FORM OF
WARRANT AGREEMENT
DATED AS OF
APRIL ___, 2000
BETWEEN
SILICON GAMING, INC.
AND
EQUISERVE TRUST COMPANY, N.A.
AS WARRANT AGENT
----------
WARRANTS FOR
COMMON STOCK OF
SILICON GAMING, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS........................................................ 1
1.1 DEFINITIONS......................................................... 1
1.2 RULES OF CONSTRUCTION............................................... 3
ARTICLE II WARRANT CERTIFICATES.............................................. 3
2.1 FORM OF WARRANT CERTIFICATES........................................ 3
2.2 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES...................... 3
2.3 LOSS OR MUTILATION.................................................. 4
ARTICLE III EXERCISE TERMS................................................... 4
3.1 EXERCISE PRICE...................................................... 4
3.2 EXPIRATION; TERMINATION............................................. 5
3.3 MANNER OF EXERCISE.................................................. 5
3.4 ISSUANCE OF WARRANT SHARES.......................................... 5
3.5 FRACTIONAL WARRANT SHARES........................................... 6
3.6 RESERVATION OF WARRANT SHARES....................................... 6
3.7 COMPLIANCE WITH LAW................................................. 6
3.8 AMENDMENT OF OUTSTANDING OPTIONS.................................... 7
ARTICLE IV ANTIDILUTION PROVISIONS........................................... 7
4.1 ADJUSTMENT OF EXERCISE PRICE AND WARRANT NUMBER..................... 7
4.2 NOTICE OF ADJUSTMENT................................................ 10
4.3 NOTICE OF CERTAIN TRANSACTIONS...................................... 10
4.4 ADJUSTMENT TO WARRANT CERTIFICATE................................... 10
ARTICLE V TRANSFERABILITY.................................................... 11
5.1 TRANSFER AND EXCHANGE............................................... 11
5.2 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE................. 11
5.3 SURRENDER OF WARRANT CERTIFICATES................................... 12
ARTICLE VI WARRANT AGENT..................................................... 12
6.1 APPOINTMENT OF WARRANT AGENT........................................ 12
6.2 RIGHTS AND DUTIES OF WARRANT AGENT.................................. 12
6.3 INDIVIDUAL RIGHTS OF WARRANT AGENT.................................. 13
6.4 WARRANT AGENT'S DISCLAIMER.......................................... 13
6.5 COMPENSATION........................................................ 13
6.6 SUCCESSOR WARRANT AGENT............................................. 13
ARTICLE VII MISCELLANEOUS.................................................... 15
7.1 COMPANY RESALES..................................................... 15
7.2 SEC REPORTS AND OTHER INFORMATION................................... 15
7.3 PERSONS BENEFITING.................................................. 15
7.4 RIGHTS OF HOLDERS................................................... 15
7.5 AMENDMENT........................................................... 15
7.6 NOTICES............................................................. 16
7.7 GOVERNING LAW....................................................... 17
7.8 SUCCESSORS.......................................................... 17
7.9 MULTIPLE ORIGINALS.................................................. 17
7.10 TABLE OF CONTENTS................................................ 17
7.11 SEVERABILITY..................................................... 17
7.12 FURTHER ASSURANCES............................................... 18
i
WARRANT AGREEMENT
This WARRANT AGREEMENT (this "Agreement") dated as of April ___, 2000, is
entered into by and between SILICON GAMING, INC., a California corporation
(together with its permitted successors and assigns, the "Company"), and
EQUISERVE TRUST COMPANY, N.A., a national banking association having its
principal offices in Canton, Massachusetts, as Warrant Agent (together with its
permitted successors and assigns, the "Warrant Agent").
WHEREAS, the Company has undergone a financial restructuring wherein the
Company will conduct an exchange offer pursuant to which the holders of Common
Stock par value $.001 per share ("Common Stock") of the Company will be provided
an opportunity to exchange their outstanding shares of Common Stock for a unit
("Unit") consisting of one share of Common Stock and one warrant, as hereinafter
described ("Warrant" or, taken collectively, the "Warrants"), to purchase
3.59662 shares of Common Stock.
WHEREAS, the Company desires that the Warrant Agent act on behalf of the
Company in connection with the issuances, division, transfer, exchange,
substitution and exercise of the Warrants, and the Warrant Agent is willing so
to act.
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the holders of Warrants:
ARTICLE I
Definitions
1.1 DEFINITIONS.
"Board" means the Board of Directors of the Company or any committee
thereof duly authorized to act on behalf of such Board of Directors.
"Business Day" means each day that is not a Saturday, a Sunday or a day on
which banking institutions are not required to be open in New York City or in
the city where the Warrant Agent's principal corporate trust office is located.
"Certificated Warrants" means certificated Warrants in fully registered
definitive form.
"Common Stock" has the meaning ascribed thereto in the preamble to this
Agreement.
"Election Notice" means the Notice of Election to Participate distributed
to shareholders on or about April 17, 2000 with the Offering Circular pursuant
to the exchange offer.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" shall have the meaning set forth in Section 3.1.
"Expiration Date" shall have the meaning set forth in Section 3.2.
"Extraordinary Transaction" shall have the meaning set forth in Section
4.1(d).
"Fair Market Value" means, with respect to any asset or Property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (i) if such property or asset has a
Fair Market Value of less than or equal to $1 million, by any Officer of the
Company or (ii) if such property or asset has a Fair Market Value in excess of
$1 million, by a majority of the Board of Directors of the Company and evidenced
by a Board Resolution, dated within 30 days of the relevant transaction.
"Issue Date" means the date on which Warrants are initially issued.
"Offering Circular" means the Offering Circular dated April 12, 2000,
setting for the terms and conditions of the exchange offer, as well as
information regarding the Company, distributed to shareholders of the Company on
April 17, 2000.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer or the Treasurer of the Company.
