AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE DUE JANUARY 1, 2010
Exhibit
10.1
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
Original
Issue Date: March 31,
2006 $6,051,250.00
Original
Conversion Price (subject to adjustment herein): $1.345
AMENDED
AND RESTATED SENIOR SECURED
CONVERTIBLE
NOTE DUE JANUARY 1, 2010
WHEREAS, on March 31, 2006, Las Vegas Gaming, Inc., a
Nevada corporation, having a principal place of business at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ (the "Company”), entered
into a Securities Purchase Agreement dated as of March 31, 2006 (the “Purchase
Agreement”), with CAMOFI Master
LDC or its registered assigns (the “Holder”), pursuant to
which the Company sold to Holder, and Holder acquired from the Company, a Senior
Secured Note due January 1, 2008 in the original aggregate principal amount of
$5,000,000 (the “Original Note”);
WHEREAS, subsequent to March 31,
2006, the Company requested that changes be made to certain provisions in the
Transaction Documents, including without limitation, extending the Maturity Date
of the Original Note from January 1, 2008 to January 1, 2010;
WHEREAS, in partial consideration of
the Holder’s agreeing to make the changes requested by the Company, the
aggregate principal amount outstanding under the Original Note was increased to
$6,051,250;
WHEREAS, the amendments described in
the two WHEREAS clauses immediately above, together with several other
amendments to the Original Note, were set forth in letter agreements
between the Company and Holder executed on each of December 21, 2007,
(ii) September 28, 2007, (iii) March 22, 2007, (iv) January 19, 2007, (v)
December 15, 2006, and (vi) September 19, 2006, (collectively, the “Letter
Agreements”); and
WHEREAS, the Company and Holder
desire to combine all of the changes delineated in the Letter Agreements
relating to the Original Note into one, comprehensive new Senior Secured
Convertible Note.
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NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company hereby agrees with ▇▇▇▇▇▇ as follows.
THIS NOTE is a duly authorized and
issued Senior Secured Convertible Note of the Company, designated as its Senior
Secured Convertible Note, due January 1, 2010 (the “Note”).
FOR VALUE
RECEIVED, the Company promises to pay to Holder the principal sum of Six Million
Fifty-One Thousand Two Hundred and Fifty U.S. Dollars ($6,051,250) on January 1,
2010 or such earlier date as the Notes are required or permitted to be repaid as
provided hereunder (the “Maturity
Date”). This Note is subject to the following additional
provisions:
Section
1. Definitions. For
the purposes hereof, in addition to the terms defined elsewhere in this Note:
(a) capitalized terms not otherwise defined herein have the meanings given to
such terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:
“Alternate
Consideration” shall have the meaning set forth in Section
6(e)(iii).
“Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions in the State
of New York are authorized or required by law or other government action to
close.
“Change of Control
Transaction” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual or legal entity or “group”
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or within an
eighteen month period of more than one-half of the members of the Company's
board of directors which is not approved by a majority of those individuals who
are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any date
whose nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof), or (iii)
the execution by the Company of an agreement to which the Company is a party or
by which it is bound, providing for any of the events set forth above in (i) or
(ii).
“Common Stock” means
the common stock, $0.001 par value, of the Company and stock of any other class
into which such shares may hereafter have been reclassified or
changed.
“Conversion Date”
shall have the meaning set forth in Section 5(a) hereof.
“Conversion Price”
shall have the meaning set forth in Section 5(c).
“Conversion Shares”
means the shares of Common Stock issuable upon conversion of Notes in accordance
with the terms hereof.
“Effectiveness Period”
shall have the meaning given to such term in the Registration Rights
Agreement.
“Event of Default” shall have the meaning set forth in Section
8.
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“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Fundamental
Transaction” shall have the meaning set forth in Section 6(e)(iii)
hereof.
“Late Fees” shall have
the meaning set forth in the second paragraph to this Note.
“Mandatory Prepayment
Amount” shall equal the aggregate principal amount of the Notes not
converted to common stock at 120% of the principal amount thereof to the date of
repayment.
“Monthly Conversion
Price” shall have the meaning set forth in Section 7(a)
hereof.
“Optional Prepayment
Amount” for any Note shall equal 120% of the principal amount thereof to
the date of repayment.
