number.
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11.12 RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
11.12, each New Note issued pursuant to this Agreement shall be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT
TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF
REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE
HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND CONDITIONS
CONTAINED IN, A SECURITIES PURCHASE AGREEMENT DATED AS OF NOVEMBER 24,
1999, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL BE
FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to the Purchaser upon its request.
Whenever the legend requirement imposed by this Section 11.12 shall
terminate, as hereinabove provided, the respective holders of Securities for
which such legend requirements have terminated shall be entitled to receive from
the Company, at the Company's expense, New Notes without such legend.
11.13 NOTICE OF TRANSFER; OPINIONS OF COUNSEL. The holder of each New Note
bearing the restrictive legend set forth in Section 11.12 above (a "RESTRICTED
SECURITY") agrees in connection with any transfer of such Restricted Security to
give to the Company, upon request (a) written description of the manner or
circumstances of such transfer and/or an opinion of counsel, which is
knowledgeable in securities law matters (including in-house counsel or regular
63
counsel to such Purchaser or its investment advisor), in form and substance
reasonably satisfactory to the Company, to the effect that the transfer of such
Restricted Security may be effected without registration of such Restricted
Security under the Securities Act. If for any reason the Company (after having
been furnished with the opinion required to be furnished pursuant to this
Section 11.13) shall fail to notify such holder within 5 days after such holder
shall have delivered such description and/or opinion to the Company that, in its
or its counsel's opinion, the transfer may not be legally effective (the
"ILLEGAL TRANSFER NOTICE"), such holders shall thereupon be entitled to
consummate the transfer of the Restricted Security as proposed; PROVIDED,
HOWEVER, that such procedure shall not be required, and any such attempted
transfer shall not be effective, in respect of a proposed transfer which is
expressly prohibited by the terms of this Agreement because it represents an
attempt to transfer New Notes in an aggregate principal amount of less than
$100,000 (subject to adjustment) in contravention of Section 11.1 hereof. If the
holder of the Restricted Security delivers to the Company an opinion of counsel
(including in-house counsel or regular counsel to such Purchaser or its
investment adviser) in form and substance reasonably satisfactory to the Company
that subsequent transfers of such Restricted Security will not require
registration under the Securities Act, or if the Company does not provide the
holders with an Illegal Transfer Notice as set forth above, the Company will
promptly after such contemplated transfer deliver new certificates for such
Restricted Security which do not bear the Securities Act legend set forth in
Section 11.12 above. The restrictions imposed by this Article XI upon the
transferability of any particular Restricted Security shall cease and terminate
when such Restricted Security has been sold pursuant to an effective
registration statement under the Securities Act or transferred pursuant to Rule
144 promulgated under the Securities Act. The holder of any Restricted Security
as to which such restrictions shall have terminated shall be entitled to receive
from the Company a new security of the same type but not bearing the restrictive
Securities Act legend set forth in Section 11.12 and not containing any other
reference to the restrictions imposed by this Article XI. Notwithstanding any of
the foregoing, no opinion of counsel will be required to be rendered pursuant to
this Section 11.13 with respect to the transfer of any Securities on which the
restrictive legend has been removed in accordance with this Section 11.13. As
used in this Section 11.13, the term "transfer" encompasses any sale, transfer
or other disposition of any Securities referred to herein.
11.14 SECURITY.
(a) In order to secure the due and punctual payment of the principal
of and interest on the New Notes when and as the same shall be due and payable,
whether on an Interest Payment Date, at maturity, by acceleration, call for
redemption or otherwise, and interest on the overdue principal and, to the
extent permitted by applicable law, interest, if any, on the New Notes and the
performance of all other obligations of the Company to the Holders under this
Agreement and the New Notes according to the terms hereunder or thereunder, the
Company covenants and agrees to enter into, and to cause its Subsidiaries to
enter into, as soon as practicable and in any event no later than March 31, 2000
(the "PLEDGE DATE") any Security Documents as Purchaser shall reasonably require
or request in order to grant a security interest to the Holders in the
Collateral constituting Capital Stock of the Gaming Subsidiaries, for the equal
and ratable benefit and security of the Holders without preference, priority or
distinction of any thereof over any other by reason or difference in time of
issuance, sale or otherwise. At the time the Security Documents are executed,
the Company will have full right, power and lawful authority to grant, convey,
hypothecate, assign, mortgage and pledge the property constituting the
64
Collateral, in the manner and form done, or intended to be done, in this
Agreement and the Security Documents, free and clear of all Liens whatsoever,
except the Liens created by this Agreement and the Security Documents and except
to the extent otherwise provided herein and therein, and the Company covenants
an agrees to (i) forever warrant and defend the title to the same against the
claims of all Persons whatsoever, (ii) execute, acknowledge and deliver to the
Purchaser such further assignments, transfers, assurances or other instruments
as the Purchaser may reasonably require or request, and (iii) do or cause to be
done all such acts and things as may be necessary or proper, or as may be
reasonably required by the Purchaser, to assure and confirm to the Purchaser the
security interest in the Collateral contemplated hereby and by the Security
Documents, or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this Agreement and of
the New Notes secured hereby, according to the intent and purposes herein
expressed. This Agreement and the Security Documents will create in favor of the
Holders a direct and valid first priority Lien (the "SECURITYHOLDER LIEN") on
the property constituting the Collateral, as set forth herein and therein;
provided, however, that the Holders' Lien shall be subject to a priority Lien of
any lender with respect to any Liens created in connection with the Incurrence
of Senior Indebtedness permitted under Section 7.7(c)(iv) and Liens on assets
acquired pursuant to Section 7.7(c)(v) which Liens are created in connection
with such purchase.
