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EXHIBIT 10.2
INNOVATIVE GAMING CORPORATION OF AMERICA
0000 Xxxxxxxxx Xxxxxx
Xxxx, Xxxxxx 00000
SUBSCRIPTION AGREEMENT
Including Investment Representations
Series C Convertible Preferred Stock
Ladies and Gentlemen:
The Shaar Fund, Ltd. ("Buyer") desires to purchase upon the terms and conditions
set forth below from Innovative Gaming Corporation of America, a Minnesota
corporation (the "Company"), Series C Convertible Preferred Stock of the Company
(the "Preferred Shares") convertible into shares of Common Stock of the Company
(the "Common Shares," and collectively with the Preferred Shares, the "Shares")
pursuant to the terms of that certain Certificate of Designation of Series C
Convertible Preferred Stock (the "Certificate of Designation"). This Agreement,
the Certificate of Designation and the Registration Rights Agreement by and
between Buyer and the Company dated the date hereof (the "Registration Rights
Agreement") shall be collectively referred to herein as the "Transaction
Documents").
1. AGENT. The name of Buyer's agent or sub-agent for this offering is
.
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(INSERT NAME OF AGENT/SUB-AGENT, IF ANY)
2. SUBSCRIPTION.
a. Buyer hereby subscribes to purchase 1,400 Preferred Shares and
agrees to pay to the Company the purchase price of: $1,400,000.
b. Buyer shall pay the purchase price by delivering at the Closing
same day funds in United States Dollars to the Company, to be
delivered to the order of the Company upon delivery of the
Preferred Shares.
c. Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("Regulation D") as promulgated by
the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act").
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3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. In connection
with the sale of the Preferred Shares to it, Buyer hereby acknowledges,
represents, warrants and covenants as follows:
a. In purchasing the Preferred Shares, Buyer has not
relied on any information or representation other than
that which is publicly disclosed or that which is
contained in this Agreement, the Registration Rights
Agreement or the Certificate of Designation relating to
the Preferred Shares.
b. Buyer has been given access to full and complete
information regarding the Company (including the
opportunity to meet with Company officers), including
the SEC Documents (as defined herein) and has utilized
such access to its satisfaction.
c. Buyer is experienced and knowledgeable in financial and
business matters, and is capable of evaluating the
merits and risks of investing in the Preferred Shares.
d. Buyer believes the investment is suitable for it based
on its investment objectives and financial needs. Buyer
can bear the economic risk of an investment in the
Preferred Shares for an indefinite period of time and
can afford a complete loss of such investment.
e. Buyer understands that there will be no market for the
Preferred Shares, that there are significant
restrictions on the transferability of the Preferred
Shares, and that for these and other reasons, Buyer may
not be able to liquidate an investment in the Preferred
Shares for an indefinite period.
f. Buyer 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
authorities, consent to a background investigation, and
respond to questions from gaming authorities. Buyer
further acknowledges that the Company may, pursuant to
the terms of its Articles of Incorporation and Section
6(g) of the Certificate of Designation, 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.
g. Buyer has no existing short position with respect to
the Common Stock of the Company and agrees not to
enter into any short sales or other hedging
transactions with respect to the Common Stock of the
Company, or cause others to do so, at any time after
the execution of this Agreement by it and
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prior to the date of effectiveness of the Registration
Statement relating to the Common Shares with the
Securities and Exchange Commission ("SEC
Effectiveness"). After SEC Effectiveness, so long as
Preferred Shares remain outstanding, Buyer agrees not
to enter into any short sales or hedging transactions
in Common Stock that would exceed the number of
Preferred Shares that are available for conversion
pursuant to the Certificate of Designation relating to
the Preferred Shares. Buyer further agrees that, at all
times after the execution of this Agreement by it and
prior to ten days after the closing of the purchase of
the Preferred Shares, it will keep its purchase of the
Preferred Shares confidential, except as required by
law and except as necessary in the ordinary course of
its business.
h. Buyer is not subscribing for the Preferred Shares as a
result of or pursuant to any advertisement, article,
notice, or other communication published in any
newspaper, magazine, or similar media or broadcast over
television or radio.