“Original Issue Date”
shall mean the date of the first issuance of the Original Note regardless of the
number of transfers of any Note and regardless of the number of instruments
which may be issued to evidence such Note.
“Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Purchase Agreement”
means the Securities Purchase Agreement, dated as of March 31, 2006,
to which the Company and the original Holder are parties, as amended, modified
or supplemented from time to time in accordance with its terms.
“Qualified Financing”
means an equity financing for the account of the Company in which shares of
common stock, or securities, directly or indirectly, convertible into or
exchangeable or exercisable for shares of common stock are issued, which
financing results in cumulative aggregate proceeds to the Company of at least
$10,000,000.
“Redemption” shall
mean the redemption of the Note pursuant to Section 7(a) hereof.
“Redemption Amount”
shall have the meaning set forth in Section 7a) hereof.
“Registration Rights
Agreement” means the Amended and Restated Registration Rights Agreement,
dated as of the date hereof, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
“Registration
Statement” means a registration statement meeting the requirements set
forth in the Registration Rights Agreement, covering among other things the
resale of the Conversion Shares and naming the Holder as a “selling stockholder”
thereunder.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Subsidiary” shall
have the meaning given to such term in the Purchase Agreement.
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“Threshold Period”
shall have the meaning given to such term in Section 5(e).
“Trading Day” means a
day on which the Common Stock is traded on a Trading Market.
“Trading Market” means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or the
OTC Bulletin Board.
“Transaction
Documents” shall have the meaning set forth in the Purchase
Agreement.
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on a Trading Market, the daily
volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the primary Trading Market on which the Common Stock is then
listed or quoted as reported by Bloomberg Financial L.P. (based on a Trading Day
from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP function;
(b) if the Common Stock is not then listed or quoted on the Trading Market
and if prices for the Common Stock are then reported in the “Pink Sheets”
published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Purchasers holding a
majority of the principal amount of Notes then outstanding.
Section
2. Prepayment and Commitment
Fee.
a)
Optional
Prepayment. The Company shall have the right to prepay, in
cash, on ten (10) Business Days’ prior written notice to the Holder (during
which time the Holder shall have the right to convert this Note into Common
Stock, at the option of the Holder, in accordance with the terms hereof) all or
a portion of this Note for an amount equal to 120% of the principal amount to be
repaid plus that portion of the Commitment Fee that would otherwise be payable
had the prepayment not been made.
b)
Mandatory
Prepayment. (i) On the closing of a Qualified Financing, or,
in the event that no Qualified Financing occurs prior to the Maturity Date, on
the Maturity Date, the Company will be required to offer to prepay or repay, in
cash, on ten (10) Business Days’ prior written notice to the Holder (during
which time the Holder shall have the right to convert this Note into Common
Stock, at the option of the Holder, in accordance with the terms hereof), the
aggregate principal amount of the Note not yet converted to Common Stock at 120%
of the principal amount thereof plus that portion of the Commitment Fee that
would otherwise be payable had the prepayment not been made.
(ii) (Intentionally
omitted).
c) Conversion Right of
Holder. Notwithstanding anything contained in this Note to the contrary,
Holder shall have the right, subject to the provisions of Section 5 hereof, to
convert up to one hundred percent (100%) of this Note into Common Stock. The
Company shall give Holder no less than ten (10) Business Days’ notice prior to
any proposed prepayments or repayments under the Note, during which time Holder
shall have the right to instead convert all or any portion of this Note into
Common Stock.
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d) Commitment Fee.
Subject to the next sentence hereof, for so long as any portion of this Note is
outstanding, the Company shall pay to Holder a fee in cash (i) on January 1,
2009 of $403,416.67 and thereafter, (ii) on each of July 1, 2009, and January 1,
2010, $302,562.50. In the event that the Company shall fail timely to pay any
Commitment Fee when due in accordance with this Section 2(d), then (i) the
Company shall be obligated to pay to Holder, as liquidated damages and not as a
penalty, two (2) times the amount of any such unpaid Commitment Fee, which
amount shall be immediately added to and become a part of the principal balance
outstanding under this Note, and (ii) the Commitment Fees owed by the Company to
Holder shall be recalculated from the amounts set forth in the first sentence of
this Section 2(d) to take into account the new principal amount outstanding
hereunder as of the date such Commitment Fee was due and not paid.
