Exhibit 10.6

 

THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW.  THIS WARRANT OR SUCH SHARES MAY NOT BE SOLD, DISTRIBUTED,
PLEDGED, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF
UNLESS: (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAW COVERING ANY SUCH TRANSACTION INVOLVING SAID
SECURITIES; (B) THE COMPANY (DEFINED BELOW) RECEIVES AN OPINION OF LEGAL COUNSEL
FOR THE HOLDER OF THIS WARRANT (IF SUCH AN OPINION IS REASONABLY REQUESTED BY
THE COMPANY) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION AND SUCH
OPINION IS IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY; OR
(C) PURSUANT TO RULE 144 UNDER SUCH ACT.

 

AMERICAN WAGERING, INC.

 

AMENDED AND RESTATED WARRANT TO PURCHASE
SHARES OF COMMON STOCK

 

DATE OF ISSUANCE:  June 11, 2010 Original Warrant

 

DATE OF ISSUANCE:  June 21, 2010

 

THIS AMENDED AND RESTATED WARRANT TO PURCHASE SHARES OF COMMON STOCK amends and
restates in its entirety that certain Warrant to Purchase Shares of Common Stock
dated June 11, 2010 (the “Original Warrant”).  Except for indicating the date
upon which the Warrant was issued to Holder, the Original Warrant is hereby
terminated, null, and void.

 

THIS IS TO CERTIFY THAT, for value received, Alpine Advisors, LLC (the “Holder”)
is entitled but not obligated, during a specified period of time as set forth in
Section 5 herein (the “Exercise Period”), to purchase from American
Wagering, Inc., a Nevada corporation (the “Company”), up to six hundred thousand
(600,000) fully paid and nonassessable shares of the Company’s common stock,
$.01 par value (the “Common Stock”), at an exercise price per share as set forth
in Section 1 herein (the “Exercise Price”).  The term “Warrant,” as used herein,
refers to this Warrant to Purchase Shares of Common Stock, the term “Warrant
Shares,” as used herein, refers to the shares of Common Stock purchasable
hereunder, and the term “Parties,” as used herein, refers collectively to the
Holder and the Company.

 

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TERMS AND CONDITIONS

 

This Warrant is subject to the following terms, provisions, and conditions:

 

1.     Exercise Price.  The Exercise Price is $0.22 per underlying share of
Common Stock, subject to adjustment as hereinafter provided.

 

2.     Manner of Exercise; Payment for Shares.  Subject to the provisions
hereof, this Warrant may be exercised by the Holder, in whole or in part (but in
not less than 25,000 share increments):

 

2.1.             By the surrender of this Warrant, together with an exercise
agreement in the form attached hereto (the “Exercise Agreement”), duly completed
and executed by the Holder, to the Company during normal business hours on any
business day at the Company’s principal executive offices (or such other
location as the Company may designate by notice to the Holder); and

 

2.2.             Payment of the exercise price shall be made, at the option of
the Holder by the following methods:

 

a.             by delivery to the Company of a certified or official bank check
payable to the order of the Company or by wire transfer of immediately available
funds to an account designated in writing by the Company, in the amount of such
exercise price;

 

b.             by instructing the Company to withhold a number of Warrant Shares
then issuable upon exercise of this Warrant with an aggregate fair market value
as of the exercise date equal to such exercise price;

 

c.             by surrendering to the Company (x) Warrant Shares previously
acquired by the Holder with an aggregate fair market value as of the exercise
date equal to such exercise price and/or (y) other securities of the Company
having a value as of the exercise date equal to the exercise price (which value
in the case of debt securities shall be the principal amount thereof plus
accrued and unpaid interest, in the case of preferred stock shall be the
liquidation value thereof plus accumulated and unpaid dividends and in the case
of shares of Common Stock shall be the fair market value thereof); or

 

d.             any combination of the foregoing.