(b) The Company will, at its own expense, enter into, register, record
and file or rerecord or refile and renew the Security Documents, this Agreement
and all amendments or supplements thereto in such manner and in such place or
places, if any, as may be required by law in order fully to effectuate, preserve
and protect the Securityholder Lien and the Security Documents and to effectuate
and preserve the Securityholder Lien and all rights of the Holders in the
Collateral.
(c) The Company shall furnish to the Purchaser as promptly as possible
an opinion of Squire, Xxxxxxx & Xxxxxxx L.L.P. (or other counsel satisfactory to
Purchaser), which opinion shall be in form and substance satisfactory to
Purchaser, either (i) stating that, in the opinion of such counsel, this
Agreement and the assignment of the Collateral intended to be made by the
Security Documents and all other instruments of further assurance or amendment
have been properly recorded, registered and filed to the extent necessary to
make effective the Securityholder Lien intended to be created by the Security
Documents, or (ii) stating that, in the opinion of such counsel, no such action
is necessary to make any Securityholder Lien and assignment effective.
(d) The Company shall be entitled to obtain a full release of all of
the Collateral from the Liens of the Security Documents upon payment in full of
its obligations under the New Notes.
(e) The Holders of a majority in aggregate principal amount of the
then outstanding New Notes shall have power to institute and to maintain such
suits and proceedings as they may deem advisable to prevent any impairment of
the Collateral by any acts which may be unlawful or in violation of the Security
Documents, or this Agreement, and such suits and proceedings as the Holders of a
majority in aggregate principal amount of the then outstanding New Notes may
deem expedient to preserve or protect their interests in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
65
impair the security hereunder or be prejudicial to the interests of the
Holders).
(f) In the event that the opinion of counsel contemplated by Section
11.14(c) hereof is not delivered to the Purchaser on or prior to the Security
Date, interest on the New Notes will accrue at 2.0% per annum (the "ADDITIONAL
INTEREST") in excess of the interest rate then in effect commencing on April 1,
2000 (unless Additional Interest is otherwise accruing). The Company shall pay
any accrued and unpaid Additional Interest to the Holders of record (as
determined on the fifteenth day of any month during which Additional Interest is
accruing) no later than the last Business Day of any month during which
Additional Interest is accruing. The Additional Interest shall cease to accrue
on any date on which the Company shall deliver to the Purchaser the relevant
opinion of counsel contemplated by Section 11.14(c) hereof.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION; EXPENSES, ETC.
(a) In addition to any and all obligations of the Company to indemnify
the Purchaser hereunder or under the other Transaction Documents, the Company
agrees, without limitation as to time, to indemnify and hold harmless the
Purchaser, its Affiliates, and the employees, officers, directors, and agents of
the Purchaser and its Affiliates (individually, an "INDEMNIFIED PARTY" and,
collectively the "INDEMNIFIED PARTIES") from and against any and all losses,
claims, damages, liabilities, costs (including the costs of preparation and
attorneys' fees) and expenses (including expenses of investigation)
(collectively, "LOSSES") incurred or suffered by an Indemnified Party (i) in
connection with or arising out of any breach of any warranty, or the inaccuracy
of any representation, as the case may be, made by the Company, or the failure
of the Company to fulfill any agreement or covenant contained in this Agreement
or (ii) in connection with any proceeding against the Company or any Indemnified
Party brought by any third party arising out of or in connection with this
Agreement or the other Transaction Documents or the transactions contemplated
hereby or thereby, as the case may be, or any action taken in connection
herewith or therewith (or any other document or instrument executed herewith or
pursuant hereto or thereto), whether or not the transactions contemplated by
this Agreement are consummated or whether or not any Indemnified Party is a
formal party to any proceeding; PROVIDED, HOWEVER, that the Company shall not be
liable for any losses resulting from action on the part of any Indemnified Party
which is finally determined in such proceeding to be wrongful or which is an act
of gross negligence, recklessness, or willful misconduct by such Indemnified
Party. The Company agrees promptly to reimburse any Indemnified Party for all
such Losses as they are incurred or suffered by such Indemnified Party.