Section
3. Registration of Transfers
and Exchanges.
a)
Different
Denominations. This Note is exchangeable for an equal aggregate principal
amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
b) Investment
Representations. This Note has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement and
may be transferred or exchanged only in compliance with the Purchase Agreement
and applicable federal and state securities laws and regulations.
c)
Reliance on Note
Register. Prior to due presentment to the Company for transfer of this
Note, the Company and any agent of the Company may treat the Person in whose
name this Note is duly registered on the Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not this Note is overdue, and neither the Company nor any such agent
shall be affected by notice to the contrary.
Section
4. (Intentionally
omitted).
Section 5.
Conversion.
a) Voluntary Conversion.
At any time after the Original Issue Date until this Note is no longer
outstanding, this Note shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to time
(subject to the limitations on conversion set forth in Section 5(d)
hereof). The Holder shall effect conversions by delivering to the
Company the form of Notice of Conversion attached hereto as Annex A (a “Notice of
Conversion”), specifying therein the principal amount of Notes to be
converted and the date on which such conversion is to be effected (a “Conversion
Date”). If no Conversion Date is specified in a Notice of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is provided hereunder. To effect conversions hereunder, the Holder
shall not be required to physically surrender Notes to the Company unless the
entire principal amount of this Note has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Note in an amount equal to the applicable conversion. The Holder
and the Company shall maintain records showing the principal amount converted
and the date of such conversions. The Company shall deliver any
objection to any Notice of Conversion
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within 3
Business Days of receipt of such notice. In the event of any dispute
or discrepancy, the records of the Holder shall be controlling and determinative
in the absence of manifest error. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the amount stated on
the face hereof. However, at the Company’s request, the Holder shall
surrender the Note to the Company within five (5) Trading Days following such
request so that a new Note reflecting the correct principal amount may be issued
to Holder.
b)
Automatic
Conversion. This Note shall not be subject to automatic
conversion upon the completion of a Qualified Financing. The portion of the Note
not converted by the Holder at its option shall be subject to the provisions of
Section 2b) hereof.
c)
Conversion
Price. The conversion price in effect on any Conversion Date
shall be $1.345, provided that in the event that the Company consummates a
Qualified Financing, the Conversion Price shall be adjusted (downward only) to
the lesser of (i) $1.345 per share, and (ii) 75% of the effective price per
share received by the Company on such qualified Financing. Anything to the
contrary notwithstanding, in no event shall the Conversion Price exceed $1.345
per share.
d)
Conversion
Limitations; ▇▇▇▇▇▇’s Restriction on
Conversion. The Company shall not effect any conversion of this Note, and
the Holder shall not have the right to convert any portion of this Note,
pursuant to Section 5(a) or (b) or otherwise, to the extent that after giving
effect to such conversion, the Holder (together with the Holder’s affiliates),
as set forth on the applicable Notice of Conversion, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such conversion. For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Note with respect to which the determination of
such sentence is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note beneficially owned by the Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Notes
or the Warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the Holder or any of its
affiliates. Except as set forth in the preceding sentence, for purposes of
this Section 5(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation
contained in this section applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder) and of which a
portion of this Note is convertible shall be in the sole discretion of such
Holder. To ensure compliance with this restriction, the Holder will be deemed to
represent to the Company each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or confirm the
accuracy of such determination. For purposes of this Section 5(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of shares of Common
Stock outstanding. Upon the written or oral request of the Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect
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to the
conversion or exercise of securities of the Company, including this Note, by the
Holder or its affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The provisions of this Section
5(d) may be waived by the Holder upon, at the election of the Holder, not less
than 61 days’ prior notice to the Company, and the provisions of this Section
5(d) shall continue to apply until such 61st day (or such later date, as
determined by the Holder, as may be specified in such notice of
waiver).
e)
Mechanics of
Conversion
i.
Conversion Shares Issuable
Upon Conversion of Principal Amount. The number of shares of
Common Stock issuable upon a conversion hereunder shall be determined by the
quotient obtained by dividing (x) the outstanding principal amount of this Note
to be converted by (y) the Conversion Price.
ii.