"Person" means any individual, corporation, company (including any limited
liability company), partnership, joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof.
"Redeemable Stock" means, with respect to any Person, any capital stock
that by its terms (or by the terms of any security into which it is convertible
or exchangeable) or otherwise (i) matures or is mandatorily redeemable pursuant
to a sinking fund obligation or otherwise, (ii) is or may become redeemable or
repurchaseable at the option of the holder thereof, in whole or in part, or
(iii) is convertible or exchangeable for indebtedness.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Termination Date" shall have the meaning set forth in Section 3.2.
"Trigger Date" shall have the meaning set forth in Section 3.2.
"Units" shall have the meaning set forth in the preamble.
"Voting Stock" means all classes of capital stock of a corporation then
outstanding and normally entitled to vote in the election of directors.
"Warrant Certificate" shall have the meaning set forth in Section 2.1.
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"Warrant Number" shall have the meaning set forth in Section 4.1.
"Warrant Shares" means the Common Stock (and other securities) issuable
upon the exercise of the Warrants.
1.2 RULES OF CONSTRUCTION. Unless the text otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles as in
effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including, without limitation; and
(v) words in the singular include the plural and words in the plural
include the singular.
ARTICLE II
Warrant Certificates
2.1 FORM OF WARRANT CERTIFICATES. Certificates representing the Warrants
(the "Warrant Certificates") shall be in registered form only and substantially
in the form attached hereto as Exhibit A. The Warrant Certificates shall be
dated the date on which countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements typed, stamped, printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto, or to conform to usage. The Company shall approve
the form of the Warrant Certificates and any notation, legend or endorsement on
them.
The terms and provisions contained in the forms of the Warrant Certificates
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Agreement.
The Warrant Certificates shall be typed, printed, lithographed or engraved
or produced by any combination of these methods, all as determined by the
Officer of the Company executing such Warrant Certificates, as evidenced by such
Officer's execution of such Warrant Certificates.
2.2 EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. The Company is
undertaking an exchange offer pursuant to which eligible shareholders will have
the opportunity to exchange their shares of Common Stock for Units consisting of
one share of Common Stock and one Warrant to purchase 3.59662 shares of Common
Stock for each whole share of Common Stock then held by the holder. The exchange
offer will be conducted pursuant to the Offering Circular and the Election
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Notice. Warrant Certificates evidencing Warrants to purchase an aggregate of up
to 58,985,734 Warrant Shares (subject to adjustment) shall be executed on or
prior to the Issue Date by the Company and delivered to the Warrant Agent for
countersignature. The Warrant Agent shall countersign and deliver such Warrant
Certificates upon the order and at the direction of the Company to the holders
of Common Stock who timely tender their Election Notices in compliance with the
provisions of the Offering Circular and the Election Notice. The Warrant Agent
is hereby authorized to countersign and deliver Warrant Certificates as required
hereby.
The Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President, either manually or by
facsimile signature printed thereon. The Warrant Certificates shall be
countersigned manually by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. In case any Officer of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be an Officer of the Company before countersignature by the Warrant
Agent and issuance and delivery thereof, such Warrant Certificates may,
nevertheless, be countersigned by the Warrant Agent and issued and delivered
with the same force and effect as though such person had not ceased to be an
Officer of the Company.
2.3 LOSS OR MUTILATION. Upon receipt by the Company and the Warrant Agent
of evidence satisfactory to them of the ownership and the loss, theft,
destruction or mutilation of any Warrant Certificate and of indemnity
satisfactory to them and (in the case of mutilation) upon surrender and
cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and deliver to the registered holder of the lost, stolen, destroyed
or mutilated Warrant Certificate, in exchange for or in lieu thereof, a new
Warrant Certificate of the same tenor and for a like aggregate number of
Warrants. Upon the issuance of any new Warrant Certificate under this Section
2.3, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and other
expenses (including the reasonable fees and expenses of the Warrant Agent and of
counsel to the Company) in connection therewith. Every new Warrant Certificate
executed and delivered pursuant to this Section 2.3 in lieu of any lost, stolen
or destroyed Warrant Certificate shall constitute a contractual obligation of
the Company, whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable under applicable law, and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Section 2.3 are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen or destroyed Warrant Certificates.
ARTICLE III
Exercise Terms
3.1 EXERCISE PRICE. The number of Warrant Shares into which each Warrant
will be exercisable (subject to adjustment as provided in this Agreement) shall
be 3.59662. The Warrants will be exercisable on or after the first anniversary
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date following the Issue Date, initially at a price per Warrant Share of $0.1528
(the "Exercise Price"); provided, however, in the event an Extraordinary
Transaction occurs during the first 12 months following the Issue Date the
Warrants will automatically become exercisable.
3.2 EXPIRATION; TERMINATION. A Warrant shall terminate and become void as
of the earlier of (i) the close of business on the fourth anniversary of the
Issue Date (the "Expiration Date"), or (ii) the date such Warrant is exercised.
In addition, following the second anniversary of the Issue Date the Warrants
will automatically terminate, if not sooner exercised, on the 180th day (the
"Termination Date") following any period of twenty (20) consecutive trading days
ending on the date (the "Trigger Date") in which the average closing price of
the Common Stock on the NASDAQ National Market, New York Stock Exchange, or
other national exchange (adjusted for any stock split, reverse stock splits or
stock dividend) equals or exceeds $0.2346 per share. The Company shall within
five (5) days after the Trigger Date deliver to the Warrant Agent, and the
Warrant Agent shall within five (5) days thereafter mail to the holders, a
notice (in such form as shall be furnished to the Warrant Agent by the Company)
informing the holders of the occurrence of the Trigger Date, specifying the
Termination Date, and stating that the Warrants will automatically terminate on
the Termination Date (unless the Expiration Date or exercise of the Warrants
shall have earlier occurred).
