Document:

Exhibit 10.6

 

Execution Version

 

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  SUBJECT TO SECTION 6 BELOW, NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDER, SATISFACTORY TO COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

 

WARRANT TO PURCHASE SHARES OF SERIES A-1 CONVERTIBLE PREFERRED STOCK

 

May 23, 2011

 

THIS CERTIFIES THAT, for value received, Oxford Finance LLC (“Holder”) is entitled to subscribe for and purchase up to such number of fully paid and nonassessable shares of Series A-1 Convertible Preferred Stock of Radius Health, Inc., a Delaware corporation (the “Company”), as is equal to the Warrant Share Amount  (as hereinafter defined) at the Warrant Price (as hereinafter defined), subject to the provisions and upon the terms and conditions hereinafter set forth.  As used herein, the term “Preferred Stock” shall mean Company’s presently authorized Series A-1 Convertible Preferred Stock, $0.01 par value per share, and/or any stock into which such Preferred Stock may hereafter be converted or exchanged pursuant to Section 7 hereof or otherwise, and the term “Warrant Shares” shall mean the shares of Preferred Stock which Holder may acquire pursuant to this Warrant and/or any other shares of stock into which such shares of Preferred Stock may hereafter be converted or exchanged pursuant to Section 7 hereof or otherwise.

 

1.             Warrant Share Amount and Warrant Price.  The “Warrant Share Amount” means such whole number (with any fractions rounded down) as is equal to the quotient of (a) the product of (i) the Initial Term Loan (as defined in the Loan and Security Agreement dated May 23, 2011 among General Electric Capital Corporation (“GECC”), the Lenders (as defined therein), and the Company (the “Loan Agreement”)) made pursuant to the terms of the Loan Agreement, multiplied by (ii) four percent (4%), multiplied by (iii) 0.5, divided by (b) the Warrant Price.  The “Warrant Price” shall initially be $81.42 per share, subject to adjustment as provided in Section 7 below.

 

2.             Conditions to Exercise.  The purchase right represented by this Warrant may be exercised at any time, or from time to time, in whole or in part during the term commencing on the date hereof and ending at 5:00 P.M. Pacific time on the tenth anniversary of the date of this Warrant (the “Expiration Date”).

 

3.             Method of Exercise or Conversion; Payment; Issuance of Shares; Issuance of New Warrant.

 

(a)           Cash Exercise.  Subject to Section 2 hereof, the purchase right represented by this Warrant may be exercised by Holder hereof, in whole or in part, by the surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company (as set forth in Section 18 below) and by payment to Company, by certified or bank check, or wire transfer of immediately available funds, of an amount equal to the then applicable Warrant Price multiplied by the number of Warrant Shares then being purchased.  In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock 

 

 

so purchased shall be in the name of, and delivered to, Holder hereof, or as such Holder may direct (subject to the terms of transfer contained herein and upon payment by such Holder hereof of any applicable transfer taxes).  Such delivery shall be made within 30 days after exercise of this Warrant and at Company’s expense and, unless this Warrant has been fully exercised or expired, a new Warrant having terms and conditions substantially identical to this Warrant and representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not have been exercised, shall also be issued to Holder hereof within 30 days after exercise of this Warrant.

 

(b)           Conversion.   In lieu of exercising this Warrant as specified in Section 3(a), Holder may from time to time convert this Warrant, in whole or in part, into Warrant Shares by surrender of the original of this Warrant (together with a duly executed Notice of Exercise in substantially the form attached hereto) at the principal office of Company, in which event Company shall issue to Holder the number of Warrant Shares computed using the following formula:

 

X = Y (A-B)

A

 

Where:

 

X = the number of Warrant Shares to be issued to Holder.

 

Y = the number of Warrant Shares purchasable under this Warrant (at the date of such calculation).

 

A = the Fair Market Value of one share of Company’s Preferred Stock (at the date of such calculation).

 

B = Warrant Price (as adjusted to the date of such calculation).

 

(c)           Fair Market Value.  For purposes of this Section 3, Fair Market Value of one share of Company’s Preferred Stock shall mean:

 

(i)            In the event of an exercise concurrently with the closing of an initial public offering of the Company’s common stock (“Common Stock”), the per share Fair Market Value for the Preferred Stock shall be the offering price at which the underwriters initially sell Common Stock to the public multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible, provided, however, that if, at the time of the closing of such initial public offering, this Warrant is then exercisable for Common Stock by virtue of any adjustment or adjustments pursuant to Section 7 hereof or otherwise, whether such adjustment or adjustments have occurred prior to such initial public offering or are occurring concurrently with such initial public offering, then, solely for purposes of this Section 3(c)(i), the per share Fair Market Value for such Common Stock shall be the offering price at which the underwriters initially sell Common Stock to the public; or

 

(ii)           The average of the closing bid and asked prices of Common Stock quoted in the Over-The-Counter Market Summary, the last reported sale price quoted on the Nasdaq Stock Market or on any other exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the three (3) trading days prior to the date of determination of Fair Market Value, multiplied by the number of shares of Common Stock into which each share of Preferred Stock is then convertible, provided, however, that if, at the time of any determination of Fair Market Value under this Section 3(c)(ii), this Warrant is then exercisable for Common Stock by virtue of any adjustment or adjustments pursuant to Section 7 hereof or otherwise, whether such adjustment 

 

 

or adjustments have occurred prior to such determination or are occurring concurrently with such determination, then, solely for purposes of this Section 3(c)(ii), the per share Fair Market Value for such Common Stock shall be the average of the closing bid and asked prices of Common Stock quoted in the Over-The-Counter Market Summary, the last reported sale price quoted on the Nasdaq Stock Market or on any other exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the three (3) trading days prior to the date of any such determination of Fair Market Value; or

 

(iii)          In the event of an exercise in connection with a merger, acquisition or other consolidation in which Company is not the surviving entity, the per share Fair Market Value for the Preferred Stock shall be the value to be received per share of Preferred Stock by all holders of the Preferred Stock in such transaction as determined in the reasonable good faith judgment of Company’s Board of Directors; or

 

(iv)          In any other instance, the per share Fair Market Value for the Preferred Stock shall be as determined in the reasonable good faith judgment of Company’s Board of Directors.

 

In the event of 3(c)(iii) or 3(c)(iv), above, Company’s Board of Directors shall prepare a certificate, to be signed by an authorized officer of Company, setting forth in reasonable detail the basis for and method of determination of the per share Fair Market Value of the Preferred Stock.  The Board of Directors will also certify to Holder that this per share Fair Market Value will be applicable to all holders of Company’s Preferred Stock.  Such certification must be made to Holder at least ten (10) business days prior to the proposed effective date of the merger, consolidation, sale, or other triggering event as defined in 3(c)(iii) or 3(c)(iv).

 

(d)           Automatic Exercise.  To the extent this Warrant is not previously exercised, it shall be deemed to have been automatically converted in accordance with Sections 3(b) and 3(c) hereof (even if not surrendered) as of immediately before its expiration, involuntary termination or cancellation if the then-Fair Market Value of a Warrant Share exceeds the then-Warrant Price, unless Holder notifies Company in writing to the contrary prior to such automatic exercise.

 

(e)           Treatment of Warrant Upon Acquisition of Company.

 

(i)            Certain Definitions.  For the purpose of this Warrant: “Acquisition” means any sale, assignment, or other disposition of all or substantially all of the assets of Company, or any reorganization, consolidation, or merger of Company, or sale of outstanding Company securities by holders thereof, where the holders of Company’s securities as of immediately before the transaction beneficially own less than a majority of the outstanding voting securities of the successor or surviving entity as of immediately after such transaction or, if such Company shareholders beneficially own a majority of the outstanding voting securities of the successor or surviving entity as of immediately after the transaction, such successor or surviving entity is not the Company; and “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise or convert this Warrant on or prior to the closing thereof is then traded on a national securities exchange or over-the-counter market, and (iii) Holder would not be restricted by contract or by applicable federal and state securities laws from 

 

 

publicly re-selling, within six (6) months and one day following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition.