Delivery of Certificate Upon
Conversion. Not later than three Trading Days after any Conversion Date,
the Company will deliver to the Holder (A) a certificate or certificates
representing the Conversion Shares which shall be free of restrictive legends
and trading restrictions (other than those required by the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of Notes (including, if so timely elected by the Company, shares of
Common Stock representing the payment of the Monthly Redemption Amount) and (B)
a bank check in the amount of principal (if the Company is required to pay the
principal in cash). The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver any certificate or
certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
iii. Failure to Deliver
Certificates. If in the case of any Notice of Conversion such
certificate or certificates are not delivered to or as directed by the
applicable Holder, as a result of negligence by the Company, by the third
Trading Day after a Conversion Date, the Holder shall be entitled by written
notice to the Company at any time on or before its receipt of such certificate
or certificates thereafter, to rescind such conversion, in which event the
Company shall immediately return the certificates representing the principal
amount of Notes tendered for conversion.
iv. Obligation Absolute; Partial
Liquidated Damages. If the Company fails, through its own
negligence, to deliver to the Holder such certificate or certificates pursuant
to Section 5(e)(ii) by the third Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10 per Trading Day
(increasing to $20 per Trading Day after 5 Trading Days after such damages begin
to accrue) for each Trading Day after such third Trading Day until such
certificates are delivered. The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Note in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or
7
any other
person, and irrespective of any other circumstance which might otherwise limit
such obligation of the Company to the Holder in connection with the issuance of
such Conversion Shares; provided, however, such
delivery shall not operate as a waiver by the Company of any such action the
Company may have against the Holder. In the event a Holder of this
Note shall elect to convert any or all of the outstanding principal amount
hereof, the Company may not refuse conversion based on any claim that the Holder
or any one associated or affiliated with the Holder of has been engaged in any
violation of law, agreement or for any other reason, unless, an injunction from
a court, on notice, restraining and or enjoining conversion of all or part of
this Note shall have been sought and obtained and the Company posts a surety
bond for the benefit of the Holder in the amount of 150% of the principal amount
of this Note outstanding, which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the dispute
and the proceeds of which shall be payable to such Holder to the extent it
obtains judgment. In the absence of an injunction precluding the
same, the Company shall issue Conversion Shares or, if applicable, cash, upon a
properly noticed conversion. Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to
Section 8 herein for the Company’s failure to deliver Conversion Shares within
the period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise
of any such rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under applicable
law.
v.
Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for any reason to
deliver to the Holder such certificate or certificates pursuant to Section
5(e)(ii) by the third Trading Day after the Conversion Date, and if after such
third Trading Day the Holder is required by its brokerage firm to purchase (in
an open market transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by such Holder of the Conversion Shares which the Holder anticipated
receiving upon such conversion (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder anticipated receiving from the conversion at
issue multiplied by (2) the actual sale price of the Common Stock at the time of
the sale (including brokerage commissions, if any) giving rise to such purchase
obligation and (B) at the option of the Holder, either reissue a Note in
principal amount equal to the principal amount of the attempted conversion or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its delivery requirements under
Section 5(e)(ii). For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of this Note with respect to which the actual sale price of
the Conversion Shares at the time of the sale (including brokerage commissions,
if any) giving rise to such purchase obligation was a total of $10,000 under
clause (A) of the immediately preceding sentence, the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In. Notwithstanding anything contained herein to the contrary, if
a Holder requires the Company to make payment in respect of a
8
Buy-In
for the failure to timely deliver certificates hereunder and the Company timely
pays in full such payment, the Company shall not be required to pay such Holder
liquidated damages under Section 5(e)(iv) in respect of the certificates
resulting in such Buy-In.
vi.
Reservation of Shares
Issuable Upon Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the Notes or payment
of principal on this Note, each as herein provided, free from preemptive rights
or any other actual contingent purchase rights of persons other than the
Holders, not less than such number of shares of the Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such
shares set forth in the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of the
outstanding principal amount of this Note or payment of principal
hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid, nonassessable and, if the Registration Statement is then
effective under the Securities Act, registered for public sale in accordance
with such Registration Statement.
vii.
Fractional Shares.
Upon a conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the VWAP at such time. If the Company elects not, or
is unable, to make such a cash payment, the Holder shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common
Stock.
viii.
