SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated as of April 30,
2002, is entered into by and between Innovative Gaming Corporation of America, a
Minnesota corporation (the "Company"), and Xxxx Xxxxx (the "Investor").
INTRODUCTION
Whereas, the Investor desires to purchase from the Company, and the
Company desires to issue to the Investor, upon the terms and conditions
contained in this Agreement, 1,100,000 shares of the Company's common stock,
$.01 par value (the "Common Stock"), in exchange for $330,000 (the "Private
Placement");
AGREEMENT
Now, Therefore, in consideration of the foregoing premises and mutual
covenants contained herein, the parties, intending to be legally bound, hereby
agree as follows:
Section 1. Issuance of Common Stock.
1.1 Issuance of Common Stock. Upon the terms and subject to the
conditions contained in this Agreement, the Company hereby agrees to
issue to the Investor 1,100,000 shares of Common Stock (the "Shares"),
at a per-share purchase price of $0.30.
1.2 The Closing. The delivery of this Agreement and the issuance
and delivery of the Shares by the Company to the Investor, and the
delivery of the Purchase Price (as defined below) to the Company (the
"Closing"), will take place at the offices of The Company, on April
30, 2002, or at such other time and place as the Company and the
Investor may agree to orally or in writing.
1.3 Closing Deliveries. At the Closing:
(a) The Investor will pay, or shall have paid, to the
Company cash in immediately available funds in the amount of
Three Hundred Thirty Thousand and No/100 US Dollars ($330,000),
such amount representing the aggregate purchase price for the
Shares to be received by the Investor (the "Purchase Price").
(b) The Investor or Agent therefor and the Company, as
applicable, shall execute, or shall have executed, this
Agreement.
(c) The Company shall issue and deliver to the Investor a
share certificate or certificates representing the Shares
acquired hereunder by such Investor, which certificate or
certificates shall be registered in such Investor's name or such
name(s) as such Investor designates.
Section 2. Representations and Warranties. The Company and the Investor
hereby represent and warrant that the following are true.
2.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor as of the date hereof that:
(a) Organization, Good Standing, and Qualification. The Company
is duly organized, validly existing, and in good standing under the
laws of the State of Minnesota and has all requisite corporate power
and authority to own and operate its assets and properties, to conduct
its business as it is currently being conducted (the "Business"), to
execute and deliver this Agreement and to issue and sell the Shares
pursuant to this Agreement. The Company possesses all governmental and
other permits, licenses, and other authorizations to own its
properties as now owned and to conduct its Business, except where the
failure to possess such governmental and other permits, licenses, and
authorizations would not have a material adverse effect on the
business, assets, financial condition, results of operation, or
properties of the Company (a "Material Adverse Effect"). The Company
is duly qualified to transact business and is in good standing in each
jurisdiction wherein the properties owned or leased to the business
transacted by the Company makes such qualification to do business as a
foreign corporation necessary, except where the failure to be so
qualified would not have a Material Adverse Effect.
(b) Authorization. All corporate action on the part of the
Company and its officers, directors, and shareholders necessary for
the authorization, execution, and delivery of this Agreement and
transactions contemplated hereby, the performance of all obligations
of the Company hereunder, and the authorization, issuance, and
delivery of the Shares being sold hereunder, have been taken or will
be taken prior to the Closing. This Agreement has been duly executed
by the Company, and will constitute the valid and binding obligations
of the Company, enforceable against the Company in accordance with
their respective terms.
(c) Valid Issuance of Common Stock.
(i) When issued, sold, and delivered in accordance with the
terms hereof and for the consideration herein stated, the Shares
will be duly and validly issued, fully paid and nonassessable,
and free of any and all liens and encumbrances, except such as
may be created or suffered by the Investor, and will have the
rights, preferences, and privileges described in the Company's
articles of incorporation.
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(ii) Subject to the accuracy of the Investor's
representations in Section 2.2 hereof and the Investor's
compliance with all applicable restrictions on transferability,
the offer, sale, and issuance of the Shares by the Company in
conformity with the terms of this Agreement constitute
transactions exempt from the registration requirements of Section
5 of the Shares Act of 1933, as amended (the "Act"), and the
qualification requirements of all applicable state Shares laws.
2.2 Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company and each officer, director, and agent of
the Company that:
(a) Receipt of Agreement. The Investor has received and reviewed this
Agreement.
(b) Restrictions on Transferability of Common Stock. The Investor is
aware that the Shares, when issued, will not have been registered under the
Act, that the offer and sale of the Shares are intended to be exempt from
registration under the Act and the rules promulgated thereunder by the
Commission, and that, because the Shares will not have been registered, the
Shares may not be sold, assigned, transferred, or otherwise disposed of
unless they are registered under the Act or an exemption from such
registration is available. The Investor is also aware that sales or
transfers of the Shares are further restricted by state securities laws and
regulations, and the provisions of this Agreement, and that the certificate
or certificates for the Shares will bear appropriate legends restricting
their transfer pursuant to all such applicable laws, regulations, and
agreements.
