ALLIANCE GAMING CORPORATION
STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of September 15, 1995, by and among
ALLIANCE GAMING CORPORATION, a Nevada corporation (the
"Company"), and each of the persons identified on the signature
pages hereof. The persons identified on the signature pages
hereof are sometimes hereinafter collectively referred to as the
"Purchasers" and individually as a "Purchaser"
WHEREAS, the company desires to issue and sell, and the
Purchasers desire to purchase, shares of Non-Voting Junior
Convertible Special stock, Series B (the "Special Stock"), of the
Company, subject to the terms and conditions herein;
NOW, THEREFORE, in reliance upon the representations and
warranties made herein and in consideration of the premises and
the mutual covenants and conditions herein contained, the Company
and each Purchaser, severally and not jointly, hereby agree as
follows:
SECTION I
Sale and Purchase of the Shares; Fees
1.1 Sale of Shares. At the Closing (as defined in
Section 2.2 hereof ), and subject to the terms and conditions
hereof, the Company will issue and sell to the Purchasers and
each Purchaser will purchase from the Company the number of
shares (the "Shares") of Special Stock set forth below its name
on the signature page hereof at a purchase price of $4.50 per
share (the "Purchase Price").
1.2 Issue of Special Stock. On or before the Closing,
the Company will have authorized the issuance of up to 6,666,667
shares of Special Stock pursuant to a Certificate of
Designations, Preferences and Relative, Participating , Optional
and other Special Rights of Special stock and Qualifications,
Limitations and Restrictions thereof of Special Stock in the form
attached hereto as Annex A (the "Certificate") which will be
filed with the appropriate officials of the State of Nevada on or
before the Closing Date; and the Company will have authorized,
subject to stockholder approval as provided herein, the issuance
of 6,666,667 shares of Common Stock, par value $0.10 per share
(the "Common Stock"), subject to adjustment as provided in the
Certificate, to be issued upon the conversion of the Shares in
accordance with the Certificate.
The Special Stock will automatically convert, upon the
approval of the Company's stockholders, into shares of Common
Stock.
Pursuant to the Certificate, if the approval for
conversion shall not have occurred within six months following
the Closing Date, the Company shall immediately make an offer to
each holder of the Shares by registered mail to redeem, put of
funds legally available therefor, on a date specified in such
offer (which shall not be lose than 30 nor more than 60 days
after the date of such notice), all such holder's Shares at a
cash price equal to the greater of (i) the Quoted Price (as
defined in the Certificate) of the Common Stock an the date
notice is sent or (ii) 125% of the original issue price of the
Shares, upon the acceptance of such offer received by the Company
at least 10 days prior to the redemption date specified in the
Company's offer. If the holder of any Share shall accept such
offer, such Shares shall be redeemed on the specified redemption
date, and on surrender of the certificates evidencing the Shares
will receive payment of the redemption price.
1.3 Commitment Fees. Each Purchaser shall be paid a
commitment fee (the "First Commitment Fee") on September 19, 1995
equal to 1.5% of its total committed purchase amount for the
period from the date hereof to November 2, 1995 (the "First
Commitment Period"). In addition, if at the option of the
Company the First Commitment Period is extended by notice to each
Purchaser on or before November 2, 1995, each Purchaser shall be
paid on the earlier of (i) the Closing Date, (ii) the termination
of the Tender Offer or (iii) December 15, 1995, an additional
commitment fee equal to 0.25% of such Purchaser's total committed
purchase amount for each week after November 2, 1995, until such
time as any of the events specified in clauses (i) through (iii)
above shall have occurred (the "Second Commitment Fee", and
together with the First Commitment Fee, the "Commitment Fees").
The Commitment Fees shall be payable in immediately available
funds by wire transfer (to the extent wire transfer instructions
have been provided to Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation (the "Placement Agent") by such Purchaser) or by
check sent by first class mail to the address of such Purchaser
listed on the signature page hereof.
SECTION 2
Closing, Payment And Delivery
2.1 Closing Date and Place of Closing. The closing of
the purchase and sale the Shares hereunder (the "Closing") shall
be held at the offices of Milbank, Tweed, Xxxxxx & XxXxxx, 0
Xxxxx Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. Eastern
Time on the Closing Date, as set forth in Section 2.2.
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2.2 Closing. Upon the satisfaction of the conditions
set forth in Section 2.3 hereof, and subject to obtaining Nevada
gaming authority approval for issuance of the Shares, the Company
shall notify each Purchaser of the date (the "Closing Date"),
place and time of the closing (the "Closing") which shall in no
event be later than 10 business days after the time that all of
the conditions set forth in Section 2.3 have been satisfied, at
which time each Purchaser shall pay to the Company, by wire
transfer of immediately available funds to the account specified
by the Company in such notice of Closing or such other form of
payment as shall be mutually agreed upon by the Company and the
Purchaser, the Purchase Price, and the Company shall deliver to
the Purchaser a certificate or certificates representing the
number of Shares purchased as set forth below such Purchaser's
name on the signature page hereof appropriately legended to
reflect the restrictions of this Agreement and the Securities Act
of 1933, as amended (the "Securities Act").
2.3 Conditions to Closing. The several obligations of
the Purchasers to purchase the Shares on the Closing Date
hereunder are subject to the following conditions:
(a) the tender offer by the Company's subsidiary, BGII
Acquisition Corp., a Delaware corporation ("BGII), for 4.4
million shares of Common Stock, $.01 par value, of Bally Gaming
International, Inc., a Delaware corporation ("Bally"), as the
same may be amended from time to time (the "Tender Offer"), shall
have been consummated on or before December 15, 1995;
(b) the representations and warranties of the Company
contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though made on
and as of such date (except for those made as of a specified
date, which shall be true and correct as of such date) and the
company shall have performed in all material respects its
obligations hereunder required to be performed on or before the
Closing Date and the Placement Agent shall have received an
Officers' Certificate addressed to the Purchasers and signed by
the Chief Executive Officer and the Chief Financial Officer to
the effect of the foregoing;
(c) the Purchasers shall have received a legal opinion
or opinions covering the matters set forth in Annex B; and
(d) no injunction, writ, restraining order or other
order of any nature arising out of the Tender offer or the
purchase of the Shares hereunder shall have been issued by any
governmental or judicial authority and remain in force against
such Purchaser preventing such Purchaser from purchasing Shares
or against the Company preventing the
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Company from issuing the Shares and the Placement Agent shall
have received an Officers' Certificate addressed to the
Purchasers and signed by the Chief Executive Officer and the
Chief Financial Officer to the effect of the foregoing insofar as
the foregoing relates to the Company.
SECTION 3
Representations and Warranties of the Company
The Company hereby represents and warrants to each
Purchaser as follows:
3.1 Due Authorization and Qualification. The Company
is duly organized and existing and in good standing,under the
laws of the State of Nevada and qualified and licensed to do
business in, and in good standing in, any state where the failure
to be so licensed or qualified could reasonably be expected to
have a material adverse affect on the business, operations,
condition (financial or otherwise), finances, or prospects of the
Company.
3.2 Due Authorization.--No Conflict. The execution,
delivery and performance of this Agreement is within the
Company's corporate powers, been duly authorized, and is not in
conflict with nor constitute a breach of any provision contained
in the Company's Articles or Certificate of Incorporation or By-
laws, nor will it constitute an event of default under any
material agreement to which the Company is a party or by which
its properties or assets may be bound, nor will it violate the
requirements of all applicable laws, rules, regulations, and
orders of any governmental authority, including any Gaming
Authority, other than laws, rules, regulations and orders the
non-compliance with which, individually or in the aggregate,
would not have and could not reasonably be expected to have a
material adverse effect on the business, operations, condition
(financial or otherwise), finances, or prospects of the Company.
