SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "Agreement") is made and
entered into as of the 28th day of May 1999, between
Casinovations Incorporated, a Nevada corporation (the "Company"),
and Xxxxxxx Xxxxx, an individual ("Investor"), and is delivered
and executed in connection with the Company's offer to sell
shares of the Company's common stock, par value $.001 ("Common
Stock").
1. GENERAL
This Agreement sets forth the terms and conditions under
which Investor will purchase the Shares of the Company, which has
been organized to research and develop, manufacture and market
gaming and gaming related products in return for partial
satisfaction of a certain promissory note in the original
principal amount of $1,235,000 dated December 31, 1998 (the
"Note"), by and between the Company and Investor, attached hereto
as EXHIBIT A, and incorporated herein by this reference.
Investor is a member of the Board of Directors ("Board") of the
Company and possesses significant information about the Company.
2. SUBSCRIPTION OFFER
(a) Investor, by signing this Agreement, hereby tenders
this subscription and offers to purchase 384,615 shares of Common
Stock (the "Shares") at the price of Two Dollars and Sixty Cents
($2.60) per share for a total subscription amount of Nine Hundred
Ninety Nine Thousand Nine Hundred Ninety Nine Dollars
($999,999.00) (the "Subscription Amount").
(b) The Company shall have the right, at its sole and
absolute discretion, to reject this subscription offer, or to
accept such subscription offer. If the Company accepts
Investor's subscription offer, the Company shall execute this
Agreement and return a copy of the same to Investor. If the
Company rejects Investor's subscription offer, the Company shall
return to Investor this Agreement, together with any payment made
by Investor to the Company, without interest or deduction.
3. SUBSCRIPTION AMOUNT AND PAYMENT
Investor hereby subscribes for the number of Shares as
stated above. In return for the Shares, the amount presently
owed by the Company to Investor by virtue of that certain Note
attached hereto as EXHIBIT A, shall be reduced in an amount equal
to the Subscription Amount, and Investor accepts the Shares as
payment in said amount of the Note.
4. RECEIPT OF DOCUMENTS
Investor hereby acknowledges receipt of a copy of this
Agreement.
5. USE OF PROCEEDS; NO REFUNDS
The Subscription Amount shall be used to reduce the amount
owing to Investor by the Company by virtue of the Note and
acceptance of the Shares by Investor shall represent payment of
the same. Upon execution and delivery of this Agreement, the
Subscription Amount shall not, under any circumstances, be
refunded to Investor.
6. REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company as follows:
(a) Investor, either alone or through Investor's purchaser
representative (as that term is defined under Rule 501(h) of
Regulation D under the Securities Act of 1933, as amended (the
"Securities Act") ("Investor's Representative," herein)), if any,
has had an opportunity to ask questions of and receive answers
from duly designated representatives of the Company concerning
the terms and conditions of this Agreement and has been afforded
an opportunity to examine such documents and other information
which Investor or Investor's Representative, if any, has
requested for the purpose of answering any question Investor or
Investor's Representative, if any, may have concerning the
business and affairs of the Company. Investor is a member of the
Board of the Company and possesses significant information about
the Company and has access to the books, records and officers of
the Company.
(b) Investor's principal residence is located in the State
of Oregon. Investor has received and reviewed this Agreement and
the Exhibits attached hereto and acknowledges the Company made
available to Investor at a reasonable time prior to the execution
of this Agreement the opportunity to ask questions and receive
answers concerning the business and affairs of the Company and
the terms and conditions of the sale of the Shares as
contemplated by this Agreement and to obtain any additional
information (which the Company possesses or can acquire without
unreasonable effort or expense) as may be necessary to verify the
accuracy of information furnished to Investor. Investor (i) is
able to bear the loss of its entire investment in the Shares
without any material adverse effect on his economic stability,
and (ii) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and
risks of the investment to be made by him pursuant to this
Agreement.
(c) Investor and Investor's Representative, if any,
understand that the Shares under this Agreement are being offered
and sold only to "accredited investors" (as that term is defined
under Rule 501(a) of Regulation D), and INVESTOR REPRESENTS THAT
INVESTOR IS AN ACCREDITED INVESTOR. Investor understands the
Company is relying on Investor with respect to the accuracy of
this representation.
(d) Investor and Investor's representative, if any,
understand that this Agreement may not comply with the
information requirements of Regulation D for offers and sales to
non-accredited investors (see Regulation D, Rule 502(b)), and,
consequently, Investor understands the significance of its
representation to the Company that it is an accredited investor.
