EXHIBIT 10.22
EXECUTION COPY
NAME OF SUBSCRIBER:
To: Jackpot Enterprises, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx 00000
SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
SECTION 1
1.1 Subscription.
The undersigned (the "Subscriber"), intending to be legally bound
hereby, irrevocably subscribes for and agrees to purchase the principal amount
of Convertible Subordinated Promissory Notes (the "Notes") of Jackpot
Enterprises, Inc., a Nevada corporation (the "Company"), indicated on page 17
hereof, on the terms and conditions described herein and set forth on the term
sheet attached hereto as Exhibit A, which terms and conditions are incorporated
herein by reference. The issuance of the Notes was described in a Confidential
Memorandum dated February 21, 2000 (the "Confidential Memorandum"). The Notes
shall be issued substantially in the form attached hereto as Exhibit B. The
Notes are part of an offering being made by the Company only to accredited
investors (as such term is defined in the Regulation D under the Securities Act
of 1933, as amended) of a minimum $15,000,000 principal amount, and a maximum
$27,500,000 principal amount, of the Notes. The minimum subscription by any
person is $100,000 principal amount of Notes.
As set forth in Section 2.1(d) the issuance of a portion of the Notes
is subject to early prepayment by the Company pursuant to the terms of this
Agreement. Accordingly, each Subscriber whose subscription is accepted will be
issued two Notes, one in the amount of the Excess Amount (as discussed in
Section 2.1(d)) and a second for the balance of the amount subscribed for. The
amount of each Subscriber Excess Amount will be set forth on page 17 hereof.
1.2 Purchase of Notes.
The Subscriber understands and acknowledges that the purchase price
of the Notes is 100% of the principal amount subscribed for. Payment for the
Notes shall be made by check or wire transfer of immediately available funds in
accordance with the instructions of the Company, together with an executed copy
of this Subscription Agreement and any other required documents.
SECTION 2
2.1 Acceptance or Rejection; Early Partial Repayment.
(a) The Subscriber understands and agrees that the Company reserves
the right to reject this subscription for the Notes in whole or part, if, in its
reasonable judgment, it deems such action in the best interest of the Company
at any time prior to the Closing (as defined in Section 2.2 below) with respect
to such Notes, notwithstanding prior receipt by the Subscriber of notice of
acceptance of the Subscriber's subscription.
(b) The Subscriber understands and agrees that the subscription may
be revoked, provided that written notice of revocation is sent by certified or
registered mail, return receipt requested, and is received by the Company at
least two business days prior to the Closing with respect to the Notes
subscribed for by the Subscriber.
(c) In the event of rejection of this subscription, or in the event
the sale of the Notes subscribed for by the Subscriber is not consummated by the
Company for any reason (in which event this Subscription Agreement shall be
deemed to be rejected), this Subscription Agreement and any other agreement
entered into between the Subscriber and the Company relating to this
subscription shall thereafter have no force or effect, and the Company shall
promptly return or cause to be returned to the Subscriber the purchase price for
the Notes, without interest thereon or deduction therefrom.
(d) The Subscriber understands that the issuance of a portion of the
Notes is subject to early prepayment by the Company pursuant to the terms of
this Agreement. In the event the shareholders of the Company fail to approve the
issuance of an aggregate amount of Notes in excess of approximately $18,700,000
or the purchase of Notes in excess of approximately $940,000 by certain
affiliates of the Company, a portion of the Notes (the "Excess Amount") shall
be redeemed by the Company at a redemption price of 120% of the face amount of
the Note plus accrued interest through the date of redemption.
2.2 Closing; Escrow Prior to Initial Closing: Closing Date.
The closing (the "Closing") of the purchase and sale of Notes
subscribed to by Subscriber pursuant to this Subscription Agreement shall take
place following the acceptance by the Company of the subscription therefor, on
such date and at such time as are determined by the Company, provided that no
Closing shall occur unless and until subscriptions for not less than $15,000,000
principal amount of Notes shall have been received and accepted by the Company.
Until such time as subscriptions for $15,000,000 principal amount of Notes shall
have been received and accepted by the Company (the "Initial Closing"), amounts
paid in respect of subscriptions shall be held in a non-interest bearing escrow
account maintained by Camhy Xxxxxxxxx & Xxxxx LLP, counsel to the Company. The
Company's acceptance of the Subscriber's subscription shall be evidenced by the
Company's execution of this Subscription Agreement. At the Closing of the
purchase and sale of the Notes subscribed to by the Subscriber, the Company
shall deliver to the Subscriber one or more original executed Notes in the form
attached hereto as Exhibit A.