3.3 MANNER OF EXERCISE. Warrants may be exercised, subject to Section 3.7
upon surrender to the Warrant Agent of the Warrant Certificates, together with
the form of election to purchase Common Stock (set forth as Exhibit 1 to the
Warrant Certificate) duly filled in and signed by the registered holder thereof
and the Exercise Price for each Warrant Share purchased (which Exercise Price
may consist of a cashless exercise as indicated on the applicable election
form). The rights represented by the Warrants shall be exercisable at the
election of the holder thereof either in full or from time to time in part and
in the event that a Warrant Certificate is surrendered for exercise in respect
of less than all the Warrant Shares purchasable on such exercise at any time
prior to the Expiration Date a new Warrant Certificate exercisable for the
remaining Warrant Shares will be issued. The Warrant Agent shall countersign and
deliver the required new Warrant Certificates, and the Company, at the Warrant
Agent's request, shall supply the Warrant Agent with Warrant Certificates duly
signed on behalf of the Company for such purpose. Funds received by the Warrant
Agent as consideration for the exercise of the Warrants must be delivered to the
Company within 3 business days following receipt.
3.4 ISSUANCE OF WARRANT SHARES. Upon the surrender of Warrant Certificates
and receipt of the Exercise Price for each Warrant Share purchased, as set forth
in Section 3.3, the Company shall issue and cause the Warrant Agent or, if
appointed, a transfer agent for the Common Stock ("Stock Transfer Agent") to
countersign and deliver to or upon the written order of the holder and in such
name or names as the holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrants or
other securities or property to which it is entitled, registered or otherwise,
to the Person or Persons entitled to receive the same, together with cash as
provided in Section 3.5 in respect of any fractional Warrant Shares otherwise
issuable upon such exercise. Such certificate or certificates shall be deemed to
have been issued and any Person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrant Certificates and payment of the per share
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Exercise Price; provided, however, that if, at such date, the transfer books for
the Warrant Shares shall be closed, the certificates for the Warrant Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened and until such date the Company
shall be under no duty to deliver any certificates for such Warrant Shares;
provided, further, however, that such transfer books, unless otherwise required
by law, shall not be closed at any one time for a period longer than 20 calendar
days.
3.5 FRACTIONAL WARRANT SHARES. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be exercised in full at the same time by the same holder, the number of
full Warrant Shares which shall be issuable upon such exercise shall be computed
on the basis of the aggregate number of Warrant Shares purchasable pursuant
thereto. If any fraction of a Warrant Share would, except for the provisions of
this Section 3.5, be issuable on the exercise of any Warrant (or specified
portion thereof), the Company shall pay an amount in cash equal to the market
price for one Warrant Share on the trading day immediately preceding the date
the Warrant is exercised, multiplied by such fraction, computed to the nearest
whole cent.
3.6 RESERVATION OF WARRANT SHARES. The Company shall at all times keep
reserved out of its authorized shares of Common Stock a number of shares of
Common Stock sufficient to provide for the exercise of all outstanding Warrants.
The registrar for the Common Stock (the "Registrar") shall at all times until
the Expiration Date reserve such number of authorized shares as shall be
required for such purpose. The Company will deliver a copy of this Agreement to
the Stock Transfer Agent with instructions to maintain it until the Expiration
Date. The Company will supply the Stock Transfer Agent with duly executed stock
certificates for such purpose and will itself provide or otherwise make
available any cash which may be payable as provided in Section 3.5. The Company
will furnish to the Stock Transfer Agent a copy of all notices of adjustments
and certificates related thereto transmitted to each holder.
Before taking any action which would cause an adjustment pursuant to
Article IV to reduce the Exercise Price below the then par value (if any) of the
Common Stock, the Company shall take any and all corporate action which may, in
the opinion of its counsel, be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock at the
Exercise Price as so adjusted.
The Company covenants that all shares of Common Stock which may be issued
upon exercise of Warrants will, upon issuance in accordance with the terms set
forth herein and in the Warrant Certificate, be fully paid, nonassessable, free
of preemptive rights, free from all taxes and free from all liens, charges and
security interests, created by or through the Company, with respect to the issue
thereof.
3.7 COMPLIANCE WITH LAW. (a) Notwithstanding anything in this Agreement to
the contrary, in no event shall a holder be entitled to exercise a Warrant
unless (i) a registration statement filed under the Securities Act in respect of
the issuance of the Warrant Shares is then effective or (ii) in the opinion of
counsel to the Company addressed to the Warrant Agent an exemption from the
registration requirements is available under the Securities Act or otherwise for
6
the issuance of the Warrant Shares (and the delivery of any other securities for
which the Warrants may at the time be exercisable) at the time of such exercise.
(b)The Company will, upon the earlier to occur of (i) forty-five days prior
to the first anniversary date of the Issue Date, or (ii) an Extraordinary
Transaction, file with the Securities and Exchange Commission a registration
statement on the appropriate form under the Securities Act covering the issuance
of the Warrant Shares upon exercise of the Warrants and shall use reasonable
efforts to cause the Securities and Exchange Commission to declare such
registration statement effective under the Securities Act not later than the
date the Warrants first become exercisable. The Company will use reasonable
efforts to maintain the effectiveness of such Registration Statement under the
Securities Act at all times that the Warrants are exercisable. At all times that
the Warrants are exercisable, if and to the extent that the Common Stock is
approved for listing on the Nasdaq National Market, the New York Stock Exchange
or other national securities exchange, the Company shall take all action
required to qualify the Warrant Shares for listing on such market or exchange.