 

2.3.             In the event of any withholding of Warrant Shares or surrender
of other equity securities pursuant to clause (ii), (iii) or (iv) above where
the number of shares whose value is equal to the  exercise price is not a whole
number, the number of shares withheld by or surrendered to the Company shall be
rounded up to the nearest whole share and the Company shall make a cash payment
to the Holder (by delivery of a certified or official bank check or by wire
transfer of immediately available funds) based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount equal to
the product of (x) such incremental fraction of a share being so withheld or
surrendered multiplied by (y) in the case of

 

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Common Stock, the fair market value per Warrant Share as of the exercise date,
and, in all other cases, the value thereof as of the exercise date determined in
accordance with clause (iii)(y) above. For purposes of this Warrant, “fair
market value” shall mean the average closing sales price of the Company’s shares
on the NASDAQ OTC Bulletin Board for the ten business days immediately preceding
the exercise date.

 

3.     Vesting.  The rights under this Warrant are fully vested.  No fractional
shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant.  In lieu of such fractional shares, which the Holder would
otherwise be entitled to purchase upon such exercise, the Company shall round up
to the next whole share.

 

4.     Issuance of Certificates.  The Warrant Shares so purchased shall be
deemed to be issued to the Holder, as the record owner of such Warrant Shares,
as of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such Warrant Shares as set in Section 2 above. 
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
Holder within a reasonable time, not exceeding ten (10) business days, after
this Warrant shall have been so exercised.  The certificates so delivered shall
be in such denominations as may be reasonably requested by the Holder and shall
be registered in the name of the Holder.  If this Warrant shall have been
exercised only in part, then, unless this Warrant has expired, the Company
shall, at its expense, at the time of delivery of such certificates, deliver to
the Holder a new warrant representing the number of Warrant Shares with respect
to which this Warrant shall not then have been exercised.

 

5.     Exercise Period.  This Warrant may be exercised any time before
5:00 p.m., Pacific Standard Time, June 11, 2015.

 

6.     Covenants of the Company.  The Company hereby covenants and agrees as
follows:

 

6.1.             Shares to be Fully Paid.  All Warrant Shares shall, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and non-assessable.

 

6.2.             Reservation of Shares.  During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

 

6.3.             Successors and Assigns.  This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company’s assets.

 

7.     Representations and Warranties of the Company.  The Company hereby
represents and warrants to the Holder (which representations and warranties
shall survive the execution and delivery of this Warrant and consummation of the
transactions contemplated hereby) that:

 

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7.1.             Existence; Authority.  The Company is a Nevada corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the power and authority to enter into this Warrant and to carry
out its obligations hereunder.

 

7.2.             Execution and Delivery.  The execution and delivery of this
Warrant by the Company and consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Company and no other proceedings on the part of the Company are
necessary to authorize this Warrant or any of the transactions contemplated
hereby.

 

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7.3.             Binding Effect; Valid Issuance of Warrant:

 

a.             This Warrant has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company and,
assuming this Warrant constitutes a legal, valid and binding obligation of
Holder, is enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws relating to or affecting the
enforcement of creditors’ rights generally in effect from time to time and by
general principles of equity.

 

b.             This Warrant is, and any Warrant issued in substitution for or
replacement of this Warrant shall be, upon issuance, duly authorized and validly
issued.

 

c.             All Warrant Shares issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be, upon issuance, and the Company shall take
all such actions as may be necessary or appropriate in order that such Warrant
Shares are, validly issued, fully paid and non-assessable, issued without
violation of any preemptive or similar rights of any stockholder of the Company
and free and clear of any liens.

 

d.             The Company shall take commercially reasonable actions as may be
necessary to ensure that all such Warrant Shares are issued without violation by
the Company of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which shares of Common Stock or other
securities constituting Warrant Shares may be listed at the time of such
exercise.

 

e.             The Company shall use take commercially reasonable actions to
cause the Warrant Shares, immediately upon such exercise, to be listed on any
domestic national securities exchange upon which shares of Common Stock or other
securities constituting Warrant Shares are listed, if any, at the time of such
exercise.