Transfer
Taxes. The issuance of certificates for shares of the Common
Stock on conversion of this Note shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of this Note so converted and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section
6. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Note are
outstanding: (A) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance of
doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Note), (B) subdivide outstanding shares of Common Stock into a
larger number of shares, (C) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (D) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and
9
of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b)
Subsequent Equity
Sales. If the Company or any Subsidiary thereof, as applicable, at any
time while this Note is outstanding, shall offer, sell, grant any option to
purchase or offer, sell or grant any right to reprice its securities, or
otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Conversion Price (such lower price, the “Base Share
Price” and such issuances collectively, a “Dilutive Issuance”), as adjusted
hereunder (if the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants, options or rights per share which is issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price), then, the
Conversion Price shall be reduced to equal the Base Share Price and the number
of Conversion Shares issuable hereunder shall be increased. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. The Company shall notify the Holder in writing, no later
than the Trading Day following the issuance of any Common Stock or Common Stock
Equivalents subject to this section, indicating therein the applicable issuance
price, or of applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”). For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 6(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Share
Price regardless of whether the Holder accurately refers to the Base Share Price
in the Notice of Conversion.
c) Pro Rata
Distributions. If the Company, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock (and not to
Holders) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security, other than in connection with the
Merger, then in each such case the Conversion Price shall be determined by
multiplying such Conversion Price in effect immediately prior to the record date
fixed for determination of stockholders entitled to receive such distribution by
a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on
such record date less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to
one outstanding share of the Common Stock as determined by the Board of
Directors in good faith. In either case the adjustments shall be
described in a statement provided to the Holders of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
10
d)
Calculations. All
calculations under this Section 6 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. The number of shares
of Common Stock outstanding at any given time shall not includes shares of
Common Stock owned or held by or for the account of the Company, and the
description of any such shares of Common Stock shall be considered on issue or
sale of Common Stock. For purposes of this Section 6, the number of
shares of Common Stock deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Stock (excluding treasury
shares, if any) issued and outstanding.
e)
Notice to
Holders.
i.
Adjustment to Conversion
Price. Whenever the Conversion Price is adjusted pursuant to
any of this Section 6, the Company shall promptly mail to each Holder a notice
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. If the Company issues a
variable rate security, despite the prohibition thereon in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the lowest possible
adjustment price in the case of an MFN Transaction (as defined in the Purchase
Agreement).
ii.
Notice to Allow Conversion
by ▇▇▇▇▇▇. If (A) the Company shall declare a dividend (or any
other distribution) on the Common Stock; (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock; (C) the
Company shall authorize the granting to all holders of the Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights; (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of the Notes, and shall cause
to be mailed to the Holders at their last addresses as they shall appear upon
the stock books of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. Holders are entitled to convert Notes during the
20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
11
iii.
Fundamental
Transaction. If, at any time while this Note is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, other than the Merger, (B) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions, (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then upon any subsequent conversion of this Note, the
Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion absent such Fundamental Transaction, the
same kind and amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental Transaction if it
had been, immediately prior to such Fundamental Transaction, the holder of one
share of Common Stock (the “Alternate
Consideration”). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration. If holders
of Common Stock are given any choice as to the securities, cash or property to
be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any conversion of
this Note following such Fundamental Transaction. To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new note consistent with the foregoing provisions and evidencing the Holder’s
right to convert such note into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this paragraph (c) and insuring that this Note (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.
iv.
Exempt Issuance.
Notwithstanding the foregoing, no adjustment will be made under this Section 6
in respect of an Exempt Issuance.
Section
7. Redemption
a)
Redemption. On
the Maturity Date, the Company shall redeem all amounts of principal and
interest then outstanding under this Note, together with the sum of all
liquidated damages and any other amounts then owing to such Holder in respect of
this Note in accordance with Section 2(b) hereof (the “Redemption
Amount”). The Redemption Amount due on the Maturity Date must be paid
in cash. The Holder may convert, pursuant to Section 5a), any
principal amount of this Note subject to Redemption at any time prior to the
Maturity Date. The Company covenants and agrees that it will honor all Notices
of Conversion tendered up until such amounts are paid in full.
12
Section
8. Negative
Covenants.