SECTION 3
3.1 Investor Representations and Warranties.
The Subscriber hereby acknowledges, represents and warrants to the
Company as follows:
(a) The Subscriber is acquiring the Notes for his own account as
principal, not as a nominee or agent, for investment purposes only, and not with
a view to, or for, resale, distribution or fractionalization thereof in whole
or in part, and no other person has a direct or indirect beneficial interest in
such Notes. Further, the Subscriber 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
Notes for which the Subscriber is subscribing.
(b) The Subscriber has full power and authority to enter into this
Subscription Agreement, the execution and delivery of this Subscription
Agreement have been duly authorized, if applicable, and this Subscription
Agreement constitutes a valid and legally binding obligation of the Subscriber.
(c) The Subscriber acknowledges that the offering and sale of the
Notes is intended to be exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), by virtue of Section 4(2) or 4(6) of
the Securities Act and the provisions of Regulation D promulgated thereunder
("Regulation D"). In furtherance thereof, the Subscriber represents and
warrants to and agrees with the Company as follows:
(i) The Subscriber is an "accredited investor" within the
meaning of Rule 501 (a) of Regulation D;
(ii) The Subscriber has the financial ability to bear the
economic risk of his investment, has adequate means for providing for
his current needs and personal contingencies and has no need for
liquidity with respect to his investment in the Company;
(iii) No Person has acted as the Subscriber's Purchaser
Representative for purposes of the private placement exemption under
the Securities Act; and
(iv) The Subscriber has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of the prospective investment in the Notes. If other
than an individual, the Subscriber also represents it has not been
organized for the purpose of acquiring the Notes.
(d) The information in the Investor Questionnaire completed and
executed by the Subscriber in the form of the Investor Questionnaire included
as Exhibit C hereto (the "Investor Questionnaire") is accurate and true in all
respects.
(e) The Subscriber:
(i) Has been furnished with the Company's Confidential
Memorandum, and the Subscriber has carefully read the Confidential
Memorandum, and understands and has evaluated the risks and the
considerations described in the Confidential Memorandum;
(ii) Has been provided an opportunity for a reasonable
period of time prior to the date hereof to obtain additional
information concerning the offering of the Notes, the Company and
all other information to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense;
(iii) Has been given the opportunity for a reasonable
period of time prior to the date hereof to ask questions of, and
receive answers from, the Company or its representatives concerning
the terms and conditions of the offering of the Notes and other
matters pertaining to this investment, and has been given the
opportunity for a reasonable period of time prior to the date hereof
to obtain such additional information necessary in order for him to
evaluate the merits and risks of purchase of the Notes to the extent
the Company possesses such information or can acquire it without
unreasonable effort or expense;
(iv) Has not been furnished with any oral or written
representation or oral or written information in connection with the
offering of the Notes which is not contained in this Subscription
Agreement; and
(v) Has determined that the Notes are a suitable
investment for the Subscriber and that at this time the Subscriber
could bear a complete loss of such investment.
(f) The Subscriber is not relying on the Company or its affiliates
with respect to economic considerations involved in this investment. The
Subscriber has relied on the advice of, or has consulted with only those
persons, if any, named as Subscriber Representative(s) herein and in the
Investor Questionnaire. Each Subscriber Representative identified by the
Subscriber, if any, is capable of evaluating the merits and risks of an
investment in the Notes on the terms and conditions set forth herein and in the
Executive Summary and each Subscriber Representative has disclosed to the
Subscriber in writing (a copy of which is annexed to this Agreement) the
specific details of any and all past, present or future relationships, actual
or contemplated, between himself and the Company.
(g) The Subscriber represents, warrants and agrees that he will not
sell or otherwise transfer the Notes, or the Common stock issuable upon
conversion thereof, without registration under the Securities Act or an
exemption therefrom and fully understands and agrees that he must bear the
economic risk of his purchase because, among other reasons, the Notes have not
been registered under the Securities Act or under the securities laws of any
state and, therefore, cannot be resold, pledged, assigned or otherwise disposed
of unless they are subsequently registered under the Securities Act and under
the applicable securities laws of such states or an exemption from such
registration is available. In particular, the Subscriber is aware that the
Notes are "restricted securities," as such term is defined in Rule 144
promulgated under the Securities Act ("Rule 144"), and they may not be sold
pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The
Subscriber also understands that the Company is under no obligation to register
the Notes, or the Common stock issuable upon conversion of the Notes, on
Subscriber's behalf or to assist him in complying with any exemption from
registration under the Securities Act or applicable state securities laws. The
Subscriber further understands that sales or transfers of the Notes and the
Common stock issuable upon conversion thereof are further restricted by state
securities laws and the provisions of this Agreement.