Investor and Investor's representative, if any, acknowledge that
they were encouraged by the Company to request all additional
information which might be material or important in order for
Investor to make an informed investment decision with respect to
the Company.
(e) The Shares being acquired by Investor are being
purchased for investment for such Investor's own account and not
with the view to, or for resale in connection with, any
distribution or public offering thereof. Investor understands
that the Shares have not been registered under the Securities Act
or any state securities laws by reason of their contemplated
issuance in transactions exempt from the registration
requirements of the Securities and applicable state securities
laws, and that the reliance of the Company and others upon these
exemptions is predicated in part upon the representation by
Investor. Investor understands that the Shares may not be
transferred or resold without (i) registration under the
Securities Act and any applicable state securities laws, or (ii)
an exemption from the requirements of the Securities Act and
applicable state securities laws.
(f) Investor has taken the time to carefully read this
Agreement and any other information furnished to Investor by the
Company in connection with this Agreement.
(g) Investor was not solicited to purchase the Shares by
any means of general solicitation, including but not limited to
the following: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio; (ii) any meeting
where attendees were invited by any general solicitation or
general advertising.
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(h) Investor and Investor's Representative, if any, are
aware that the Shares are and will be, when issued, "restricted
securities" as that term is defined in Rule 144 (the "Rule") of
the rules and regulations promulgated under the Act. Investor
and Investor's Representative, if any, are fully aware of the
applicable limitations on the resale of the Shares. The Rule
only permits sales of "restricted securities" held for not less
than one year upon compliance with the requirements of such Rule.
If the Rule is available to Investor-and representatives of the
Company hereby advise Investor that such availability is HIGHLY
UNLIKELY-Investor may make only routine sales of the Shares in
limited amounts in accordance with the terms and conditions of
the Rule. Investor is fully aware that in any event, there is
not likely to be any market for the Shares and that finding a
purchaser for the Shares could be extremely difficult.
(i) Investor and Investor's Representative, if any,
understand that any and all certificates representing the Shares
shall bear a legend substantially as follows, which legend
Investor has read and understands:
The Shares represented by this Certificate have not
been registered under the Securities Act of 1933
("Act") or the securities laws of any state and are
"restricted securities" as that term is defined in Rule
144 under the Act. Such Shares may not be offered for
sale, sold or otherwise transferred except pursuant to
an effective registration statement under the Act and
the applicable state securities laws or pursuant to an
exemption from registration thereunder, the
availability of which is to be established to the
satisfaction of counsel to the issuer.
(j) Investor acknowledges that in making its investment
decision Investor has relied upon its examination of the Company
and its officers, directors and employees regarding the merits
and risks involved. Investor has consulted its own attorney,
business or tax advisor as to legal, business or tax advice.
(k) Investor represents and warrants that Investor can bear
the economic risk of loss of Investor's entire investment in the
Company. Investor understands that an investment in the Company
involves substantial risks, including, without limitation, the
following:
(i) NEED FOR ADDITIONAL FINANCING. The Company, at
this time, has limited capital resources. To continue
operations, the Company may require additional financing for
working capital and general business purposes. No assurance
can be given that the Company will obtain any additional
outside financing on terms that are favorable to the Company
or in amounts necessary to fund its cash requirements.
(ii) DILUTION. If the Company obtains additional funds
through private or public equity or debt financings,
Investor may experience substantial dilution as a
consequence of such future financings, including, without
limitation, a reduction in his respective percentage
ownership in the Company.
(iii) COMPETITION. The gaming and gaming related
products industry is characterized by intense competition.
Many of the Company's competitors have far greater
experience and financial resources than the Company. No
assurance can be given that the Company will be able to
compete effectively against its competitors.
(iv) DEPENDENCE ON KEY PERSONNEL. The Company's
success depends to a significant extent on the performance
of certain key personnel. The loss of such key personnel
could materially and adversely affect the Company. The
Company has not executed employment agreements with all such
key personnel.
(v) LIMITATIONS ON TRANSFERABILITY. Transferability
of the Shares sold pursuant to this Agreement will be
restricted by state and federal securities laws and the
rules and regulations
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promulgated thereunder. Investor will be required to bear
the economic risk of his investment in the Company for an
indefinite period of time.