If and to the extent the Company fails to comply with any of the covenants set
forth in this Section 3.7(b), the Expiration Date shall be extended by a number
of days equal to the number of days the Company failed to so comply with such
covenants (such extension period to be computed concurrently, and not
consecutively, for one or more simultaneous failures to so comply with such
covenants).
(c) If any shares of Common Stock required to be reserved for purposes of
exercise of Warrants require, under any other Federal or state law or applicable
governing rule or regulation of any national securities exchange, registration
with or approval of any governmental authority, or listing on any such national
securities exchange before such shares may be issued upon exercise, the Company
will in good faith and as expeditiously as possible endeavor also to cause such
shares to be duly registered or approved by such governmental authority or
listed on the relevant national securities exchange, as the case may be.
3.8 AMENDMENT OF OUTSTANDING OPTIONS. The Company will not amend the terms
or provisions of its Amended and Restated 1994 Stock Option Plan, 1996 Outside
Directors Stock Option Plan, 1996 Employee Stock Purchase Plan, 1997
Nonstatutory Stock Option Plan, 1998 Employee Stock Purchase Plan, any option
agreements outstanding thereunder or any other plan or agreement under which
options to employees or directors are outstanding as of the Issue Date
(collectively the "Plans"), if such amendment would result in (i) a decrease in
the per share exercise price, or (ii) an increase in the number of shares for
which the options might be exercised, of any options outstanding as of the Issue
Date under the Plans, other than as provided for by the terms and provisions of
the Plans as in effect on the Issue Date.
ARTICLE IV
Antidilution Provisions
4.1 ADJUSTMENT OF EXERCISE PRICE AND WARRANT NUMBER. The number of Warrant
Shares issuable upon the exercise of each Warrant (the "Warrant Number") is
subject to adjustment from time to time upon the occurrence of the events
enumerated in, or as otherwise provided in, this Section 4.1.
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(a) Adjustment for Change in Capital Stock
If the Company:
(1) subdivides or reclassifies its outstanding shares of Common Stock
into a greater number of shares;
(2) combines or reclassifies its outstanding shares of Common Stock
into a smaller number of shares; or
(3) issues by reclassification of its Common Stock any shares of its
capital stock (other than reclassification arising solely as a result of a
change in the par value or no par value of the Common Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which it would have owned immediately following such action if such
Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed above
shall occur.
The Company shall not issue shares of Common Stock as a dividend or
distribution on any class of capital stock other than Common Stock with the
intention of denying the Warrant holders the benefit of the foregoing provisions
unless the Warrant holders also receive such dividend or distribution on a
ratable basis or the appropriate adjustment to the Warrant Number is made under
this Section 4.1.
(b) ADJUSTMENT TO EXERCISE PRICE Upon each adjustment to the Warrant Number
pursuant to this Section 4.1, the Exercise Price shall be adjusted so that it is
equal to the Exercise Price in effect immediately prior to such adjustment
multiplied by a quotient, the numerator of which is the Warrant Number in effect
immediately prior to such adjustment and the denominator of which is the Warrant
Number in effect immediately after such adjustment.
(c) WHEN NO ADJUSTMENT REQUIRED If an adjustment is made upon the
establishment of a record date for a reclassification subject to subsection (a),
hereof and such reclassification is subsequently cancelled, the Warrant Number
and Exercise Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines to cancel such reclassification, to that
which would have been in effect if such record date had not been fixed.
(d) REORGANIZATIONS In the event of, prior to the Expiration Date, (i) a
merger, reorganization or consolidation in which a majority of the outstanding
voting power of the surviving or consolidated corporation immediately following
8
such event is held by persons or entities who were not stockholders of the
Company immediately prior to such event, (ii) the sale or transfer or all or
substantially all of the properties and assets of the Company and its
subsidiaries, (iii) any purchase by any party (or group of affiliated parties)
other than any investment fund or funds associated with DDJ Capital management
LLC, of all of the shares of capital stock of the Company (each an
"Extraordinary Transaction"), the Warrants shall terminate on the effective date
of such Extraordinary Transaction, unless provision is made in such transaction
in the sole discretion of the parties thereto for the assumption of the Warrants
or the substitution for the Warrants of new warrants of the successor person or
entity or a parent or subsidiary thereof, with such adjustment as the number and
kinds of shares and the per share exercise price as shall be necessary to
provide holders of the Warrants upon exercise thereof with the kind and amount
of securities, cash or other assets that such holder (net of Exercise Price)
would have owned immediately after the Extraordinary Transaction if such holder
had exercised the Warrant immediately before the effective date of the
Extraordinary Transaction. In the event of any transaction which will result in
such termination, the Company shall give to the Warrant Agent written notice
thereof. Until the earlier to occur of such effective date or record date, the
holders of Warrants may exercise the Warrants in accordance with their terms,
but after such effective date or record date, as the case may be, holders of
Warrants may not exercise the Warrants unless they are assumed or substituted by
the successor as provided above.
(e) FORM OF WARRANTS Irrespective of any adjustments in the Exercise Price
or the number or kind of shares purchasable upon the exercise of the Warrants,
Warrants here or hereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(f) OTHER DILUTIVE EVENTS In case any event shall occur as to which the
provisions of this Section 4.1 are not strictly applicable but the failure to
make any adjustment would not, in the good faith judgment of the Board of
Directors, fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles of such section, then, in
each such case, such Board of Directors shall make a good faith adjustment to
the Exercise Price and Warrant Number into which each Warrant is exercisable in
accordance with the intent of this Section 4.1.
(g) MISCELLANEOUS For purpose of this Section 4.1, the term "shares of
Common Stock" shall mean (i) shares of any class of stock designated as Common
Stock of the Company as of the date of this Agreement and (ii) shares of any
other class of stock resulting from successive changes or reclassification of
such shares consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any time, as
a result of an adjustment made pursuant to this Section 4.1, the holders of
Warrants shall become entitled to purchase any securities of the Company other
than, or in addition to, shares of Common Stock, thereafter the number or amount
of such other securities so purchasable upon exercise of each Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in subsections (a) through (e) of this Section 4.1, inclusive, and the
other provisions hereof with respect to the Warrant Shares or the Common Stock
shall apply on like terms to any such other securities.