 

(ii)           Acquisition for Cash and/or Marketable Securities.  Holder agrees that, in the event of an Acquisition in which the sole consideration is cash and/or Marketable Securities, this Warrant shall terminate on and as of the closing of such Acquisition to the extent not previously exercised.  The Company shall provide Holder with written notice of any proposed Acquisition not later than ten (10) business days prior to the closing thereof setting forth the material terms and conditions thereof, and shall provide Holder with copies of the draft transaction agreements and other documents in connection therewith and with such other information respecting such proposed Acquisition as may reasonably be requested by Holder.

 

(iii)          Assumption of Warrant.  Upon the closing of any Acquisition other than as particularly described in subsection 3(e)(ii) above, the Company shall cause the surviving or successor entity to assume this Warrant and the obligations of the Company hereunder, and this Warrant shall, from and after such closing, be exercisable for the same class, number and kind of securities, cash and other property as would have been paid for or in respect of the shares issuable (as of immediately prior to such closing) upon exercise in full hereof as if such shares had been issued and outstanding on and as of such closing, at an aggregate Warrant Price equal to the aggregate Warrant Price in effect as of immediately prior to such closing; and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.

 

4.             Representations and Warranties of Holder and Company.

 

(a)           Representations and Warranties by Holder.  Holder represents and warrants to Company with respect to this purchase as follows:

 

(i)            Evaluation.  Holder has substantial experience in evaluating and investing in private placement transactions of securities of companies similar to Company so that Holder is capable of evaluating the merits and risks of its investment in Company and has the capacity to protect its interests.

 

(ii)           Resale.  Except for transfers to an affiliate of Holder, Holder is acquiring this Warrant and the Warrant Shares issuable upon exercise of this Warrant (collectively the “Securities”) for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof.  Holder understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Act”) by reason of a specific exemption from the registration provisions of the Act which depends upon, among other things, the bona fide nature of the investment intent as expressed herein.

 

(iii)          Rule 144.  Holder acknowledges that the Securities must be held indefinitely unless subsequently registered under the Act or an exemption from such registration is available.  Holder is aware of the provisions of Rule 144 promulgated under the Act.

 

(iv)          Accredited Investor.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

(v)           Opportunity To Discuss.  Holder has had an opportunity to discuss Company’s 

 

 

business, management and financial affairs with its management and an opportunity to review Company’s facilities.  Holder understands that such discussions, as well as the written information issued by Company, were intended to describe the aspects of Company’s business and prospects which Company believes to be material but were not necessarily a thorough or exhaustive description.

 

(b)           Representations and Warranties by Company.   Company hereby represents and warrants to Holder that the statements in the following paragraphs of this Section 4(b) are true and correct (a) as of the date hereof and (b) except where any such representation and warranty relates specifically to an earlier date, as of the date of any exercise of this Warrant.

 

(i)            Corporate Organization and Authority.  Company (a) is a corporation duly organized, validly existing, and in good standing in its jurisdiction of incorporation, (b) has the corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted; and (c) is qualified as a foreign corporation in all jurisdictions where such qualification is required, except where the failure to be so qualified as a foreign corporation would not have a material adverse effect on the Company.

 

(ii)           Corporate Power .  Company has all requisite legal and corporate power and authority to execute, issue and deliver this Warrant, to issue the Warrant Shares issuable upon exercise or conversion of this Warrant, and to carry out and perform its obligations under this Warrant and any related agreements.

 

(iii)          Authorization; Enforceability.  All corporate action on the part of Company, its officers, directors and shareholders necessary for the authorization, execution, delivery and performance of its obligations under this Warrant and for the authorization, issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise of this Warrant has been taken and this Warrant constitutes the legally binding and valid obligation of Company enforceable in accordance with its terms.

 

(iv)          Valid Issuance of Warrant and Warrant Shares.  This Warrant has been validly issued and is free of restrictions on transfer other than restrictions on transfer set forth herein and under applicable state and federal securities laws. The Warrant Shares issuable upon conversion of this Warrant, when issued, sold and delivered in accordance with the terms of this Warrant for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Warrant and under applicable state and federal securities laws.  Subject to applicable restrictions on transfer, the issuance and delivery of this Warrant and the Warrant Shares issuable upon exercise or conversion of this Warrant are not subject to any preemptive or other similar rights or any liens or encumbrances except as specifically set forth in Company’s Certificate of Incorporation or this Warrant.  The offer, sale and issuance of the Warrant Shares, as contemplated by this Warrant, are exempt from the prospectus and registration requirements of applicable United States federal and state security laws, and neither Company nor any authorized agent acting on its behalf has or will take any action hereafter that would cause the loss of such exemption.

 

(v)           No Conflict.  The execution, delivery, and performance of this Warrant will not result in (a) any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice (1) any provision of Company’s Certificate of Incorporation or by-laws; (2) any provision of any judgment, decree, or order to which Company is a party, by which it is bound, or to which any of its material assets are subject; 

 

 

(3) any contract, obligation, or commitment to which Company is a party or by which it is bound; or (4) any statute, rule, or governmental regulation applicable to Company, or (b) the creation of any lien, charge or encumbrance upon any assets of Company.

 

(vi)          Capitalization.  The capitalization table of Company attached hereto as Annex A is complete and accurate as of the date hereof (after giving effect to the issuance of this Warrant) and reflects (a) all outstanding capital stock of Company and (b) all outstanding warrants, options, conversion privileges, preemptive rights or other rights or agreements to purchase or otherwise acquire or issue any equity securities or convertible securities of Company.  Company has reserved 1535 shares of Common Stock for issuance upon conversion of the Preferred Stock.

 

(vii)         Warrant Price.  As of the date hereof, the Warrant Price is no greater than the lowest price (as adjusted to reflect stock splits, stock combinations and like occurrences) at which Company has issued Series A-1 Convertible Preferred Stock.  The Warrant Price is, and will be, no greater than the lowest price (as adjusted to reflect stock splits, stock combinations and like occurrences) at which the Company issues Series A-1 Convertible Preferred Stock pursuant to that certain Series A-1 Convertible Stock Purchase Agreement, dated April 25, 2011, by and among the Company and the persons listed on Schedule I thereto, as amended from time to time.

 

5.             Legends.

 

(a)           Legend.  Each certificate representing the Warrant Shares shall be endorsed with substantially the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED (UNLESS SUCH TRANSFER IS TO AN AFFILIATE OF HOLDER) UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A “NO ACTION” LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED BY COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

 

Company need not enter into its stock records a transfer of Warrant Shares unless the conditions specified in the foregoing legend are satisfied.  Company may also instruct its transfer agent not to allow the transfer of any of the Warrant Shares unless the conditions specified in the foregoing legend are satisfied.

 

(b)           Removal of Legend and Transfer Restrictions.  The legend relating to the Act endorsed on a certificate pursuant to paragraph 5(a) of this Warrant shall be removed and Company shall issue a certificate without such legend to Holder if (i) the Securities are issued by the Company pursuant to a registration statement filed under the Act and a prospectus meeting the requirements of Section 10 of the Act is available or (ii) Holder provides to Company an opinion of counsel for Holder reasonably satisfactory to Company, a no-action letter or interpretive opinion of the staff of the Securities and Exchange Commission (“SEC”) reasonably satisfactory to Company, or other evidence reasonably satisfactory to Company, to the effect that public sale, transfer or assignment of the Securities may be made without registration and without compliance with any restriction such as Rule 144.

 

 

6.             Transfers of Warrant.  In connection with any transfer by Holder of this Warrant, the Company may require the transferee to provide the Company with written representations and warranties substantially similar to Holder’s representations and warranties set forth in Section 4(a) above, and may require Holder to provide a legal opinion, in form and substance satisfactory to Company and its counsel, that such transfer is exempt from the registration and prospectus delivery requirements of the Act; provided, that the Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that such affiliate is an “accredited investor” as defined in Regulation D promulgated under the Act.  Any transferee (including, without limitation, any affiliate of Holder) shall take this Warrant subject to all of the terms and conditions thereof and such transferee’s rights under this Warrant shall be subject to such transferee’s compliance with all of the terms and conditions of this Warrant that are applicable to Holder.  Following any transfer of this Warrant, at the request of either the Company or the transferee, the transferee shall surrender this Warrant to the Company in exchange for a new warrant of like tenor and date, executed by Company.  Subject to the foregoing, this Warrant is transferable on the books of the Company at its principal office by the registered Holder hereof upon surrender of this Warrant properly endorsed.  Upon any partial transfer, Company will execute and deliver to Holder a new warrant of like tenor with respect to the portion of this Warrant not so transferred.  Holder shall not have any right to transfer any portion of this Warrant to any direct competitor of Company.

