Exhibit
10.1
NEITHER THIS
SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
Original Issue
Date: March 31,
2006 $6,051,250.00
Original
Conversion Price (subject to adjustment herein):
$1.345
AMENDED AND RESTATED SENIOR
SECURED
CONVERTIBLE NOTE DUE JANUARY 1,
2010
WHEREAS, on March 31, 2006, Las Vegas Gaming,
Inc. , a Nevada corporation, having a principal place of
business at 4000 W. Ali Baba Lane, Las Vegas, 89118 (the "
Company ”), entered into a Securities Purchase
Agreement dated as of March 31, 2006 (the “Purchase
Agreement”), with CAMOFI Master LDC or its registered
assigns (the “ Holder ”), pursuant to which the
Company sold to Holder, and Holder acquired from the Company, a
Senior Secured Note due January 1, 2008 in the original aggregate
principal amount of $5,000,000 (the “Original
Note”);
WHEREAS, subsequent to March 31, 2006, the
Company requested that changes be made to certain provisions in the
Transaction Documents, including without limitation, extending the
Maturity Date of the Original Note from January 1, 2008 to January
1, 2010;
WHEREAS, in partial consideration of the
Holder’s agreeing to make the changes requested by the
Company, the aggregate principal amount outstanding under the
Original Note was increased to $6,051,250;
WHEREAS, the amendments described in the two
WHEREAS clauses immediately above, together with several other
amendments to the Original Note, were set forth in letter
agreements between the Company and Holder executed on
each of December 21, 2007, (ii) September 28, 2007, (iii) March 22,
2007, (iv) January 19, 2007, (v) December 15, 2006, and (vi)
September 19, 2006, (collectively, the “Letter
Agreements”); and
WHEREAS, the Company and Holder desire to
combine all of the changes delineated in the Letter Agreements
relating to the Original Note into one, comprehensive new Senior
Secured Convertible Note.
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company hereby agrees with Holder as
follows.
THIS NOTE is a duly authorized and issued Senior
Secured Convertible Note of the Company, designated as its Senior
Secured Convertible Note, due January 1, 2010 (the “
Note ”).
FOR VALUE RECEIVED, the Company
promises to pay to Holder the principal sum of Six Million
Fifty-One Thousand Two Hundred and Fifty U.S. Dollars ($6,051,250)
on January 1, 2010 or such earlier date as the Notes are required
or permitted to be repaid as provided hereunder (the “
Maturity Date ”). This Note is subject to
the following additional provisions:
Section
1 . Definitions
. For the purposes hereof, in addition to the terms
defined elsewhere in this Note: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the
Purchase Agreement, and (b) the following terms shall have the
following meanings:
“ Alternate Consideration ”
shall have the meaning set forth in Section 6(e)(iii).
“ Business Day ” means any
day except Saturday, Sunday and any day which shall be a federal
legal holiday in the United States or a day on which banking
institutions in the State of New York are authorized or required by
law or other government action to close.
“ Change of Control Transaction
” means the occurrence after the date hereof of any of (i) an
acquisition after the date hereof by an individual or legal entity
or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the
Company, by contract or otherwise) of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or
within an eighteen month period of more than one-half of the
members of the Company's board of directors which is not approved
by a majority of those individuals who are members of the board of
directors on the date hereof (or by those individuals who are
serving as members of the board of directors on any date whose
nomination to the board of directors was approved by a majority of
the members of the board of directors who are members on the date
hereof), or (iii) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
“ Common Stock ” means the
common stock, $0.001 par value, of the Company and stock of any
other class into which such shares may hereafter have been
reclassified or changed.
“ Conversion Date ” shall
have the meaning set forth in Section 5(a) hereof.
“ Conversion Price ” shall
have the meaning set forth in Section 5(c).
“ Conversion Shares ” means
the shares of Common Stock issuable upon conversion of Notes in
accordance with the terms hereof.
“ Effectiveness Period ”
shall have the meaning given to such term in the Registration
Rights Agreement.
“ Event of Default
” shall have the meaning set forth in Section 8.
“ Exchange Act ” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
Fundamental Transaction ” shall have the meaning set
forth in Section 6(e)(iii) hereof.
“ Late
Fees ” shall have the meaning set forth in the second
paragraph to this Note.
“
Mandatory Prepayment Amount ” shall equal the
aggregate principal amount of the Notes not converted to common
stock at 120% of the principal amount thereof to the date of
repayment.