 

8.     Registration Rights.

 

8.1.             Demand Registration Rights

 

a.             On or after June 11, 2012, the Holder may make a written request
to the Company that the Company file a registration statement under the
Securities Act of 1933, as amended (the “Securities Act”) covering the
registration of the Warrant Shares.  Upon receipt of such request, the Company,
at it sole cost and expense, shall as soon as practicable, but no later than
ninety (90) days following receipt of such request, file a registration
statement with the Securities and Exchange Commission (“SEC”) covering the
Warrant Shares, and use its commercially reasonable efforts to cause, as soon as
practicable, the registration statement for the Warrant Shares to be declared
effective by the SEC and such Warrant Shares to be qualified in those
jurisdictions as the Holder may reasonably request.

 

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b.             If the Holder intends to distribute the Warrant Shares covered by
its request by means of an underwriting, it shall so advise the Company as a
part of its request pursuant to Section 8.1 or any request pursuant to
Section 8.2.  In such event, the Holder shall enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company (which underwriter or underwriters shall be
reasonably acceptable to the Holder).

 

c.             The Company shall not be required to effect a registration
pursuant to this Section 8.1: (i) during the period starting with the date sixty
(60) days prior to the Company’s good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a Company-initiated registration; provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective; (ii) if the Company shall furnish to the Holder a
certificate signed by the Chairman of the Board stating that in the good faith
and reasonable judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be effected at such time, in which event the Company shall have the
right to defer such filing for a period of not more than ninety (90) days after
receipt of the request of the Holder; provided that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period; or (iii) if the Holder proposes to dispose of Warrant Shares that
may be immediately registered on Form S-3 pursuant to a request made pursuant to
Section 8.2 below.

 

d.             The Company may include in any such registration other securities
for sale for its own account or for the account of any other person; provided
that, if the underwriter for the offering shall determine that the number of
shares proposed to be offered in such offering would be reasonably likely to
adversely affect such offering, then the securities to be sold by the Holder
shall be included in such registration before any securities proposed to be sold
for the account of the Company or any other person.

 

8.2.             Form S-3 Registration.  If, on or after June 11, 2012, the
Company shall receive from the Holder a written request that the Company effect
a registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Warrant Shares owned by the Holder, the
Company, at it sole cost and expense, will, as soon as practicable, but no later
than sixty (60) days following receipt of such request, file such registration
statement and use its commercially reasonable efforts to have such registration
statement declared effective and obtain all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of the Holder’s Warrant Shares as are
specified in such request, provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 8.2: (a) if Form S-3 is not available for such offering by the
Holder; (b) if the Holder, together with the holders of any other securities of
the Company entitled to inclusion in such registration, proposes to sell Warrant
Shares and such other securities (if any) at an aggregate price to the public of
less than one million dollars ($1,000,000); or (c) if the Company shall furnish
to the Holder a certificate

 

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signed by the Chairman of the Board of Directors of the Company stating that in
the good faith and reasonable judgment of the Board of Directors of the Company,
it would be seriously detrimental to the Company and its stockholders for such
Form S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration statement
for a period of not more than sixty (60) days after receipt of the request of
the Holder under this Section 8.2; provided, that such right to delay a request
shall be exercised by the Company not more than once in any twelve (12) month
period.

 

8.3.             Incidental Registration Rights.  If the Company proposes to
register any of its stock or other securities under the Securities Act of 1933
in connection with the public offering of such securities (other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to an SEC Rule 145 transaction, or (iii) a registration effected
pursuant to a form of registration statement that is not available for
registration of the Warrant Shares for sale to the public), the Company shall
provide Holder with written notice of such determination. Upon the written
request of Holder given within twenty (20) days after receipt of any such notice
from the Company, the Company, at its sole cost and expense, shall cause to be
registered under the Act all of the Warrant Shares that Holder has requested be
registered.

 

8.4.             Most-Favored Nation. If the Company grants any person any
rights with respect to the registration of any shares of equity securities of
the Company or any securities convertible or exercisable into shares of any
equity securities of the Company that are more favorable to such person than the
rights of the Holder set forth in this Warrant, then the Company shall grant to
the Holder the same rights granted to such other person.