Except as otherwise provided herein, the Company agrees (for the
benefit of the Purchaser) to pay, and to hold the Purchaser harmless from and
against, all costs and expenses (including, without limitation, attorneys' fees,
expenses and disbursements), if any, incurred in connection with the enforcement
against the Company of this Agreement or any other agreement to which the
Company is a party or any other agreement or instrument furnished pursuant
hereto or thereto, as the case may be, or in connection herewith or therewith in
66
any action in which the Purchaser shall prevail or in any action in which the
Purchaser shall in good faith assert any provision of any of the foregoing as a
defense.
(b) If any Indemnified Party is entitled to indemnification hereunder,
such Indemnified Party shall give prompt notice to the Company of any claim or
of the commencement of any proceeding against the Company or any Indemnified
Party brought by any third party with respect to which such Indemnified Party
seeks indemnification pursuant hereto; PROVIDED, HOWEVER, that the failure so to
notify the Company shall not relieve the Company from any obligation or
liability except to the extent the Company is prejudiced by such failure. The
Company shall have the right, exercisable by giving written notice to an
Indemnified Party promptly after the receipt of written notice from such
Indemnified Party of such claim or proceeding, to assume, at the expense of the
Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. The Indemnified Party or Parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The Company shall
not consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and substance
satisfactory to the Indemnified Party or Parties, from all liability in respect
of such claim, litigation or proceeding.
(c) In addition to any other obligations of the Company to indemnify
the Purchaser herein or pursuant to any of the Transaction Documents or any
other agreements or documents executed and delivered in connection herewith or
therewith, the Company will pay, and will save the Purchaser and each other
holder of any of the Securities harmless from liability for the payment of, all
expenses arising in connection with such transactions, including, without
limitation: (a) all document production and duplication charges and the
reasonable fees, charges and expenses of Purchaser's Special Counsel (whether
arising before or after the Closing Date), the transactions contemplated hereby
and any subsequent proposed modification of, or proposed consent under, this
Agreement, whether or not such proposed modification shall be effected or such
proposed consent granted; (b) the costs of obtaining a private placement CUSIP
number from Standard & Poor's Corporation for the Securities; (c) the costs and
expenses, including attorneys' fees, incurred by the Purchaser in enforcing any
rights under this Agreement or in responding to any subpoena or other legal
process issued in connection with this Agreement or the transactions
contemplated hereby or thereby or by reason of the Purchaser's having acquired
any of the Securities, including, without limitation, costs and expenses
incurred by the Purchaser in any bankruptcy case; (d) the cost of delivering to
the Purchaser's principal office, insured to its satisfaction, the New Notes
delivered to the Purchaser hereunder and any Securities delivered to the
Purchaser upon any substitution of Securities pursuant to this Agreement or any
of the Transaction Documents and of the Purchaser's delivering any Securities,
insured to its satisfaction, upon any such substitution; and (e) the reasonable
out-of-pocket expenses incurred by the Purchaser in connection with such
transactions and any such amendments or waivers.
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ARTICLE XIII
MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY. All
representations and warranties contained in this Agreement or the Transaction
Documents or made in writing by or on behalf of the Company in connection with
the transactions contemplated by this Agreement or the Transaction Documents
shall survive, for the duration of any statutes of limitation applicable
thereto, the execution and delivery of this Agreement, any investigation at any
time made by the Purchaser or on the Purchaser's behalf, the purchase of the New
Notes by the Purchaser under this Agreement and any disposition of or payment on
the New Notes. All statements contained in any certificate or other instrument
delivered to the Purchaser by or on behalf of the Company pursuant to this
Agreement or the Transaction Documents at the Closing shall be deemed
representations and warranties of the Company under this Agreement. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provisions
in any other jurisdiction.
13.2 NOTICES, ETC. Any notice or communication under this Agreement shall
be duly given if in writing and delivered in person, mailed by registered or
certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company: Silicon Gaming, Inc.
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
Tel: (000) 000-0000
With a copy to: Squire, Xxxxxxx & Xxxxxxx L.L.P.
00 X. Xxxxxxx Xxx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxxxxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Tel: (000) 000-0000
If to the Purchaser: DDJ Capital Management, LLC
000 Xxxxxx Xxxxxx, Xxxxx X-0
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: General Counsel
Fax: (000) 000-0000
Tel: (000) 000-0000
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With a copy to: Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx Xxxxxx, P.C.