"Gaming Authorities" as used herein means all regulatory
authorities and other bodies regulating or having jurisdiction
over the gaming activities of the Company or any of its
subsidiaries (or any entity under the control of the Company or
any of its subsidiaries), including, without limitation, the
Nevada Gaming Commission.
3.3 Litigation. There are no actions or proceedings
pending by or against the Company before any court or
administrative agency and the Company does not have knowledge or
belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or
prosecutions involving the Company, except for: (a) ongoing
collection matters in which the Company is the plaintiff; and b)
matters that would not reasonably be expected in the Company's
good faith judgment to have a materially adverse effect
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on the condition (financial or otherwise), finances, results of
operations or prospects of the Company.
3.4 Capitalization. As of September 14, 1995, the
Company's authorized capital stock consists of 175,000,000 shares
of Common Stock and 10,000,000, of which as of July 31, 1995
11,654,150 shares of Common Stock and 1,333,333 shares of Special
Stock were issued and outstanding. As of the date hereof, the
Company had reserved 18,454,834 shares of Common Stock for
issuance upon the exercise of outstanding convertible debentures,
options and warrants. All of the issued and outstanding shares
of Common Stock are validly issued, fully paid and non-
assessable. All of the Shares being issued to the Purchasers
pursuant to this Agreement, and (subject to stockholder approval
as contemplated hereby) all of the shares of Common Stock
issuable upon conversion of the Shares (the "Conversion Shares"),
upon issuance will be validly issued, fully paid and non-
assessable shares of Special Stock and Common Stock,
respectively. Except for the foregoing and as disclosed in the
Company's Reports (as hereinafter defined), as of the date hereof
there are no outstanding options, warrants or other rights of any
kind to acquire any additional shares of capital stock of the
Company or securities convertible into or exchangeable for, or
which otherwise confer on the holder thereof any right to
acquire, any such additional shares, nor is the Company committed
to issue any such option, warrant, right or security.
3.5 No Restrictive Agreements. The issuance and
delivery of the Shares to the Purchasers, and the issuance and
delivery of the Conversion Shares upon conversion of the Shares,
is not and will not be subject to any preemptive rights.
3.6 Valid-Agreement. This Agreement constitutes a valid
and binding agreement of the Company enforceable in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and general principles
of equity.
3.7 Financial Information. The financial statements
included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1994 together with the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended
September 30, 1994, December 31, 1994 and March 31, 1995
(collectively, the "Exchange Act Documents") present fairly in
all material respects in accordance with generally accepted
accounting principles consistently followed (except as disclosed
therein) the financial position and results of operations of the
Company at the dates and for the periods to which they relate
(subject, in the case of the unaudited financial statements, to
normal year-end adjustments).
3.8 Consents. Except for those consents and filings
contemplated by Section 5 hereof and such approvals as at the
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time of the Closing will have been obtained, no consent,
approval, qualification, order or authorization of, or filing
with any governmental authority is required in connection with
the Company's execution, delivery or performance of this
Agreement or the offer, sale or issuance of the Shares by the
Company other than as required under "Blue Sky" laws.
3.9 Company Reports; Private Placement Memorandum.
Since June 30, 1994, all reports, proxy statements, registration
statements and other filings required to be filed by the Company
with the Securities and Exchange Commission (the "SEC") pursuant
to the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act), including without limitation the
Company's Schedule 14D-1 and Schedule 13D, each as amended, have
been duly filed with the SEC, and none of such documents and the
Private Placement Memorandum, dated September 1995, when taken
together with such documents as a whole (collectively, the
"Company Reports"), contained as of their respective dates any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein, or necessary to make
the statements therein, in the light of the circumstances in
which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to any
projections or other forward-looking information or statements
contained in the Private Placement Memorandum except that such
projections or forward-looking information or statements were
made in good faith based upon reasonable assumptions and provided
further that no representation or warranty is made with respect
to information concerning any person other than the Company and
its affiliates on the date hereof.
SECTION 4
Representations, Warranties and Covenants of Purchasers
Each Purchaser represents and warrants to the Company
and agrees, severally and not jointly, and only as to itself, as
follows:
4.1 Experience. It is experienced in evaluating and
investing in companies such as the Company, and has such
knowledge and experience in evaluating the merits and risks of
its investment, and has the ability to bear the economic risks of
its investment. It is an "accredited investor," as such term in
defined in Regulation D under the Securities Act. It has
completed and delivered to the Placement Agent an investors
questionnaire, and all information set forth therein is true and
correct as of the date hereof. It acknowledges that it has
received all information relating to the Company reasonably
requested by it and that it has had an opportunity to ask
questions and receive answers concerning the investment
contemplated hereby.
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4.2 Investment. It is acquiring the Shares for
investment for its own account and not with the view to, or for
resale in connection with, any distribution thereof (subject to
the provisions of Sections 5.2 and 5.3 hereof) . It understands
that the shares have not been registered under the Securities Act
by reason of exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona
fide nature of its investment intent as expressed herein. it
acknowledges that the Company may place restrictive legends on,
and stop transfer orders against, the certificates representing
the Shares being acquired by it.
4.3 Rule 144. It acknowledges that the shares must be
held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is
available. It agrees that it will not sell, transfer or assign
the Shares or the Conversion shares for a period of six months
after the Closing and thereafter without furnishing an opinion of
counsel reasonably satisfactory to the Company to the effect that
such sale will not violate the Securities Act. It has been
advised or is aware of the provisions of Rule 144 promulgated
under the securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of
certain conditions and that such Rule may not become available
for resale of the Shares.
4.4 Authority. It has full power and authority under
all applicable laws to enter into this Agreement and to
consummate the transactions herein and has taken all action
necessary to authorize its execution and performance of this
Agreement. This Agreement when executed and delivered will be
duly executed and will constitute a legal, valid and binding
obligation of each of the Purchasers, enforceable in accordance
with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency or other similar laws affecting
the enforcement or creditors, rights generally and general
principles of equity. Its source of funds is not an employee
benefit plan.
SECTION 5
Covenants of the Company
5.1 Future Reports; Stockholders Meeting. (a) Until the
earlier of the termination of the Purchaser's commitment to
purchase the Shares and the Closing Date and thereafter for a
period of two (2) years from the Closing Date for so long as the
Purchaser is a holder of Shares or Conversion Shares, the Company
will furnish to the Purchaser (i) all annual, quarterly and
periodic reports and proxy statements filed by the Company with
the SEC pursuant to the Exchange Act, (ii) all registration
statements filed by the Company under the Securities Act, within
five (5) days after filing such report or registration statement
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with the SEC and (iii) all amendments to the Company's offer to
purchase Bally. Until the Closing Date and for so long. after
the Closing Date as any Purchaser holds any Shares or Conversion
Shares, the Company will file all reports required to be filed by
it under the Exchange Act and will take such further action as
any Purchaser may reasonably request, all to the extent required
to enable such Purchaser to sell pursuant to Rule 144 adopted by
the SEC under the Securities Act. Until the closing Date and
thereafter for so long as the Purchaser is a holder of shares or
Conversion Shares, the Company will also promptly furnish to the
Purchasers copies of all reports or other material information
relating to the Company which it furnishes to stockholders (as
such) of the Company generally.