 

7.             Adjustment for Certain Events. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows:

 

(a)           Reclassification, Recapitalization, Reorganization, Conversion or Merger.  In case of (i) any reclassification, recapitalization, reorganization, conversion or other change of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), (ii) any merger of Company with or into another corporation (other than a merger with another corporation in which Company is the acquiring and the surviving corporation and which does not result in any reclassification, recapitalization, reorganization, conversion or other change of outstanding securities issuable upon exercise of this Warrant and other than a merger with respect to which the provisions of Section 3(e)(ii) are applicable), or (iii) any sale of all or substantially all of the assets of Company (other than any such sale with respect to which the provisions of Section 3(e)(ii) are applicable), Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to Holder a new Warrant (in form and substance satisfactory to Holder of this Warrant), or Company shall make appropriate provision without the issuance of a new Warrant, so that Holder shall have the right to receive, at a total purchase price not to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the Warrant Shares theretofore issuable upon exercise or conversion of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, recapitalization, reorganization, conversion, other change, merger or sale by a holder of the number of shares of Preferred Stock (or any other class or series of stock) then purchasable under this Warrant.  Any new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 7.  The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers.

 

(b)           Subdivision or Combination of Shares.  If Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Preferred Stock (or of any other class or series of stock then purchasable under this Warrant), the Warrant Price shall be proportionately decreased and the number of Warrant Shares issuable hereunder shall be proportionately increased in the case of a subdivision and the Warrant Price shall be proportionately 

 

 

increased and the number of Warrant Shares issuable hereunder shall be proportionately decreased in the case of a combination.

 

(c)           Stock Dividends and Other Distributions.  If Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Preferred Stock (or with respect to any other class or series of stock then purchasable under this Warrant) payable in Preferred Stock (or shares of such other class or series of stock, if applicable), then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Preferred Stock (or such other class or series of stock then purchasable under this Warrant) outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Preferred Stock (or such other class or series of stock then purchasable under this Warrant) outstanding immediately after such dividend or distribution; or (ii) make any other distribution with respect to Preferred Stock or with respect to any other class or series of stock then purchasable under this Warrant (except any distribution specifically provided for in Sections 7(a) and 7(b)), then, in each such case, provision shall be made by Company such that Holder shall receive upon exercise of this Warrant a proportionate share of any such dividend or distribution as though it were Holder of the Warrant Shares as of the record date fixed for the determination of the shareholders of Company entitled to receive such dividend or distribution.

 

(d)           Adjustment for Dilutive Issuance.  The number of shares of Common Stock issuable upon conversion of any shares of Series A-1 Convertible Preferred Stock that are issuable upon exercise of this Warrant shall be subject to adjustment, from time to time in the manner set forth in Company’s Certificate of Incorporation as if such shares of Series A-1 Convertible Preferred Stock were issued and outstanding on and as of the date of any such required adjustment.  The provisions set forth for the Warrant Shares in Company’s Certificate of Incorporation relating to the above in effect as of the date hereof may not be amended, modified or waived, without the prior written consent of Holder, unless such amendment, modification or waiver affects the rights associated with the Warrant Shares in the same manner as such amendment, modification or waiver affects the rights associated with all other shares of the same series and class as the Warrant Shares.

 

(f)            Adjustment for Pay-to-Play Transaction.  In the event that Company’s Certificate of Incorporation provides, or is amended to so provide, for the amendment or modification of the rights, preferences or privileges of the Preferred Stock, or the reclassification, conversion or exchange of the Preferred Stock, in the event that a holder thereof fails to participate in an equity financing transaction (a “Pay-to-Play Provision”), and in the event that such Pay-to-Play Provision becomes operative, this Warrant shall automatically and without any action required become exercisable for that number and type of shares of equity securities as would have been issued or exchanged, or would have remained outstanding, in respect of the Warrant Shares issuable hereunder had this Warrant been exercised in full prior to such event, and the Holder elected to participate in the equity financing or elected not to participate in the equity financing, as the case may be.

 

8.             Notice of Adjustments.  Whenever any Warrant Price or the kind or number of securities issuable under this Warrant shall be adjusted pursuant to Section 7 hereof, Company shall prepare a certificate signed by an officer of Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and number or kind of shares issuable upon exercise of this Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by certified or registered mail, return receipt required, postage prepaid) within thirty (30) days of such adjustment to Holder as set forth in Section 19 hereof.

 

 

9.             Financial and Other Reports.  From time to time up to the earlier of the Expiration Date or the complete exercise of this Warrant, Company shall furnish to Holder, if Company is a private company, (a) unaudited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements within 30 days of each calendar quarter end, in a form reasonably acceptable to Holder and certified by Company’s president or chief financial officer, and (b) Company’s complete annual audited consolidated and, if available, consolidating balance sheets, statements of operations and cash flow statements certified by an independent certified public accountant selected by Company within 120 days of the fiscal year end or, if sooner, within thirty (30) days after the Company’s Board of Directors receives the audit in final form.  All such statements are to be prepared using GAAP and, if Company is a publicly held company, are to be in compliance with SEC requirements.    At the time of Company’s delivery of quarterly financial statements in accordance with this Section 9, Company shall also deliver to Holder an updated capitalization table of Company in the form attached hereto as Annex A, provided that the Company shall have an obligation to deliver such updated capitalization table only if the Company is not a public company at that time.

 

10.           Registration Rights.  The Company agrees that the shares of Common Stock issued and issuable upon conversion of the shares of Preferred Stock issued and issuable upon exercise or conversion of this Warrant (and the shares of Common Stock issued and issuable upon exercise or conversion of this Warrant at all times, if any, when the Warrant Shares shall be Common Stock), shall have all registration rights pursuant to and as set forth in the Company’s Amended and Restated Stockholders’ Agreement, as amended and in effect from time to time (the “Stockholders Agreement”), on a pari passu basis with the investor parties thereto holding shares of Preferred Stock.  The foregoing referenced registration rights are subject to and conditioned upon the Holder, at the time of exercise of this Warrant, becoming a party to the Stockholders’ Agreement by executing and delivering to the Company an Instrument of adherence thereto and such registration rights will be governed by the terms of the Shareholders’ Agreement.

 

11.           No Fractional Shares.  No fractional share of Preferred Stock will be issued in connection with any exercise or conversion hereunder, but in lieu of such fractional share Company shall make a cash payment therefor upon the basis of the Warrant Price then in effect.

 

12.           Charges, Taxes and Expenses.  Issuance of certificates for shares of Preferred Stock upon the exercise or conversion of this Warrant shall be made without charge to Holder for any United States or state of the United States documentary stamp tax or other incidental expense with respect to the issuance of such certificate, all of which taxes and expenses shall be paid by Company, and such certificates shall be issued in the name of Holder.

 

13.           No Shareholder Rights Until Exercise.  Except as expressly provided herein, this Warrant does not entitle Holder to any voting rights or other rights as a shareholder of Company prior to the exercise hereof.

 

14.           Registry of Warrant.  Company shall maintain a registry showing the name and address of the registered Holder of this Warrant.  This Warrant may be surrendered for exchange or exercise, in accordance with its terms, at such office or agency of Company, and Company and Holder shall be entitled to rely in all respects, prior to written notice to the contrary, upon such registry.

 

15.           Loss, Theft, Destruction or Mutilation of Warrant.  Upon receipt by Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon surrender and cancellation of this Warrant, Company will execute and deliver a new Warrant, having terms and conditions substantially identical to this Warrant, in lieu hereof.

 

 

 

16.           Miscellaneous.

 

(a)           Issue Date.  The provisions of this Warrant shall be construed and shall be given effect in all respect as if it had been issued and delivered by Company on the date hereof.

 

(b)           Successors.  This Warrant shall be binding upon any successors or assigns of Company.