Fax: (000) 000-0000
Tel: (000) 000-0000
The Company or the Purchaser by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; the date receipt is acknowledged, if mailed by registered or
certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to any other Holder shall be mailed by
first-class mail to his or her address shown on the register maintained by the
Company. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.
13.3 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties
hereto are referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of the respective parties which are contained in this Agreement shall
bind and inure to the benefit of the successors and assigns of all other
parties. The terms and provisions of this Agreement and the other Transaction
Documents shall inure to the benefit of and shall be binding upon any assignee
or transferee of the Purchaser, and in the event of such transfer or assignment,
the rights and privileges herein conferred upon the Purchaser shall
automatically extend to and be vested in, and become an obligation of, such
transferee or assignee, all subject to the terms and conditions hereof. In
connection therewith, such transferee or assignee may disclose all documents and
information which such transferee or assignee now or hereafter may have relating
to the Securities, this Agreement, the other Transaction Documents, the Company,
any other Persons referred to herein or any of the business of any of the
foregoing entities, subject to full compliance with Section 13.9 hereof.
13.4 DESCRIPTIVE HEADINGS. The headings in this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.
13.5 SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchaser or to the holders of a specified
portion of the principal amount of any class of the Securities, the
determination of such satisfaction shall be made by the Purchaser or such
holders, as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
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13.6 GOVERNING LAW. THIS AGREEMENT AND THE CONVERTIBLE NOTES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAW.
13.7 SERVICE OF PROCESS. The Company (a) hereby irrevocably submits itself
to the jurisdiction of the state courts of the State of New York and to the
jurisdiction of the United States District Court for the Southern District of
New York for the purpose of any suit, action or other proceeding arising out of
or based upon this Agreement, the Securities, the other Transaction Documents or
the subject matter hereof or thereof brought by the Purchaser or its successors
or assigns and (b) hereby waives, and agrees not to assert, by way of motion, as
a defense, or otherwise, in any such suit, action or proceeding, any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and (c) hereby waives any
offsets or counterclaims in any such action, suit or proceeding (other than
compulsory counterclaims). The Company hereby consents to service of process by
registered mail at the address to which notices are to be given. The Company
agrees that its submission to jurisdiction and its consent to service of process
by mail is made for the express benefit of the Purchaser. Final judgment against
the Company in any such action, suit or proceeding shall be conclusive and may
be enforced in other jurisdictions (a) by suit, action or proceeding on the
judgment, a certified or true copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness or liability of the Company therein
described or (b) in any other manner provided by or pursuant to the laws of such
other jurisdiction; provided, however, that the Purchaser may at its option
bring suit or institute other judicial proceedings against the Company or any of
the Company's assets in any state or federal court of the United States or in
any country or place where the Company or such assets may be found.
13.8 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
13.9 DISCLOSURE TO OTHER PERSONS. The Purchaser agrees to keep confidential
any financial information delivered by the Company pursuant to this Agreement
(other than information that is publicly available) and such other non-public
proprietary information delivered by the Company that is clearly designated in
writing to be or otherwise known by the Purchaser to be confidential; PROVIDED,
HOWEVER, that nothing herein shall prevent the Purchaser from disclosing such
information: (a) to any prospective purchaser who agrees in writing to be bound
by this Section 13.9, (b) to any Affiliate, director, officer, employee, agent
and professional consultant of any prospective purchasers, in its capacity as
such or any actual purchaser, participant, assignee, or transferee of such
Purchaser's or prospective purchaser's rights under any Unit or any part thereof
that agrees in writing to be bound by this Section 13.9, (c) upon order of any
court or administrative agency having jurisdiction over such party, (d) upon the
request or demand of any regulatory agency or authority having jurisdiction over
such party, (e) which has been publicly disclosed through no breach of
Purchaser, (f) which has been obtained from any Person that is not a party
hereto or an Affiliate of any such party, (g) in connection with the exercise of
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any remedy hereunder, (h) to the certified public accountants for the Purchaser
or as required in summary financial or descriptive business information
disclosed by the Purchaser that is an investment fund as part of its regular
reports to its investors or partners, or (i) as otherwise expressly contemplated
by this Agreement. In order to permit the Company to remove or limit any order,
request or demand or to obtain confidential treatment for any disclosure
pursuant to (c) or (d) above, the Purchaser will use reasonable efforts to
inform the Company of any such request for disclosure prior to disclosure.
Nothing in this Section 13.9 shall be construed to create or give rise to any
fiduciary duty on the part of the Purchaser to the Company.
13.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Agreement may not
be used to interpret another agreement, indenture, loan or debt agreement of the
Company or any Subsidiary. Any such agreement, indenture, loan or debt agreement
may not be used to interpret this Agreement.