(h) No representations or warranties have been made to the Subscriber
by the Company, or any officer, employee, agent, affiliate or subsidiary of the
Company, other than the representations of the Company contained herein, and in
subscribing for the Notes the Subscriber is not relying upon any representations
other than those contained herein.
(i) Any information which the Subscriber has heretofore furnished to
the Company with respect to his financial position and business experience is
correct and complete as of the date of this Subscription Agreement and if there
should be any material change in such information he will immediately furnish
such revised or corrected information to the Company.
(j) The Subscriber understands and agrees that the certificates for
the Notes, and any Common stock issued upon conversion thereof, shall bear
substantially the following legend until (i) such securities shall have been
registered under the Securities Act and effectively been disposed of in
accordance with a registration statement that has been declared effective; or
(ii) in the opinion of counsel for the Company such securities be may sold
without registration under the Securities Act as well as any applicable "Blue
Sky" or state securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES,
OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE
WRITTEN OPINION OF COUNSEL TO THE CORPORATION OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE CORPORATION THAT THE PROPOSED DISPOSITION
IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS
WELL AS ANY APPLICABLE BLUE SKY OR SIMILAR SECURITIES LAW."
(k) The Subscriber's overall commitment to investments which are not
readily marketable is not disproportionate to the Subscriber's net worth, and
an investment in the Notes will not cause such overall commitment to become
excessive.
(l) The Subscriber understands that an investment in the Notes is a
speculative investment, which involves a high degree of risk and the potential
loss of his entire investment.
(m) The foregoing representations, warranties, and agreements shall
survive the closing of the investment in the Notes.
3.2 Indemnity
(a) The Subscriber agrees to indemnify and hold harmless the Company,
its officers and directors, employees and its affiliates and each other person,
if any, who controls any thereof, against any loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation commenced or threatened or any claim whatsoever) arising out of
or based upon any false representation or warranty or breach or failure by the
Subscriber to comply with any covenant or agreement made by the Subscriber
herein or in any other document furnished by the Subscriber to the Company in
connection with this transaction.
(b) The Company agrees to indemnify and hold harmless the
Subscriber, its officers and directors, employees and its affiliates and each
other person, if any, who controls any thereof, against any loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever) arising
out of or based upon any false representation or warranty or breach or failure
by the Company to comply with any covenant or agreement made by the Company
herein or in any other document furnished by the Company to the Subscriber in
connection with this transaction.
3.3 Representations and Warranties of the Company and its
Subsidiaries
The Company hereby represents and warrants to the Subscriber as
follows:
(a) The Company is a corporation duly organized and in good
standing under the laws of the State of Nevada and has all requisite corporate
authority to own its properties and to carry on its business as now being
conducted. The Company does not have any and does not own more than fifty
percent (50%) of or control any other business entity, except as set forth
in the Company's reports, proxy statement or registration statements with the
Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or the Securities Act
(collectively, the "SEC Documents"). The Company is duly qualified and is in
good standing as a foreign corporation to do business in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have any effect on the business, operations, properties, or financial
condition of the Company that is material and adverse to the Company and its
Subsidiaries (as defined below), taken as a whole, and/or any condition,
circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement in any material respect (collectively, a "Material
Adverse Effect").
(b) Each of the subsidiaries of the Company as reflected on Exhibit
21.1 to its Annual Report on Form 10-K for its fiscal year ended June 30, 1999
(the "Subsidiaries") is duly organized, validly existing and in good standing
under the laws of their state of formation and are qualified to do business as
a foreign corporation wherever necessary to so qualify. Each Subsidiary has
requisite power and authority to conduct its business and own its property as
now conducted and owned.
(c) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement. The execution, issuance and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and, except as set forth in
Section 2.1(d), no further consent or authorization of the Company or its
board of directors or stockholders is required. This Agreement shall be as
of the Closing, duly executed and delivered by the Company, and as of the
Closing, shall constitute valid and binding obligations of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application.
(d) The authorized capital stock of the Company consists of
60,000,000 shares of Common Stock, $.01 par value per share and 1,000,000 shares
of Series A Junior Preferred Stock, $1.00 par value per share of which 8,954,041
shares of Common Stock and no shares of Series A Junior Preferred Stock are
outstanding as of the date hereof.