 

(c)           Headings.  The headings used in this Warrant are used for convenience only and are not to be considered in construing or interpreting this Warrant.

 

(d)           Saturdays, Sundays, Holidays.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or a Sunday or shall be a legal holiday in the State of New York, then such action may be taken or such right may be exercised on the next succeeding day not a legal holiday.

 

(e)           Attorney’s Fees.   In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorney’s fees.

 

17.           No Impairment.  Company will not, by amendment of its Certificate of Incorporation or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of Holder hereof against impairment.

 

18.           Addresses.  Any notice required or permitted hereunder shall be in writing and shall be mailed by overnight courier, registered or certified mail, return receipt requested, and postage prepaid, or otherwise delivered by hand or by messenger, addressed as set forth below, or at such other address as Company or Holder hereof shall have furnished to the other party in accordance with the delivery instructions set forth in this Section 18.

 

	
If   to Company:
    	
 
    	
Radius Health, Inc.

201   Broadway, 6th floor

Cambridge,   Massachusetts 02139

Attn:   Chief Financial Officer
    
	
 
    	
 
    	
 
    
	
If to Holder:
    	
 
    	
Oxford   Finance LLC

Attn: Vice President and General Counsel

133 North Fairfax Street

Alexandria, VA 22314

Telephone:    703-519-6082

Facsimile: 703-519-5225
    

 

If mailed by registered or certified mail, return receipt requested, and postage prepaid, notice shall be deemed to be given five (5) days after being sent, and if sent by overnight courier, by hand or by messenger, notice shall be deemed to be given when delivered (if on a business day, and if not, on the next business day).

 

19.           WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL 

 

 

BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WARRANT OR THE WARRANT SHARES.

 

20.           GOVERNING LAW.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

[Remainder of page intentionally left blank]

 

 

Execution Version

 

IN WITNESS WHEREOF, Company  has caused this Warrant to be executed by its officer thereunto duly authorized.

 

RADIUS HEALTH, INC.

 

	
By: 
    	
/s/ C. Richard Lyttle
    	
 
    	
 
    
	
 
    	
Name: C. Richard Edmund Lyttle
    	
 
    	
 
    
	
 
    	
Title:   President and Chief Executive Officer
    	
 
    	
 
    

 

Dated as of May 23, 2011.

 

 

NOTICE OF EXERCISE

 

To:

Radius Health, Inc.

201 Broadway, 6th floor

Cambridge, Massachusetts 02139

Attn: Chief Financial Officer

 

1.                                       The undersigned Warrantholder (“Holder”) elects to acquire shares of the Series A-1 Convertible Preferred Stock (the “Preferred Stock”) of Radius Health, Inc. (the “Company”), pursuant to the terms of the Stock Purchase Warrant dated May         , 2011 (the “Warrant”).

 

2.                                       Holder exercises its rights under the Warrant as set forth below:

 

	
 
    	
(           )
    	
Holder   elects to purchase                                shares of Preferred Stock as provided in Section 3(a) and tenders   herewith a check in the amount of   $                      as payment of the purchase price.
    
	
 
    	
 
    	
 
    
	
 
    	
(           )
    	
Holder elects to   convert the purchase rights into shares of Preferred Stock as provided in   Section 3(b) of the Warrant.
    

 

3.                                       Holder surrenders the Warrant with this Notice of Exercise.

 

Holder represents that it is acquiring the aforesaid shares of Preferred Stock for investment and not with a view to or for resale in connection with distribution and that Holder has no present intention of distributing or reselling the shares.

 

Please issue a certificate representing the shares of the Preferred Stock in the name of Holder or in such other name as is specified below:

 

	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Taxpayer   I.D.:
    	
 
    	
 
    
					

 

	
 
    	
[NAME   OF HOLDER]
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
                      , 200
    	
 
    

 

 

Execution Version

 

ANNEX A

 

CAPITALIZATION TABLE

 

RADIUS

 

	
 
    	
 
    	
POST MERGER CAPITALIZATION AFTER 1ST SERIES A-1, A-5, IPSEN EQUITY CLOSING, 1ST DEBT CLOSING
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Series A-1
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Post
    	
 
    	
%
    	
 
    	
Post
    	
 
    	
%
    	
 
    
	
 
    	
 
    	
Series A-1
    	
 
    	
Series A-2
    	
 
    	
Series A-3
    	
 
    	
Series A-4
    	
 
    	
Series A-5
    	
 
    	
 
    	
 
    	
Warrants
    	
 
    	
Common
    	
 
    	
Common
    	
 
    	
As Converted
    	
 
    	
Shares
    	
 
    	
Fully Diluted
    	
 
    	
Fully
    	
 
    
	
 
    	
 
    	
Convert 1:10
    	
 
    	
Convert 1:10
    	
 
    	
Convert 1:10
    	
 
    	
Convert 1:10
    	
 
    	
Convert 1:10
    	
 
    	
Common
    	
 
    	
Convert 1:10
    	
 
    	
Warrants
    	
 
    	
Options
    	
 
    	
Shares Out
    	
 
    	
Out
    	
 
    	
Shares
    	
 
    	
Diluted
    	
 
    
	
Preferred Holders
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
MPM Bioventures III Funds
    	
 
    	
8,222
    	
 
    	
12,194
    	
 
    	
2,985
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
234,010
    	
 
    	
1.46
    	
%
    	
234,010
    	
 
    	
1.32
    	
%
    
	
MPM Bioventures III-QP, L.P.
    	
 
    	
122,290
    	
 
    	
181,364
    	
 
    	
44,395
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3,480,490
    	
 
    	
21.69
    	
%
    	
3,480,490
    	
 
    	
19.64
    	
%
    
	
MPM Bioventures III GMBH & Co.
    	
 
    	
10,335
    	
 
    	
15,327
    	
 
    	
3,752
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
294,140
    	
 
    	
1.83
    	
%
    	
294,140
    	
 
    	
1.66
    	
%
    
	
MPM Bioventures III Parallel Fund, L.P.
    	
 
    	
3,693
    	
 
    	
5,477
    	
 
    	
1,340
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
105,100
    	
 
    	
0.65
    	
%
    	
105,100
    	
 
    	
0.59
    	
%
    
	
MPM Asset Management Investors 2003
    	
 
    	
2,368
    	
 
    	
3,511
    	
 
    	
859
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
67,380
    	
 
    	
0.42
    	
%
    	
67,380
    	
 
    	
0.38
    	
%
    
	
MPM Bio IV NVS Strategic Fund
    	
 
    	
54,001
    	
 
    	
184,242
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
2,382,430
    	
 
    	
14.85
    	
%
    	
2,382,430
    	
 
    	
13.44
    	
%
    
	
Wellcome Trust
    	
 
    	
25,522
    	
 
    	
210,325
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
2,358,470
    	
 
    	
14.70
    	
%
    	
2,358,470
    	
 
    	
13.31
    	
%
    
	
HealthCare Ventures VII
    	
 
    	
19,651
    	
 
    	
98,278
    	
 
    	
63,663
    	
 
    	
 
    	
 
    	
 
    	
 
    	
83,113
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,899,033
    	
 
    	
11.83
    	
%
    	
1,899,033
    	
 
    	
10.72
    	
%
    
	
Saints Capital (OBP IV Holdings)
    	
 
    	
16,213
    	
 
    	
108,628
    	
 
    	
24,983
    	
 
    	
 
    	
 
    	
 
    	
 
    	
15,173
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,513,413
    	
 
    	
9.43
    	
%
    	
1,513,413
    	
 
    	
8.54
    	
%
    
	
Saints Capital (mRNA Fund II Holdings)
    	
 
    	
162
    	
 
    	
1,090
    	
 
    	
250
    	
 
    	
 
    	
 
    	
 
    	
 
    	
151
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
15,171
    	
 
    	
0.09
    	
%
    	
15,171
    	
 
    	
0.09
    	
%
    
	
BB Biotech Ventures II
    	
 
    	
43,596
    	
 
    	
105,162
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,487,580
    	
 
    	
9.27
    	
%
    	
1,487,580
    	
 
    	
8.39
    	
%
    
	
Scottish Widows
    	
 
    	
6,805
    	
 
    	
56,086
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
628,910
    	
 
    	