 

9.     Tag-Along Rights.

 

9.1.             Transfers by majority stockholders of the Company.

 

a.             In the event of any proposed transfer (a “Proposed Tag-Along
Transfer”) of any Common Stock or securities convertible into or exchangeable
for Common Stock (collectively, the “Subject Shares”) by existing stockholders,
including Victor J. Salerno (the “Existing Stockholders”), in a single
transaction or a series of related transactions involving Subject Shares
aggregating at least 51% of the Common Stock outstanding on a fully diluted
basis to an individual, corporation, association, partnership, joint venture,
limited liability company, joint-stock company, trust, organization, business,
or other entity (the “Proposed Purchaser”), the Holder shall have the
irrevocable and exclusive right, but not the obligation (the “Tag-Along Right”),
to require the purchase from it of up to such number of Warrant Shares as
determined in accordance with Section 9.3 below.

 

b.             Any Warrant Shares purchased from the Holder pursuant to this
Section 9.1 shall be paid for at the same price per share and upon the same
terms and conditions as apply to the Proposed Tag-Along Transfer by the Existing
Stockholders, provided that the price payable by the Proposed Purchaser shall
equal the price proposed to be paid per share of

 

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Common Stock for which such Warrant Share is exercisable, less the Exercise
Price of such Warrant Share;

 

c.             The Company or the Existing Stockholders shall give written
notice of at least 30 days prior to the date of the Proposed Tag-Along Transfer
to the Holder stating (i) the name and address of the Proposed Purchaser,
(ii) the proposed amount of consideration and terms and conditions of payment
offered by such Proposed Purchaser (if the proposed consideration is not cash,
the notice shall describe the terms of the proposed consideration), (iii) the
number of Subject Shares proposed to be transferred and (iv) that either the
Proposed Purchaser has been informed of the Tag-Along Right and has agreed to
purchase Warrant Shares in accordance with the terms hereof or that the Existing
Stockholders will make such purchase. The Tag-Along Right may be exercised by
the Holder by giving written notice to the Company and the Proposed Purchaser
(the “Tag-Along Notice”), within 20 Business Days of receipt of the notice
specified in the preceding sentence (such 20 day period being referred to herein
as the “Tag-Along Period”), indicating its election to exercise the Tag-Along
Right. The Tag-Along Notice shall state the amount of Warrant Shares that the
Holder proposes to include in the Proposed Tag-Along Transfer. Failure by the
Holder to give such notice within the Tag-Along Period shall be deemed an
election by the Holder not to sell its Warrant Shares in connection with that
Proposed Tag-Along Transfer. The closing with respect to any sale to a Proposed
Purchaser pursuant to this Section 9.1 shall be held at the time and place
specified in the Tag-Along Notice, but in any event within 90 days of the end of
the Tag-Along Period. Consummation of the sale of Subject Shares by the Existing
Stockholders to a Proposed Purchaser shall be conditioned upon the consummation
of the sale by the Holder to such Proposed Purchaser of the Warrant Shares
subject to the Tag-Along Right.

 

9.2.             Purchase Obligation of Existing Stockholders.  In the event
that the Proposed Purchaser does not purchase such Warrant Shares from the
Holder on the same terms and conditions as purchased from the Existing
Stockholders, then the Existing Stockholders making such transfer shall purchase
the Warrant Shares from the Holder if the transfer occurs on such terms and
conditions.

 

9.3.             Determination of Transferred Interests.  The number of Warrant
Shares purchased from the Holder shall be determined by multiplying the
aggregate amount of Subject Shares proposed to be sold by the Existing
Stockholders to the Proposed Purchaser by a fraction, the numerator of which is
the total number of shares of Common Stock (including the number of Warrant
Shares issuable upon exercise of the Warrant) owned by the Holder and the
denominator of which is the Common Stock outstanding on a fully diluted basis.

 

9.4.             Cost of Transfer.  The Existing Stockholders who are parties to
a sale to a Proposed Purchaser shall arrange for payment directly by the
Proposed Purchaser to the Holder, upon delivery of the certificate representing
the Warrant Shares to be sold, duly endorsed for transfer, together with such
other documents as the Proposed Purchaser may reasonably request. The Company
shall be responsible for and pay the costs and expenses (including the
reasonable fees

 

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and disbursements of counsel) incurred by the Holder in connection with a sale
to a Proposed Purchaser, whether or not such sale is consummated.