i. Buyer acknowledges that in no event shall Buyer be
entitled to convert any portion of the principal of or
interest on the Preferred Shares in excess of that
amount upon conversion of which the sum of 1) the
number of Common Shares beneficially owned by Buyer and
its affiliates (other than shares of Common Shares
which may be deemed beneficially owned through
ownership of the unconverted portion of the principal
amount of, and interest on, the Preferred Shares); and
2) the number of Common Shares issuable upon conversion
of the Preferred Shares, would result in beneficial
ownership by Buyer and its affiliates of more than 4.9%
of the outstanding shares of the Company's issued and
outstanding Common Stock. Buyer acknowledges that any
beneficial ownership in excess of 4.9% may require
filing certain documents with the Securities and
Exchange Commission and certain state gaming regulatory
agencies and that beneficial ownership in excess of 10%
could trigger certain Minnesota anti-takeover statutes.
j. Buyer acknowledges that the Company or any transfer
agent of the Company shall register the transfer or
exchange of any of the Preferred Shares only upon
receipt of the certificate(s) evidencing such Preferred
Shares with the transfer notice set forth thereon
appropriately completed, upon the receipt of an opinion
of counsel acceptable to the Company, that the transfer
is exempt from registration under the Securities Act of
1933 and upon receipt in writing from the transferee or
the recipient of such Preferred Shares in such transfer
or exchange (as the case may be) of a certificate
setting forth the representations, warrants and
covenants in Paragraphs 3 and 4 hereof transferee or
any affiliated person of such transferee, provided,
however, that the Buyer may not transfer or exchange
any of the Preferred Shares to any proposed transferee
who the Company reasonably believes is: (1) a convicted
felon; (2) convicted of gaming-related offenses or (3)
publicly known to be associated with organized crime.
With respect to such transferee, the
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Company has ten (10) business days following receipt
of written notice of the identity of such transferee
to conduct any investigation and make any objection
to such transfer.
k. Buyer acknowledges that it is not acquiring the
Shares for the purpose of exerting any control over
the Company.
l. The Company acknowledges and agrees that the Buyer
makes no representations or warranties with respect
to the transactions contemplated hereby other than
those specifically set forth in this Section 3, and
in Sections 4, 5 and 7 of this Agreement.
4. INVESTMENT INTENT; RESTRICTIONS ON TRANSFER OF PREFERRED
SHARES.
a. Buyer represents and warrants that it is purchasing
the Preferred Shares for its own account, for
investment and without the current intention of
reselling or redistributing the Preferred Shares
except pursuant to the terms of this Agreement and
pursuant to an effective registration statement under
the 1933 Act and State Laws or pursuant to an
exemption from such registration. Buyer has made no
arrangement or agreement with others regarding any of
the Preferred Shares.
b. Buyer understands that Preferred Shares have not been
registered as of the date of the closing of this
offering under the Securities Act of 1933, as amended
(the "1933 Act"), or applicable state securities laws
(the "State Laws"), and are being offered and sold
pursuant to exemptions from registration under the
1933 Act and the State Laws. Buyer understands that
the Company's reliance on such exemptions is
predicated in part on its representations and
warranties contained herein.
c. Buyer understands that neither the Preferred Shares
nor the underlying Common Shares may be sold by it
except pursuant to an effective registration
statement under the 1933 Act and State Laws, or an
exemption from such registration.
d. Buyer understands that any transfer of the Preferred
Shares by it will be further restricted by a legend
placed on the certificate(s) representing the
Preferred Shares containing substantially the
following language:
"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
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THE ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT
FOR THE SHARES UNDER THE SECURITIES ACT OF 1933 OR
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE
UNDER THE SECURITIES LAWS."
e. Certificates for Common Shares issued on conversion of
Preferred Shares shall not contain any legend, other
than the legends indicated on Annex A, if the
conversion of Preferred Shares occurs at any time while
a Registration Statement relating to the Common Stock
issuable upon conversion of the Preferred Shares (the
"Common Shares Registration Statement") is effective
under the Securities Act or, in the event there is not
an effective Common Shares Registration Statement at
such time, if in the opinion of counsel to the Company
such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff
of the Commission). The Company agrees that it will
provide the Buyer, upon request, with a certificate or
certificates representing the Common Shares issuable
upon exercise of the Preferred Shares free from such
legend, other than the legends indicated on Annex A, at
such time as such legend is no longer required
hereunder. The Company may not make any notation on its
records or give instructions to any transfer agent of
the Company which enlarge the restrictions of transfer
set forth in this Section 4(e).
5. RESIDENCE. Buyer represents and warrants as follows.
a. Buyer is a corporation organized and existing under the
laws of British Virgin Islands.
b. The Preferred Shares are being purchased by Buyer in
its name solely for its own beneficial interest and not
as nominee for, on behalf of, for the beneficial
interest of, or with the intention to transfer to, any
other person, trust, or organization, except as
specifically set forth in this Subscription Agreement.