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4.2 NOTICE OF ADJUSTMENT. Whenever the Exercise Price or the number of
shares of Common Stock and other property, if any, purchasable upon exercise of
Warrants is adjusted, as herein provided, the Company shall deliver to the
Warrant Agent a certificate of an officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Exercise Price and the number
of shares of Common Stock purchasable upon exercise of Warrants after giving
effect to such adjustment. The Company shall promptly cause the Warrant Agent to
mail a copy of such certificate to each holder in accordance with Section 7.6.
The Warrant Agent shall be entitled to rely on such certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time, to any holder desiring an inspection thereof
during reasonable business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any holder to determine whether any facts
exist which may require any adjustment of the Exercise Price or the number of
shares of Common Stock or other stock or property, purchasable on exercise of
the Warrants, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed in making such adjustment or
the validity or value of any shares of Common Stock.
4.3 NOTICE OF CERTAIN TRANSACTIONS. In the event that the Company shall
propose (a) to effect any Extraordinary Transaction or (b) to effect the
voluntary or involuntary dissolution, liquidation or winding-up of the Company,
the Company shall within 5 days send to the Warrant Agent and the Warrant Agent
shall within 5 days send the holders a notice (in such form as shall be
furnished to the Warrant Agent by the Company) of such proposed action or offer,
such notice to be mailed by the Warrant Agent to the holders at their addresses
as they appear in the Certificate register, which shall specify the date such
issuance or event is to take place and the date of participation therein by the
holders of Common Stock, if any such date is to be fixed, and shall briefly
indicate the effect of such action on the Common Stock and on the number and
kind of any other shares of stock and on other property, if any, and the number
of shares of Common Stock and other property, if any, purchasable upon exercise
of each Warrant and the Exercise Price after giving effect to any adjustment, if
any, which will be required as a result of such action. Such notice shall be
given by the Company at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of Common
Stock, whichever shall be the earlier.
4.4 ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant Certificate need
not be changed because of any adjustment made pursuant to this Article IV, and
Warrant Certificates issued after such adjustment may state the same Exercise
Price and the same number of shares of Common Stock as are stated in the Warrant
Certificates initially issued pursuant to this Agreement. The Company, however,
may at any time in its sole discretion make any change in the form of Warrant
Certificate to give effect to such adjustments. Such a change in form will not
affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
10
ARTICLE V
Transferability
5.1 TRANSFER AND EXCHANGE. The Warrant Certificates shall be issued in
registered form only. The Company shall cause to be kept at the office of the
Warrant Agent a register in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Warrant
Certificates and transfers or exchanges of Warrant Certificates as herein
provided. All Warrant Certificates issued upon any registration of transfer or
exchange of Warrant Certificates shall be the valid obligations of the Company,
evidencing the same obligations, and entitled to the same benefit under this
Agreement, as the Warrant Certificates surrendered for such registration of
transfer or exchange.
The Warrants will not be registered under the Securities Act. The Warrants
may not be sold, transferred or otherwise disposed of except pursuant to a valid
exemption from the registration requirements of the Securities Act and
applicable state securities laws. A holder may transfer its Warrants only
pursuant to a valid exemption from the registration requirements of applicable
securities laws and only by complying with the terms of this Agreement. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a holder only upon, final acceptance and registration of the transfer
by the Warrant Agent in the register. Prior to the registration of any transfer
of Warrants by a holder as provided herein, the Company, the Warrant Agent, and
any agent of the Company or the Warrant Agent may treat the Person in whose name
the Warrants are registered as the owner thereof for all purposes and as the
Person entitled to exercise the rights represented thereby, any notice to the
contrary notwithstanding. When Warrant Certificates are presented to the Warrant
Agent with a request to register the transfer or to exchange them for an equal
amount of Warrants of other authorized denominations, the Warrant Agent shall
register the transfer or make the exchange in accordance with the provisions
hereof.
5.2 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. When Certificated
Warrants are presented to the Warrant Agent with a request from the holder of
such Warrants to register the transfer or to exchange them for an equal number
of Warrants of other authorized denominations, the Warrant Agent shall register
the transfer or make the exchange as requested; provided, however, that every
Warrant presented and surrendered for registration of transfer or exchange shall
be duly endorsed and be accompanied by a written instrument of transfer in form
satisfactory to the Company, duly executed by the holder thereof or the holder's
attorneys duly authorized in writing.
To permit registrations of transfer and exchanges, the Company shall make
available to the Warrant Agent a sufficient number of executed Warrant
Certificates to effect such registrations of transfers and exchanges. No service
charge shall be made to the holder for any registration of transfer or exchange
of Warrants, but the Company may require from the transferring or exchanging
holder payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable upon exchanges pursuant to Section 2.3 and exchanges
in respect of portions of Warrants not exercised and the Company may deduct such
taxes from any payment of money to be made and such transfer or exchange shall
not be consummated (if such taxes are not deducted in full) unless or until the
11
holder shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company and the Warrant Agent that such
tax has been paid.
5.3 SURRENDER OF WARRANT CERTIFICATES. Any Warrant Certificate surrendered
for registration of transfer, exchange, exercise or repurchase of the Warrants
represented thereby shall, if surrendered to the Company, be delivered to the
Warrant Agent, and all Warrant Certificates surrendered or so delivered to the
Warrant Agent shall be promptly canceled by the Warrant Agent and shall not be
reissued by the Company and, except as provided in this Article V in case of an
exchange or in Article III hereof in case of the exercise or repurchase of less
than all the Warrants represented thereby or in case of a mutilated Warrant
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time such canceled
Warrant Certificates.