(e) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) result in a violation of the
Company's Certificate of Incorporation or By-Laws or (ii) conflict with, or
constitute a material default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, (iii) subject to the receipt of
Stockholder approval as described in Section 2.1(d), result in a violation of
any federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the New York Stock Exchange (the "NYSE")) applicable to the
Company or by which any material property or asset of the Company is bound or
affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect) or (iv)
violate the Certificate of Incorporation, by-laws or other governing documents
of any of the Subsidiaries. The business of the Company is not being conducted
in violation of any law, ordinance or regulation of any governmental entity,
except for possible violations that either singly or in the aggregate would not
have a Material Adverse Effect.
(f) Except as disclosed in the SEC Documents, there are no
lawsuits or proceedings pending or, to the knowledge of the Company,
threatened, against the Company or any Subsidiary, nor has the Company or any
Subsidiary received any written or oral notice of any such action, suit,
proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect on the consummation of the transactions contemplated
herein. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company or any Subsidiary, requested of any court, arbitrator or governmental
agency which could result in a Material Adverse Effect.
(g) The Company maintains books and records and internal accounting
controls which provide reasonable assurance that: (i) all material transactions
to which the Company or any Subsidiary is a party or by which its properties are
bound are executed with management's authorization; (ii) the recorded accounting
of the Company's consolidated assets is compared with existing assets at regular
intervals; (iii) access to the Company's consolidated assets is permitted only
in accordance with management's authorization; and (iv) all transactions to
which the Company or any Subsidiary is a party or by which its properties are
bound are recorded as necessary to permit preparation of the financial
statements of the Company in accordance with United States generally accepted
accounting principles.
(h) Except as provided in Section 2.1(d), no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental entity is required in connection with the execution, delivery and
performance of the transaction by the Company and the consummation of the
transactions by the Company hereunder.
(i) Each of the Company and its Subsidiaries has previously
delivered to the Subscriber copies of (i) the consolidated balance sheet
of the Company and its Subsidiaries for the past two fiscal years, and the
related consolidated statements of income, statements of stockholders' equity
and cash flows for such years, as reported in the Company's annual report on
Form 10-K, filed by the Company with the SEC, in each case accompanied by the
audit report of Deloitte & Touche LLP, independent public accountants with
respect to the Company, and (ii) the unaudited consolidated balance sheet of
the Company and its Subsidiaries, and the related unaudited consolidated
statement of operations, statement of stockholders' equity and cash flows as
reported in the Company's quarterly reports on Form 10-Q, filed with the SEC
under the Exchange Act since the last audited 10-K. All of such financial
statements fairly present the consolidated financial position of the Company
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth, in each case subject, as to interim statements, to
changes resulting from year-end adjustments (none of which will be material
in amount or effect). All of such financial statements have been prepared in
accordance with GAAP consistently applied during the periods involved, except
as otherwise set forth in the notes thereto, and the Company and its
Subsidiaries have no liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are not fully reflected or reserved
against in the balance sheet included in such financial statements, except
for liabilities that may have arisen in the ordinary and usual course of
business and consistent with past practice and that, individually or in the
aggregate, would not have a Material Adverse Effect.
(j) The Company has timely filed all reports, registration
statements, proxy statements and other materials, together with any amendments
required to be made with respect thereto, that were required to be filed with
the SEC under the Securities Act or the Exchange Act or with the NYSE (all such
reports and statements are collectively referred to herein as the "Company
Reports"). As of the respective dates, the Company Reports, including the
financial statements contained therein, complied in all material respects with
all of the statutes and published rules and regulations enforced or promulgated
by the regulatory authority or exchange with which they were filed, did not
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and were complete and accurate in all material respects.
(k) This transaction will not result in the creation of any lien,
claim or encumbrance on any properties of the Company or any of its
Subsidiaries, nor will it contravene any license or permit under which the
Company or any of its Subsidiaries operate.
(l) Since the date of the last audited financial statement, there
has been no change in the assets, liabilities, business or financial condition,
operation or prospects of the Company and its Subsidiaries that would have a
Material Adverse Effect.