6. CONVERSION. The Company shall use its best efforts to issue
and deliver to Buyer a certificate or certificates for the number of Common
Shares to which Buyer shall be entitled within three (3) business days after
Buyer has fulfilled all conditions required for conversion as set forth in this
Agreement and the Certificate of Designation of Series C Preferred Stock (the
"Deadline"). The Company understands that a delay in the issuance of the
registered Common Shares beyond the Deadline could result in economic loss to
Buyer. The Company agrees to pay liquidated damages to Buyer for late issuance
of registered Common Shares to Buyer upon conversion in the amount of one
percent (1%) of the requested conversion amount, per day, beginning on the fifth
(5th) business day from the date of receipt by the Company of a duly executed
notice of conversion accompanied by the certificate representing the Preferred
Shares, all in accordance with this Agreement, the Preferred Shares and the
requirements of the Company's transfer agent. Said liquidated damages
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shall accrue each day through the date the registered Common Shares are issued
to Buyer upon conversion, and shall be paid by wire transfer to an account
designated by Buyer upon the earlier to occur of (i) issuance of the Preferred
Shares to Buyer, or (ii) each monthly anniversary of the receipt by the Company
of such Buyer's notice of conversion. Nothing herein shall waive the Company's
obligations to deliver Common Shares upon conversion of the Preferred Shares or
Buyer's other rights and remedies in the event of a breach of this Section 6.
7. INVESTOR QUALIFICATIONS. The undersigned subscriber represents and
warrants that the undersigned was not formed for the specific purpose of
acquiring shares of the Company and is a corporation with total assets in excess
of $5,000,000.
8. REPRESENTATIONS, WARRANTS AND COVENANTS OF THE COMPANY. In
connection with the sale of the Preferred Shares by it, the Company hereby
acknowledges, represents, warrants and covenants as follows:
8.1 Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing
under the laws of the State of Minnesota, and has the
requisite corporate power and authority to carry on
its business in all material respects as it is now
being conducted and to enter into this Agreement and
the Registration Rights Agreement by and between the
Company and Buyer dated as of the date hereof (the
"Registration Rights Agreement") and to issue
Preferred Shares and Common Stock pursuant to the
Certificate of Designation. Each of the Company's
subsidiaries is duly organized, validly existing and
in good standing under the laws of its respective
incorporation, with all requisite corporate power and
authority to carry out its business in all material
respects as it is now being conducted.
8.2 Qualification. The Company and each of its
subsidiaries is duly qualified or licensed as a
foreign corporation in good standing in each
jurisdiction wherein the nature of its activities
makes such qualification or licensing necessary and
failure to be so qualified or licensed would have a
material adverse impact on its business.
8.3 Corporate Acts and Proceedings. This Agreement and
the Registration Rights Agreement and the
consummation of the transactions contemplated by the
Certificate of Designation have been duly authorized
by all necessary corporate action on behalf of the
Company, and have been duly executed and delivered by
authorized officers of the Company. All corporate
action necessary for the authorization, creation,
issuance and delivery of the Preferred Shares and the
Common Shares, including reservation of such Common
Shares has been taken on the part of the Company.
This Agreement and the Registration Rights Agreement
are valid and binding agreements of the Company
enforceable in accordance with their respective
terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the
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enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of
the remedy of specific enforcement and other
equitable remedies.
8.4 Brokers or Finders. No person, firm or corporation
has or will have any right, interest or valid claim
against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar
capacity, in connection with the transactions
contemplated by this Agreement.
8.5 Adverse Government or Legal Actions. There are no
legal or governmental actions, suits or
proceedings/pending, or to the best of the Company's
knowledge, threatened to which the Company is or may
be a party to which would adversely affect the
Company or the transactions
8.6 Capitalization. Except for stock options issued to
employees of the Company pursuant to the Company's
1992 Stock Option and Incentive Compensation Plan,
the Company's 1997 Director's Stock Option Plan, and
the Company's 1998 Non-Executive Stock Option Plan
and, except for issuances of convertible securities
indicated on Annex A, there have been no issuances of
capital stock, warrants, outstanding subscriptions,
contracts, calls, commitments or any purchase rights
of any nature or character (including preemptive
rights) relating to the Company's capital stock since
December 31, 1998. The authorized capital stock of
the Company consists of 100,000 shares of Common
Stock, of which 6,690,688 shares are outstanding on
the date hereof and 4,000 shares of Series B
Preferred Stock of which 2,375 are outstanding on the
date hereof. All of the issued and outstanding shares
of Common Stock and Preferred Stock have been duly
authorized and validly issued and are fully paid and
non-assessable. As of the date hereof, the Company
has outstanding stock options and warrants to
purchase shares of Common Stock. There are no
preemptive, subscription, "call" or other similar
rights to acquire the Common Stock that have been
issued or granted to any person.