 

9.5.             Expiration of the Tag-Along Right.  If at the end of 90 days
following the end of the Tag-Along Period, or as otherwise extended pursuant to
the provisions of Section 9.1, the sale of Subject Shares by the Existing
Stockholders and the sale of the Warrant Shares by the Holder have not been
completed in accordance with the terms of the Proposed Purchaser’s offer, all
certificates representing such Subject Shares and Warrant Shares shall be
returned to the Existing Holders and Holder, as applicable, and all the
restrictions on sale, transfer, or assignment contained in this Agreement shall
again be in effect.

 

10.   Drag-Along Rights.  In the event that the holders of at least 66% of the
outstanding Common Stock (the “66% Holders”) accept an offer to purchase their
shares from a bona fide third party, the 66% Holders may send a written notice
(the “Drag-Along Notice”) to the Holder specifying the name of the purchaser,
the consideration payable per share of Common Stock and a summary of the
material terms of such proposed purchase.  Upon receipt of a Drag-Along Notice,
the Holder shall be obligated to (i) sell all of its Warrant Shares, free of any
encumbrance, in the transaction contemplated by the Drag-Along Notice on the
same terms and conditions as the 66% Holders (including payment of its pro-rata
share of all costs associated with such transaction), and (ii) otherwise take
all necessary action to cause the consummation of such transaction, including
voting its Warrant Shares in favor of such transaction and not exercising any
appraisal rights in connection therewith. The Holder (i) further agrees to take
all actions (including executing documents) in connection with consummation of
the proposed transaction as may reasonably be requested of it by the 66%
Holders, and (ii) hereby appoints the 66% Holders, acting jointly, as its
attorney-in-fact to do the same on its behalf.

 

11.   Observer Rights; Election of Directors.

 

11.1.           Observer Rights.  A representative of Holder, or its appointee,
shall be entitled to observe all meetings of the Company’s Board of Directors
(the “Board”) and receive all information provided to the Board; provided, that
such observer rights shall terminate at such time as the Obligations between the
Company, as Borrower, and the Lender under that certain Loan Agreement dated
June [·], 2010 are satisfied and the Loan Agreement is terminated.  The Company
requires and the Holder agrees that as a condition precedent to Holder’s
representative or appointee attending a Board meeting or having access to any
information provided to the Board, the representative or appointee shall agree
to keep confidential all information so received during such meetings or
otherwise on the same basis as the Holder has agreed to maintain confidentiality
pursuant to Section 8 of the Engagement Agreement dated March 12, 2010, between
Issuer and Holder; and the Company reserves the right not to provide information
and to exclude such representative or appointee from any Board meeting or
portion thereof if delivery of such information or attendance at such meeting by
such representative or appointee would result in the disclosure of trade secrets
to such holders or its representative in violation of the foregoing
confidentiality obligation or would adversely affect the attorney-

 

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client privilege between the Company and its counsel or if such representative
or appointee is a direct competitor of the Company.

 

11.2.           Election of Directors.   The Amended and Restated Bylaws of the
Company provide that the Board of Directors shall consist of not more than 9
directors. The Company currently consists of 5 directors.  Upon the occurrence
of an Event of Default in Section 12 the Loan Agreement, the Company agrees that
Holder may, at its sole discretion, (i) provide the Company with a one-time only
written notice demanding that the Company increase number of its Board of
Directors by two (2) persons from 5 directors to 7 directors and (ii) appoint
persons designated by Holder to fill the 2 vacancies; provided that such
appointed director positions do not include any special voting, quorum, or
replacement rights that are excessive, additional, or absent rights available to
the remaining directors of the Board of Directors.  The Holder’s Election of
Directors as set forth in this Section in 11.2 shall terminate at such time as
the Obligations between the Company, as Borrower, and the Lender under that
certain Loan Agreement dated June [·], 2010 are satisfied and the Loan Agreement
is terminated.