13.11 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES, ANY OTHER
TRANSACTION DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
AGREEMENT, THE SECURITIES OR ANY OTHER TRANSACTION DOCUMENTS, OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, PROVIDED,
HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY ONE
PARTY AGAINST ANOTHER PARTY WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN
THE PARTY BRINGING SUCH CLAIM BEING FOREVER BARRED FROM BRINGING SUCH CLAIM),
THE PARTY BRING SUCH CLAIM SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
13.12 MERGER. This Agreement, the New Notes and the Restructuring Agreement
constitute the entire agreement of the Company and the Holders and express the
entire understanding of the Company and the Holders with respect to the New
Notes.
13.13 EXPENSES. The Company agrees to pay, on demand, all reasonable
out-of-pocket expenses incurred by the Holders, including, without limitation,
legal and accounting fees, in connection with the collection of amounts upon the
occurrence of an Event of Default hereunder, and the revision, protection or
enforcement of any of the Holder's rights against the Company under this
Agreement and the New Notes. 13.14 COOPERATION WITH GAMING AUTHORITIES. The
Purchaser and each Holder of the Securities agree to cooperate with the Gaming
Authorities in connection with the administration of their regulatory
jurisdiction over the Company and its Gaming Subsidiaries, including, without
limitation, the provision of such documents or other information as may be
requested by any such Gaming Authority relating to the Purchaser or any Holder
of the Securities, or to the Company or its Gaming Subsidiaries, or to the
Transaction Documents.
71
13.15 GAMING LAWS; REQUISITE GAMING APPROVALS. Notwithstanding anything to
the contrary therein, the Transaction Documents and the exercise of all rights,
powers and remedies thereunder, are subject to all applicable provisions of the
Gaming Laws.
13.16 ASSISTANCE WITH GAMING APPROVALS.
(a) The Company will and will cause its Gaming Subsidiaries to assist
the Purchaser and pay all expenses of the Purchaser (including fees of counsel)
in obtaining all approvals of any Gaming Authority or other Governmental Body
that are required by law, including, without limitation, the Gaming Laws, for or
in connection with any action or transaction contemplated by the Transaction
Documents, including any approvals required for the conversion of the Series D
Preferred Stock.
(b) Following the Closing Date, the Purchaser shall not be obligated
to make any filing under the Gaming Laws of any other jurisdiction, and shall
not be required to apply for licensure or registration, seek a finding of
suitability or a waiver of licensing, registration or suitability requirements
or seek any similar approval of any Gaming Authority or other Governmental Body
under the Gaming Laws (collectively, a "GAMING APPROVAL"). In the event any
applicable Gaming Authority or other Governmental Body requires the Purchaser to
apply for a Gaming Approval, the Company will or will cause the relevant Gaming
Subsidiary to, at Purchaser's request, withdraw from such jurisdiction and not
sell its products or otherwise conduct its business in such jurisdiction in a
manner that would otherwise require Purchaser to be required to apply for a
Gaming Approval of any Gaming authority or other Governmental Body under the
Gaming Laws of such jurisdiction. The Company further agrees that it will not
and will cause its Gaming Subsidiaries not to seek any remedy against the
Purchaser, either at law or in equity, for the Purchaser's failure or refusal to
apply for a Gaming Approval, including, without limitation, seeking the
divestiture by the Purchaser of the Series D Preferred Stock, the Amended Notes,
the New Notes or any other securities of the Company then held by the Purchaser.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
72
SECURITIES PURCHASE AGREEMENT
13% SENIOR SECURED NOTES
COMPANY SIGNATURE PAGE
If this Agreement is satisfactory, please so indicate by signing the
applicable attached signature page of this Agreement and delivering such
counterpart to the Company whereupon this Agreement will become binding among
the parties hereto in accordance with its terms.
SILICON GAMING, INC.,
a California corporation
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
SECURITIES PURCHASE AGREEMENT FOR SENIOR SECURED NOTES OF
SILICON GAMING, INC.
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the Aggregate Principal amount of
date first written above: New Notes to be purchased:
$2,000,000.00
B III CAPITAL PARTNERS, L.P.,
a Delaware limited partnership
By: DDJ Capital III, LLC,
its General Partner
By: DDJ Capital Management, LLC,
its Manager
By:
--------------------------------------
Name:
Title: Purchase Price: $2,000,000.00
Address: c/o DDJ Capital Management, LLC
Attn: Xxxxx Xxxxxxxxx Xxxxxxx
000 Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Designated Bank:
------------------------------------- --------------------------------------
Name ABA #
------------------------------------- --------------------------------------
Street Address
------------------------------------- --------------------------------------
Account Number Attention
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS
SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH SECURITY ARE
SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN, A SECURITIES PURCHASE
AGREEMENT DATED AS OF NOVEMBER __, 1999, A COMPLETE AND CORRECT COPY OF THE FORM
OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
SILICON GAMING, INC.