(vi) ABSENCE OF MARKET FOR THE SHARES. The Shares are
being offered exclusively to accredited investors for
investment purposes only. There will be no public market
for the Shares, and the Company does not intend for the
Shares sold pursuant to this Agreement to be publicly
traded. Although the Company intends to cause the common
stock of the Company to begin trading, there is no assurance
that this will occur. The Company does not presently intend
to list the Shares on any securities exchange or to seek
approval for quotation thereof through any automated
quotation system. Accordingly, the Shares are not a liquid
investment. The Shares are only suitable for persons who
have substantial financial resources, have no need for
liquidity in their investment in the Company and who are
prepared to lose their investment in the Company in its
entirety.
(vii) TAX RISKS. An investment in the Shares may
involve material and substantial tax consequences to
Investor. Investor is urged to consult with tax counsel
and/or a tax accountant or Investor's own choice concerning
the tax consequences particular to Investor which may arise
from subscribing to, holding and/or disposing of the Shares.
(viii) LIQUIDITY CONDITION. As a Director of the
Company, Investor is fully aware of the Company's current
liquidity condition and is aware that the Company may seek
to increase the number of shares of stock currently being
publicly offered.
7. INDEMNIFICATION BY INVESTOR
Investor agrees that it shall indemnify and hold harmless
the Company and its officers, directors, employees, agents and
professional advisors from and against any and all loss, damage,
liability, or expense, including costs and reasonable attorneys'
fees, that the foregoing, or any of them, may incur by reason of,
or in connection with, any misrepresentation, inaccurate
statement or material omission made by Investor herein, any
breach of any of Investor's warranties, or any failure on
Investor's part to fulfill any of Investor's covenants,
agreements or obligations set forth herein.
8. AUTHORIZATION
Investor hereby authorizes the Company and its officers,
employees and agents to investigate Investor's personal and
business background including, without limitation, communication
with any employer, former employer, business associate,
government agency, bank or other credit reference. Investor
hereby authorizes any person, organization or entity that may
have any knowledge or information concerning Investor's personal
or business background to provide such information to the Company
as the Company may request.
9. NO BROKERS OR FINDERS
No person, firm or corporation has or will have, as a result
of any act or omission by such Investor, any right, interest or
valid claim against Investor or the Company for any commission,
fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions
contemplated by this Agreement.
10. MISCELLANEOUS
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Nevada, disregarding
any principles of conflicts of law that would otherwise provide
for the application of the substantive law of another
jurisdiction. The Company and Purchaser agree that any legal
suit, action or
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proceeding arising out of or relating to this Agreement shall be
instituted exclusively in Nevada State District Court or in the
United State District Court for the District of Nevada, waive any
objection to the venue of any such suit, action or proceeding and
the right to assert that such forum is not a convenient forum,
and consent to the jurisdiction of the Nevada State District
Court or the United State District Court for the District of
Nevada in any such suit, action or proceeding.
(b) This Agreement contains the entire agreement between
the Company and Investor with regard to the subject matter hereof
and may not be modified or waived except in a writing signed by
both parties.
(c) The headings of this Agreement are for convenience and
reference only, and shall not limit or otherwise affect the
interpretation of any term or provision hereof.
(d) This Agreement and the rights, powers, and duties set
forth herein shall, except as otherwise expressly provided
herein, be binding upon and inure to the benefit of, the heirs,
executors, administrators, legal representatives, successors, and
assigns of the parties hereto.
(e) Investor may not assign any of Investor's rights or
interests in and under this Agreement without the prior written
consent of the Company, and any attempted assignment without such
consent shall be null and void and without any force or effect
whatsoever.
(f) If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any
other relief to which it may be entitled.
(g) This Agreement shall be construed in accordance with
its intent and without regard to any presumption or any other
rule requiring construction against the party causing the same to
be drafted.
(h) If any provision of this Agreement, or any portion of
any provision, shall be deemed invalid or unenforceable for any
reason whatsoever, such invalidity or unenforceability shall not
affect the enforceability and validity of the remaining
provisions hereof.
In witness whereof, the undersigned has executed this
Agreement as of the date first ascribed above.
"INVESTOR"
/s/ Xxxxxxx Xxxxx
-----------------------------------
XXXXXXX XXXXX
Address: 0000 X.X. Xxxxx Xxxx Xxxx
Xxxx, Xxxxxx 00000
(000) 000-0000
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ACCEPTANCE OF SUBSCRIPTION AGREEMENT
On this _____ day of May 1999, Casinovations Incorporated, a
Nevada corporation (the "Company"), hereby accepts subscription
offer of Xxxxxxx Xxxxx, an individual, to purchase 384,615
shares, par value $.001, of the Company's common stock for a
total subscription amount of $999,999.00.
CASINOVATIONS INCOROPRATED
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Xxxxxx X. Xxxx
Its: President and Chief Executive
Officer
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