 

12.   Representations, Warranties and Covenants of the Holder.  The Holder
hereby represents and warrants to the Company that:

 

12.1.           Accredited Investor Status.  The Holder represents and warrants
that the Holder is an “accredited investor” within the meaning of Rule 501(a) of
Regulation D, promulgated under the Securities Act.  The Holder understands that
the Warrants are being offered and sold only to “accredited investors” (as that
term is defined under Rule 501(a) of Regulation D), and the Holder represents
that the Holder is an accredited investor.

 

12.2.           The Holder understands that the Company is relying on the Holder
with respect to the accuracy of this representation and understands the
significance of the Holder’s representation to the Company that the Holder is an
accredited investor.

 

12.3.           Residence.  The address set forth in Section 18 is the Holder’s
true and correct residence or principal place of business and the Holder has no
present intention of becoming a resident or domicile of any other state or
jurisdiction.

 

12.4.           Authority.  The Holder has the power and authority to enter into
this Warrant and to carry out its obligations hereunder.

 

12.5.           Binding Effect.  This Warrant has been duly executed and
delivered by the Holder and constitutes a legal, valid and binding obligation of
the Holder and, assuming this Warrant constitutes a legal, valid and binding
obligation of the Company, is enforceable against the Holder in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or
affecting the enforcement of creditors’ rights generally in effect from time to
time and by general principles of equity.

 

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12.6.          Purchase for Own Account.  The Holder represents and warrants
that the Warrant and the Warrant Shares will be acquired for investment purposes
only for the Holder’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and the Holder has no
present intention of selling, granting any participation in, or otherwise
distributing the same.  By executing this Warrant, the Holder further represents
and warrants that the Holder does not have any contract, undertaking, agreement,
or arrangement with any person to sell, transfer, or grant participations to
such person or to any third person, with respect to any of the Warrant or the
Warrant Shares. Notwithstanding the foregoing, the Holder may transfer this
Warrant to members of Lender, the children of the members of Lender, or a trust
for the benefit of the individual members of the Lender or for the children of
the members of the Lenders provided such members, children of members, or trust
shall remain subject to the transfer restrictions provided in this Agreement and
under applicable law.

 

12.7.          Restricted Securities.  The Holder acknowledges and understands
that the Warrant and the Warrant Shares are characterized as “restricted
securities” under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the
“Securities Act”), only in certain limited circumstances.  In this regard, the
Holder represents and warrants that the Holder is familiar with Securities and
Exchange Commission Rule 144 (“Rule 144”), as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act. 
Without in any way limiting the representations set forth above, the Holder
agrees not to make any disposition of all or any portion of the Warrant and the
Warrant Shares unless there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement, or the Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition.  The Holder acknowledges that the Company is under no obligation to
register any resale or transfer of the Warrant Shares.

 

12.8.          Legend.  The Holder understands that, prior to the registration
of the Warrant Shares, the stock certificate evidencing the Warrant Shares shall
bear the restrictive legend set forth below:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT OR PURSUANT
TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENT OF SAID ACT AND COMPLIANCE
WITH ANY APPLICABLE STATE SECURITIES LAW.

 

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12.9.          Risk of Loss.  The Holder acknowledges, represents and warrants
that it understands investment in the Company involves a high degree of risk. 
The Holder is financially capable of bearing the loss of the Holder’s entire
investment, understands that an investment in the Warrant and Warrant Shares
involves special and substantial risks and recognizes the lack of liquidity of
the Warrant and the Warrant Shares and the restrictions upon transferability
thereof.

 

12.10.        No Solicitation.  The Holder represents and warrants that the
Holder was not solicited to acquire the Warrant or the Warrant Shares by any
means of general solicitation, including but not limited to the following: 
(1) any advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio; or
(2) any meeting where attendees were invited by any general solicitation or
general advertising.

 

12.11.        Access to Information; Opportunity to Inquire.  The Holder: 
(i) has had access to information regarding the Company and its present and
prospective business, assets, liabilities and financial condition; (ii) has such
knowledge of business and financial affairs as is necessary to enable Holder to
understand the speculative nature of and the risks attendant to investments in
securities, in general, and to an investment in the Warrants and Shares, in
particular, and to understand the financial, legal and tax implications of the
business to be conducted by the Company; (iii) has had the opportunity to ask
questions and receive answers from the Company and its management with respect
to Holder’s proposed acquisition of the Warrants and the Shares; and (iv) has
determined on the basis of consultation with its own legal counsel and tax
advisors that the acquisition of the Warrants and the Shares is consistent with
his/her own investment objectives and income prospects.