ARTICLE VI
Warrant Agent
6.1 APPOINTMENT OF WARRANT AGENT. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with provisions of this
Agreement and the Warrant Agent hereby accepts such appointment.
6.2 RIGHTS AND DUTIES OF WARRANT AGENT.
(a) AGENT FOR THE COMPANY. In acting under this Warrant Agreement and in
connection with the Warrant Certificates, the Warrant Agent is acting solely as
agent of the Company and does not assume any obligation or relationship or
agency or trust for or with any of the holders of Warrant Certificates or
beneficial owners of Warrants.
(b) COUNSEL. The Warrant Agent may consult with counsel satisfactory to it,
and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the advice of such counsel.
(c) DOCUMENTS. The Warrant Agent shall be protected and shall incur no
liability for or in respect of any action taken or thing suffered by it in
reliance upon any Warrant Certificate, notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(d) NO IMPLIED OBLIGATIONS. The Warrant Agent shall be obligated to perform
only such duties as are herein and in the Warrant Certificates specifically set
forth and no implied duties or obligations shall be read into this Agreement or
the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not
be under any obligation to take any action hereunder which may tend to involve
it in any expense or liability for which it does not receive indemnity if such
indemnity is reasonably requested. The Warrant Agent shall not be accountable or
under any duty or responsibility for use by the Company of any of the Warrant
Certificates countersigned by the Warrant Agent and delivered by it to the
holders or on behalf of the holders pursuant to this Agreement or for the
12
application by the Company of the proceeds of the Warrants. The Warrant Agent
shall have no duty or responsibility in case of any default by the Company in
the performance of its covenants or agreements contained herein or in the
Warrant Certificates or in the case of the receipt of any written demand from a
holder with respect to such default, including any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise.
(e) NOT RESPONSIBLE FOR ADJUSTMENTS OR VALIDITY OF STOCK. The Warrant Agent
shall not at any time be under any duty or responsibility to any holder to
determine whether any facts exist that may require an adjustment of the number
of shares of Common Stock purchasable upon exercise of each Warrant or the
Exercise Price, or with respect to the nature or extent of any adjustment when
made, or with respect to the method employed, or herein or in any supplemental
agreement provided to be employed, in making the same. The Warrant Agent shall
not be accountable with respect to the validity or value of any shares of Common
Stock or of any securities or property which may at any time be issued or
delivered upon the exercise of any Warrant or upon any adjustment pursuant to
Article IV, and it makes no representation with respect thereto. The Warrant
Agent shall not be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any shares of Common Stock or stock
certificates upon the surrender of any Warrant Certificate for the purpose of
exercise or upon any adjustment pursuant to Article IV, or to comply with any of
the covenants of the Company contained in Article IV.
6.3 INDIVIDUAL RIGHTS OF WARRANT AGENT. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company or its affiliates
or become pecuniarily interested in transactions in which the Company or its
affiliates may be interested, or contract with or lend money to the Company or
its affiliates or otherwise act as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
6.4 WARRANT AGENT'S DISCLAIMER. The Warrant Agent shall not be responsible
for and makes no representation as to the validity or adequacy of this Agreement
or the Warrant Certificates and it shall not be responsible for any statement in
this Agreement or the Warrant Certificates other than its countersignature
thereon.
6.5 COMPENSATION. The Company agrees to pay the Warrant Agent from time to
time such compensation for its services as the Company and the Warrant Agent
shall agree from time to time. The Company's payment obligations pursuant to
this Section 6.5 shall survive the termination of this Agreement.
6.6 SUCCESSOR WARRANT AGENT.
(a) THE COMPANY TO PROVIDE WARRANT AGENT. The Company agrees for the
benefit of the holders that there shall at all times be a Warrant Agent
hereunder until all the Warrants have been exercised or are no longer
exercisable.
13
(b) RESIGNATION AND REMOVAL. The Warrant Agent may at any time resign by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided,
however, that such date shall not be less than 60 days after the date on which
such notice is given unless the Company otherwise agrees. The Warrant Agent
hereunder may be removed at any time by the filing with it an instrument in
writing signed by or on behalf of the Company and specifying such removal and
the date when it shall become effective, which date shall not be less than 60
days after such notice is given unless the Warrant Agent otherwise agrees. Any
removal under this Section 6.6 shall take effect upon the appointment by the
Company as hereinafter provided of a successor Warrant Agent (which shall be a
bank or trust company authorized under the laws of the jurisdiction of its
organization to exercise corporate trust powers) and the acceptance of such
appointment by such successor Warrant Agent.
(c) THE COMPANY TO APPOINT SUCCESSOR. In case at any time the Warrant Agent
shall resign, or shall be removed, or shall become incapable of acting, or shall
be adjudged bankrupt or insolvent, or shall commence a voluntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or under any other
applicable Federal or state bankruptcy, insolvency or similar law or shall
consent to the appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Warrant Agent or its property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall take corporate action in furtherance of
any such action, or a decree or order for relief by a court having jurisdiction
in the premises shall have been entered in respect of the Warrant Agent in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or State bankruptcy, insolvency or
similar law; or a decree order by a court having jurisdiction in the premises
shall have been entered for the appointment of a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or similar official) of the Warrant
Agent or of its property or affairs, or any public officer shall take charge or
control of the Warrant Agent or of its property or affairs for the purpose of
rehabilitation, conservation, winding up of or liquidation, a successor Warrant
Agent, qualified as aforesaid, shall be appointed by the Company by an
instrument in writing, filed with the successor Warrant Agent (or, in the
absence of such appointment within 60 days after the notice of resignation or
removal, either party hereto may petition the appointment of a successor by a
court of competent jurisdiction). Upon the appointment as aforesaid of a
successor Warrant Agent and acceptance by the successor Warrant Agent of such
appointment, the Warrant Agent shall cease to be Warrant Agent hereunder;
provided, however, that in the event of the resignation of the Warrant Agent
under this subsection (c), such resignation shall be effective on the earlier of
(i) the date specified in the Warrant Agent's notice of resignation and (ii) the
appointment and acceptance of a successor Warrant Agent hereunder.
