THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER THE
SECURITIES OR BLUE SKY LAWS OF ANY STATE, AND THIS NOTE
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION;
PROVIDED, HOWEVER, THAT THIS NOTE MAY BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED PURSUANT TO AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION.
CASINOVATIONS INCORPORATED
9.5% CONVERTIBLE NOTE DUE 2004
$ _____,000.00 February ___, 1999
For Value Received, the undersigned Casinovations
Incorporated, a Washington corporation (the "Obligor"), hereby
promises to pay to the order of ________________ or its
registered assigns (the "Purchaser") on February 15, 2004, the
principal sum of _____________ Thousand and 00/100 Dollars
($______,000.00) and to pay interest on the unpaid principal
balance hereof from the date hereof at a rate of 9.5% per annum,
payable semiannually in arrears on August 15 and February 15 of
each year, to holders registered on the immediately preceding
August 1 and February 1. Interest on this Note will accrue from
the most recent date on which interest has been paid. Interest
will be computed on the basis of a 360-day year of twelve 30-day
months. The Note is unsecured. At its discretion, the Obligor
may, at anytime after the one-year anniversary of the Note,
redeem the Note without penalty upon payment of the face value of
the Note and any unpaid and accrued interest.
This Note is being issued as a part of a Unit consisting of
a Common Stock Purchase Warrant (the "Warrant") to purchase up to
_______ shares of Obligor's common stock (the "Common Stock").
This Note and the Warrant are not detachable unless and until the
Note is converted in accordance herewith. Exercise of certain
rights under the Warrant are expressly subject to certain
conditions contained therein and herein.
At the expiration of the later of (a) six months from the
date of the Note or (b) September 1, 1999, the Holder of this
Note is entitled, at its option, to convert this Note into fully
paid and non-assessable shares of restricted Common Stock of the
Obligor at the conversion price of $2.60 per share (the
"Conversion Price"), subject to such adjustment or adjustments,
if any, of such Conversion Price and the Common Stock issuable
upon conversion, upon surrender of this Note, duly endorsed or
assigned to the Obligor or in blank, to the Obligor, with the
conversion notice attached hereto, or accompanied by a separate
written notice substantially in the form of such conversion
notice, duly executed by the Holder and stating that the Holder
hereof elects to convert this Note, or if less than the entire
principal amount hereof is to be converted (but not less than
$25,000 increments), the portion hereof to be converted, all in
accordance with the provisions of the Subscription Agreement.
The Warrant may only be exercised if the full principal amount of
this Note is converted in accordance with this paragraph. No
fractional shares will be issued on
conversion, but instead of any fractional interest, the Obligor
shall pay a cash adjustment. If the Company shall, prior to the
conversion or payment of the Note in full, (a) declare a dividend
or make a distribution on its Common Stock payable in shares of
its Common Stock, (b) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (d) issue any shares of
capital stock of the Company by reclassification or capital
reorganization of its shares of Common Stock, then the conversion
privilege and the Conversion Price in effect immediately prior to
such action shall be adjusted so that the Holder of a Note
thereafter converted shall be entitled to receive the number and
kind of shares of Common Stock or other Capital Stock which the
Holder would have owned or have been entitled to receive
immediately after such action had the Holder converted the Note
immediately prior to the record date in the case of (a), or the
effective date in the case of (b), (c) or (d).
The Company shall prepare and, no sooner than nine months
and no later than twelve months after the date hereof, file with
United States Securities and Exchange Commission (the "SEC"), an
appropriate registration statement to effect a registration of
the Registrable Securities (as defined below) covering the resale
of the Registrable Securities issuable to Holder upon conversion
of this Note, which registration statement, to the extent
allowable under the Securities Act of 1933, as amended, and the
rules promulgated thereunder (including Rule 416), shall state
that such registration statement also covers such indeterminate
numbers of additional shares of Common Stock as may become
issuable upon conversion of the Note to prevent dilution
resulting from stock splits, stock dividends or similar
transactions. The Company shall use its best efforts to obtain
effectiveness of the registration statement as soon as
practicable. For purposes of this Agreement, the term
"Registrable Securities" means the shares of Common Stock issued
or issuable upon conversion of the Note and any shares of capital
stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to any of the foregoing. All reasonable
expenses, other than underwriting discounts and commissions,
incurred by the Company in connection with registrations, filings
or qualifications pursuant to this paragraph, including without
limitation, all registration, listing and qualification fees,
printers and accounting fees, and the fees and disbursements of
counsel for the Company, shall be borne by the Company.
Obligor may issue other indebtedness from time to time prior
to or hereafter that has a senior ranking to this Note in
priority of payment and this Note will be subordinate in right of
payment thereto. In the event any action is taken to collect or
enforce the indebtedness evidenced by this Note (the
"Indebtedness") or any part thereof, the Obligor agrees to pay,
in addition to the principal and interest due and payable hereon,
all costs of collecting this Note, including reasonable
attorneys' fees and expenses. These costs shall include any
expenses incurred by the Purchaser in any bankruptcy,
reorganization, or other insolvency proceeding.
No delay or omission of any holder in exercising any right
or rights, shall operate as a waiver of such right or any other
rights. A waiver on one occasion shall not be construed as a bar
to or waiver of any right or remedy on any future occasion.
The liability of the Obligor under this Note (and the
liability of any endorsers of this Note) shall not be discharged,
diminished or in any way impaired by (a) any waiver by Purchaser
or failure to enforce or exercise rights under any of the terms,
covenants or conditions of this Note, (b) the granting of any
renewal, indulgence, extension of time to Obligor, or any other
obligors of the Indebtedness, or (c) the addition or release of
any person or entity primarily or secondarily liable for the
Indebtedness.
In no event shall the interest rate charged or received
hereunder at any time exceed the maximum interest rate permitted
under applicable law. Payments of interest received by Purchaser
hereunder which
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would otherwise cause the interest rate hereunder to exceed such
maximum interest rate shall, to the extent of such excess, be
deemed to be (and deemed to have been contracted as being)
prepayments of principal and applied as such.
This Note shall be binding upon the undersigned and its
successors and assigns and shall inure to the benefit of
Purchaser, its successors and assigns. Every person and entity at
any time liable for the payment of this Note hereby waives
demand, presentment, protest, notice of protest, notice of
nonpayment due and all other requirements otherwise necessary to
hold them immediately liable for payment hereunder.
This Note is governed by and shall be construed and enforced
in accordance with Nevada law.
Time is of the essence with respect to all of the terms and
provisions of this Note.
CASINOVATIONS INCORPORATED
By: _______________________________
Its:_______________________________
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