 

12.12.        Finder’s Fee.  No person, firm or corporation has or will have, as
a result of any act or omission by the Holder, any right, interest or valid
claim against the Company for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Warrant.

 

13.  Adjustment Provisions.  Until the closing of the first (1st) financing
after the execution of this Warrant, number of Warrants or the strike price may
be adjusted as provided in this Section 12 to provide for certain anti-dilution
protection.

 

13.1.          The ratio of Warrant Shares to outstanding shares of Common Stock
shall be the ratio thereof existing on the date hereof (the “Ratio”, which the
parties agree is currently 5.03%), after giving effect to the issuance of a
maximum of 2.3 million shares of Common Stock to be covered by options or grants
issued to management of the Company.  For purposes hereof, the term “outstanding
shares of Common Stock” includes the said maximum of 2.3 million shares, plus
8,379,879 issued shares of Common Stock outstanding as of the date hereof, as
well as 647,300 shares currently reserved for issuance under existing options,
rights and any other outstanding securities of the Company.  If the Company
shall (1) declare a dividend or make a distribution of Common Stock payable in
shares of Common Stock, (2) subdivide its outstanding shares of

 

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Common Stock into a greater number of shares of Common Stock, (3) combine its
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, or (4) issue any shares of capital stock of the Company by
reclassification or capital reorganization of its shares of Common Stock, then
the number of Warrant Shares and the Exercise Price in effect immediately prior
to such action shall be adjusted so that the Holder 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 exercised the Warrant immediately prior to the record date
in the case of (1), or the effective date in the case of (2), (3) or (4).  In
the event that any adjustment of the Exercise Price as required herein results
in a fraction of a cent, such Exercise Price shall be rounded up to the nearest
cent; or

 

13.2.          Should the Company complete a financing transaction that includes
convertible debt or equity securities, or warrants or options for equity
securities, at a strike price that is less than $.22, Holder’s unexercised
Warrants shall be re-priced to match the strike price of the convertible debt or
equity security, option or warrant.

 

14.  Payment of Expenses.  The Company shall be responsible for and pay Holder’s
costs and expenses (including reasonable fees and disbursements of counsel)
payable in connection with:  (1) the negotiation, preparation, execution and
delivery of this Warrant and the other agreements to be executed in connection
herewith; (2) the issuance of certificates for Warrant Shares upon the exercise
of this Warrant; and (3) the enforcement by Holder of any of its rights or
remedies under or in connection with this Warrant and the other agreements to be
executed in connection herewith.  The Company shall pay any issuance tax in
connection with the issuance of certificates for Warrant Shares; provided,
however, that the Holder shall be responsible for any income or other taxes
based on the Holder’s net income in connection with such issuance.

 

15.  No Rights or Liabilities as a Stockholder.  This Warrant shall not entitle
the Holder to any voting rights or other rights as a stockholder of the
Company.  No provision of this Warrant, in the absence of affirmative action by
the Holder to purchase Warrant Shares, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of such
Holder for the Exercise Price or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

 

16.  Transfer and Replacement of Warrant.  Neither this Warrant, nor any
interest in this Warrant, may be sold, distributed, assigned, offered, pledged
or otherwise transferred without the express written consent of the Company,
except that transfers of this Warrant or an interest in this Warrant may be made
at any time during the term to members of Lender, the children of the members of
Lender, or a trust for the benefit of the individual members of the Lender or
for the children of the members of the Lenders provided such members, children
of members, or trust shall remain subject to the transfer restrictions provided
in this Agreement and under applicable law.

 

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16.1.          Replacements of Warrants.  Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction, or
mutilation of this Warrant, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant.