(d) SUCCESSOR TO EXPRESSLY ASSUME DUTIES. Any successor Warrant Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to the Company an instrument accepting such appointment hereunder, and
thereupon such successor Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights and obligations of such
predecessor with like effect as if originally named as Warrant Agent hereunder,
and such predecessor, upon payment of its charges and disbursements then unpaid,
14
shall thereupon become obligated to transfer, deliver and pay over, and such
successor Warrant Agent shall be entitled to receive, all monies, securities and
other property on deposit with or held by such predecessor, as Warrant Agent
hereunder.
(e) SUCCESSOR BY MERGER. Any corporation into which the Warrant Agent
hereunder may be merged or consolidated, or any corporation resulting from any
merger or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of its corporate trust business; provided that it shall be
qualified as aforesaid, shall be the successor Warrant Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE VII
Miscellaneous
7.1 COMPANY RESALES. The Company hereby agrees with each holder, that the
Company shall not resell any Warrants or Warrant Shares it acquires, by purchase
or otherwise, except pursuant to an effective registration statement.
7.2 SEC REPORTS AND OTHER INFORMATION. Notwithstanding that the Company may
not be subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall, for all periods ending after the date of this
Warrant Agreement and through the Expiration Date, file with the SEC and
thereupon provide the Warrant Agent and holders with such annual reports and
such information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to
such Sections, such information, documents and other reports to be so filed and
provided at the times specified for the filing of such information, documents
and reports under such Sections.
7.3 PERSONS BENEFITING. Nothing in this Agreement is intended or shall be
construed to confer upon any Person other than the Company, the Warrant Agent
and the holders any right, remedy or claim under or by reason of this agreement
or any part hereof.
7.4 RIGHTS OF HOLDERS. Except as expressly contemplated herein, holders of
unexercised Warrants are not, solely because they hold Warrants, entitled (i) to
receive dividends or other distributions, (ii) to receive notice of or vote at
any meeting of the stockholders, (iii) to consent to any action of the
stockholders, (iv) to exercise any preemptive right or to receive notice of any
other proceedings of the Company or (v) to exercise any other rights whatsoever
as stockholders of the Company.
7.5 AMENDMENT. This Agreement may be amended by the parties hereto without
the consent of any holder for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective provision contained herein or making
any other provisions with respect to matters or questions arising under this
Agreement as the Company and the Warrant Agent may deem necessary or desirable;
provided, however, that the Company determines, and the Warrant Agent may rely
on such determination, that such action shall not affect adversely the rights of
15
the holders. Any amendment or supplement to this Agreement that has an adverse
effect on the interests of the holders shall require the written consent of the
holders of a majority of the then outstanding Warrants. The consent of each
holder affected shall be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of Warrants would be decreased (other than pursuant to adjustments
provided in Article IV). In determining whether the holders of the required
number of Warrants have concurred in any direction, waiver or consent, Warrants
owned by the Company, or by any officer or employee of the Company or any of its
subsidiaries, or by any person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Warrant Agent shall be protected in relying on any such
direction, waiver or consent, only Warrants which the Warrant Agent knows are so
owned shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
7.6 NOTICES. Any notice or communication shall be in writing and delivered
in Person or mailed by first-class mail addressed as follows:
if to the Company:
Silicon Gaming, Inc.
0000 X. Xxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: President
with a copy to:
Squire, Xxxxxxx & Xxxxxxx L.L.P.
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Xxxx X. Xxxxx, Esq.
and:
Xxxx, Xxxx, Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
if to the Warrant Agent:
EquiServe Trust Company, N.A.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Att: Corporate Actions Department
16
The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a holder shall be mailed to the
holder at the holder's address as it appears on the register in which the
Company shall provide for the registration of Warrants and Warrant Shares and of
transfers and exchanges of Warrants and Warrant Shares and shall be sufficiently
given if so mailed within the time prescribed.
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, it is duly given, whether
or not the addressee receives it.
7.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF CALIFORNIA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND CALIFORNIA STATE COURTS LOCATED
IN THE CITY OF PALO ALTO OR THE CITY OF SAN XXXX IN CONNECTION WITH ANY SUIT,
ACTION OR PROCEEDING RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS
CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL
JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. THE COMPANY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
7.8 SUCCESSORS. All agreements of the Company in this Agreement and the
Warrant Certificates shall bind its successors. All agreements of the Warrant
Agent in this Agreement shall bind its successors.
7.9 MULTIPLE ORIGINALS. The parties may sign any number of copies of this
Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement. One signed copy is enough to prove this Agreement.
7.10 TABLE OF CONTENTS. The table of contents and headings of the Articles
and Sections of this Agreement have been inserted for convenience of reference
only, are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
7.11 SEVERABILITY. The provisions of this Agreement are severable, and if
any clause or provision shall be held invalid, illegal or unenforceable in whole
or in part in any jurisdiction, then such invalidity or unenforceability shall
17
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
7.12 FURTHER ASSURANCES. From time to time on and after the date hereof,
the Company shall deliver or cause to be delivered to the Warrant Agent such
further documents and instruments and shall do and cause to be done such further
acts as the Warrant Agent shall reasonably request (it being understood that the
Warrant Agent shall have no obligation to make such request) to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to be
duly executed as of the date first written above.