(m) Except as set forth in Schedule 3.3(m), since the date of the
last audited financial statement, except as contemplated by this Agreement or
as set forth in the interim financial statements, neither the Company nor any
of its Subsidiaries has (i) issued any stock, bond or other corporate security,
(ii) borrowed any amount or incurred or become subject to any liability
(absolute, accrued or contingent), except current liabilities incurred and
liabilities under contracts entered into in the ordinary course of business,
(iii) discharged or satisfied any lien or incurred or paid any obligation or
liability (absolute, accrued or contingent) other than current liabilities shown
on the interim financial statements and current liabilities incurred since the
date of the last applicable interim financial statement in the ordinary course
of business, (iv) declared or made any payment or distribution to stockholders
or purchased or redeemed any of its capital stock, (v) mortgaged, pledged or
subjected to any lien or encumbrance any of its assets, tangible or intangible,
other than liens of current real property taxes not yet due and payable, (vi)
sold, assigned or transferred any of its tangible assets except in the ordinary
course of business, or canceled any debt or claim owed to it except in the
ordinary course of business, (vii) sold, assigned, transferred or granted any
exclusive license with respect to any patent, trademark, trade name, service
xxxx, copyright, trade secret or other intangible asset, (viii) suffered any
substantial loss of property or waived any right of substantial value other than
in the ordinary course of business, (ix) made any change in officer compensation
except in the ordinary course of business and consistent with past practice, (x)
made any material change in the manner of its business or operations, (xi)
entered into any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xii) entered into any commitment, obligation,
understanding or other arrangement, contingent or otherwise, to effect, directly
or indirectly, any of the foregoing.
(n) Neither the Company nor any of its Subsidiaries nor any
officer, employee, agent or any other person acting on behalf of any of the
foregoing has, directly or indirectly, given or agreed to give any money, gift
or similar benefit (other than legal price concessions to customers in the
ordinary course of business) to any customer, supplier, employee or agent of a
customer or supplier, or official or employee of any governmental agency or
instrumentality of any government (domestic or foreign) or other person who
was, is, or may be in a position to help or hinder the business of the Company
or any of its Subsidiaries (or assist in connection with any actual or proposed
transaction) which (i) might subject the Company or any of its Subsidiaries to
any material damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past, could reasonably be
expected to have had a Material Adverse Effect or (iii) if not continued in the
future, might have a Material Adverse Effect.
(o) To the best knowledge of the Company:
(i) neither the officers of the Company or any of its
Subsidiaries nor any officer of any of the foregoing has any interest (other
than as non-controlling holders of securities of a publicly-traded company),
either directly or indirectly, in any entity (whether as an employee, officer,
director, shareholder, agent, independent contractor, security holder, creditor,
consultant or otherwise) that presently (i) provides any services or designs,
produces or sells any products or product lines, or engages in any activity
which is the same, similar to or competitive with any activity or business in
which the Company or any of its respective Subsidiaries is now engaged, (ii) is
a supplier of, customer of, creditor of, or has an existing contractual
relationship with, the Company or any of its Subsidiaries, or (iii) has any
direct or indirect interest in any asset or property used by the Company or any
of its Subsidiaries or any property, real or personal, tangible or intangible,
that is necessary or desirable for the conduct of the business of the Company
or any of its Subsidiaries; and
(ii) except as set forth in Schedule 3.3(o), no current
stockholder, director or officer of the Company or any of its Subsidiaries or
any affiliate of any such person, is at present (nor has any former stockholder,
director or officer of any such person who has acted as such within the 12
months preceding the date hereof been) directly or indirectly through his
affiliation with any other person, a party to any transaction with the Company
or any of its Subsidiaries providing for the furnishing of services by, or
rental of real or personal property from, or otherwise requiring cash payments
to any such person in excess of $1,000.
(p) The Company and each of its Subsidiaries own or possess, and
will own or possess after giving effect to this transaction, the valid right to
use all the patents, patent applications, patent and know-how licenses,
inventions, technology, permits, trademark registration and applications,
trademarks, service marks, trade names, copyrights, product designs,
applications, formulae, processes, circulation, and other subscriber lists,
industrial property rights and licenses and rights in respect of the foregoing
used or necessary for the conduct of its business (collectively, "Intellectual
Property"), except to the extent the failure to own or possess any such
Intellectual Property would not have a Material Adverse Effect. The Company is
not aware of any existing or threatened infringement or misappropriation (a) by
the Company or any of its Subsidiaries of any Intellectual Property owned or
possessed by any other person or (b) by any other person of any Intellectual
Property of the Company or any of its Subsidiaries, which in either case would
have a Material Adverse Effect.