(c) No Registration of Common Stock. The Investor understands and is
aware that the Shares, when issued, will not have been registered under the
Act, and that the Company has made no promise or covenant, contained in
this Agreement or otherwise, to register the Shares with the Commission,
and that, as a result, the Shares will not be freely transferable until
either the Company has elected, at its sole discretion, to register the
Shares, or until an exemption from registration is available under the Act.
(d) Suitability of Investment.
(i) The Investor is acquiring the Shares for its own account, or
for the account of another "accredited investor" who is an affiliate
of the Investor and who can make all of the representations contained
herein, for investment purposes only and not with a view to the resale
or distribution thereof.
(ii) The Investor has not and will not, directly or indirectly,
offer, sell, transfer, assign, exchange, or otherwise dispose of all
or any part of the Shares except in accordance with applicable federal
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and state securities laws, regulations, and the provisions of this
Agreement.
(iii) The Investor has such knowledge and experience in
financial, business, and tax matters that the Investor is capable of
evaluating the merits and risks relating to the Investor's investment
in the Shares and making an investment decision with respect to the
Company.
(iv) To the full satisfaction of the Investor, the Investor has
been given the opportunity to obtain information and documents
relating to the Company and to ask questions of and receive answers
from representatives of the Company concerning the Company and its
investment in the Private Placement.
(v) The Investor is able at this time, and in the foreseeable
future, to bear the economic risk of a total loss of his investment in
the Private Placement.
(vi) The Investor is aware that there are risks incident to an
investment in the Private Placement. The Investor understands that
some of these risks have been set forth in the Company's most recent
Report on Form 10-K for the year ended December 31, 2000, as filed
with the Commission on April 10, 2001, and in the Company's most
recent Registration Statement on Form S-3, as filed with the
Commission on May 15, 2001 and amended on May 18 and June 29, 2001
(the "Commission Filings"). Furthermore, the Investor acknowledges
that the Company has referred and directed the Investor to the risks
contained in such Commission Filings.
(vii) The Investor is an "accredited investor" within the meaning
of Rule 501 of Regulation D under the Act.
(viii) The undersigned Investor understands that, unless he
notifies the Company in writing to the contrary at or prior to the
Closing, all of the Investor's representations and warranties
contained in this Agreement will be deemed to have been reaffirmed and
confirmed as of the Closing, taking into account all information
received by the Investor.
(ix) In making its investment decision, the Investor has not
relied on materials, representations, or other information of any kind
provided by any party other than the Company or specifically referred
to herein.
(x) The Investor acknowledges that the Company's Articles of
Incorporation provide that no person or entity may become the
beneficial owner of 5% or more of the Company's shares of capital
stock of every series and class unless such person or entity agrees to
provide personal background and financial information to gaming
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authorities, consent to a background investigation and respond to
questions from gaming authorities. Investor further acknowledges that
the Company may, pursuant to the terms of its Articles of
Incorporation repurchase shares held by any person or entity whose
status as a shareholder jeopardizes the approval, continued existence
or renewal by any gaming authority of a tribal, federal or state
license or franchise held by the Company or any of its subsidiaries.
The foregoing restrictions will be contained in a legend on each
certificate of Common Stock.
(e) Authorization. All action on the part of the Investor
necessary for the authorization, execution, and delivery of this
Agreement, and for the performance of all obligations of the Investor
hereunder and thereunder has been taken. This Agreement has been duly
executed and delivered by the Investor and will constitute valid and
binding obligations of the Investor, enforceable against the Investor
in accordance with their respective terms.
Section 3. Transfer Restrictions.
3.1 Restrictions on Transfer. The Shares have not been registered
under the Act and may not be sold, assigned, transferred, or otherwise
disposed of unless they are registered under the Act or an exemption from
such registration is available. Sales or transfers of the Shares are
further restricted by state securities laws, regulations, and the
provisions of this Agreement.
3.2 Legend. Unless sold pursuant to an effective registration
statement, each certificate representing the Shares shall bear a legend
substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE.
THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO
THEIR DISTRIBUTION AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER
THE SECURITIES ACT OF 1933 OR UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THIS CORPORATION, AN EXEMPTION FROM REGISTRATION IS
AVAILABLE UNDER THE SECURITIES LAWS.
THE ARTICLES OF INCORPORATION OF THE CORPORATION IMPOSE CERTAIN
RESTRICTIONS ON THE OWNERSHIP OF FIVE PERCENT OR MORE OF THE CAPITAL
STOCK OF THE CORPORATION AND EMPOWER THE BOARD OF DIRECTORS TO REDEEM
CAPITAL STOCK UNDER CERTAIN CIRCUMSTANCES. THE CORPORATION WILL
FURNISH ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE, A COPY OF THE
ARTICLES OF
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INCORPORATION AND A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES,
LIMITATIONS, AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES
AUTHORIZED TO BE ISSUED, SO FAR AS THEY HAVE BEEN DETERMINED, AND THE
AUTHORITY OF THE BOARD TO DETERMINE THE RELATIVE RIGHTS AND
PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.