(b) The Company shall cause a meeting of its
stockholders (the "Stockholders Meeting"), to be duly called and
held within six months of the Closing Data for the purpose of
approving the conversion of the Shares into shares of Common
Stock. The Board of Directors of the Company shall recommend to
its stockholders the approval of such conversion and shall use
all reasonable efforts to obtain the approval of such
stockholders; provided, however, that nothing herein shall
require the Board of Directors of the Company to act, or refrain
from acting, in any manner that it may deem, after consultation
with its outside counsel, to be necessary to the proper discharge
of the Directors' fiduciary duties to their stockholders. In
connection with the Stockholders Meeting, the Company shall
prepare and file a preliminary proxy statement relating to the
conversion of Shares (the "Preliminary Proxy Statement") with the
SEC, and the Company shall use its best efforts to respond to the
comments of the SEC and to cause a definitive proxy statement
(the Definitive Proxy Statement") to be mailed to its
stockholders. The Definitive Proxy Statement, as of the date of
the mailing of the Definitive Proxy Statement by the Company to
its stockholders and as of the date of the Stockholders Meeting,
(i) will comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder and
(ii) will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made not misleading.
5.2 Piggyback Registration.
(a) Right to Include Shares. Whenever the Company
proposes to register under the securities Act an offering of the
Common Stock on any form for the registration of securities under
such Act, whether or not for its own account (other than by (i) a
registration statement on Form S-4 or S-8 or any successor or
similar forms, (ii) any registration statement to be used
exclusively in the offering and sale of the Company's securities
acquired by any of its or its subsidiaries, employees, directors
or consultants pursuant to any employee compensation, option,
restricted stock or similar plan arrangement or agreement, (iii)
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a registration statement filed exclusively in connection with an
exchange offer or an offering of securities solely to the
securityholders of the Company, or (iv) any registration
statement filed exclusively in connection with a rights offering)
(a "Piggyback Registration") it shall give written notice to all
Purchasers of its intention to do so no later than 20 days prior
to the proposed date of filing such registration statement. Such
rights are referred to hereinafter as "Piggyback Registration
Rights" Upon the written request of any such Purchaser made
within 10 days after receipt of any such notice (which request
shall specify the Registrable securities (as defined below)
intended to be disposed of by such Purchaser), the Company shall
subject to Section 5.2(a) hereof, include in the registration
statement the Registrable Securities which the company has been
so requested to register by the Purchasers thereof (such
requesting Purchasers hereinafter the "Holders") and the Company
shall keep such registration statement (the "Registration
Statement") in affect and maintain compliance with each Federal
and state law or regulation for the period necessary for such
Holder to effect the proposed sale or other disposition (but in
no event for a period greater than 120 days). "Registrable
Securities" shall mean any shares of common Stock issued to a
Purchaser and/or its permitted designees or transferees on
conversion of Shares and/or other securities that may be or are
issued by the Company upon conversion of any Shares, including
those which may thereafter be issued by the Company in respect of
any such securities by means of any stock splits, stock
dividends, recapitalizations, reclassifications or the like, and
as adjusted pursuant to the Certificate; provided, however, that
as to any particular securities contained in Registrable
Securities such securities shall cease to be Registrable
Securities when (i) a Registration Statement with respect to the
sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in
accordance with such Registration Statement; or (ii) they shall
have boon sold to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act or are eligible for
sale to the public under Rule 144(k) (or any successor provision)
under the Securities Act.
(b) Withdrawal of Piggyback Registration by Company.
If, at any time after giving written notice of its intention to
register any securities in a Piggyback Registration but prior to
the effective date of the related Registration Statement, the
Company shall determine for any reason not to register such
securities, the Company shall give notice of such determination
to each Holder and, thereupon, shall be relieved of its
obligation to register any Registrable Securities in connection
with such Piggyback Registration. All best efforts obligations
of the Company pursuant to Section 5.4 hereof shall cease if the
company determines to terminate prior to such effective date any
registration where Registrable Securities are being registered
pursuant to this Section 5.2.
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(c) Piggyback Registration of Underwritten Public
Offerings. If a Piggyback Registration involves an offering by
or through underwriters, then (i) all Holders requesting,to have
their Registrable Securities included in the Company's
Registration Statement must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and
conditions as apply to other selling stockholders and (ii) any
Holder requesting to have his or its Registrable Securities
included in such Registration Statement may elect in writing, not
later than three Business Days prior to the filing of the
Registration Statement filed in connection with such
registration, not to have his or its Registrable Securities so
included in connection with such registration.
(d) Payment of Registration Expenses for Piggyback
Registration. The Company shall pay all expenses (including any
and all fees, disbursements and expenses incurred in connection
with any registration or action incident to performance of or
compliance by the Company with Section 5 hereof, including,
without limitation, (i) all SEC, national securities exchange and
NASD registration and filing fee, all listing fees and all
transfer agent fees; (ii) all fees and expenses of complying with
state securities or blue sky laws (including the fees and
disbursements of counsel of the underwriters in connection with
blue sky qualifications of the Registrable Securities); (iii) all
printing, mailing, messenger and delivery expenses; (iv) all fees
and disbursements of counsel for the Company and of its
accountants, including the expenses of any special audits and/or
"cold comfort" letters required by or incident to such
performance and compliance, and all reasonable fees and
disbursements of one counsel for the holders of Shares; and (v)
any disbursements of underwriters or their counsel in connection
with the preparation of a customary blue sky and legal investment
survey, but excluding underwriting discounts and commissions,
brokerage fees and transfer taxes, if any (all of such expenses
hereinafter referred to as "Registration Expenses")) in
connection with each registration of Registrable Securities
requested pursuant to a Piggyback Registration Right contained in
this Section 5.2.
(e) Priority in Piggyback Registration. If a Piggyback
Registration involves an offering by or through underwriters, the
Company, except as otherwise provided herein, shall not be
required to include Registrable Securities therein if and to the
extent the underwriter managing the offering reasonably believes
in good faith and advises the Company that such inclusion would
materially adversely affect such offering; provided that any
reduction or elimination of the Registrable Securities shall
occur (i) first, to the extent necessary to permit the sale of
all of the shares of Common Stock to be sold by the company or
the other stockholders with demand registration rights requesting
a registration and (ii) second, pro rata among persons having
piggyback registration rights, based on the number of shares
requested to be registered by all such stockholders.
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If the Piggyback Registration does not involve an
offering by or through underwriters, the Company shall not be
required to include Registrable Securities therein if and to the
extent the company reasonably believes such inclusion would
adversely affect such offering; provided, however, that a
reduction or elimination in the Registrable Securities included
in such registration shall be applied according to the priorities
set forth above for an underwritten offering.
5.3 Demand Registration.
(a) Request for Registration. If, at any time after a
period of six months from the Closing Date, one or more Holders
holding in the aggregate at least 10% of the outstanding
Registrable Securities request that the Company file a
registration statement under the Securities Act with, respect to
the Registrable Securities held by such Holder or Holders (a
"Demand Registration"), as soon as practicable thereafter the
company shall use its best efforts to file a registration
statement with respect to all Registrable Securities that it has
been so requested to include and obtain the effectiveness
thereof, and to take all other action necessary under any Federal
or state law or regulation to permit the Registrable Securities
that are specified in the notices of the Holders or holders
thereof to be sold or otherwise disposed of, and the Company
shall maintain such compliance with each such Federal and state
law and regulation for the period necessary for such Holder or
Holders to effect the proposed sale or other disposition;
provided, however the Company shall be entitled to defer such
registration for a period of (i) up to 90 days if and to the
extent that its board of directors shall determine that such
registration would interfere with a pending corporate transaction
or (ii) up to 120 days following the effective date of any
registration statement previously filed by the Company under the
Securities Act, other than registration statements of the type
described in clauses (i) through (iv) of Section 5.2(a) hereof.