3.92
    	
%
    	
628,910
    	
 
    	
3.55
    	
%
    
	
Raymond F. Schinazi
    	
 
    	
757
    	
 
    	
1,524
    	
 
    	
—
    	
 
    	
414
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
26,950
    	
 
    	
0.17
    	
%
    	
26,950
    	
 
    	
0.15
    	
%
    
	
David E. Thompson Revocable Trust
    	
 
    	
196
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,619
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
18,150
    	
 
    	
0.11
    	
%
    	
18,150
    	
 
    	
0.10
    	
%
    
	
Hostetler Family Trust
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
3,071
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3,071
    	
 
    	
0.02
    	
%
    	
3,071
    	
 
    	
0.02
    	
%
    
	
H.Watt Gregory, III
    	
 
    	
132
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,095
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
12,270
    	
 
    	
0.08
    	
%
    	
12,270
    	
 
    	
0.07
    	
%
    
	
The Richman Trust
    	
 
    	
65
    	
 
    	
 
    	
 
    	
 
    	
 
    	
535
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
6,000
    	
 
    	
0.04
    	
%
    	
6,000
    	
 
    	
0.03
    	
%
    
	
Breining Family Trust
    	
 
    	
40
    	
 
    	
 
    	
 
    	
 
    	
 
    	
335
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
3,750
    	
 
    	
0.02
    	
%
    	
3,750
    	
 
    	
0.02
    	
%
    
	
Dr. Dennis A. Carson
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
533
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
533
    	
 
    	
0.00
    	
%
    	
533
    	
 
    	
0.00
    	
%
    
	
B Van Wyck
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
363
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
363
    	
 
    	
0.00
    	
%
    	
363
    	
 
    	
0.00
    	
%
    
	
Jonnie K. Westbrook
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
 
    	
 
    	
363
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
363
    	
 
    	
0.00
    	
%
    	
363
    	
 
    	
0.00
    	
%
    
	
Nordic Bioscience
    	
 
    	
—
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
6,443
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
64,430
    	
 
    	
0.40
    	
%
    	
64,430
    	
 
    	
0.36
    	
%
    
	
Brookside
    	
 
    	
40,940
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
409,400
    	
 
    	
2.55
    	
%
    	
409,400
    	
 
    	
2.31
    	
%
    
	
BB Biotech AG
    	
 
    	
40,940
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
409,400
    	
 
    	
2.55
    	
%
    	
409,400
    	
 
    	
2.31
    	
%
    
	
Ipsen
    	
 
    	
17,326
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
173,260
    	
 
    	
1.08
    	
%
    	
173,260
    	
 
    	
0.98
    	
%
    
	
GE Capital Equity Investments
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,535
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
0.00
    	
%
    	
15,350
    	
 
    	
0.09
    	
%
    
	
Oxford Finance LLC
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
1,535
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
0.00
    	
%
    	
15,350
    	
 
    	
0.09
    	
%
    
	
Leerink
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
818
    	
 
    	
 
    	
 
    	
 
    	
 
    	
—
    	
 
    	
0.00
    	
%
    	
8,180
    	
 
    	
0.05
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Common (Shares, Options,   Warrants)
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
452,827
    	
 
    	
 
    	
 
    	
266
    	
 
    	
1,634,860
    	
 
    	
452,827
    	
 
    	
2.82
    	
%
    	
2,087,953
    	
 
    	
11.78
    	
%
    
	
Total
    	
 
    	
413,254
    	
 
    	
983,208
    	
 
    	
142,227
    	
 
    	
3,998
    	
 
    	
6,443
    	
 
    	
555,594
    	
 
    	
3,888
    	
 
    	
266
    	
 
    	
1,634,860
    	
 
    	
16,046,894
    	
 
    	
100.00
    	
%
    	
17,720,900
    	
 
    	
100.00
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Per   Share
    	
 
    	
$
    	
8.1420
    	
 
    	
 
    	
 
    	
$
    	
8.1420
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
Post-money   $
    	
 
    	
$
    	
130,653,811
    	
 
    	
 
    	
 
    	
$
    	
144,283,568Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

EXECUTIVE EMPLOYMENT AGREEMENT dated as of May 23, 2011, by and between BALLY TECHNOLOGIES, INC., a Nevada corporation (the “Company”), and RAMESH SRINIVASAN (“Executive”).

 

WHEREAS, the Company and Executive are parties to that certain Executive Employment Agreement dated as of March 9, 2005, and amended as of December 31, 2008 (the “Original Employment Agreement”) pursuant to which Executive is employed as the Company’s Executive Vice President for the Company’s Systems Division; and

 

WHEREAS, the Company and Executive desire to amend and restate the Original Employment Agreement in accordance with and subject to the terms and conditions hereof;

 

NOW THEREFORE, on the basis of the foregoing premises and in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

 

1.             Employment.  The Company continues to employ Executive, and Executive continues to be employed by the Company, on the terms and conditions set forth in this Agreement.  This Agreement is not intended to create an agreement of employment for any specific term or otherwise alter the at-will nature of Executive’s employment relationship with the Company.

 

2.             Position and Duties.  From and after March 30, 2011 (the “Effective Date”), Executive shall serve as the Company’s President and Chief Operating Officer and shall report to the Chief Executive Officer of the Company.  Executive shall perform the duties contemplated by such title and such other duties, consistent with his experience and abilities, as the Chief Executive Officer and/or Board of Directors of the Company may assign to Executive.  Executive shall devote his full business time and efforts to the business and affairs of the Company, use his best efforts to advance the interests of the Company, and at all times conduct himself in a manner that reflects credit on the Company.  It is contemplated that Executive shall render services to the Company from the Company’s principal place of business; however, the parties acknowledge and agree that Executive may be required to travel extensively in fulfilling his duties hereunder.

 

3.             Compensation.

 

(a)           Salary.  From and after the Effective Date, the Company shall pay Executive an annual base salary of $600,000, payable in equal installments on the Company’s regularly recurring paydays in accordance with the Company’s normal payroll practice.  Increases in annual base salary shall be considered by the Company at least annually, beginning with the Company’s 2012 fiscal year and will be based on criteria applicable to other senior executives of the Company, provided, however, that the award of any such increase shall be at the sole discretion of the Company.

 

(b)           Management Incentive Program.  Executive shall be entitled to participate in the Company’s Management Incentive Program (and/or such other incentive

 

 

compensation plan maintained by the Company) established for the Company (the “MIP”).  From and after July 1, 2011, the financial metrics part of this MIP will entitle Executive to receive up to 200 percent of Executive’s base salary for performance at plan maximum, with Executive’s target annual bonus under the MIP equal to 100 percent of his base salary and the threshold annual bonus under the MIP equal to 60 percent of his base salary.  Executive’s bonus under the MIP shall be earned based upon objectives established by the Board of Directors each year, which objectives shall be based on the Company’s earnings per share performance (or such other objective measure determined by the Compensation Committee of the Board of Directors) and personal objectives established by the Compensation Committee.  Any payment made to Executive pursuant to the MIP in accordance with this Section 3(b) shall be paid to Executive in a lump sum payment payable in the normal business course similar to those payments made to other Company executives, but in no event later than by December 31 of the calendar year that includes the last day of the fiscal year to which such payment relates.

 

(c)           Option.  On April 6, 2011 (the “Grant Date”), Executive shall receive an option to acquire an aggregate of 36,000 shares of the common stock of the Company.  Subject to the further provisions of this Agreement, the option shall “vest” (that is, become exercisable by Executive) in four installments of 9,000 shares on each of the first four anniversaries of the Grant Date.  The option shall be subject to the Company’s 2010 Long Term Incentive Plan (the “LTIP”) and the Company’s standard form of stock option agreement.  Executive shall be eligible to receive additional grants in the future, at the discretion of and as approved by the Company’s Board of Directors and/or Compensation Committee thereof.

 

(d)           Restricted stock.  On the Grant Date, Executive shall receive an award of 18,000 shares of restricted stock under the LTIP (the “Restricted Stock”).  Subject to the further provisions of this Agreement, the Restricted Stock shall vest in four installments of 4,500 shares on each of the first four anniversaries of the Grant Date.  The Restricted Stock shall be subject to the LTIP and the Company’s standard form of restricted stock agreement.  Executive shall be eligible to receive additional grants in the future, at the discretion of and as approved by the Company’s Board of Directors and/or Compensation Committee thereof.