“ Monthly Conversion Price ”
shall have the meaning set forth in Section 7(a) hereof.
“ Optional Prepayment Amount
” for any Note shall equal 120% of the principal amount
thereof to the date of repayment.
“ Original Issue Date ” shall
mean the date of the first issuance of the Original Note regardless
of the number of transfers of any Note and regardless of the number
of instruments which may be issued to evidence such
Note.
“ Person ” means a
corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision
thereof or a governmental agency.
“ Purchase Agreement ” means
the Securities Purchase Agreement, dated as of March
31, 2006, to which the Company and the original Holder
are parties, as amended, modified or supplemented from time to time
in accordance with its terms.
“ Qualified Financing ” means
an equity financing for the account of the Company in which shares
of common stock, or securities, directly or indirectly, convertible
into or exchangeable or exercisable for shares of common stock are
issued, which financing results in cumulative aggregate proceeds to
the Company of at least $10,000,000.
“ Redemption ” shall mean the
redemption of the Note pursuant to Section 7(a) hereof.
“ Redemption Amount ” shall
have the meaning set forth in Section 7a) hereof.
“ Registration Rights Agreement
” means the Amended and Restated Registration Rights
Agreement, dated as of the date hereof, to which the Company and
the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its
terms.
“ Registration Statement ”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement, covering among other things
the resale of the Conversion Shares and naming the Holder as a
“selling stockholder” thereunder.
“ Securities Act ” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“ Subsidiary ” shall have the
meaning given to such term in the Purchase Agreement.
“ Threshold Period ” shall
have the meaning given to such term in Section 5(e).
“ Trading Day ” means a day
on which the Common Stock is traded on a Trading Market.
“ Trading Market ” means the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the Nasdaq SmallCap
Market, the American Stock Exchange, the New York Stock Exchange,
the Nasdaq National Market or the OTC Bulletin Board.
“ Transaction Documents ”
shall have the meaning set forth in the Purchase
Agreement.
“ VWAP ” means, for any date,
the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
primary Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a Trading
Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted
on the Trading Market and if prices for the Common Stock are then
reported in the “Pink Sheets” published by the Pink
Sheets, LLC (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share
of the Common Stock so reported; or (c) in all other cases,
the fair market value of a share of Common Stock as determined by a
nationally recognized-independent appraiser selected in good faith
by Purchasers holding a majority of the principal amount of Notes
then outstanding.
Section
2 .
Prepayment and Commitment Fee .
a)
Optional Prepayment . The Company shall have the
right to prepay, in cash, on ten (10) Business Days’ prior
written notice to the Holder (during which time the Holder shall
have the right to convert this Note into Common Stock, at the
option of the Holder, in accordance with the terms hereof) all or a
portion of this Note for an amount equal to 120% of the principal
amount to be repaid plus that portion of the Commitment Fee that
would otherwise be payable had the prepayment not been
made.
b) Mandatory
Prepayment . (i) On the closing of a Qualified
Financing, or, in the event that no Qualified Financing occurs
prior to the Maturity Date, on the Maturity Date, the Company will
be required to offer to prepay or repay, in cash, on ten (10)
Business Days’ prior written notice to the Holder (during
which time the Holder shall have the right to convert this Note
into Common Stock, at the option of the Holder, in accordance with
the terms hereof), the aggregate principal amount of the Note not
yet converted to Common Stock at 120% of the principal amount
thereof plus that portion of the Commitment Fee that would
otherwise be payable had the prepayment not been made.
(ii) (Intentionally
omitted).
c)
Conversion Right of Holder . Notwithstanding anything
contained in this Note to the contrary, Holder shall have the
right, subject to the provisions of Section 5 hereof, to convert up
to one hundred percent (100%) of this Note into Common Stock. The
Company shall give Holder no less than ten (10) Business
Days’ notice prior to any proposed prepayments or repayments
under the Note, during which time Holder shall have the right to
instead convert all or any portion of this Note into Common
Stock.
d)
Commitment Fee . Subject to the next sentence hereof, for so
long as any portion of this Note is outstanding, the Company shall
pay to Holder a fee in cash (i) on January 1, 2009 of $403,416.67
and thereafter, (ii) on each of July 1, 2009, and January 1, 2010,
$302,562.50. In the event that the Company shall fail timely to pay
any Commitment Fee when due in accordance with this Section 2(d),
then (i) the Company shall be obligated to pay to Holder, as
liquidated damages and not as a penalty, two (2) times the amount
of any such unpaid Commitment Fee, which amount shall be
immediately added to and become a part of the principal balance
outstanding under this Note, and (ii) the Commitment Fees owed by
the Company to Holder shall be recalculated from the amounts set
forth in the first sentence of this Section 2(d) to take into
account the new principal amount outstanding hereunder as of the
date such Commitment Fee was due and not paid.