The Company shall promptly give written notice to the Holders of
any Registrable Securities who or that have not made a request to
the Company pursuant to the provisions of this Section 5.3(a) of
its intention to effect any required registration or
qualification, and shall use its best efforts to effect as
expeditiously as possible such registration or qualification of
all such other Registrable Securities that are then held, the
Holder or Holders of which have requested such registration or
qualification, within 15 days after such notice has been given by
the Company, as provided in the preceding sentence. The Company
shall be required to effect a registration or qualification
pursuant to this Section 5.3(a) in the aggregate on three
occasions only.
(b) Payment of Expenses for Demand Registration. The
company shall pay all Registration Expenses in connection with
the Demand Registration.
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(c) Selection of Underwriters. If any Demand
Registration is requested to be in the form of an underwritten
offering, the managing underwriter shall be selected by the
Company and reasonably acceptable to the holders of a majority of
the Registrable Securities included in such Demand Registration,
which acceptance will not be unreasonably withheld, and the
independent pricer required under the rules of the National
Association of Securities Dealers, Inc. ("NASD") (if any) shall
be so selected and obtained by the Company. All fees and
expenses (other than expenses otherwise required to be paid) of
any managing underwriter, any co-manager or any independent
underwriter or other independent pricer required under the rules
of the NASD shall be paid for by such underwriters or by the
Holders whose Registrable Securities are being registered.
(d) Procedure for Requesting Demand Registration. Any
request for a Demand Registration shall specify the aggregate
number of the Registrable Securities proposed to be sold and the
intended method of disposition. Within ten (10) days after
receipt of such a request, the Company will give written notice
of such registration request to all Holders, and, subject to the
limitations of Section 5.3(b) hereof, the Company will include in
such registration all Registrable Securities with respect to
which the company has received written requests for inclusion
therein within five business days after the date on which such
notice is given. Each such request will also specify the
aggregate number of Registrable Securities to be registered and
the intended method of disposition thereof.
5.4 Registration Procedures. If and whenever the
company is required to use its best efforts to take action
pursuant to any Federal or state law or regulation to permit the
sale or other disposition of any Registrable Securities in order
to effect or cause the registration of any Registrable Securities
under the Securities Act as provided in this Article 5, the
Company shall, as expeditiously as practicable;
(a) prepare and file with the SEC, as soon as
practicable within ninety (90) days after the and of the period
within which requests for registration may be given to the
Company under Section 5.3 hereof (but subject to the provision
for deferral contained in Section 5.3(a) hereof) a Registration
statement or Registration Statements relating to the registration
on any appropriate form under the Securities Act, which form
shall be selected by the Company and available for the sale of
the Registrable Securities in accordance with the intended method
or methods of distribution thereof, subject to Section 5.2(c)
hereof, and use its best efforts to cause such Registration
Statements to become effective; provided that before filing a
Registration Statement or prospectus or any amendment or
supplements thereto, including documents incorporated by
reference after the initial filing of any Registration Statement,
the Company will furnish to the Holders of the Registrable
Securities covered by such Registration Statement and the
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underwriters, if any, copies of all such documents provided to be
filed, which documents will be subject to the review of such
Holders and underwriters;
(b) prepare and file with the SEC such amendments and
post-effective amendments to a Registration Statement as may be
necessary to keep such Registration Statement effective for a
reasonable period not to exceed the shorter of the completion of
distribution of the registered securities and 120 days; cause the
related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule
424 under the Securities Act; and comply with the provisions of
the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by
the sellers thereof set forth in such Registration Statement or
supplement to such prospectus;
(c) notify the selling Holders of Registrable
Securities and the managing underwriters, if any, promptly, and
(if requested by any such person) confirm such advice in writing,
(i) when a prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related
prospectus or for additional information; (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for
that purpose; (iv) if at any time the representation and
warranties of the Company contemplated by paragraph (m) below
cease to be true and correct in all material respects; (v) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and (vi) of the
happening of any event that makes any statement of a material
fact made in the Registration statement, the prospectus or any
document incorporated therein by reference untrue or which
requires the making of any changes in the Registration Statement
or prospectus so that they will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading;
(d) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment;
(e) if reasonably requested by the managing
underwriters, immediately incorporate in a prospectus supplement
or post-effective amendment such information as the underwriters
believe (on advice of counsel) should be included therein as
required by applicable law relating to the sale of Registrable
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Securities, including, without limitation, information with
respect to the purchase price being paid for the Registrable
securities by such underwriters and with respect to any other
terms of the underwritten (or "best-efforts" underwritten
offering; and make all required filing of such prospectus
supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such prospectus supplement or post-
effective amendment;
(f) furnish to each selling Holder of Registrable
Securities and each managing underwriter, without charge, at
least one signed copy of the Registration Statement and any post-
effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(g) deliver to each selling Holder of Registrable
Securities and the underwriters, if any, without charge, as many
copies of the prospectus or prospectuses (including each
preliminary prospectus) any amendment or supplement thereto as
such persons may reasonably request; the Company consents to the
use of such prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by such prospectus or any
amendment or supplement thereto;
(h) prior to any public offering of Registrable
Securities, cooperate with the selling Holders of Registrable
Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of
such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the
United states as any selling Holder or underwriter reasonably
requests in writing, keep each such registration or qualification
effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
applicable Registration Statement; provided that the Company will
not be required to qualify to do business in any Jurisdiction
where it is not then so qualified or to take any action which
would subject the Company or any of its subsidiaries to general
service of process in any jurisdiction where it is not at the
time so subject;
(i) cooperate with the selling Holders of Registrable
Securities and the managing underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive
legends and enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any
sale of Registrable Securities to the underwriters;
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(j) use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies
or authorities within the United States as may be necessary to
enable the seller or sellers thereof or the underwriters, if any,
to consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated in
Section 5. 4 (c) (vi) above, prepare a supplement or post-
effective amendment to the applicable Registration Statement or
related prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchaser of the Registrable
Securities being sold thereunder, such prospectus will not
contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading;
(1) with respect to each issue or class of Registrable
securities, use its best efforts to cause all Registrable
Securities covered by the Registration Statements to be listed on
each securities exchange, if any, on which securities of the same
class issued by the Company are then listed if requested by the
holders of a majority of such issue or class Registrable
Securities;
(m) enter into such agreements (including an
underwriting agreement) and take all such other action consistent
with its obligations hereunder and reasonably required in
connection therewith in order to expedite or facilitate the
disposition of such Registrable Securities and in such
connection, if the registration is in connection with an
underwritten offering, (i) make such representations and
warranties to the underwriters, in such form, substance and scope
as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions in form, scope and
substance shall be reasonably satisfactory to the underwriters)
addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings; (iii)
obtain "cold comfort" letters and updates thereof from the
Company's accountants addressed to the underwriters, such letters
to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in
connection with underwritten offerings; (iv) set forth in full in
any underwriting agreement entered into the indemnification
provisions and procedures of Section 5.5 hereof with respect to
all parties to be indemnified pursuant to said Section; and (v)
deliver such documents and certificates as may be reasonably
requested by the underwriters to evidence compliance with clause
(i) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company; the above shall be done at each closing under such
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underwriting or similar agreement or as and to the extent
required hereunder;
(n) make available for inspection upon reasonable
notice by one or more representatives of the Holders of
Registrable Securities being sold, any underwriter participating
in any disposition pursuant to such registration, and any
attorney or accountant retained by such Holders or underwriter,
all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such representatives at reasonable times, in
connection with such; and
(o) otherwise use its best efforts to comply with all
applicable Federal and state regulations; and take such other
action as may be reasonably necessary to or advisable to enable
each such Holder and each such underwriter to consummate the sale
or disposition in such jurisdiction or jurisdiction in which any
such Holder or underwriter shall have requested that the
Registrable Securities be sold.