 

(e)           Reimbursement of expenses.  In accordance with established policies and procedures of the Company as in effect from time to time, the Company shall pay or reimburse Executive for all reasonable and actual out-of-pocket expenses including but not limited to travel, hotel, and similar expenses, incurred by Executive from time to time in performing his obligations under this Agreement.  Any reimbursement of Executive’s expenses made by the Company pursuant to this Section 3(e) shall be payable in the normal business course in accordance with the Company’s expense reimbursement policy, but in no event later than the last day of the calendar year following the calendar year in which the expense was incurred, and the expenses eligible for reimbursement in anyone calendar year

 

2

 

shall not affect the expenses eligible for reimbursement in any other calendar year.

 

(f)            Vacation.  Executive shall be entitled to annual paid vacation time in accordance with the Company’s policy with respect to the senior executives of the Company prorated for any partial employment year.

 

(g)           Other benefits.  Executive shall be entitled to other employment benefits, including but not limited to life insurance, medical and hospitalization, disability, and retirement benefits, consistent with the benefits provided to other senior executives of the Company.

 

(h)           No Reduction.  There shall be no material reduction or diminution of the benefits provided in this Section 3 during the term of this Agreement unless (i) Executive consents in writing, (ii) an equitable arrangement (embodied in a substitute or alternative benefit or plan) is made with respect to such benefit or plan, or (iii) the reduction is part of a program of across-the-board benefit reductions similarly affecting all other senior executive officers of the Company.

 

4.             Termination or Material Change of Employment

 

(a)           At-will employment.  Executive’s employment with the Company is “at-will.” Either Executive or the Company may terminate Executive’s employment at any time with or without Cause.

 

(b)           Termination by Company for Cause.

 

(1)           The Company may terminate this Agreement for Cause at any time immediately on written notice to Executive, in which case the Company’s obligations and Executive’s rights under this Agreement shall terminate.  For purposes of this provision, the term “Cause” means:

 

(i)            Executive’s clear and substantiated insubordination, fraud, disloyalty, dishonesty, willful misconduct, or gross negligence in the performance of Executive’s duties under this Agreement, including willful and material failure to perform such duties as may properly be assigned to Executive under this Agreement;

 

(ii)           Executive’s material breach (without cure within 30 days following notice thereof) of any material provision of this Agreement;

 

(iii)          Executive’s failure to qualify (or having so qualified being thereafter disqualified) under any suitability or licensing requirement of any jurisdiction or regulatory authority to which Executive may be subject by reason of his position with the Company and its affiliates or subsidiaries.  The Company will use its best efforts to work with Executive in fulfilling the

 

3

 

requirements and will promptly provide written information on the suitability and licensing requirements to Executive so that Executive may adequately prepare;

 

(iv)          Executive’s commission of a crime against the Company or violation of any material law, order, rule, or regulation pertaining to the Company’s business;

 

(v)           Executive’s inability to perform the job functions and responsibilities assigned in accordance with reasonable standards established from time to time by the Company in its sole and reasonable discretion, which inability, if subject to cure, is not cured by Executive within 30 days after notice thereof; and

 

(vi)          The Company’s obtaining from any reliable source accurate information with respect to Executive that would, in the reasonable good faith opinion of the Company, jeopardize the gaming licenses, permits, or status of the Company or any of its subsidiaries or affiliates with any gaming commission, board, or similar regulatory or law enforcement authority.

 

(2)           Any termination by the Company for Cause shall not be in limitation of any other right or remedy the Company may have under this Agreement or otherwise.

 

(c)           Termination by Company without Cause.  The Company may terminate this Agreement at any time without Cause (as defined in Section 4(b)(1)), whereupon the Company’s obligations and Executive’s rights under this Agreement shall terminate, except that the Company shall, subject to Executive’s execution, within 21 days following Executive’s date of termination, an effective general release of claims in favor of the Company (i) continue to pay Executive an amount equal to Executive’s base salary for eighteen months after the date of termination (with the first payment occurring on the date that is 30 days following the date of termination), (ii) pay to Executive, on the date that is 12 months following the date of termination, a lump sum payment equal to 1.5 times the annual bonus under the MIP that Executive would have earned for the year of termination had he remained employed for the full year based on the Company’s actual results for the full fiscal year and (iii) accelerate the vesting of a portion of Executive’s Restricted Stock award described in Section 3(d) such that, taking into account the portion of such award that vested prior to the date of termination, Executive is vested in a fraction of the total number of shares subject to the award equal to the number of full months completed between the Effective Date and the date of termination plus 18 (but in no event greater than 48) divided by 48.

 

(d)           Termination by Executive.  Except as set forth in Section 4(e), if Executive resigns for any reason, the Company’s obligations and Executive’s rights under this Agreement shall terminate; provided, however, that a resignation within 60

 

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days following a material diminution of Executive’s duties shall be treated as a termination without cause under Section 4(c).  As used in this Section 4, Executive’s duties shall be deemed to have been materially diminished if, without Executive’s prior written consent, (1) Executive (A) is not the President and Chief Operating Officer of the Company or, following a Change of Control, the combined or surviving corporation resulting from the Change of Control or (B) does not report directly to the Chief Executive Officer or Board of Directors of the Company or, following a Change of Control, the ultimate parent company resulting from the transaction, (2) the Company materially breaches (without cure within 30 days following notice thereof) any material provision of this Agreement, or (3) his position, title, duties, authority or responsibilities are otherwise substantially diminished.  Notwithstanding anything herein to the contrary, if Executive remains employed by the Company through the end of a fiscal year (or provides up to 90 days written notice of termination, which 90-day period would run through the end of a fiscal year), Executive shall be entitled to receive, at the time annual bonuses are paid to other executive officers of the Company, an annual bonus under the MIP for the year of termination based on the Company’s actual results for such fiscal year.

 

(e)           Change of Control.

 

(1)           Termination by Company or Executive.  In lieu of the payments and benefits described in Section 4(c), in the event of a termination by the Company without Cause or resignation within 60 days following a material diminution of Executive’s duties, which termination without Cause or material diminution of duties occurs within one year following the occurrence of a Change of Control, the Company’s obligations and Executive’s rights under this Agreement shall terminate, except that the Company shall, subject to Executive’s execution, within 21 days following Executive’s date of termination, an effective general release of claims in favor of the Company (i) continue to pay Executive an amount equal to Executive’s base salary for eighteen months after the date of termination (with the first payment occurring on the date that is 30 days following the date of termination), (ii) pay to Executive, on the date that is 12 months following the date of termination, a lump sum payment equal to 1.5 times the annual bonus under the MIP that Executive would have earned for the year of termination had he remained employed for the full year based on the Company’s actual results for the full fiscal year and (iii) accelerate in full the vesting of all of the equity compensation awards granted to Executive prior to the date of the Change of Control (including the option and Restricted Stock awards described in Section 3(c) and 3(d)).

 

(2)           “Change of Control” defined.  As used in this Section 4(e), a Change of Control shall be deemed to have occurred upon the earliest to occur of the following events: (i) the date an unaffiliated person, entity or group (as defined in Treas. Reg. I.409A-3(i)(5)(v)(B)) acquires, directly or

 

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indirectly, ownership of a substantial portion of the Company’s assets equal to or more than 50% of the total gross fair market value (as defined in Treas. Reg. 1.409A-3(i)(5)(vii)) of all of the assets of the Company immediately before such acquisition or acquisitions; (ii) the date any unaffiliated person, entity or group (as defined in Treas. Reg. 1.409A-3(i)(5)(v)(B)) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of the Company’s capital stock having more than 50% of the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; or (iii) a majority of members of the Company’s Board of Directors (together with any directors elected or nominated by a majority of such members) is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election; except that any event or transaction which would be a “Change of Control” under (i) or (ii) of this definition shall not be a Change of Control if persons who were the equity holders of the Company immediately prior to such event or transaction (other than the acquirer in the case of a reorganization, merger or consolidation), immediately thereafter, beneficially own more than 50% of the combined voting power of the Company’s or the reorganized, merged or consolidated company’s then outstanding voting securities entitled to vote generally in the election of directors.