Section 3.
Registration of Transfers and Exchanges .
a) Different
Denominations . This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the
same. No service charge will be made for such
registration of transfer or exchange.
b) Investment
Representations . This Note has been issued subject to certain
investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in
compliance with the Purchase Agreement and applicable federal and
state securities laws and regulations.
c) Reliance on Note
Register . Prior to due presentment to the Company for transfer
of this Note, the Company and any agent of the Company may treat
the Person in whose name this Note is duly registered on the Note
Register as the owner hereof for the purpose of receiving payment
as herein provided and for all other purposes, whether or not this
Note is overdue, and neither the Company nor any such agent shall
be affected by notice to the contrary.
Section 4. (Intentionally
omitted).
a) Voluntary
Conversion . At any time after the Original Issue Date until
this Note is no longer outstanding, this Note shall be convertible
into shares of Common Stock at the option of the Holder, in whole
or in part at any time and from time to time (subject to the
limitations on conversion set forth in Section 5(d)
hereof). The Holder shall effect conversions by
delivering to the Company the form of Notice of Conversion attached
hereto as Annex A (a “ Notice of Conversion
”), specifying therein the principal amount of Notes to be
converted and the date on which such conversion is to be effected
(a “ Conversion Date ”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
provided hereunder. To effect conversions hereunder, the
Holder shall not be required to physically surrender Notes to the
Company unless the entire principal amount of this Note has been so
converted. Conversions hereunder shall have the effect of lowering
the outstanding principal amount of this Note in an amount equal to
the applicable conversion. The Holder and the Company
shall maintain records showing the principal amount converted and
the date of such conversions. The Company shall deliver
any objection to any Notice of Conversion
within 3
Business Days of receipt of such notice. In the event of
any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Note, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note may be less than the
amount stated on the face hereof. However, at the
Company’s request, the Holder shall surrender the Note to the
Company within five (5) Trading Days following such request so that
a new Note reflecting the correct principal amount may be issued to
Holder.
b) Automatic
Conversion . This Note shall not be subject to
automatic conversion upon the completion of a Qualified Financing.
The portion of the Note not converted by the Holder at its option
shall be subject to the provisions of Section 2b)
hereof.
c) Conversion
Price . The conversion price in effect on any
Conversion Date shall be $1.345, provided that in the event that
the Company consummates a Qualified Financing, the Conversion Price
shall be adjusted (downward only) to the lesser of (i) $1.345 per
share, and (ii) 75% of the effective price per share received by
the Company on such qualified Financing. Anything to the contrary
notwithstanding, in no event shall the Conversion Price exceed
$1.345 per share.
d) Conversion
Limitations ; Holder’s Restriction on Conversion .
The Company shall not effect any conversion of this Note, and the
Holder shall not have the right to convert any portion of this
Note, pursuant to Section 5(a) or (b) or otherwise, to the extent
that after giving effect to such conversion, the Holder (together
with the Holder’s affiliates), as set forth on the applicable
Notice of Conversion, would beneficially own in excess of 4.99% of
the number of shares of the Common Stock outstanding immediately
after giving effect to such conversion. For purposes of the
foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon conversion of
this Note with respect to which the determination of such sentence
is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) conversion of the remaining,
nonconverted portion of this Note beneficially owned by the Holder
or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Notes or the
Warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained herein beneficially owned by
the Holder or any of its affiliates. Except as set forth in
the preceding sentence, for purposes of this Section 5(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act. To the extent that the
limitation contained in this section applies, the determination of
whether this Note is convertible (in relation to other securities
owned by the Holder) and of which a portion of this Note is
convertible shall be in the sole discretion of such Holder. To
ensure compliance with this restriction, the Holder will be deemed
to represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. For purposes of this Section 5(d), in
determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company’s most recent Form 10-Q or
Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company
or the Company’s Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of the Holder, the Company shall within two Trading Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect
to the
conversion or exercise of securities of the Company, including this
Note, by the Holder or its affiliates since the date as of which
such number of outstanding shares of Common Stock was
reported. The provisions of this Section 5(d) may be
waived by the Holder upon, at the election of the Holder, not less
than 61 days’ prior notice to the Company, and the provisions
of this Section 5(d) shall continue to apply until such 61st day
(or such later date, as determined by the Holder, as may be
specified in such notice of waiver).