(q) Neither the Company nor any of its Subsidiaries, is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(r) Neither the Company nor any of its Subsidiaries have dealt
with, nor is the Company or any of its Subsidiaries obligated to pay any fee or
commission in connection with, any broker, finder or other similar person in
connection with the offer or sale of the Notes or any of the transactions
contemplated by this Agreement, and the Company hereby indemnifies each of the
Subscribers against, and agrees that it will hold each of the Subscribers
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
(s) The Company has not, either directly or through any agent,
offered any Notes or any other securities to, or solicited any offers to acquire
any Notes or any other securities from, or otherwise approached, negotiated or
communicated in respect of any Notes or any other securities with, any person
in such a manner as to require that the offer or sale of the Notes or any such
other securities be registered pursuant to the Securities Act or any Blue Sky
Laws.
(t) Neither this Agreement, the Notes nor any of the exhibits,
schedules, attachments, written or oral statements, documents, certificates or
other items prepared or supplied to the Subscriber by or on behalf of the
Company or any of its Subsidiaries with respect to the transactions contemplated
hereby or thereby contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading; provided, however, that with respect to any financial projections
furnished to each of the Subscribers by or on behalf of the Company or any of
its Subsidiaries, the Company represents and warrants only that such projections
were based upon assumptions reasonably believed by the Company to be reasonable
and fair as of the date the projections were prepared in the context of the
Company's history and then current and reasonably foreseeable business
conditions.
(u) The Company and each of its Subsidiaries own good and
marketable title to all of their respective properties and assets, real and
personal, tangible and intangible, of any nature whatsoever (including
Intellectual Property); free and clear of all liens (including infringement
claims with respect to Intellectual Property) except where the failure to do
so would not have a Material Adverse Effect on the Company.
(v) During the twelve-consecutive-month period prior to the date of
the execution and delivery of this Agreement, no steps have been taken to
terminate any pension plan, and no contribution failure has occurred with
respect to any pension plan sufficient to give rise to a lien under section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any pension plan which might result in the incurrence by the Company
or any member of its Controlled Groups of any material liability, fine or
penalty. Except as disclosed in Schedule 3.3(v), neither the Company nor any
member of its Controlled Groups has any contingent liability with respect to any
post-retirement benefit under a welfare plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
(w) The Company and each of its Subsidiaries has accurately
completed and filed or will file within the time prescribed by law
(including extensions of time granted by the appropriate taxing authority) all
material tax returns and reports required to be filed with the Internal Revenue
Service and any states or governmental subdivisions and all foreign countries,
and has paid all taxes, interest, penalties, assessments or deficiencies shown
to be due and payable by the Company or any of its Subsidiaries on or in respect
of such tax returns and reports. Except as set forth on Schedule 3.3(w),
neither the Company nor any of its Subsidiaries knows of (i) any other material
federal, state, county, municipal or foreign taxes (or other liabilities in
respect thereof) which are due and payable by the Company or any of its
Subsidiaries which have not been so paid, (ii) any other federal, state,
county, municipal or foreign tax returns or reports which are required to be
filed by the Company or any of its Subsidiaries which have not been so filed,
(iii) any other material unpaid assessment for, or any fact which would
constitute grounds for the assessment of, additional taxes or penalties due or
payable by the Company or any of its Subsidiaries for any fiscal period or any
basis thereof or (iv) any material tax lien, whether imposed by any federal,
state, county, municipal or foreign taxing authority, outstanding against the
assets or business of the Company or any of Subsidiaries. Except as set forth
on Schedule 3.3(w), none of the federal or state income tax returns of the
Company or any of its Subsidiaries has been audited. Proper and accurate
amounts have been withheld by the Company and its Subsidiaries from their
respective employees for all periods in compliance with the tax, social
security and any employment withholding provisions of applicable federal
and state law, and proper and accurate federa and state returns have been
filed by the Company and its Subsidiaries for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or provision therefor included on the books of the Company
and each of its Subsidiaries in accordance with and to the extent required by
GAAP. The Company has not made any election under Section 341(f) of the Code.
3.4 Covenants of the Company
For so long as the Note shall be outstanding:
(a) The Company will, and will cause each of its Subsidiaries to,
at all times preserve and keep in full force and effect its corporate or
partnership existence and all rights and franchises material to its business.
(b) The Company will, and will cause each of its Subsidiaries to,
comply in all material respects with all applicable laws, rules, regulations and
orders (including Environmental Laws), such compliance to include:
(i) the maintenance and preservation of its corporate or
partnership existence and qualification as a foreign entity; and
(ii) the payment, before the same become delinquent, of all
Taxes, assessments and governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including claims
for labor, services, materials and supplies) for sums that have become due and
payable and that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided that no such charge or claim need be paid if the same
is being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.