 

(f)            Termination of Employment.  For all purposes of this Agreement, “termination of employment” and any phrase of similar meaning shall have the meaning assigned to such term in Treas. Reg. Section 1.409A-1(h)(1).

 

(g)           Six-Month Delay for Payments to Specified Employee.  If Executive is a Specified Employee (as defined below) as of the date of his termination of employment under this Agreement, notwithstanding any other provision of this Agreement, any payment to Executive following a termination of employment described in Section 4(c) or 4(e)(1) will be accumulated (the “Accumulated Amount”) and Executive’s right to receive payment or distribution of such Accumulated Amount will be delayed until the earlier of Executive’s death or the first day of the seventh month following Executive’s termination of employment (the “Termination Payment Date”), whereupon the Accumulated Amount will be paid or distributed to Executive and the normal payment or distribution schedule for any remaining payments or distributions will resume.  During the period in which the payment of the Accumulated Amount is delayed pursuant to Code Section 409A, the Accumulated Amount will be set aside in a “rabbi trust” (within the meaning of Internal Revenue Service Revenue Procedure 92-64) established by the Company for purposes of holding the funds constituting the Accumulated Amount.  Such funds shall be invested in short-term U.S. Government obligations until the Termination Payment Date, and an amount equal to the interest earned on obligations held by the rabbi trust shall be paid to Executive on the Termination Payment Date or, if later, the date the Termination Payment is actually paid to

 

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Executive.  For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder (“Final 409A Regulations”), provided, however, that, as permitted in the Final409A Regulations, the Company’s Specified Employees and its application of the six-month delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board of Directors or a committee thereof, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company, including this Agreement.

 

5.             Restrictive covenants.

 

(a)           Covenant not to compete.

 

(1)           Executive will not compete with the Company:

 

(i)            During the term of Executive’s employment with the Company; or

 

(ii)           For twelve months after the Company terminates Executive’s employment for any reason, subject to the Company continuing, to the extent required under Section 4, to pay Executive’s base salary as required in Section 4.

 

(2)           As used in Section 5(a), “compete” means to establish, engage, or be connected with, directly or indirectly, any company engaged in a business in competition with the business of the Company or its subsidiaries or affiliates in any area where the Company is doing business, whether as owner, partner, agent, employee, director, officer, consultant, advisor, or stockholder (except as the beneficial owner of not more than 5 percent of the outstanding shares of a corporation, any of the capital stock of which is listed on any national or regional securities exchange or quoted in the daily listing of over-the-counter market securities and, in each case, in which Executive does not undertake any management or operational or advisory role).

 

(3)           In addition to the restrictions set forth above, during the term of Executive’s employment with the Company and until the date that is eighteen months after the Company terminates Executive’s employment for any reason, Executive shall not become employed by, act as a consultant for, contract with, obtain a beneficial ownership interest of 5% or more in or otherwise enter into any form of business relationship with any of the following entities: International Game Technology, Inc., WMS Industries, Inc., Shuffle Master, Inc., Aristocrat Leisure, Ltd., Gtech Holdings Corp., Multimedia Games, Inc., Scientific Games Corporation, Konami Gaming, Inc., Aruze Gaming America, Inc., Novomatic AG,  American Gaming Systems, Global Cash Access Holdings, Inc., Inspired Gaming Group Limited, Ainsworth Game Technology Ltd., or Global

 

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Zitro, S.L., or any of their present and future affiliates, subsidiaries, divisions, parent companies and successors.

 

(4)           The Company and Executive acknowledge and agree that the scope and duration of the covenant in Section 5(a) are reasonable and fair; however, if a court of competent jurisdiction determines that this covenant is overly broad or unenforceable in any respect, the Company and Executive acknowledge and agree that the covenant shall be enforced to the greatest extent any such court deems appropriate, and such court may modify this covenant to that extent.

 

(b)           Covenant not to solicit customers.  Executive shall not, directly or indirectly, during the term of Executive’s employment with the Company and for twelve months after termination of Executive’s employment for any reason, solicit the trade or patronage of any of the customers or prospective customers of the Company (which, for purposes of this paragraph, shall include any of the Company’s subsidiaries or affiliates) of which the Executive has personally engaged with in his capacity as Executive or of anyone whom the Executive has heretofore traded or dealt with in his capacity within the Company, regardless of the location of such customers or prospective customers of the Company with respect to any technologies, services, products, trade secrets, or other matters in which the Company is active.

 

(c)           Covenant not to solicit employees, or consultants.  Executive shall not, directly or indirectly, during the term of Executive’s employment with the Company and for eighteen months after termination of Executive’s employment for any reason, aid or endeavor to solicit or induce any other employee or consultant of the Company to leave the Company to accept employment of any kind with any other person or entity.

 

(d)           Confidential Information.  Executive’s work for the Company will give Executive access to confidential matters of the Company not publicly known such as proprietary matters of a technical nature (including but not limited to know-how, technical data, gaming processes, gaming equipment, techniques, developments) and proprietary matters of a business nature (including but not limited to information about costs, profits, markets, sales, lists of customers, and matters received by the Company in confidence from other parties), collectively referred to as “Confidential Matters.” Some Confidential Matters may be entitled to protection as “Trade Secrets,” as that term is defined in N.R.S. 600A.030(5), the Restatement of Torts, and case law interpreting the same.  “Confidential Matters” shall not include any matters for which Executive has prior knowledge of prior to the commencement of Executive’s employment with the Company or its affiliates or matters that are known or come to be known as industry standard practice.  Executive agrees to keep secret all such Confidential Matters and agree not to directly or indirectly, other than is necessary in the business of the Company and the scope of Executive’s employment, disclose or use any such Confidential Matters at any time except with prior written consent of the Company.  Executive

 

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agrees that all written materials (including correspondence, memoranda, manuals, notes, and notebooks) and all models, mechanisms, devices, drawings, and plans in Executive’s possession from time to time (whether or not written or prepared by Executive) embodying Confidential Matters shall be and remain the sole property of the Company, and Executive will use all reasonable precautions to assure that all such written materials and models, mechanisms, devices, drawings, and plans are properly protected and kept from unauthorized persons.  Executive further agrees to deliver all Confidential Matters, including copies, immediately to the Company on termination of Executive’s employment for any reason, or at any time the Company may request.  Unless required by court proceeding, for a period of three years after termination of Executive’s employment with the Company for any reason, Executive shall not reveal directly or indirectly to any person or entity or use for Executive’s personal benefit (including without limitation, for the purpose of soliciting business, whether or not competitive with any business of the Company) any Confidential Matters.  These obligations will not apply to the extent that the Confidential Matters (i) were already known to the Executive, without an obligation to keep it confidential, at the time of its receipt from the Company; (ii) were received by the Executive in good faith from a third party lawfully in possession thereof and having no obligation to keep such information confidential; or (iii) were publicly known at the time of its receipt by the Executive or has become publicly known other than by a breach of this Agreement or other action by the Executive.  To the extent that any Confidential Matters are considered by the Company as Trade Secrets, Executive agrees that all limitations on use of these Trade Secrets shall last as long as such information remains a trade secret under applicable law.  Executive further agrees that immediately upon or after termination, Executive will deliver to the Company all memoranda, notes, reports, lists, models, mechanisms, devices, drawings or plans and other documents (and all copies thereof) in Executive’s possession relating to the business of the Company or its subsidiaries and affiliates.

 

(e)           Non-disparagement.  Each party agrees that, during Executive’s employment with the Company and after the termination thereof for any reason, neither shall, publicly or privately, intentionally disparage or make any willful statements (written or oral) that could impugn the integrity, acumen (business or otherwise), ethics, or business practices of the other (including, in the case of the Company, its affiliates and subsidiaries), except, in each case, to the extent (but solely to the extent) necessary (i) in any judicial or arbitration action to enforce the provisions of this Agreement, or (ii) in connection with any judicial or administrative proceeding to the extent required by applicable law, or (iii) as otherwise required by law.