13% SENIOR SECURED NOTE DUE NOVEMBER ___, 2004
No. 1 $
Silicon Gaming, Inc., a California corporation (hereinafter called the
"COMPANY", which term includes any successor entity under the Agreement
hereinafter referred to), for value received, hereby promises to pay to B III
CAPITAL PARTNERS, L.P., a Delaware limited partnership, or registered assigns,
the principal sum of Two Million Dollars on November ___, 2004.
Interest Payment Dates: the first day of each calendar month commencing on
January 1, 2000
Record Dates: ten (10) days preceding each Interest Payment Date
Reference is hereby made to the further provisions of this New Note set
forth on the following five (5) pages, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this New Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
seal to be affixed hereto or imprinted hereto.
SILICON GAMING, INC.
By:
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
13% Senior Secured Note due November ___, 2004
1. INTEREST. Silicon Gaming, Inc. (the "Company") promises to pay interest
on the principal amount of this New Note at the rate and in the manner specified
below. Interest on this New Note will accrue at (i) the rate of 10% per annum
from November ___, 1999 until maturity and will be payable in cash monthly in
advance, and (ii) at the rate of 3% per annum, compounded monthly, from November
___, 1999 until maturity and will be payable-in-kind, annually in arrears, each
based upon a 360 day year beginning on November ___, 1999, or if any such day is
not a Business Day on the next succeeding Business Day (each an "INTEREST
PAYMENT DATE"), to the holder of record on the tenth (10th) day immediately
preceding that Interest Payment Date. The Company shall pay interest on overdue
principal and premium, if any, from time to time on demand at the rate of 1.5%
per annum in excess of the interest rate then in effect and shall pay interest
on overdue installments of interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. METHOD OF PAYMENT. The Company will pay interest on this New Note
(except defaulted interest) to the Person who is the registered Holder of this
New Note at the close of business on the record date for the next Interest
Payment Date even if such New Note is canceled after such record date and on or
before such Interest Payment Date. Holders must surrender New Notes to the
Company to collect principal payments on such New Notes. The Company will pay
principal, premium, if any, and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal, premium, if any, and interest by wire
transfer of Federal funds, or interest by check payable in such money, and any
such check may be mailed to a Holder's registered address.
3. SECURITIES PURCHASE AGREEMENT. The Company issued the New Notes pursuant
to a Securities Purchase Agreement, dated as of November ____, 1999 (the
"AGREEMENT"), by and between the Company, as issuer of the New Notes, and the
Purchaser named therein. The terms of the New Notes are those stated in the
Agreement and herein. The New Notes are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders are referred to the
Agreement (all capitalized terms not defined herein shall have the meanings
assigned them in the Agreement). The New Notes are general obligations of the
Company limited to $5,000,000 in aggregate principal amount. Reference is hereby
made to the Agreement for a description of the properties and assets in which a
security interest has been granted, and the nature of the security, the terms
and conditions upon which the security interests were granted.
4. REDEMPTION PROVISIONS. The New Notes will be subject to redemption, in
whole or in part from time to time (in multiples of $1,000 of principal amount)
at the option of the Company at a price of $1.00 for every $1.00 of principal
amount of New Notes, plus any accrued but unpaid interest, plus a premium which
when taken together with the interest earned on the New Notes, results in an
annualized internal rate of return to the Holder of 25%.
In addition, if not previously redeemed, the New Notes will be subject to
redemption (a "CHANGE OF CONTROL REDEMPTION") at the option of the Holders, in
whole or in part, at any time within 30 days after the completion of an Offer
made as a result of a Change of Control, at a redemption price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest to the Purchase
Date, subject to certain conditions set forth in the Agreement.
In addition, the New Notes will be subject to redemption ("SECURITIES SALE
REDEMPTION") at the option of the Holders, in whole or in part, following a
Securities Sale or a Mezzanine Debt Financing, from the Net Cash Proceeds of
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such Securities Sale or Mezzanine Debt Financing, subject to the provisions of
Section 7.13 of the Agreement; provided that an Offer to make a Securities Sale
Redemption shall be made by the Company only if, and to the extent that, the
aggregate amount of Net Cash Proceeds from all such Securities Sales or
Mezzanine Debt Financings occurring on or after the date hereof exceed
$5,000,000. In the event of a Securities Sale Redemption, the New Notes will be
redeemable at the aggregate principal amount plus any accrued and unpaid
interest to the Purchase Date.
5. MANDATORY OFFERS. (a) Within 10 days after any Change of Control Trigger
Date, any Repayment Trigger Date or any Excess Proceeds Date, the Company shall
mail a notice to each Holder stating a number of items as set forth in Section
6.7 of the Agreement.