So long
as any portion of this Note is outstanding, the Company will not and will not
permit any of its Subsidiaries to, directly or indirectly:
a)
enter into, create, incur, assume or suffer to exist any
indebtedness or liens of any kind, on or with respect to any of its property or
assets now owned or hereafter acquired or any interest therein or any income or
profits therefrom; except that the
Company’s prior incurrence of an aggregate of approximately $75,000 principal
amount of indebtedness in connection with (i) the purchase of certain slot
machines from PDS Gaming Corporation-Nevada, and (ii) certain capital leases, is
hereby expressly waived by ▇▇▇▇▇▇, provided that the Company shall use its best
efforts to repay all such indebtedness no later than December 31,
2008;
b)
amend its certificate of incorporation, bylaws or to
its
charter documents so as to adversely affect any rights of the
Holder;
c)
repay,
repurchase or offer to repay, repurchase or otherwise acquire any of its Common
Stock, Preferred Stock, or other equity securities other than as to the
Conversion Shares to the extent permitted or required under the Transaction
Documents or as otherwise permitted by the Transaction Documents; provided,
however, that the Company’s payment of an aggregate of $179,500 to redeem shares
of its Series B Preferred Stock (the “Series B”) in the calendar year 2007 is
hereby expressly waived by ▇▇▇▇▇▇, and the Company shall be permitted to pay an
aggregate of up to $175,000 in the calendar year 2008 to redeem shares of its
Series B;
d)
engage in
any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of $10,000
other than (i) for payment of salary or consulting fees for services rendered
pursuant to an agreement existing on the date hereof, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company and (iii) for other
employee benefits, including stock option agreements under any stock option plan
of the Company existing on the date hereof;
e)
create or
acquire any Subsidiary after the date hereof unless (i) such Subsidiary is a
wholly-owned Subsidiary of the Company and (ii) such Subsidiary becomes party to
the Security Agreement and the Subsidiary Guarantee, as both have been amended
to date (either by executing a counterpart thereof or an assumption or joinder
agreement in respect thereof) and satisfied each condition of this Note and the
Transaction Documents as if such Subsidiary were a Subsidiary on the Closing
Date;
f)
sell,
transfer or otherwise dispose of any of its assets on terms where they are or
may be leased to or re-acquired or acquired by the Company or any of its
Subsidiaries;
g)
dispose,
in a single transaction, or in a series of transactions all or any part of its
assets unless such disposal is (i) in the ordinary course of business, (ii) for
fair market value, (iii) for cash, and (iv) approved by the board of directors
of the Company;
13
h)
neither expend in excess of $460,000 in any one month in
regard of “cash burn” (which shall be defined for the purposes hereof as gross
expenditures, not subject to offset by any receivables, or income (from
operations, investments, exercise of securities or otherwise)), nor exceed any
reasonable cash burn limitations proposed by Holder from time to time. The
Company shall deliver to the Holder’s General Counsel no later than the tenth
(10th) calendar day of each month a certificate executed by
its Chief Financial Officer certifying compliance with this Section 8(h),
including specifying the Company’s corporate burn rate for the succeeding
month;
i) make any loan, advance, guarantee obligations, offer
other extensions of credit or capital contributions to, or hold or invest in, or
purchase or otherwise acquire any shares of capital stock, bonds, notes,
debentures, or other securities of, or make any other investment in, any other
Person, or permit any of its Subsidiaries to do any of the foregoing;
or
j) enter into any agreement with respect to any of the
foregoing.
Section 9.
Events of
Default.
a)
“Event of Default”,
wherever used herein, means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body):
i.
any default in the payment of (A) the principal amount
of this Note, or (B) Late Fees on, or liquidated damages in respect
of, this Note, in each case free of any claim of subordination,
as and when the same shall become due and payable (whether on a Conversion Date
or the Maturity Date or by acceleration or otherwise) which default, solely in
the case of a default under clause (B) above, is not cured, within 3
Trading Days;
ii.
the
Company shall fail to observe or perform any other covenant or agreement
contained in this Note or any of the other Transaction Documents (other than a
breach by the Company of its obligations to deliver shares of Common Stock to
the Holder upon conversion which breach is addressed in clause (xii) below)
which failure is not cured, if possible to cure, within the earlier to occur of
(A) five Trading Days after notice of such default sent by the Holder or by
any other Holder and (B) ten Trading Days after the Company shall become or
should have become aware of such failure;
iii.
a default
or event of default (subject to any grace or cure period provided for in the
applicable agreement, document or instrument) shall occur under (A) any of the
Transaction Documents other than this Note, or (B) any other material agreement,
lease, document or instrument to which the Company or any Subsidiary is
bound;
iv.
any
representation or warranty made herein, in any other Transaction Document, in
any written statement pursuant hereto or thereto, or in any other report,
financial statement or certificate made or delivered to the Holder or any other
holder of Notes shall be untrue or incorrect in any material respect as of the
date when made or deemed made;
14
v.