(c) The Company will, and will cause each of its Subsidiaries to,
maintain, preserve, protect and keep its properties (including all its
Intellectual Property and Licenses) in good repair, working order and condition,
and make necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times unless the Company determines in good faith that the continued maintenance
of any of its properties is no longer economically desirable.
(d) The Company will, and will cause each of its Subsidiaries to,
maintain or cause to be maintained with responsible insurance companies
insurance with respect to its properties and business against such casualties
and contingencies and of such types and in such amounts as is customary in the
case of similar businesses and will, upon the reasonable request of the
Subscriber, furnish to such Subscriber at reasonable intervals a certificate of
the chief financial officer of the Company setting forth the nature and extent
of all insurance maintained by the Company and its Subsidiaries in accordance
with this Section.
(e) The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, for the purpose of
effecting the conversion of the Notes to Common Stock and otherwise complying
with the terms of this Agreement, such number of its duly authorized shares of
Common Stock as shall be sufficient to effect such conversions or otherwise to
comply with the terms of this Agreement. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Notes into Common Stock, or otherwise to comply
with the terms of this Agreement, the Company will forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes. In addition to the foregoing, all Common Stock issued in connection
with any such conversion shall be reasonably satisfactory in form and substance
to a majority in interest of the holders participating in such conversion,
including as to rights, preferences, privileges, etc. The Company will obtain
any authorization, consent, approval from, or other action by, or make any
filing with any person or persons (including any applicable court or
administrative body) that may be required to effect the foregoing, including
under applicable state securities laws.
(f) At any time and from time to time upon the reasonable request
of the Subscriber, the Company will, and will cause each of its Subsidiaries to,
at its own expense, promptly execute, acknowledge and deliver such further
documents and do such other acts and things as the Subscriber may reasonably
request in order to effect fully the purposes of this Agreement, the Notes and
the other Transaction Documents and to provide for payment of the Obligations
in accordance with the terms hereof and thereof.
(g) The Company will not, and will not permit any of its
Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any officer or director of the Company or
any of the Subsidiaries unless such arrangement or contract is fair and
equitable to the Company or such Subsidiary and is an arrangement or contract
of the kind which would be entered into by a prudent person in the position of
the Company or such Subsidiary with a person which is not one of its officers
or directors. Any such arrangement or contract shall be approved by a majority
of the disinterested members of the Board of Directors of the Company.
(h) The Company will timely file all reports, registration
statements, proxy statements and other materials, together with any amendments
required to be made with respect thereto, that are required to be filed with the
SEC under the Securities Act or the Exchange Act or with the NYSE (all such
reports and statements are collectively referred to herein as the "Company
Reports"). As of their respective dates, the Company Reports, including the
financial statements contained therein, will comply in all material respects
with all of the statutes and published rules and regulations enforced or
promulgated by the regulatory authority or exchange with which they are filed,
will not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and are complete and accurate in all material respects.
(i) As promptly as practicable, the Company will apply to the NYSE
to list the shares of Common Stock into which the Notes may by converted, and
the Company will use its reasonable efforts to cause such shares to be listed
on the NYSE as promptly thereafter as practicable.
(j) The Company shall use its best efforts to take all action
required by the NYSE's rules and regulations to obtain the approval of the
Company's stockholders of the issuance and sale of the Notes to the Subscriber
hereunder. Subject to its fiduciary duties under applicable law, the Company's
Board of Directors shall recommend that the Company's stockholders approve the
issuance and sale of the Notes hereunder.
(k) Promptly following the date hereof, the Company will prepare
and file with the SEC a proxy statement to be distributed to the Company's
stockholders in connection with the issuance and sale of the Notes hereunder,
including any amendments and supplements thereto (the "Proxy Statement"). The
Company will use all reasonable efforts to have or cause the Proxy Statement to
be declared effective as promptly as practicable. The Company agrees to provide
the Subscriber and their respective counsel with any written comments the
Company or its counsel receive from the SEC with respect to the Proxy Statement
promptly after the receipt of such comments. The form and substance of the Proxy
Statement shall be determined by the Company, in its reasonable discretion. The
Company will use all reasonable efforts to cause the Proxy Statement (i) not to
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (ii) to
comply as to form in all material respects with the applicable provision of the
Exchange Act and the rules and regulations thereunder.