8.7 Issuance of Shares. The Preferred Shares and the
Common Shares have been duly authorized and the
Preferred Shares, when issued, delivered and paid for
pursuant to the terms hereof and the Common Shares,
when issued pursuant to the terms of the Certificate
of Designation relating to the Preferred Shares, will
be duly authorized, validly issued, fully paid and
nonassessable and free from all taxes, liens and
other encumbrances and will not be subject to
preemptive rights. The Company has duly and validly
authorized and reserved for issuance 1,331,500 shares
of Common Stock for the conversion of 1,400 Preferred
Shares. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of
the issuance of the Common Stock and upon conversion
of the Preferred Stock, subject to enforceability in
bankruptcy. The Company further acknowledges that its
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obligation to issue Common Stock upon conversion of
the Preferred Shares, the Certificate of Designations
is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the
ownership interests of other stockholders of the
Company and, subject to enforceability in bankruptcy,
notwithstanding the commencement of any case under 11
U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). In
the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may
have under 11 U.S.C. ss. 362 in respect of the
conversion of the Preferred Stock. The Company
agrees, without cost or expense to the Buyer, to take
or consent to any and all action necessary to
effectuate relief under 11 U.S.C. ss. 362.
8.8 No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the
consummation by the Company of the transactions
contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of its
certificate of incorporation, bylaws or other charter
documents (each as amended through the date hereof)
or (ii) subject to obtaining the consents referred to
in Section 8.9, conflict with, or constitute a
default (or an event which 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 agreement,
indenture or instrument (evidencing a Company debt or
otherwise) to which the Company is a party or by
which any property or asset of the Company or any of
its subsidiaries is bound or affected, or (iii)
result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other
restriction of any court or governmental authority to
which the Company or any of its subsidiaries is
subject (including federal and state securities laws
and regulations), or by which any property or asset
of the Company or any of its subsidiaries is bound or
affected, except in the case of each of clauses (ii)
and (iii), as could not, individually or in the
aggregate, have or result in a material adverse
effect on the financial condition of the Company and
its subsidiaries taken as a whole ("Material Adverse
Effect"). The business of the Company and its
subsidiaries is not being conducted in violation of
any law, ordinance or regulation of any governmental
authority, except for violations which, individually
or in the aggregate, do not have a Material Adverse
Effect.
8.9 Consents and Approvals. Except for consents and
approvals required by the Nevada Gaming Commission
and the Mississippi Gaming Commission, neither the
Company nor any of its subsidiaries is required to
obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any
court or other federal, state, local or other
governmental authority or other Person in connection
with the execution, delivery and performance by the
Company of the Transaction Documents other than (i)
the filing of a Registration Statement with the
Securities and Exchange Commission (the
"Commission"), which shall be filed in the time
period set forth in the
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Registration Rights Agreement and (ii) other than, in
all other cases, where the failure to obtain such
consent, waiver, authorization or order, or to give or
make such notice or filing, could not have or result
in, individually or in the aggregate, a Material
Adverse Effect (together with the consents, waivers,
authorizations, orders, notices and filings referred to
in herein, the "Required Approvals"). The consummation
of the transactions contemplated hereby does not and
will not require the approval of the Company's
shareholders under the rules of the NASDAQ National
Market.
8.10 Litigation; Proceedings. Except as specifically
disclosed in the Disclosure Materials (as hereinafter
defined), there is no action, suit, notice of
violation, proceeding or investigation pending or, to
the best knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries or
any of their respective properties before or by any
court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or
foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the
Transaction Documents or the Shares or (ii) could,
individually or in the aggregate, have or result in a
Material Adverse Effect.
8.11 No Default or Violation. None of the Company or any of
its subsidiaries (i) is not in default under or in
violation of (and no event has occurred which has not
been waived which, with notice or lapse of time or
both, would result in a default by the Company under),
nor has the Company received notice of a claim that it
is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by
which it or any of its properties is bound except as
could not individually or in the aggregate, have or
result in, individually or in the aggregate, Material
Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, or (iii) is
in violation of any statute, rule or regulation of any
governmental authority, except as could not
individually or in the aggregate, have or result in,
individually or in the aggregate, a Material Adverse
Effect.
