THIS SECURITY
HAS NOT 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, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF SUCH ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, ALL 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.
UNSECURED TERM PROMISSORY
NOTE
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$______________
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Dated: February ____,
2007
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For Value
Received, Spectre Gaming, Inc., a Minnesota corporation (the
“ Maker ”), with its primary offices located at
14200 23rd Avenue N., Minneapolis, Minnesota 55447, promises to pay
to the order of _____________________________ or its registered
assigns (the “ Payee ”), upon the terms set
forth below, the principal sum of _____________________ AND NO/100
DOLLARS ($________________), plus interest on the unpaid principal
sum outstanding at the per annum rate equal to fifty-five
percent (55%). This Note is not secured by any security interest in
any of the Company’s assets and the Company has and shall
have no obligation to provide Payee with any collateral to secure
repayment of the loan evidenced by this Note.
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(a)
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Subject to
Section 14 below, the full amount of principal and accrued interest
under this Note, net of interest paid in advance pursuant to
paragraph (d) below, shall be due on the one-year anniversary of
the date of this Note, as first set forth above (the “
Maturity Date ”), unless due earlier in accordance
with the terms of this Note.
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(b)
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Maker may
prepay the principal sum and interest under this Note in whole or
in part until the Maturity Date or such earlier time as the
principal sum and interest become due in accordance with the terms
of this Note. In the event of any prepayment, the Maker will not be
entitled to recover any advance payments of interest made pursuant
to paragraph (d) below.
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(c)
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Any payments of
principal under and pursuant to this Note shall be made in cash, by
either check or wire transfer of immediately available funds to the
Payee pursuant to written instructions from the Payee.
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(d)
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Payments of
interest on this Note shall be made in shares of the Maker’s
common stock, $0.01 par value per share, at the valuation rate of
$1.10 per share (the “ Conversion Price ”),
subject to adjustment as set forth in Section 3 below. Payment of
one year of interest on this Note shall be made in advance by
issuance of an appropriate number of shares of common stock to the
Payee on or prior to February 15, 2007. In the event of a downward
adjustment to the Conversion Price subsequent to the issuance of
shares of common stock as advance interest payments hereunder,
additional shares of common stock will be due and payable at the
Maturity Date.
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(a)
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“
Event of Default ,” wherever used herein, means any
one of the following events (whatever the reason and whether it
shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental
body):
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(i)
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any default in
the payment of the principal of, or the interest on, this Note, as
and when the same shall become due and payable;
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(ii)
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Maker shall
fail to observe or perform any obligation or shall breach any
material term or provision of this Note and such failure or breach
shall not have been remedied within ten days after the date on
which notice of such failure or breach shall have been
delivered;
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(iii)
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Maker shall
fail to observe or perform any of its obligations owed to Payee or
any other material covenant, agreement, representation or warranty
contained in, or otherwise commit any material breach under that
certain Purchase Agreement by and between the Maker and Payee,
dated as of ____, 2007 (the “ Purchase Agreement
”); or
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(iv)
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Maker shall
commence, or there shall be commenced against Maker a case under
any applicable bankruptcy or insolvency laws as now or hereafter in
effect or any successor thereto, or Maker commences any other
proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to Maker, or there is commenced against Maker any such
bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or Maker is adjudicated
insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or Maker suffers
any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or Maker makes a general
assignment for the benefit of creditors; or Maker shall fail to
pay, or shall state in writing that it is unable to pay its debts
generally as they become due.
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(b)
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If any Event of
Default occurs, then, subject to Section 14 below, the full
principal amount of this Note, together with all accrued interest
thereon, shall at the Payee’s election become immediately due
and payable in the manner described in Section 1 above. The Payee
need not provide and Maker hereby waives any presentment, demand,
protest or other notice of any kind, and the Payee may immediately
and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available
to it under applicable law. Such declaration may be rescinded and
annulled by Payee at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.
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3.
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Adjustments
to Conversion Price . The
Conversion Price is subject to adjustment as provided in this
Section 3.
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(a)
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The Conversion
Price shall be adjusted from time to time such that in case the
Company shall hereafter (i) subdivide its then-outstanding shares
of common stock into a greater number of shares, or (ii) combine
outstanding shares of common stock, by reclassification or
otherwise. In any such event, the Conversion Price in effect
immediately prior to such event shall (until adjusted again
pursuant hereto) be adjusted immediately after such event to a
price (calculated to the nearest full cent) determined by dividing
(A) the number of shares of common stock outstanding immediately
prior to such event, multiplied by the then-existing Conversion
Price, by (B) the total number of shares of common stock
outstanding immediately after such event, and the resulting
quotient shall be the adjusted Conversion Price per share. An
adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of any subdivision,
combination or reclassification. If, as a result of an adjustment
made pursuant to this paragraph, the Payee shall become entitled to
receive shares of two or more classes of capital stock or shares of
common stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive) shall determine
the allocation of the adjusted Conversion Price between or among
shares of such classes of capital stock or shares of common stock
and other capital stock. All calculations under this paragraph
shall be made to the nearest cent. In the event that at any time as
a result of an adjustment made pursuant to this paragraph, the
Payee shall become entitled to receive any shares of the Company
other than shares of common stock, thereafter the Conversion Price
of such other shares so receivable upon payment of interest
hereunder sh
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