Document:

Exhibit 10.3

 

SECURED PROMISSORY
NOTE

 

	
  US $195,000.00

  	
   

  	
  Las Vegas, Nevada

  
	
   

  	
   

  	
  June 11, 2010

  

 

FOR VALUE RECEIVED, the
undersigned, American Wagering, Inc., a Nevada corporation (“Borrower”),
promises to pay to the order of Alpine Advisors LLC (“Lender”) the principal
sum of one hundred ninety-five thousand dollars ($195,000.00) on June 17,
2010 (the “Maturity Date”), together with interest from the date hereof through
the Maturity Date at the rate of fifteen percent (15.0%) per annum.  If, and to the extent, the principal amount
of this Note is not paid on the Maturity Date, the principal amount hereof
outstanding shall bear interest from the Maturity Date until paid in full at
the default rate of twenty-two percent (22.0%) per annum and shall be payable
on demand or, in the absence of a demand, weekly, on the first business day of
each week.  All interest shall be
calculated on the basis of a 360-day year prorated for the number of days in
each month. All payments of principal and interest under this Note shall be
made in immediately available lawful funds of the United States of America by
wire transfer to a bank specified by Lender by no later than 3:00 p.m.
(Nevada time) on the date such payments are due.

 

This Note may be prepaid, in
whole or in part, at any time, and from time to time, without premium or
penalty.  All prepayments shall be
applied first to any accrued and unpaid interest and then to the unpaid
principal balance hereof.

 

As security for the payment
of all indebtedness under this Note, Borrower
hereby pledges to Lender, and grants to Lender
a first priority security interest in, all of borrower’s right, title and
interest in and to the following property (the “Collateral”): (i) all
equity interests in Computerized Bookmaking Systems, Inc., a Nevada
corporation (“CBS”); (ii) all shares of stock, certificates, instruments or other documents
evidencing or representing the same; and (iii) all present and future
payments, proceeds, dividends, distributions, instruments, compensation,
property, assets, interests and rights in connection with or related to any of
the foregoing.  If Borrower defaults in
paying any indebtedness evidenced hereby promptly on the date when due and
payable, Lender shall have, in addition to other rights and remedies provided for
herein or otherwise available to it, all rights and remedies of a secured party
on default under the Uniform Commercial Code (“UCC”).

 

Borrower hereby represents
and warrants to Lender that: (a) each of Borrower and CBS is a corporation
organized under the laws of the State of Nevada; (b) Borrower has no
organizational number, and its exact legal name is American Wagering, Inc.;
(c) the issued and outstanding capital stock of CBS is 100 shares of
common stock, represented by Certificate No. 1, all of which have been
duly authorized and issued and are fully-paid and non-assessable, and none of
which constitutes Margin Stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System of the United States, as the same is
from time to time in effect); and (d) all of the Collateral is owned by
Borrower free and clear of any lien, security interest or other encumbrance
other than the pledge and security interest in favor of Lender.  The foregoing representations and warranties
shall survive the execution and delivery of this Note.

 

Borrower hereby irrevocably
authorizes Lender at any time and from time to time to file in any jurisdiction
in which the UCC has been adopted any initial financing statements and
amendments thereto that (a) describe the Collateral, and (b) contain
any other information required by part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any initial financing statement or
amendment.

 

 

This Note may not be
modified, amended, waived or otherwise altered in whole or in part, except by a
further writing signed by the party to be charged therewith.  Any failure of Borrower to comply with any
obligation herein may be waived by Lender only by a written instrument signed
by Lender.  Any waiver or failure to
exercise any right or remedy on any occasion shall not operate as a waiver of,
or estoppel with respect to, any subsequent default hereunder.

 

This Note shall be binding
upon Borrower and its successors and assigns and shall inure to the benefit of
Lender and its successors and assigns. 
Borrower may not assign its rights or delegate its duties, in whole or
in part, under this Note.

 

This Note shall be governed
by and construed in accordance with the laws of the State of Nevada without
reference to conflicts of law principles thereof.

 

All amounts payable
hereunder shall be paid free and clear of, and without deduction or offset for,
any present or future taxes, levies, imposts, charges, withholdings, or
liabilities with respect thereto, and free and clear of any and all other
defenses, offsets, set-offs, claims, counterclaims, credits or deductions of
any kind.

 

The release of any security
for this Note or the alteration, amendment or waiver of any provision of this
Note or any instrument evidencing, securing or guaranteeing payment of this
Note or the performance by Borrower thereunder shall not release or modify or
affect the liability of, Borrower or any guarantor or any other person who may
be or become liable under or with respect to this Note.

 

Time is of the essence with
respect to this Note, and demand, protest, notice of demand and non-payment and
all other demands and notices whatsoever in connection with the delivery,
acceptance, performance or default of this Note are hereby expressly waived by
Borrower and an action for amounts due hereunder shall immediately accrue.  Borrower shall be responsible for all costs
and expenses (including reasonable attorneys’ fees and court costs) incurred by
Lender or any subsequent holder in connection with the collection of this Note.

 

In no event shall the rate
of interest charged hereunder be higher than that allowed under applicable
law.  If any excessive interest is herein
provided for or shall be adjudicated to be so provided for herein, then the provisions
of this paragraph shall govern, and Borrower shall not be obligated to pay the
amount of such interest to the extent that it is higher than that allowed under
applicable law.

 

If for any reason any term
or provision of this Note is held to be invalid or unenforceable, all other
valid terms and provisions hereof shall remain in full force and effect, and
all of the terms and provisions of this Note shall be deemed to be severable in
nature.

 

IN WITNESS WHEREOF, Borrower has executed this Note as
of the date first written above.

 

	
   

  	
  American Wagering, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Victor Salerno

  
	
   

  	
  Name:

  	
  Victor Salerno

  
	
   

  	
  Its:

  	
  CEO

  

 

2Exhibit 10.4

 

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.

 

WARRANT TO
PURCHASE

SHARES OF COMMON STOCK

 

DATE OF ISSUANCE:  June 11, 2010

 

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.

 

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 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.

 

2

 

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:

 

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.

 

4

 

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 

 

5

 

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 

 

6

 

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 

 

7

 

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

 

11.1.           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.

 

11.2.           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.

 

11.3.           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.

 

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

 

8

 

11.5.           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.

 

11.6.           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.

 

11.7.           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.

 

11.8.           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 

 

9

 

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.

 

11.9.           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.

 

11.10.         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.

 

11.11.         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.

 

11.12.         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.

 

12.   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.

 

12.1.           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%),

 

10

 

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 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

 

12.2.           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.

 

13.   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.

 

14.   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.

 

15.   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 

 

11

 

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.

 

15.1.           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.

 

15.2.           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.

 

15.3.           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.

 

16.   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.

 

17.   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.

 

18.   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:

 

12

 

If to the Company:

 

American
Wagering, Inc.

Attn:  General Counsel

675 Grier Drive

Las Vegas, NV 89119

 

If to
the Holder:

 

Alpine
Advisors, LLC

825 Lakeshore Blvd

Incline Village, NV 89451

 

19.   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.

 

20.   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.

 

21.   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.

 

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

 

13

 

23.   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

  
					

 

14

 

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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