SILICON GAMING, INC.
By:
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
EQUISERVE TRUST COMPANY, N.A.,
as Warrant Agent,
By:
-------------------------------------
Name:
Title:
18
EXHIBIT A
FORM OF WARRANT CERTIFICATE
No. _________ Certificate for _____ Warrants
CUSIP No. 827054 12 3
WARRANTS TO PURCHASE COMMON STOCK OF
SILICON GAMING, INC.
THIS CERTIFIES THAT ___________________, or its registered assigns, is the
registered holder of the number of Warrants set forth above (the "Warrants").
Each Warrant entitles the holder thereof (the "Holder"), at its option and
subject to the provisions contained herein and in the Warrant Agreement referred
to below, to purchase from Silicon Gaming, Inc., a California corporation (the
"Company"), shares of Common Stock, $.001 par value, of the Company (the "Common
Stock") at the per share exercise price of $0.1528 (the "Exercise Price"). The
number of shares of Common Stock into which each Warrant will be exercisable
(subject to adjustment as provided in the Warrant Agreement) shall be 3.59662
per share of current Common Stock. This Warrant shall terminate and become void
as of the earlier of (i) the close of business on the fourth anniversary of the
Issue Date (the "Expiration Date"), or (ii) the date such Warrant is exercised.
In addition, following the second anniversary of the Issue Date the Warrants
will automatically terminate, if not sooner exercised, on the 180th day (the
"Termination Date") following any period of twenty (20) consecutive trading days
ending on the date (the "Trigger Date") on which the average closing price of
the Common Stock as reported by the NASDAQ National Market, New York Stock
Exchange, or other national securities exchange (adjusted for any stock split,
reverse stock splits or stock dividend) equals or exceeds $0.2346 per share. The
"Issue Date" of this Warrant is May ___, 2000. The number of shares purchasable
upon exercise of the Warrants and the Exercise Price per share shall be subject
to adjustment from time to time as set forth in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of April ___, 2000 (the "Warrant Agreement"), between the
Company and EquiServe Trust Company, N.A., a national banking association with
its principal offices in Canton, Massachusetts (the "Warrant Agent," which term
includes any successor Warrant Agent under the Warrant Agreement), and is
subject to the terms and provisions contained in the Warrant Agreement, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. In the event of a conflict between the terms
and provisions of this Warrant and the Warrant Agreement, the terms and
provisions of the Warrant Agreement will control. Reference is hereby made to
the Warrant Agreement for a full statement of the respective rights, limitations
of rights, duties and obligations of the Company, the Warrant Agent and the
Holders of the Warrants. Capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Warrant Agreement.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to Section 5.2 of the Warrant
Agreement but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be countersigned and
issued to the Holder hereof a new Warrant Certificate in respect of the shares
of Common Stock as to which the Warrants shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Warrant Agent by
presenting this Warrant Certificate properly endorsed with a request to exchange
this Warrant Certificate for other Warrant Certificates evidencing an equal
number of Warrants. No fractional Warrant Shares will be issued upon the
exercise of the Warrants, but the Company shall pay an amount in cash equal to
the market price for one Warrant Share on the trading day immediately preceding
the date the Warrant is exercised, multiplied by the fraction of a Warrant Share
that would be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the exercise of the
Warrants shall, upon such issue, be duly and validly issued and fully paid and
nonassessable.
Notwithstanding anything in this Warrant Certificate or the Warrant
Agreement to the contrary, in no event shall a holder be entitled to exercise a
Warrant unless (i) a registration statement filed under the Securities Act in
respect of the issuance of the Warrant Shares is then effective or (ii) in the
opinion of counsel to the Company addressed to the Warrant Agent an exemption
from the registration requirements is available under the Securities Act or
otherwise for the issuance of the Warrant Shares (and the delivery of any other
securities for which the Warrants may at the time be exercisable) at the time of
such exercise.
The Warrants will not be registered under the Securities Act. The Warrants
may not be sold, transferred or otherwise disposed of except pursuant to a valid
exemption from the registration requirements of the Securities Act and
applicable state securities laws. A holder may transfer its Warrants only
pursuant to a valid exemption from the registration requirements of applicable
securities laws and only by complying with the terms of this Agreement. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a holder only upon, final acceptance and registration of the transfer
by the Warrant Agent in the register.
The Holder in whose name the Warrant Certificate is registered may be
deemed and treated by the Company and the Warrant Agent as the absolute owner of
the Warrant Certificate for all purposes whatsoever and neither the Company nor
the Warrant Agent shall be affected by notice to the contrary.
The Warrants do not entitle any Holder hereof to any of the rights of a
stockholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
2
DATED: April ___, 2000
SILICON GAMING, INC. Countersigned:
By: EQUISERVE TRUST COMPANY, N.A. as
-------------------------------- Warrant Agent,
Name: Xxxxxx X. Xxxxxx
Its: President and Chief Executive
Officer
By:
Attest: -------------------------------
Authorized Signatory
------------------------------------
Assistant Secretary
3
EXHIBIT 1
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of May ___, 2000, to purchase
_______ shares of the Common Stock, par value $.001 pre shares, of Silicon
Gaming, Inc. and
[Check one]
______ tenders herewith payment of $____________ (the Exercise Price multiplied
by the number of shares).
______ elects a cashless exercise for the number of shares of Common Stock equal
in Market Value to the difference between the Market Value of ______ shares of
Common Stock issuable upon exercise of this Warrant and the total case Exercise
Price thereof. Market Value shall be an amount equal to the market price of the
Common Stock on the day of the Company's receipt of this Notice of Exercise form
duly executed, multiplied by the number of shares of Common Stock above.
Please deliver the stock certificate to:
----------------------------------
----------------------------------
----------------------------------
--------------------------------
[Name of holder]
By:
4