(b) Holders may tender all or, subject to Section 8 below, any portion
of their New Notes in an Offer by completing the form below entitled "OPTION OF
HOLDER TO ELECT PURCHASE."
(c) Promptly after consummation of an Offer, (i) the Company shall
mail to each Holder of New Notes or portions thereof accepted for payment an
amount equal to the purchase price for, plus any accrued and unpaid interest on,
such New Notes, (ii) with respect to any tendered New Note not accepted for
payment in whole or in part, the Company shall return such New Note to the
Holder thereof, and (iii) with respect to any New Note accepted for payment in
part, the Company shall authenticate and mail to each such Holder a new New Note
equal in principal amount to the unpurchased portion of the tendered New Note.
(d) The Company will (i) publicly announce the results of the Offer to
Holders on or as soon as practicable after the Purchase Date, and (ii) comply
with Rule 14e-1 under the Securities Exchange Act of 1934, as amended, and any
other securities laws and regulations to the extent applicable to any Offer.
6. NOTICE OF REDEMPTION OR PURCHASE. At least 30 days but not more than 60
days before any Redemption Date the Company shall mail by first class mail a
notice of redemption to each Holder of New Notes or portions thereof that are to
be redeemed.
7. NEW NOTES TO BE REDEEMED OR PURCHASED. The New Notes may be redeemed or
purchased in part, but only in whole multiples of $1,000 unless all New Notes
held by a Holder are to be redeemed or purchased. On or after any date on which
New Notes are redeemed or purchased, interest ceases to accrue on the New Notes
or portions thereof called for redemption or accepted for purchase on such date.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The New Notes are in registered form
without coupons in denominations of $100,000 and integral multiples thereof
(subject to adjustment as provided in the Agreement). The transfer of New Notes
may be registered and New Notes may be exchanged as provided in the Agreement.
Holders seeking to transfer or exchange their New Notes may be required, among
other things, to furnish appropriate endorsements and transfer documents and to
pay any taxes and fees required by law or permitted by the Agreement. The
Company need not exchange or register the transfer of any New Note or portion of
a New Note selected for redemption or tendered pursuant to an Offer.
9. PERSONS DEEMED OWNERS. The registered holder of a New Note may be
treated as its owner for all purposes.
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10. AMENDMENTS AND WAIVERS.
(a) Subject to certain exceptions, the Agreement and the New Notes may
be amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding New Notes, and
any existing Default or Event of Default or compliance with any provision of the
Agreement or the New Notes may be waived with the consent of the Holders of at
least a majority in principal amount of the then outstanding New Notes.
(b) Notwithstanding Section 10(a) above, the Company may amend or
supplement the Agreement or the New Notes without the consent of any Holder to:
cure any ambiguity, defect or inconsistency; provide for uncertificated New
Notes in addition to or in place of certificated New Notes; provide for the
assumption of the Company's obligations to the Holders in the event of any
Disposition involving the Company that is permitted under Article VIII of the
Agreement and in which the Company is not the Surviving Person; or make any
change that would provide any additional rights or benefits to Holders or not
adversely affect the legal rights under the Agreement of any Holder.
(c) Certain provisions of the Agreement cannot be amended,
supplemented or waived without the consent of each Holder of New Notes affected.
11. DEFAULTS AND REMEDIES. Events of Default include: (i) the Company's
failure to make any payment in respect of (A) the principal of or premium, if
any, on the New Notes or the Amended Notes as the same shall become due, whether
at maturity, upon acceleration, redemption, or otherwise, or (B) interest on or
in respect of any New Notes or the Amended Notes as the same shall become due
and such failure shall continue for a period of 15 Business Days; (ii) failure
by the Company for 30 days after receipt of notice from the Holders of at least
25% of the outstanding New Notes to comply with any other provisions of the
Agreement, the Amendment Notes Securities Purchase Agreement, the Restructuring
Agreement, the Amended Notes or the New Notes; (iii) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness now exists, or is created after
the date hereof, if (A) such default results in the acceleration of such
Indebtedness prior to its express maturity or shall constitute a default in the
payment of such Indebtedness at final maturity of such Indebtedness, and (B) the
principal amount of any such Indebtedness that has been accelerated or not paid
at maturity, when added to the aggregate principal amount of all other such
Indebtedness that has been accelerated or not paid at maturity, exceeds
$250,000; (iv) failure by the Company or any of its Subsidiaries to pay final
judgments, the uninsured portion of which exceeds $250,000, which judgments are
not paid, discharged, bonded or stayed for a period of 60 days after the date of
entry thereof; (v) if under any Bankruptcy Law, (A) the Company or any
Subsidiary commences a voluntary case, consents to the entry of an order for
relief against it in an involuntary case, consents to the appointment of a
Custodian of it or for all or substantially all of its property, or makes a
general assignment for the benefit of its creditors, or (B) a court of competent
jurisdiction enters an order or decree, and such order or decree remains
unstayed and in effect for 90 days, that is for relief against the Company or
any Subsidiary in an involuntary case, appoints a Custodian of the Company or
any Subsidiary or for all or substantially all of the Property of the Company or
any Subsidiary, or orders the liquidation of the Company or any Subsidiary; (vi)
any of the Transactions Documents shall cease for any reason, to be in full
force and effect, in any material respect, except as a result of an amendment,
waiver or termination thereof as contemplated or permitted hereby, or the
Company shall so assert in writing; (vii) if the Secretary of State for the
State of California fails to accept, within twenty (20) days after the initial
submission thereof, the Series D Certificate of Determination or the Series E
Certificate of Determination (each as defined in the Agreement) in the forms
A-4
attached to the Restructuring Agreement (as defined in the Agreement) as EXHIBIT
A and EXHIBIT B, respectively, or with such changes as would not individually or
in the aggregate, in the reasonable opinion of the Purchaser, adversely affect
the rights, privileges or preferences of the holders of the Series D Preferred
Stock or the Series E Preferred Stock.