Except as otherwise provided in this Agreement, the
Company shall have sole control in connection with the
preparation, filing, withdrawal, amendment or supplementing of
each Registration Statement, the selection of underwriters, and
the distribution of any preliminary prospectus included in the
Registration Statement, and may include within the coverage
thereof additional shares of Common Stock or other securities for
its own account or the account of one or more of its other
security holders.
The Company may require each seller of Registrable
Securities as to which any registration is being affected to
furnish to the Company such information regarding the
distribution of such securities and such other information as may
otherwise be required by the Securities Act to be included in
such Registration Statement.
5.5 Indemnification
(a) Indemnification by company. In connection with
each Registration Statement relating to disposition of
Registrable Securities, the Company shall indemnify and hold
harmless each Holder and each underwriter of Registrable
Securities and each person, if any, who controls such Holder or
underwriter (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) (collectively, "Holder
Indemnified Parties") against any and all losses, claims, damages
and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of any action, suit or
proceeding or any claim asserted), to which they, or any of them,
may become subject under the Securities Act, the Exchange Act or
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other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto, or arise out of or are based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity
shall not inure to the benefit of any Holder or underwriter (or
any person controlling such Holder or underwriter within the
meaning of Section 1 of the Securities Act or Section 20 of the
Exchange Act) on account of any losses, claims, damages or
liabilities arising from the sale of the Registrable Securities
if such untrue statement or omission or alleged untrue statement
or omission was made in such Registration Statement, prospectus
or preliminary prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in
writing to the Company by the Holder or underwriter specifically
for use therein. This indemnity agreement shall be in addition
to any liability which the Company may otherwise have.
(b) Indemnification by Holder. In connection with the
Registration Statement, each Holder shall indemnify, to the same
extent as the indemnification provided by the Company in Section
5.5(a) hereof, the Company, its directors and each officer who
signs the Registration Statement and each person who controls the
Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act) but only insofar as such
losses, claims, damages and liabilities arise out of or are based
upon any untrue statement or omission or alleged untrue statement
or omission which was made in the Registration Statement, the
prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, in reliance upon and in conformity with
information furnished in writing by such Holder to the Company
specifically for use therein. In no event shall the liability of
any selling Holder of Registrable Securities hereunder be greater
in amount than the dollar amount of the not proceeds received by
such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation. The company shall be
entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same
extent as provided above, with respect to information so
furnished in writing by such persons specifically for inclusion
in any prospectus, registration statement or preliminary
prospectus or any amendment thereof or supplement thereto.
(c) Conduct of Indemnification Procedure. Any party
that proposes to assert the right to be indemnified hereunder
will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which
a claim is to be made against any indemnifying party or parties
under this Section, notify each such indemnifying party of the
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commencement of such action, suit or proceeding, enclosing a copy
of all papers served. No indemnification provided for in Section
5.5(a) or 5.5(b) hereof shall be available to any party who shall
fail to give notice as provided in this Section 5.5(c) to the
extent the party to whom notice was not given was prejudiced by
the failure to give such notice, but the omission so to notify
such indemnifying party of any such action, suit or proceeding
shall not relieve it from any liability that it may have to any
indemnified party for contribution otherwise than under this
Section. In case any such action, suit or proceeding shall be
brought against any indemnified party, it shall notify the
indemnifying party of the commencement thereof and the
indemnifying party shall be entitled to participate in, and, to
the extent that it shall wish, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and the
approval by the indemnifying party of such indemnified party of
such, counsel, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, except as
provided below. The indemnified party shall have the right to
employ its counsel in any such action, but the feet and expenses
of such counsel shall be at the expense of such indemnified party
unless (i) the employment of counsel by such indemnified party
has been authorized in writing by the indemnifying parties, (ii)
the indemnified party shall have reasonably concluded that there
may be a conflict of interest between the indemnifying parties
and the indemnified party in the conduct of the defense of such
action (in which case the indemnified parties shall not have the
right to direct the defense of such action on behalf of the
indemnified party) or (iii) the indemnified parties shall not
have employed counsel to assume the defense of such action within
a reasonable time after notice of the commencement thereof, in
each of which cases the fees and expenses of counsel shall be at
the expenses of the indemnifying parties. The indemnifying party
shall not without the prior written consent of each indemnified
party affected thereby, effect any settlement of any pending or
threatened proceeding in which such indemnified party has sought
indemnity hereunder, unless such settlement involves an
unconditional release of such Indemnified Party from all
liability arising out of such action, claim, litigation or
proceeding.
(d) Contribution. If the indemnification provided for
in this Section 5.5 is unavailable to any party entitled to
indemnification pursuant to Section 5.5(a) or 5.5(b) hereof, then
each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
judgments, liabilities and expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and each Holder Indemnified Party on the
other from the offering of the Registrable Securities or (ii) if
the allocation provided by clause (i) above is not permitted by
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applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand and
each Holder Indemnified Party on the other in connection with
trio statements or omissions which resulted in such losses,
claims, damages, judgments, liabilities or expenses, an well as
any other relevant equitable considerations. The relative fault
of the company on the one hand and each Holder Indemnified Party
on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on
the one hand or by each Holder Indemnified Party on the other and
the parties relative intent, knowledge, access or information and
opportunity to correct or prevent such statement or omission.
(e) The Company and each Holder Indemnified Party agree
that it would not be just and equitable if contributions pursuant
to Section 5.5(d) hereof were determined by pro rata allocation
or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 5.5(d)
hereof. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages, liabilities, or expenses
referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending
any such action or claim. No person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was to
found guilty of such fraudulent representation.
5.6 Reservation of Shares. The Company hereby agrees
that at all times there shall be reserved for issuance and
delivery upon conversion of any of the Shares such number of
conversion Shares as may be issuable upon conversion of the
shares. All Conversion Shares shall be duly authorized, and when
issued upon such conversion, shall be validly issued, fully paid
and nonassessable, free and clear of all lions, security
interests, charges and other encumbrances or restrictions on sale
and free and clear of all preemptive rights.
SECTION 6
Miscellaneous
6.1 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Now
York, without giving effect to conflicts of law.
6.2 Survival. The representations and warranties made
in Sections 3 aand 4 herein shall survive the Closing Date for a
period of one year.
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6.3 Successors and Assigns. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and
their respective successors, permitted assigns, heirs, executors
and administrators. No Purchaser may assign its obligations
hereunder to be performed on or before the closing.
6.4 Entire agreement Amendment. This Agreement and the
documents delivered pursuant hereto constitute the full and
entire understanding and agreement among the parties with regard
to the subjects hereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated except by
a written instrument signed by the Company and the Purchasers;
provided, however, that Purchasers holding a majority of the
Shares together with the Company may by written instrument amend
the provisions of Sections 5 or 6 (other than this Section 6.4)
hereof.