 

16.2.          Cancellation: Payment of Expenses.  Upon the surrender of this
Warrant in connection with any transfer or replacement as provided in this
Section 15, this Warrant shall be promptly canceled by the Company.  The Company
shall be responsible for and pay all costs and expenses payable in connection
with the preparation, execution, and delivery of new Warrants pursuant to this
Section 15.  The Holder shall be responsible for any tax which may be payable in
connection with any transfer of a certificate for Warrant Shares.

 

16.3.          Registrar.  The Company shall maintain, at its principal
executive offices (or such other location as the Company may designate by notice
to the Holder), a registrar for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee and each prior owner of this
Warrant.

 

17.  Representation of Counsel.  The parties acknowledge that they have
consulted with or have had the opportunity to consult with their own legal
counsel prior to executing this Warrant.  This Warrant has been freely
negotiated by the parties and any rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Warrant.

 

18.  Choice of Laws; Actions.  This Warrant shall be construed in accordance
with the internal laws of the State of Nevada, without regard to the choice of
law principles thereof.  The exclusive venue of any legal suit, action, or
proceeding arising out of or relating to this Warrant shall be state court in
Clark County, Nevada.

 

19.  Notices.  Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned at the address indicated below or to such changed address as
such party may subsequently give notice of:

 

If to the Company:

 

 

American Wagering, Inc.

 

Attn: General Counsel

 

675 Grier Drive

 

Las Vegas, NV 89119

 

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If to the Holder:

 

 

Alpine Advisors, LLC

 

825 Lakeshore Blvd

 

Incline Village, NV 89451

 

20.  Severability.  In case any provision of this Warrant shall be invalid,
illegal or unenforceable in any jurisdiction then, as to such jurisdiction only,
such provision shall to the extent of such prohibition or unenforceability be
deemed severed from the remainder of this Warrant and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

21.  Section Headings.  The various headings used in this Warrant are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Warrant or any provision hereof.

 

22.  Amendments.  No amendment or modification of any provision of this Warrant
shall be effective without the written agreement of the parties, and no
termination or waiver of any provision of this Warrant, or consent to any
departure by the Company therefrom shall in any event be effective without the
written concurrence of the Holder, which concurrence the Holder shall have the
right to grant or withhold at its sole discretion.

 

23.  Counterparts.  This Warrant may be executed in any number of counterparts,
each constituting an original, but all together one and the same instrument.

 

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24.  Entire Agreement.  This Warrant, together with the Agreement, constitutes
the sole and entire agreement of the parties with respect to the subject matter
contained herein, and supersedes all prior and contemporaneous understandings
and agreements, both written and oral, with respect to such subject matter.

 

IN WITNESS WHEREOF, the Company and the Holder have executed this Warrant as of
the date first written above.

 

COMPANY:

 

HOLDER:

American Wagering, Inc.,

 

Alpine Advisors, LLC

 A Nevada corporation

 

 A Nevada Limited liability company

 

 

 

 

 

 

By:

/s/ Victor Salerno

 

By:

/s/ Don R. Kornstein

Name: Victor Salerno

 

Name: Don R. Kornstein

Its: Chief Executive Officer

 

Its: Managing Member

 

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EXERCISE AGREEMENT

 

TO:         AMERICAN WAGERING, INC. (THE “COMPANY”)

 

The undersigned, pursuant to the provisions set forth in the attached Warrant to
Purchase Shares of Common Stock (the “Warrant”) hereby irrevocably elects and
agrees to purchase                          shares (the “Exercised Shares”) of
the Company’s common stock (“Common Stock”) covered by the Warrant and makes
payment herewith in full therefor at the price per share provided by the Warrant
in cash or by certified or official bank check in the amount of
$                                .

 

If said number of shares of Common Stock shall not be all the shares available
under the Warrant, a new warrant is to be issued in the name of said undersigned
covering the balance of the shares available thereunder less any fraction of a
share paid in cash.  Please issue a certificate or certificates for the
Exercised Shares in the name of and pay any cash for any fractional share to:

 

 

NAME:

 

 

 

 

 

SIGNATURE:

 

 

 

 

 

DATED:

 

 

 

 

 

ADDRESS:

 

 

 

 

 

 

 

 

 

 

 

NOTE:

The above signature should correspond exactly with the name on the face of the
Warrant.

 

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