SECTION 4
4.1 Modification. Neither this Subscription Agreement nor any
provisions hereof shall be modified, discharged or terminated except by an
instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
4.2 Notices. Any notice, demand or other communication which any
party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a
United States mail letter box, registered or certified mail, return receipt
requested, addressed to such address as may be given herein, or (b) delivered
personally at such address.
4.3 Counterparts. This Subscription Agreement may be executed
through the use of separate signature pages or in any number of counterparts
(and by facsimile signature), and each of such counterparts shall, for all
purposes, constitute one agreement binding on all parties, notwithstanding that
all parties are not signatories to the same counterpart.
4.4 Binding Effect. Except as otherwise provided herein, this
Subscription Agreement shall be binding upon and inure to the benefit of the
parties and their heirs, executors, administrators, successors, legal
representatives and assigns. If the Subscriber is more than one person, the
obligation of the Subscriber shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his heirs, executors,
administrators and successors.
4.5 Entire Agreement. This Subscription Agreement and the
documents referenced herein contain the entire agreement of the parties hereto
and there are no representations, covenants or other agreements except as
stated or referred to herein and therein.
4.6 Assignability. This Subscription Agreement is not
transferable or assignable by the Subscriber; provided, however, that
Subscriber may assign its rights and obligations hereunder to its affiliates
and limited partners.
4.7 Applicable Law. This Subscription Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, without
giving effect to rules governing the conflicts of law.
4.8 Pronouns. The use herein of the masculine pronouns "he", "him"
or "his" or similar terms shall be deemed to include the feminine and neuter
genders as well and the use herein of the singular pronoun shall be deemed to
include the plural as well.
ALL SUBSCRIBERS MUST COMPLETE THIS PAGE
Principal Amount of
Notes
Subscribed For
___________________
Excess Amount
Manner in which Title is to be held (Please Check One):
1
.
G
Individual
7
.
G
Trust/Estate/Pension
or Profit Sharing
Plan
Date Opened:
2
.
G
Joint Tenants with
Right of
Survivorship
8
.
G
As a Custodian for
____________________
____
Under the Uniform
Gift to Minors Act
of the State of
3
.
G
Community Property
9
.
G
Married with
Separate Property
4.
G
Tenants in Common
10
.
G
Xxxxx
5
.
G
Corporation/Partners
hip/
Limited Liability
Company
1
1.
G
Tenants by the
Entirety
6.
G
XXX
IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE PAGE 9.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 10.
IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement
on the ____ day of June, 2000.
EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY
(Corporation, Partnership, Limited Liability Company, Trust, Etc.)
Name of Entity (Please Print):
State of Incorporation or Organization:
State of Principal Offices:
Federal Taxpayer Identification Number:
______________________________________
BY:
Name:
Title:
[seal]
Attest:
(If Entity is a Corporation)
Address:
COMPANY ACCEPTANCE
ACCEPTED this ______ day of June, 2000 on behalf of the Company.
JACKPOT ENTERPRISES, INC.
BY:
Name: Xxxxx X. Xxxxxxx
Title: Chairman
IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement
on the ____day of June, 2000.
EXECUTION BY NATURAL PERSONS
Exact Name in Which Title is to be Held:
Name:
(Please Print)
Name of Additional Purchaser:
(Please Print)
Residence:
Number and Street
Address of Additional Purchaser:
Number and Street
City, State and Zip Code
City, State and Zip Code
Social Security Number
Social Security Number
(Signature)
(Signature)
COMPANY ACCEPTANCE
ACCEPTED this ______ day of June, 2000 on behalf of the Company.
JACKPOT ENTERPRISES, INC.
BY:
Name: Xxxxx X. Xxxxxxx
Title: Chairman
SCHEDULES
Schedule 3.3(m)
1. An aggregate of 178,571 shares of common stock was issued to the
following individuals for an aggregate consideration of $2,000,000
in connection with the investment by Jackpot Enterprises, Inc. in
TechTrader, Inc.
Xxxxx Xxxxxxxx 151,881
Xxxx Xxxxxxxx 16,393
Xxxxxx Xxxxxxxxx 4,518
Xxxxx Xxxxxx 3,320
Xxxxxx Xxxxxx 2,459
2. Xxxx X. Xxxxx was hired as President and Chief Operating Officer and
Xxxxxx X. Xxxxx has been hired as Executive Vice President and Chief
Financial Officer.
Schedule 3.3(w)
The Federal Income Tax Returns for Jackpot Enterprises, Inc. for the fiscal
year ended June 30, 1989 was audited by the Internal Revenue Service.