Any notice of default delivered to the Company by the Holders of New Notes must
be in writing and must specify the Event of Default, demand that it be remedied
and state that the notice is a "Notice of Default."
12. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or shareholder of the Company shall have any liability for any
obligation of the Company under the Agreement or the New Notes or for any claim
based on, in respect of, or by reason of, any such obligation or the creation of
any such obligation. Each Holder by accepting a New Note waives and releases
such Persons from all such liability, and such waiver and release is part of the
consideration for the Issuance of the New Notes.
13. SUCCESSOR SUBSTITUTED. Upon the merger, consolidation or other business
combination involving the Company or upon the sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the Company's
properties and assets, the Surviving Person (if other than the Company)
resulting from such Disposition shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Agreement with the
same effect as if such Surviving Person had been named as the Company in the
Agreement.
14. GOVERNING LAW. This New Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without regard to
the conflict of laws provisions thereof.
15. CUSIP NUMBERS. The Company will use reasonable efforts to cause CUSIP
numbers to be printed on the New Notes and to use CUSIP numbers in notices of
redemption as a convenience to Holders. No representation is made as to the
accuracy of such numbers either as printed on the New Notes or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers printed on the securities.
16. COPIES OF AGREEMENT. The Company will furnish to any Holder upon
written request and without charge a copy of the Agreement, which has in it the
text of this New Note. Requests may be made to: Silicon Gaming, Inc., 0000 X.
Xxxxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, Attn: President.
17. CERTAIN INFORMATION OBLIGATIONS. To the extent permitted by applicable
law or regulation, whether or not the Company is subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall file with the
Commission all quarterly and annual reports and such other information,
documents or other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) required to be filed
pursuant to such provisions of the Exchange Act. At any time when the Company is
not permitted by applicable law or regulations to file the aforementioned
reports, the Company shall mail to the Holders, within five days after it would
have been required to file the same with the Commission, all information that
the Company would have had to provide to the Commission if the Company had been
subject to Section 13 or 15(d) of the Exchange Act. Also, at any time when the
Company is not permitted by applicable law or regulations to file the
aforementioned reports, upon the request of a Holder of a New Note, the Company
will promptly furnish or cause to be furnished such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) to such Holder or to a prospective purchaser of such New Note, as the
case may be, in order to permit compliance by such Holder with Rule 144A under
the Securities Act.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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ASSIGNMENT FORM
To assign this New Note, fill in the form below:
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
(Please insert social security or other identifying number of assignee)
at
(Please print or typewrite name and address including postal
zip code of assignee)
the within New Note and all rights thereunder, hereby irrevocably constituting
and appointing ________________________________________ to transfer said New
Note on the books of the Company. The agent may substitute another to act for
him. Date:________________________
Your Signature:________________________________
(Sign exactly as your name appears on the
other side of this New Note)
Signature Guarantee: _________________________
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OPTION OF HOLDER TO ELECT PURCHASE
[ ] If you elect to have this New Note purchased by the Company pursuant to
Section 7.12 of the Agreement, check the box:
[ ] If you elect to have this New Note purchased by the Company pursuant to
Section 7.13 of the Agreement, check the box:
[ ] If you elect to have only part of this New Note purchased by the Company
pursuant to Section 7.12 or 7.13 of the Agreement, state the amount
(multiples of $1,000 only):
$
-------------------------
Date: Your Signature:
-----------------------------------
(Sign exactly as your name appears
on the other side of this New Note)
Signature Guarantee:
-----------------------------
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