6.5 Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be
mailed by first class mail, postage prepaid, or by express
courier, or delivered either by hand or by messenger, addressed
(a) if to a Purchaser, as indicated on the signature page hereof,
or at such other address as such Purchaser shall have furnished
to the Company in writing, or (b) if to the Company, at 0000
Xxxxxxx Xxxxxxx, Xxx Xxxxx, Xxxxxx 00000, Attn: Chief Financial
Officer, or at such other address as the Company shall have
furnished to the Purchasers in writing.
6.6 Rights; Separability. Unless otherwise expressly
provided herein, the rights of the Purchasers hereunder are
several rights, not rights jointly held with any of the other
Purchasers. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
6.7 Information Confidential. Each Purchaser
acknowledges that the information received by it pursuant to this
Agreement may be confidential and is for the Purchaser's use
only. It will not use such confidential information in violation
of the Exchange Act or otherwise, or reproduce, disclose or
disseminate such information to any other person (other than its
employees or agents having a need to know the contents of such
information, and its attorneys and financial advisors), except in
connection with the exercise of rights under this Agreement,
unless the Company has made such information available to the
public generally or such Purchaser is required to disclose such
information by a governmental body.
6.8 Expenses. The company and the Purchasers shall bear
their own expenses and legal fees incurred on their behalf with
respect to this Agreement and the transactions contemplated
hereby.
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6.9 Titles and Gender. The titles of the Sections and
Subsections of this Agreement are for convenience of reference
only and are not to be considered in construing this Agreement.
Whenever used herein, the singular member includes the plural,
the plural includes the singular, and the use of either gender
shall include both genders.
6.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered by their respective
proper and duly authorized officers as of the day and year first
above written.
ALLIANCE GAMING CORPORATION
By:
PURCHASER:
By:
Address:
No. of Shares:
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ANNEX A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF SPECIAL
STOCK AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
or
NON-VOTING JUNIOR CONVERTIBLE
SPECIAL STOCK, SERIES 3
OF
ALLIANCE GAMING CORPORATION
a Nevada corporation,
Pursuant to Section 79.195 of the
Nevada Revised Statutes
ALLIANCE GAMING CORPORATION, a Nevada corporation (the
"Corporation"), certifies that, pursuant to the authority
contained in Article IV of its Amended Articles of Incorporation
(the "Articles of Incorporation") and in accordance with the
provisions of Section 78.195 of the Nevada Revised Statutes, the
Board of Directors of the Corporation at a meeting duly called
and held on September _, 1995, adopted the following resolution
which resolution remains in full force and effect on the date
hereof:
RESOLVED, that the Articles of Incorporation have
authorized 10,000,000 shares of special stock, par value $.10 per
share, of which 8,666,667 remain unissued; and
FURTHER RESOLVED, that it is necessary to set forth the
designation, preferences and relative, participating, optional
and other special rights and qualifications, limitations and
restrictions of 6,666,667 shares of such non-voting special
stock; and
FURTHER RESOLVED, that there is hereby established a
series of authorized special stock having a par value of $.10 per
share, which series shall be designated as "Non-Voting Junior
Convertible Special Stock, Series B" (herein the "Convertible
Special Stock,"), shall consist of 6,666,667 shares and shall
have the following voting powers, preferences and relative,
participating, optional and other special rights, and
qualifications, limitations and restrictions thereof as follows:
ARTICLE I
Certain Definitions
Unless the context otherwise requires, the terms defined
in this Article I shall have, for all purposes of this
resolution, the meanings herein specified:
Common Stock. The term "Common Stock" shall mean the
common stock, par value $.10 per share, of the corporation.
Conversion Condition. The term "Conversion Condition"
shall mean that the stockholders of the Corporation, at a duly
held annual or special meeting, or by action by written consent
in lieu thereof, have taken all action necessary or required
under Section 5(i)(1) of the "Non-Quantitative Designation
Criteria" of the NASDAQ National Market System to approve the
issuance of Common Stock on conversion as contemplated by this
Certificate.
Conversion Ratio. The term "Conversion Ratio" shall
initially mean the issuance, upon conversion as herein provided,
of one share of Common Stock for each share of Convertible
Special Stock surrendered for conversion and thereafter shall be
subject to adjustment from time to time pursuant to the terms of
Article IV below.
Exchange Date. The term "Exchange Date" shall have the
meaning set forth in subparagraph 4.2 below.
Initial Issue Date. The term "Initial Issue Date" shall
mean the date that shares of Convertible Special Stock are first
issued by the Corporation.
Liquidation Preference. The term "Liquidation
Preference,, shall mean $.01 per share of Convertible Special
Stock.
Person. The term "Person" shall mean an individual,
partnership,, joint venture, corporation, trust or unincorporated
organization, a government or any department, agency or political
subdivision thereof or other entity,
Quoted Price. The term "Quoted Price" shall mean, with
respect to the Common Stock, the last reported sales price as
reported by the NASDAQ National Market System, or if such
security is listed on a securities exchange, the last reported
sales price on such exchange which shall be for consolidated
trading if applicable to such exchange, or if neither so reported
or listed, the last reported bid price. In the absence of such
quotations on one or more such trading days, the Board of
Directors shall determine the Quoted Price for such trading days
on the basis of such quotations as it in good faith considers
appropriate.
Senior Stock. The term "Senior Stock" shall mean any
class or series of stock of the Corporation authorized after the
Initial Issue Date ranking senior to the Convertible Special
Stock in respect of the right to receive dividends or in respect
of the right to participate in any distribution upon liquidation,
dissolution or winding up of the affairs of the Corporation.
Trading Day. The term "Trading Day" shall mean, with
respect to the Common Stock, any day on which any market in which
the applicable security is then traded and in which a Quoted
Price may be ascertained is open for business.
ARTICLE II
Dividends or Other Distributions of Property
2.1 General. The holders of Convertible Special Stock
shall not be entitled to receive dividends unless and until
expressly declared by the Board of Directors of the Corporation
with respect to the Convertible Special Stock, or to otherwise
participate in any manner in the earnings of the Corporation;
provided, however, that in the event the Corporation pays a
dividend or makes any other distribution, whether in cash,
property or otherwise, including, without limitation, any rights,
options, or warrants to acquire securities or other securities
(but excluding a stock dividend, stock split or other similar
distribution consisting solely of shares of Common Stock which
results in an adjustment to the Conversion Ratio pursuant to
Article IV), pro rata to the holders of its Common Stock
generally, then the record holders of the Convertible Special
Stock outstanding on the applicable record date of such dividend
or other distribution shall be entitled to receive dividends or
such other distributions, out of funds legally available
therefor, in an amount per share of Convertible Special Stock
equal to the dividend or other distribution receivable had such
record holder(s) converted their Convertible Special Stock into
Common Stock immediately prior to the record date for such
dividend or other distribution pursuant to the terms of this
resolution, whether or not such Convertible Special Stock was at
such time convertible.
2.2 No Limitations on Dividends. No provision of this
resolution shall be deemed to limit or otherwise restrict or
qualify the right of the Corporation to declare, pay or set
apart,
for payment on any of its capital stock (whether outstanding on
the date hereof or issued in the future) any dividends, whether
in cash, property or otherwise, or to otherwise make any
distribution in respect of or purchase, redeem or otherwise
acquire any such capital stock, subject only to the right of the
holders Of Convertible Special Stock, pursuant to Section 2.1
hereof, to receive certain dividends and other distributions
payable in respect of Common Stock.