THESE SECURITIES ARE SUBJECT TO THE MISSISSIPPI GAMING CONTROL ACT AND
THE REGULATIONS OF THE MISSISSIPPI GAMING COMMISSION.
THESE SECURITIES ARE SUBJECT TO THE NEVADA GAMING CONTROL ACT AND THE
REGULATIONS OF THE NEVADA GAMING COMMISSION.
3.3 Removal of Legend. The foregoing legend, if necessary, shall be
removed from the certificates representing any of the Shares at the request
of the holder thereof, at such time as (1) they are sold pursuant to an
effective registration statement, (2) they become eligible for resale
pursuant to Rule 144(k) under the Act or another provision of Rule 144 of
the Act pursuant to which all or a portion of the Shares could be resold in
a single transaction, or (3) an opinion of counsel reasonably satisfactory
to the Company is obtained to the effect that the proposed transfer is
exempt from the Act. The transfer agent for the Shares will issue a new
certificate or certificates representing Shares without the legend upon a
receipt of the certificate from the Investor stating that the Shares have
been registered or transferred pursuant to an effective registration
statement under the Act, upon confirmation that the Shares can be resold in
reliance on Rule 144, or upon confirmation that the Company has received an
opinion of counsel reasonably satisfactory to the Company to the effect
that the proposed transfer is exempt from the Act.
Section 4. Miscellaneous.
4.1 Survival of Warranties and Covenants. The representations and
warranties set forth in Section 2 and the covenants contained in Section 3
hereof shall survive indefinitely.
4.2 Successors and Assigns. This Agreement may not be assigned by any
Investor or the Company without the prior written consent of the other
party hereto. Nothing in this Agreement, express or implied, is intended to
confer upon any party, other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement except as expressly
provided in this Agreement.
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4.3 Amendment and Waiver. Neither this Agreement nor any
provisions hereof shall be modified, amended, discharged, or terminated
except by a written instrument signed by the party against whom any
modification, amendment, discharge, or termination is sought. Any term
or condition of this Agreement may be waived at any time by the party
entitled to the benefit thereof, but no such waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other
term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by law or otherwise afforded,
will be cumulative and not alternative.
4.4 Governing Law and Submission to Jurisdiction. This
Agreement shall be governed by and construed in accordance with the
laws of the State of Nevada applicable to contracts made and to be
performed entirely within such jurisdiction. Each of the Investor and
the Company hereby submits to the nonexclusive jurisdiction of the
United States District Court for the District of Nevada, and of any
Nevada court sitting in the City of Las Vegas, for purposes of all
legal proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby. Each of the Investor and the Company
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue or
any such proceeding brought in such a court and any claim that any such
proceeding brought in such court has been brought in an inconvenient
forum.
4.5 Section and Other Headings. The section headings and
subheadings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
4.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall be deemed to be one and the
same agreement.
4.7 Notices. Unless otherwise provided, any notice or other
communication required or permitted to be given or effected under this
Agreement shall be in writing and shall be deemed effective upon
personal or facsimile delivery to the party to be notified or three
business days after deposit with an internationally recognized courier
service, delivery fees prepaid, and addressed to the party to be
notified at the following respective addresses, or at such addresses
as may be designated by written notice; provided, however, that any
notice of change of address shall be deemed effective only upon actual
receipt:
If to the Company: Innovative Gaming Corporation of America
Attention: Xxxxx X. Xxxx, General Counsel
000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, Xxxxxx, 00000
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If to the Investor: At the address of such Investor indicated
on the signature page hereof.
4.8 Entire Agreement. This Agreement supersedes all prior
discussions and agreements among the parties hereto with respect to
the subject matter herein, and contains the sole and entire agreement
among the parties hereto with respect to the subject matter herein.
4.9 Expenses; Attorney's Fees. Both the Company and the Investor
shall bear their own fees and expenses incurred by them or on their
behalf in connection with this Agreement and any transactions
contemplated hereby.
4.10 Further Assurances. Each party hereto shall execute and
deliver such additional documents as may reasonably be necessary or
desirable to consummate the transactions contemplated by this
Agreement.
4.11 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law; but, if any provision of this Agreement
shall nonetheless be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(Signature Page Follows)
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
30th day of April, 2002.
Investor
By: / s /
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Name: Xxxxxx Xxxxx
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Title: ----------------------------
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Number and Street
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City, State, and Zip Code
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Investor's SSN or Tax ID Number
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Signature of Co-Owner, if applicable
If Joint Ownership, please check one (n.b., both parties must sign above):
| | Joint Tenants with Right of Survivorship
| | Community Property
| | Tenants in Common
If Fiduciary or Corporation, please check one:
| | Corporation
| | Trust
| | Estate
| | Power of Attorney
ACCEPTED BY:
INNOVATIVE GAMING CORPORATION OF AMERICA
a Minnesota corporation
Dated: April 30, 2002 By: / s /
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Name: Laus X. Xxxx
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Title: President & CFO
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