(i) the
Company or any of its Subsidiaries shall commence, or there shall be commenced
against the Company or any such Subsidiary, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company or any Subsidiary commences any other proceeding under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or any Subsidiary
thereof or (ii) there is commenced against the Company or any Subsidiary thereof
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or (iii) the Company or any Subsidiary thereof is
adjudicated by a court of competent jurisdiction insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or (iv) the Company or any Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or (v) the Company
or any Subsidiary thereof makes a general assignment for the benefit of
creditors; or (vi) the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they become
due; or (vii) the Company or any Subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or (viii) the Company or any Subsidiary thereof shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or (ix) any corporate or other action is taken by the
Company or any Subsidiary thereof for the purpose of effecting any of the
foregoing;
vi.
the
Company or any Subsidiary shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $150,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
vii.
the
Common Stock shall not be eligible for quotation on or quoted for trading on a
Trading Market and shall not again be eligible for and quoted or listed for
trading thereon within five Trading Days;
viii.
the
Company shall be a party to any Change of Control Transaction or Fundamental
Transaction, shall agree to sell or dispose of all or in excess of 33% of its
assets in one or more transactions (whether or not such sale would constitute a
Change of Control Transaction) or shall redeem or repurchase more than a de
minimis number of its outstanding shares of Common Stock or other equity
securities of the Company (other than redemptions of Conversion Shares and
repurchases of shares of Common Stock or other equity securities of departing
officers and directors of the Company; provided such repurchases shall not
exceed $100,000, in the aggregate, for all officers and directors during the
term of this Note);
15
ix.
a
Registration Statement shall not have been declared effective by the Commission
on or prior to the Effectiveness Date;
x.
if,
during the Effectiveness Period (as defined in the Registration Rights
Agreement), the effectiveness of the Registration Statement lapses for any
reason or the Holder shall not be permitted to resell Registrable Securities (as
defined in the Registration Rights Agreement) under the Registration Statement,
in either case, for more than 10 consecutive Trading Days or 15 non-consecutive
Trading Days during any 12 month period; provided, however, that in the
event that the Company is negotiating a merger, consolidation, acquisition or
sale of all or substantially all of its assets or a similar transaction and in
the written opinion of counsel to the Company, the Registration Statement, would
be required to be amended to include information concerning such transactions or
the parties thereto that is not available or may not be publicly disclosed at
the time, the Company shall be permitted an additional 10 consecutive Trading
during any 12 month period relating to such an event;
xi.
an Event
(as defined in the Registration Rights Agreement) shall not have been cured to
the satisfaction of the Holder prior to the expiration of thirty days from the
Event Date (as defined in the Registration Rights Agreement) relating thereto
(other than an Event resulting from a failure of an Registration Statement to be
declared effective by the Commission on or prior to the Effectiveness Date (as
defined in the Registration Rights Agreement), which shall be covered by Section
9(a)(ix);
xii.
the
Company shall fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to and in accordance with
Section 5(e) or the Company shall provide notice to the Holder, including by way
of public announcement, at any time, of its intention not to comply with
requests for conversions of any Notes in accordance with the terms
hereof;
xiii.
the
Company shall fail for any reason to pay in full the amount of cash due pursuant
to a Buy-In within five Trading Days after notice therefor is delivered
hereunder or shall fail to pay all amounts owed on account of an Event of
Default within five days of the date due; or
xiv.
any of
the Security Agreement or the Subsidiary Guarantee, as both have been amended to
date, shall cease to be in full force and effect.