ARTICLE III
Distributions Upon Liquidation, Dissolution or Winding Up
3.1 Preference on Liquidation, Etc. In the event of
any voluntary or involuntary liquidation, dissolution or other
winding up of the affairs of the Corporation, subject to the
prior preferences and other rights of any Senior Stock as to
liquidation preferences, the holders of Convertible Special Stock
shall be entitled to be paid out of the assets of the Corporation
in cash or property at its fair market value as determined, in
good faith, by the Board of Directors of the Corporation the
Liquidation Preference per share prior to any payment to the
holders of Common Stock. After payment in full of the
Liquidation Preference per share of the Convertible Special
Stock, the holders of the Convertible Special Stock and the
Common Stock (as defined in Section 4.6 hereof) shall share pro
rata based upon (i) the number of shares of Common Stock into
which the Convertible Special Stock was convertible immediately
prior to such liquidation, dissolution or winding up (assuming,
for purposes of such calculation, conversion of the outstanding
shares of Convertible Special Stock whether or not such
Convertible Special Stock was at such time convertible) and (ii)
the number of shares of Common Stock (as defined in Section 4.6
hereof) outstanding. Except as provided in this Section 3.1,
holders of Convertible Special Stock shall not be entitled to any
distribution in the event of liquidation, dissolution or winding
up of the affairs of the Corporation.
3.2 Liquidation Pro-rata if Assets Inadequate, If, upon
any such liquidation, dissolution or other winding up of the
affairs of the Corporation, the assets of the Corporation shall
be insufficient to permit the payment in full of the Liquidation
Preference per share of the Convertible Special Stock, then the
assets of the Corporation remaining after the distributions to
holders of any Senior Stock of the full amounts to which they may
be entitled shall be ratably distributed among the holders of
Convertible Special Stock in proportion to the full amounts to
which they would otherwise be respectively entitled if all
amounts thereon were paid in full. Neither the consolidation or
merger of the Corporation into or with another corporation or
corporations, nor the sale, lease, transfer or conveyance of all
or substantially all of the assets of the Corporation to another
corporation or any other entity shall be deemed a liquidation,
dissolution or winding up of the affairs of the Corporation
within the meaning of this resolution.
ARTICLE IV
Conversion
4.1 Conversion. Upon the occurrence of the Conversion
Condition, all shares of Convertible Special Stock shall convert
into Common Stock. Subject to the adjustments to the Conversion
Ratio provided for in this Article IV, each share of Convertible
Special Stock shall be convertible into one share of Common
Stock. Immediately following such conversion, the rights of the
holders of converted Convertible Special Stock shall cease and
the persons entitled to receive the Common Stock upon the
conversion of Convertible Special Stock shall upon compliance
with the requirements of Section 4.2 hereof be treated for all
purposes as having become the owners of such Common Stock.
4.2 Procedures. To receive certificates evidencing
Common Stock issuable on conversion of Convertible Special Stock,
a holder must (i) surrender the certificate or certificates
evidencing the shares of Convertible Special Stock to be
converted, duly endorsed in a form reasonably satisfactory to the
Corporation, at the office of the Corporation or transfer agent
for the Convertible Special Stock, (ii) state in writing the name
or names in which he wishes the certificate or certificates for
shares of Common Stock to be issued, and (iii) pay any transfer
or similar tax if required by Section 4.4 hereof. The date on
which the holder satisfies all those requirements is the
"Exchange Date". The person in whose name the Common Stock
certificate is registered shall be treated as the stockholder of
record on and after the Exchange Date. As soon as practicable,
but in any event within 10 business days, the Corporation shall
deliver, through the transfer agent, a certificate for the number
of full shares of Common Stock issuable upon the conversion and a
check for any fractional share. The number of full shares of
Common stock issuable to any holder of Convertible Special Stock
upon conversion shall be based on the total number of shares of
Convertible Special Stock held by such holder.
4.3 Fractional Shares. The Corporation will not issue
a fractional share of Common Stock upon conversion of Convertible
Special Stock. Instead the Corporation will deliver its check
for the current market value of the fractional share. The
current market value of a fraction of a share is determined an
follows: Multiply the current market price of a full share by the
fraction and round the result to the nearest cent. The current
market price of a share of Common stock is the Quoted Price of
the Common Stock on the last Trading Day prior to the Conversion
Date.
4.4 Transfer Taxes. The Corporation will pay all
documentary stamp taxes attributable to the initial issuance of
shares of Common Stock upon the conversion of Convertible Special
Stock; provided, however,, that the Corporation shall not be
required to pay any tax or taxes which may be payable in respect
of any registration or transfer involved in the loans or delivery
of any shares of Common Stock in a name other than that of the
registered holder of the Convertible Special Stock surrendered
upon the conversion thereof, and the Corporation shall not be
required to issue or deliver such shares of Common Stock unless
or until the person or persons requesting the issuance thereof
shall have paid to the corporation the amount of such tax or
shall have established to the reasonable satisfaction of the
Corporation that such tax has been paid.
4.5 obtaining Stock Exchange Listings. The Corporation
will from time to time take all action, if any, which may be
necessary so that the shares of Common Stock issued upon
conversion of the Convertible Special Stock, immediately upon
their issuance in accordance with this resolution, will be listed
or quoted on the principal securities exchanges and markets,
within the United States of America, if any, on which other
shares of Common Stock are then listed or quoted.
4.6 Adjustments of Conversion Ratio.
(a) General. The Conversion ratio is subject to
adjustment from time to time upon the occurrence of the events
enumerated in this Section 4.6. For purposes of this Section 4.6,
"Common Stock" means shares (other than the Convertible Special
Stock) now or hereafter authorized of any class of common stock
of the Corporation and any other stock of the Corporation,
however designated, that has the right (subject to any prior
rights of any class or series of preferred stock) to participate
in any distribution of the assets or consolidated earnings of the
Corporation without limit as to per share amount.
(b) Adjustment for Changes in Common Stock. If the
Corporation:
(i) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(ii) combines its outstanding shares of Common Stock
into a smaller number of shares;
(iii) issues by reclassification of its Common stock
any shares of its capital stock; or
(iv) declares a stock dividend, stock split or effects
any other similar distribution consisting solely of shares of
Common Stock payable in respect of Common Stock;
then the Conversion Ratio in effect immediately prior to such
action shall be proportionately adjusted so that the holder of
Convertible Special Stock thereafter converted may receive the
aggregate number and kind of shares of capital stock of the
Corporation which he would have owned immediately following such
action if such Convertible Special Stock had been converted
immediately prior to such action (whether or not the Convertible
Special Stock was at such time convertible); provided, however.,
that no adjustment shall be made hereunder if the cash,
securities or property which would be the source of such
adjustment were distributed to the holders of the Convertible
Special Stock pursuant to Section 2.1 hereof. The adjustment
shall become effective immediately after the record date, if one
is declared, or 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.
(c) When De Minimis Adjustment May Be Deferred. No
adjustment in the Conversion Ratio need to be made unless the
adjustment would require an increase or decrease of at least 1%
in the Conversion Ratio. Any adjustments that are not made shall
be carried forward and taken into account in any subsequent
adjustments. All calculations under this Section shall be made
to the nearest cent or to the nearest 1/100th of a share, as the
case may be.