e) Mechanics of
Conversion
i. Conversion Shares Issuable
Upon Conversion of Principal Amount . The number of
shares of Common Stock issuable upon a conversion hereunder shall
be determined by the quotient obtained by dividing (x) the
outstanding principal amount of this Note to be converted by (y)
the Conversion Price.
ii. Delivery of
Certificate Upon Conversion . Not later than three Trading Days
after any Conversion Date, the Company will deliver to the Holder
(A) a certificate or certificates representing the Conversion
Shares which shall be free of restrictive legends and trading
restrictions (other than those required by the Purchase Agreement)
representing the number of shares of Common Stock being acquired
upon the conversion of Notes (including, if so timely elected by
the Company, shares of Common Stock representing the payment of the
Monthly Redemption Amount) and (B) a bank check in the amount of
principal (if the Company is required to pay the principal in
cash). The Company shall, if available and if allowed under
applicable securities laws, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company
under this Section electronically through the Depository Trust
Corporation or another established clearing corporation performing
similar functions.
iii. Failure to
Deliver Certificates . If in the case of any Notice
of Conversion such certificate or certificates are not delivered to
or as directed by the applicable Holder, as a result of negligence
by the Company, by the third Trading Day after a Conversion Date,
the Holder shall be entitled by written notice to the Company at
any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event
the Company shall immediately return the certificates representing
the principal amount of Notes tendered for conversion.
iv. Obligation
Absolute; Partial Liquidated Damages . If the
Company fails, through its own negligence, to deliver to the Holder
such certificate or certificates pursuant to Section 5(e)(ii) by
the third Trading Day after the Conversion Date, the Company shall
pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $1000 of principal amount being converted, $10
per Trading Day (increasing to $20 per Trading Day after 5 Trading
Days after such damages begin to accrue) for each Trading Day after
such third Trading Day until such certificates are
delivered. The Company’s obligations to issue and
deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or
any other
person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares;
provided , however , such delivery shall not operate
as a waiver by the Company of any such action the Company may have
against the Holder. In the event a Holder of this Note
shall elect to convert any or all of the outstanding principal
amount hereof, the Company may not refuse conversion based on any
claim that the Holder or any one associated or affiliated with the
Holder of has been engaged in any violation of law, agreement or
for any other reason, unless, an injunction from a court, on
notice, restraining and or enjoining conversion of all or part of
this Note shall have been sought and obtained and the Company posts
a surety bond for the benefit of the Holder in the amount of 150%
of the principal amount of this Note outstanding, which is subject
to the injunction, which bond shall remain in effect until the
completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such Holder to the extent it
obtains judgment. In the absence of an injunction
precluding the same, the Company shall issue Conversion Shares or,
if applicable, cash, upon a properly noticed
conversion. Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default
pursuant to Section 8 herein for the Company’s failure to
deliver Conversion Shares within the period specified herein and
such Holder shall have the right to pursue all remedies available
to it at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from
seeking to enforce damages pursuant to any other Section hereof or
under applicable law.
v. Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Conversion . In
addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such
certificate or certificates pursuant to Section 5(e)(ii) by the
third Trading Day after the Conversion Date, and if after such
third Trading Day the Holder is required by its brokerage firm to
purchase (in an open market transaction or otherwise) Common Stock
to deliver in satisfaction of a sale by such Holder of the
Conversion Shares which the Holder anticipated receiving upon such
conversion (a “ Buy-In ”), then the Company
shall (A) pay in cash to the Holder (in addition to any remedies
available to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if
any) for the Common Stock so purchased exceeds (y) the product of
(1) the aggregate number of shares of Common Stock that such Holder
anticipated receiving from the conversion at issue multiplied by
(2) the actual sale price of the Common Stock at the time of the
sale (including brokerage commissions, if any) giving rise to such
purchase obligation and (B) at the option of the Holder, either
reissue a Note in principal amount equal to the principal amount of
the attempted