 

(f)            Intellectual Property.  Executive shall promptly disclose in writing to the Company all inventions, discoveries, concepts, ideas, developments, improvements, and innovations, whether or not patentable, and the expressions of all inventions, discoveries, concepts, ideas, developments, improvements, and innovations, whether or not copyrightable (collectively “Inventions”), conceived, developed, or first actually reduced to practice by Executive, either alone or with

 

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others, during Executive’s employment with the Company, that (i) relate in any manner to the existing or contemplated business or research activities of the Company, (ii) are suggested by or result from Executive’s work for the Company; or (iii) result from the use of time, materials, or facilities of the Company.  All Inventions Executive conceives, develops, or first actually reduces to practice, either alone or with others, while employed by the Company that relate in any manner to the existing or contemplated business or research activities of the Company shall be the exclusive property of the Company.  Executive will, at the request and expense of the Company, execute specific assignments to any such Inventions and execute, acknowledge, and deliver patent applications and such other documents (including but not limited to all provisionals, continuations, continuations-in-part, continued prosecution applications, extensions, re-issues, re-examinations, divisionals and foreign counterparts) and take such further action as may be considered necessary by the Company at any time, whether during Executive’s employment with the Company or after it terminates for any reason, to obtain and define letters patent in any and all countries and to vest title to such Inventions and related patents or patent applications in the Company or its assignees.  Any Invention that Executive discloses to a third person or describes in a patent application filed by Executive or in Executive’s behalf during Executive’s employment with the Company or within three months after Executive’s employment with the Company terminates for any reason shall be presumed to have been conceived or made by Executive during Executive’s employment with the Company unless proved to have been conceived and made by Executive after the expiration or termination of this Agreement.

 

(g)           Injunctive relief; jurisdiction.  Executive acknowledges that the Company will suffer irreparable injury, not readily susceptible of valuation in monetary damages, if Executive breaches any of Executive’s obligations under the restrictive covenants in this Section 5  Accordingly, Executive agrees that the Company will be entitled, at its option, to injunctive relief against any breach by Executive of Executive’s obligations under Section 5 in any federal or state court of competent jurisdiction sitting in Nevada, in addition to monetary damages and any other remedies available at law or in equity.  Executive hereby submits to the jurisdiction of such courts for the purposes of any actions or proceedings instituted by the Company to obtain such injunctive relief, and agree that process may be served on Executive under the relevant rules of civil procedure, addressed to Executive’s last address known to the Company, or in any other manner authorized by law.

 

(h)           Material inducements.  The restrictive covenants and other provisions in this Agreement are material inducements to the Company entering into and performing its obligations under this Agreement.  Accordingly, in the event of any proven breach of these provisions by Executive, in addition to all other remedies at law or in equity possessed by the Company, including but not limited to the right to enforce the covenants Executive has agreed to in this Agreement, the Company shall have the right to terminate this agreement and Executive’s

 

10

 

employment with the Company and not pay any amounts payable to Executive under this Agreement.

 

6.             Licenses and approvals.  This Agreement is contingent on any necessary approvals and licenses from any regulatory authorities having jurisdiction over the parties or the subject matter of this Agreement.  Each party shall promptly apply to the appropriate regulatory authorities for any licenses and approvals necessary for Executive to perform under this Agreement and shall diligently pursue its applications, and the Company shall pay all associated costs and fees.  Each party shall fully cooperate with any requests, inquiries, or investigations of any regulatory authorities or law enforcement agencies in connection with the Company, its affiliates, or this Agreement.  If any license or approval necessary for either party to perform under this Agreement is denied, suspended, or revoked, this Agreement shall be void, provided, however, that if the denial, suspension, or revocation affects performance of the Agreement in part only, the parties may by mutual agreement continue to perform under this Agreement to the extent it is unaffected by the denial, suspension, or revocation.

 

7.             Compliance program.  The parties acknowledge that the Company operates under privileged licenses in a highly regulated industry, and that maintains a compliance program to protect and preserve the name, reputation, integrity, and good will of the Company and its subsidiaries and affiliates (the “Company Group”) through a thorough review and determination of the integrity and fitness, both initially and thereafter, of any person or company that performs work for any member of the Company Group or with which any member of the Company Group is or are otherwise associated, and to monitor compliance with the requirements established by gaming regulatory authorities in various jurisdictions around the world.  This Agreement and the association of the Company and its affiliates with Executive are contingent on the continued approval of the Company and its compliance committee under the Company’s compliance program and the parties shall cooperate with the Company and its compliance committee as reasonably requested by the Company or the committee and shall provide the committee with such information as it may request, but the termination of this Agreement shall in all respects be governed by and subject to the rights and obligations of the parties as set forth in Section 4 hereof.

 

8.             Executive’s Indemnification.  To the extent permitted by applicable law, Executive shall be indemnified by the Company against expenses, including attorneys’ fees, necessarily incurred by Executive in connection with the defense or settlement of any action, suit, or proceeding to which he is a party, alone or together with others, by reason of his being or having been an Executive of the Company.  To the extent permitted by applicable law, Executive shall also be reimbursed by the Company for any amounts paid by such person in satisfaction of any judgment or settlement in connection with any such action, suit, or proceeding, unless the amount of such judgment shall be adjudged on such action, suit, or proceeding to be liable for willful misconduct in violation of law or the Company’s written policies.  It shall be the responsibility of the Company to obtain and keep current adequate liability insurance coverage to ensure that this provision shall be complied with as written.

 

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9.             General Provisions.

 

(a)           Arbitration.  Any controversy or claim arising out of or relating to this Agreement or its breach shall be settled by arbitration in Las Vegas, Nevada, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof.  Nothing contained in this section shall in any way deprive the Company of its right to obtain injunctive or other equitable relief under Section 5 of this Agreement.

 

(b)           Further assurances.  Each party shall execute all documents and take all other actions necessary to effect the provisions and purposes of this Agreement.

 

(c)           Entire agreement.  This Agreement contains the entire agreement between the parties and supersedes all other oral and written agreements previously entered into by the parties concerning the same subject matter, including the Original Employment Agreement, provided, however, that except as modified by this Agreement, the terms and conditions of Executive’s employment with the Company shall be subject to the Company’s regular employment policies and practices as may be in effect from time to time.

 

(d)           Modification, rescission, and assignment.  This Agreement may be modified or rescinded only with the written consent of both parties.  Neither this Agreement nor any right or interest under this Agreement shall be assignable by either party without the written consent of the other, provided, that nothing contained in this Agreement shall limit or restrict the Company’s ability to merge or consolidate or effect any similar transaction with any other entity, irrespective of whether the Company is the surviving entity (including a split up, spin off, or similar type transaction), provided that one or more of such surviving entities continues to be bound by the provisions of this Agreement.

 

(e)           Controlling law; severability.  Nevada law shall govern this Agreement and its interpretation.  If any provision is unenforceable for any reason, it shall be deemed stricken from the Agreement but shall not otherwise affect the intention of the parties or the remaining provisions of the Agreement.

 

(f)            Binding effect.  This Agreement shall bind and inure to the benefit of each of the parties and their respective heirs, successors, administrators, executors, and assigns.

 

(g)           Notices.  All notices required by this Agreement must be in writing and must be delivered, mailed, or telecopied to the addresses given above or such other addresses as the parties may designate in writing.

 

(h)           Counterparts; facsimiles.  This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument.  This Agreement may be executed and delivered by exchange of facsimile copies showing the signatures of the parties, and those signatures need not be affixed to the same copy.  The facsimile copies

 

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so signed will constitute originally signed copies of the same consent requiring no further execution.

 

(i)            Captions; construction; drafting ambiguities.  The captions in this Agreement are for convenience only and shall not be used in interpreting it.  In interpreting this Agreement any change in gender or number shall be made as appropriate to fit the context.  Each party has reviewed and revised this Agreement with independent counsel or has had the opportunity to do so.  The rule of construction that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or of any amendments or exhibits to this Agreement.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first set forth above.

 

	
BALLY   TECHNOLOGIES, INC.  
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Mark Lerner 
    	
 
    	
/s/   Ramesh Srinivasan
    
	
 
    	
Mark   Lerner 
    	
 
    	
Ramesh   Srinivasan
    
	
 
    	
Secretary
    	
 
    	
 
    

 

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