16
b)
Remedies Upon Event of
Default. If any Event of Default occurs, the full principal amount of
this Note, together with any other amounts owing in respect thereof, to the date
of acceleration shall become, at the Holder’s election, immediately due and
payable in cash. The aggregate amount payable upon an Event of
Default shall be equal to 120% of the principal amount of the
Note. Commencing five days after the occurrence of any Event of
Default that results in the eventual acceleration of this Note, a penalty shall
accrue on this Note rate of 18% per annum, or such lower maximum amount of
penalty rate permitted to be charged under applicable law. All Notes
for which the full Mandatory Prepayment Amount hereunder shall have been paid in
accordance herewith shall promptly be surrendered to or as directed by the
Company. The Holder need not provide and the Company hereby waives
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by
▇▇▇▇▇▇ at any time prior to payment hereunder and the Holder shall have all
rights as a Note holder until such time, if any, as the full payment under this
Section shall have been received by it. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
Section
10. Seniority.
This Note
is senior in rights of payment to any and all indebtedness of the
Company.
Section
11. Miscellaneous.
a)
Notices. Any
and all notices or other communications or deliveries to be provided by the
Holders hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service, addressed to the Company, at the address
set forth above, facsimile number (▇▇▇)
▇▇▇-▇▇▇▇), Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer, or such other address or
facsimile number as the Company may specify for such purposes by notice to the
Holders delivered in accordance with this Section. Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service addressed to each Holder at the
facsimile telephone number or address of such ▇▇▇▇▇▇ appearing on the books of
the Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 5:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the second Business Day following the date of mailing, if sent
by nationally recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given.
b)
Absolute Obligation.
Except as expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal and liquidated damages (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct debt obligation of the Company.
17
c)
Lost or Mutilated
Note. If this Note shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal amount of
this Note so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Note, and of the ownership
hereof, and indemnity, if requested, all reasonably satisfactory to the
Company.
d)
Security
Interest. This Note is a direct debt obligation of the Company
and, pursuant to the Security Agreement, as amended to date, is secured by a
first priority perfected security interest in all of the assets of the Company
and its subsidiaries for the benefit of the Holder.
e)
Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York
Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of any of
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out of
or relating to this Note or the transactions contemplated hereby. If either
party shall commence an action or proceeding to enforce any provisions of this
Note, then the prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
f)
Waiver. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The
failure of the Company or the Holder to insist upon strict adherence to any term
of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Note. Any waiver must be in
writing.
18
g)
Severability. If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any penalty
amount due hereunder violates applicable regulations or laws governing usury,
the applicable penalty due hereunder shall automatically be reduced to equal the
maximum permitted penalty. The Company covenants (to the extent that it may
lawfully do so) that it shall 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 or other law which would prohibit or forgive the Company from
paying all or any portion of the principal on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
h) Next Business
Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
i)
Headings. The
headings contained herein are for convenience only, do not constitute a part of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.
*********************
19
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly
authorized officer as of the date first above indicated.
|
LAS
VEGAS GAMING, INC.
|
|
/s/ ▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇, Chief Financial Officer
|
20
ANNEX
A
NOTICE
OF CONVERSION
The undersigned hereby elects to
convert principal under the Senior Secured Convertible Note of Las Vegas Gaming,
Inc., a Nevada corporation (the “Company”), due on
January 1, 2010, into shares of common stock, par value $0.001 (the “Common Stock”), of
the Company according to the conditions hereof, as of the date written
below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.
By the delivery of this Notice of
Conversion the undersigned represents and warrants to the Company that its
ownership of the Common Stock does not exceed the amounts determined in
accordance with Section 13(d) of the Exchange Act, specified under Section 5 of
this Note.
The undersigned agrees to comply with
the prospectus delivery requirements under the applicable securities laws in
connection with any transfer of the aforesaid shares of Common
Stock.
Conversion
calculations:
Date to
Effect Conversion:
Principal
Amount of Notes to be Converted:
Number of
shares of Common Stock to be issued:
Signature:
Name:
Address:
21
Schedule
1
CONVERSION
SCHEDULE
The
Senior Secured Convertible Notes due on January 1, 2010, in the aggregate
principal amount of $6,051,250 issued by Las Vegas Gaming, Inc., a Nevada
corporation. This Conversion Schedule reflects conversions made under
Section 5 of the above referenced Note.
Dated:
|
Date
of Conversion
(or
for first entry,
Original
Issue Date)
|
Amount
of
Conversion
|
Aggregate
Principal
Amount
Remaining
Subsequent
to
Conversion
(or
original
Principal
Amount)
|
Company
Attest
|
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
|||
|
|
22