(d) When No Adjustment Required. No adjustment need be
made for a change in the par value of the Common Stock (including
a change from par value to no par value or from no par value to
par value).
(e) Notice of Adjustment. Whenever the Conversion
Ratio is adjusted, the Corporation shall provide the notices
required by Section 4.7 hereof.
(f) Reorganization of Corporation. If the Corporation
shall at any time consolidate or merge with one or more
Persons (other than a merger or consolidation in which the
corporation is the continuing Person and which does not result in
any reclassification, change or exchange of the outstanding
shares of Common Stock), or sell, lease, transfer, or convey all
or substantially all of its assets, the record holders of the
Convertible Special Stock shall have the right thereafter to
receive, upon the surrender of a certificate or certificates
representing Convertible Special Stock, the cash, securities or
other property to which the record holder would have been
entitled upon such consolidation, merger, sale, lease, transfer
or conveyance (to the extent permitted by applicable law) if the
record holder had held the shares of Common Stock issuable upon
any conversion thereof immediately prior to any such transaction,
whether or not the Convertible Special Stock was at such time
convertible. The Corporation shall take such steps in connection
with such consolidation or merger or sale, lease, transfer or
conveyance as may be necessary to assure that the provisions
hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to any cash, securities or other property
thereafter deliverable upon any conversion or redemption hereof.
The provisions of this Section 4.6(f) shall similarly apply to
successive consolidations, mergers, sales, leases, transfers or
conveyances.
(g) When Issuance or Payment May Be Deferred. In any
case in which this Section 4.6 shall require that an adjustment
in the Conversion Ratio be made effective as of a record date for
a specified event, the Corporation may elect to defer until the
occurrence of such event (i) issuing to the holder of any shares
of Convertible Special Stock converted after such record date the
Common Stock and other capital stock of the Corporation, if any,
issuable upon such conversion over and above the Common Stock and
other capital stock of the Corporation, if any, issuable upon
such conversion on the basis of the Conversion Ratio and (ii)
paying to such holder any amount in cash in lieu of a fractional
share pursuant to Section 4.3; provided, however,, that the
Corporation shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holders right to receive
such additional shares of Common Stock, other capital stock and
cash upon the occurrence of the event requiring such adjustment.
4.7 Notice to Holders. Upon any adjustment of the
Conversion Ratio pursuant to Section 4.6, the Corporation shall
promptly thereafter (i) cause to filed with the Corporation a
certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors (who may
be the regular auditors of the Corporation) setting forth the
Conversion Ratio after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon
which such calculations are based and setting forth the number of
shares of Common Stock (or portion thereof) issuable after such
adjustment in the Conversion Ratio, upon conversion of a share of
Convertible Special Stock which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and
(ii) cause to be given to each of the registered holders of the
Convertible Special Stock at its address appearing on the
transfer agent's register written notice of such adjustments by
first-class mail, postage prepaid.
4.8 Treatment of converted Shares. All shares of
Convertible Special Stock converted pursuant to this resolution
shall be retired and shall be restored to the status of
authorized and unissued shares of special stock, without
designations as to series and may thereafter be reissued as
shares of any series of special stock.
ARTICLE V
Voting Rights
5.1 Voting Rights of Holders of Convertible Special
Stock. Except as provided by law to the contrary, the
Convertible Special Stock shall be non-voting stock and no holder
of Convertible Special Stock shall be entitled (in such capacity)
to vote at any meeting of shareholders or otherwise.
ARTICLE VI
Redemption
6.1 Redemption. If the initial Condition shall not
have occurred within six months following the Initial Issue Date,
the Corporation shall immediately make an offer to each holder of
the convertible Special Stock by registered mail to redeem, out
of funds legally available therefor, on a date specified in such
offer (which shall not be less than 30 nor more. than 60 days
after the date of such notice), all such holder's Convertible
Special Stock at a cash price equal to the greater of (i) the
Quoted Price of the Common Stock on the date notice is sent and
(ii) 125% of the original issue price of the Convertible Special
stock, upon the acceptance of such offer received by the
Corporation at least 10 days prior to the redemption date
specified in the Corporation's offer. If the holder of any share
of Convertible Special Stock shall accept such offer, and upon
surrender of the certificates evidencing such Convertible Special
Stock such holder shall receive the redemption price therefor.
ARTICLE VII
Miscellaneous
7.1 Exclusion of Other Rights. Except as may otherwise
be required by law, the shares of Convertible Special Stock shall
not have any powers, preferences and relative, participating,
optional or other special rights, other than those specifically
set forth in this resolution and in the Articles of
Incorporation. The shares of Convertible Special Stock shall
have the same preemptive or subscription rights, if any, as
provided for the holders of the Common Stock.
7.2 Headings of Subdivisions. The headings of the
various subdivisions hereof are for convenience of reference only
and shall not affect the interpretation of any of the provisions
hereof.
7.3 Severability of Provisions. If any voting powers,
preferences and relative, participating, optional and other
special rights of the Convertible Special Stock and
qualifications, limitations and restrictions thereof set forth in
this resolution is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other
voting powers, preferences and relative, participating, optional
and other special rights of the Convertible Special Stock and
qualifications, limitations and restrictions thereof set forth in
this resolution (as so amended) which can be given effect without
the invalid, unlawful or unenforceable voting powers, preferences
and relative, participating, optional and other special rights of
the Convertible Special Stock and qualifications, limitations and
restrictions thereof shall, nevertheless, remain in full force
and effect, and no voting powers, preferences and relative,
participating, optional or other special rights of the
Convertible special Stock and qualifications, limitations and
restrictions thereof herein act forth shall be deemed dependent
upon any other such voting powers, preferences and relative,
participation, optional or other special rights of the
Convertible Special Stock and qualifications, limitations and
restrictions thereof unless so expressed herein.
ANNEX B
LEGAL OPINIONS OF COUNSEL TO THE COMPANY
1. The company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada.
2. The company has all requisite corporate power to
enter into the Purchase Agreement and to sell the Shares and to
carry out and perform its obligations under the Purchase
Agreement and has taken all requisite corporate action on the
part of the Company necessary for the authorization, execution,
delivery and performance by the Company of the Purchase Agreement
and for the authorization, issuance and delivery of the
Conversion Shares upon conversion of the Shares, other than
receiving stockholder approval for such conversion. The
Certificate of Designations establishing the Special Stock has
been filed with the Secretary of State of the State of Nevada and
is effective under Nevada law and the terms of the Special Stock
are valid under the laws of the State of Nevada. The execution,
delivery and performance of the Purchase Agreement will not
conflict with nor constitute a breach of any provision contained
in the Company's Articles or Certificate of Incorporation or By-
laws or, to the knowledge of such counsel, in any material
agreement to which the Company is a party or by which its
properties or assets may be bound.
3. The Shares have been duly authorized and, upon
payment of the purchase price therefor as contemplated in the
Purchase Agreement, will be validly issued, fully paid and non-
assessable. The Conversion Shares have been duly authorized and,
upon conversion as contemplated in the Certificate of
Designations, will be validly issued, fully paid and non-
assessable.
4. The Purchase Agreement has been duly and validly
authorized, executed and delivered by the Company and, assuming
due execution and delivery by the Purchasers, constitutes a valid
and binding obligation of the Company, enforceable in accordance
with its terms except as may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and general principles of equity and
except that such counsel expresses no opinion as to the
enforceability of indemnification or contribution provisions
contained in the Purchase Agreement.
5. The issuance of the Shares by the Company is exempt
from the registration requirements of the Securities Act.