8.12 Private Offering. Assuming the accuracy of the
representations and warranties of the Buyer set forth
herein, the issuance and sale of the Preferred Shares
to the Buyer as contemplated hereby are exempt from the
registration requirements of the Securities Act. Except
as provided in the Transaction Documents, neither the
Company nor any person acting on its behalf has taken
or will take any action which might subject the
offering, issuance or sale of the Preferred Shares to
the registration requirements of the Securities Act.
8.13 SEC Documents; Financial Statements; No Adverse Change.
The Company has filed all reports required to be filed
by it under the Securities Exchange
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Act of 1934, as amended (the "Exchange Act"),
including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such
shorter period as the Company was required by law to
file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents"
and, together with the Schedules to this Agreement, the
"Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and
has filed any such SEC Documents prior to the
expiration of any such extension. As of their
respective dates, the SEC Documents complied in all
material respects with the requirements of the
Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder,
and none of the SEC Documents,
when filed, contained any untrue statement of a
material fact or omitted to state a 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. All material agreements to which the
Company is a party or to which the property or assets
of the Company are subject have been filed as exhibits
to the SEC Documents as required. The financial
statements of the Company included in the SEC Documents
comply in all material respects with applicable
accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been
prepared in accordance with generally accepted
accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise
specified in such financial statements or the notes
thereto, and fairly present in all material respects
the financial position of the Company as of and for the
dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case
of unaudited statements, to normal year end audit
adjustments. Since the date of the financial statements
included in the last filed Annual Report on Form 10-K
for the year ended December 31, 1998 for the Company,
there has been no event, occurrence or development that
has had a Material Adverse Effect which has not been
specifically disclosed to the Buyer by the Company. The
Company last filed audited financial statements with
the Commission in connection with its 1998 Form 10-K,
and has not received any comments from the Commission
in respect thereof.
8.14 Form S-3 Eligibility. The Company is, and at the
Closing Date will be, eligible to register securities
for resale with the Commission under Form S-3
promulgated under the Securities Act.
8.15 Investment Company. The Company is not, and is not an
affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as
amended.
8.16 Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with
the offering and sale of the Preferred Shares
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other than, or that are materially different from,
the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to
buy or sell the Preferred Shares by means of any form
of general solicitation or advertising.
8.17 Listing and Maintenance Requirements Compliance.
Except as indicated on Schedule 8.17, since the date
on which the Company's Common Stock was initially
listed on the NASDAQ National Market, the Company has
not received written notice from the NASDAQ to the
effect that the Company is not in compliance with the
listing, maintenance or other requirements of such
market. The Company has no reason to believe that it
does not now or will not in the future meet any such
requirements.
8.18 Disclosure. All information relating to or concerning
the Company set forth in the Transaction Documents or
the Disclosure Materials, or provided to the Buyer or
its respective representatives and counsel in
connection with the transactions contemplated hereby
is true and correct in all material respects and does
not fail to state any material fact necessary in
order to make the statements herein or therein, in
light of the circumstances under which they were
made, not misleading. The Company confirms that it
has not provided to the Buyer or any of its
representatives, agents or counsel any information
that constitutes or might constitute material
nonpublic information. The Company understands and
confirms that the Buyer shall be relying on the
foregoing representation in effecting transactions in
securities of the Company.
9. CONDITIONS OF CLOSING. Buyer shall have no obligation to consummate
the transactions contemplated hereby until the following conditions have been
met:
a. The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of
Minnesota.
b. The Buyer shall have received the opinion of Xxxxxx
Xxxxxxx Xxxxxx & Brand LLP, counsel to the Company,
with respect to the issuance and sale of the
Preferred Shares and the Common Shares, in form
attached hereto as Annex B.
c. No events or circumstances shall have occurred that
would have a Material Adverse Effect.
d. The Company shall have delivered reimbursement of
Buyer's out-of-pocket costs and expenses incurred in
connection with the transactions contemplated by this
Agreement (including the fees and disbursements of
Buyer's legal counsel) in the aggregate amount of
$35,000.
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10. MISCELLANEOUS.
a. Buyer agrees to furnish any additional information that
the Company or its counsel reasonably deem necessary in
order to verify the responses set forth above.
b. Buyer understands the meaning and legal consequences of
the agreements, representations, warranties and
covenants contained herein.
c. As long as the Buyer owns any Preferred Shares or
Common Shares, the Company covenants to use its best
efforts to timely file (or obtain extensions in respect
thereof and file within the applicable grace period)
all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. If at any time prior to the date on
which the Purchasers may resell all of the Common
Shares without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act (as
determined by counsel to the Company pursuant to a
written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the
benefit of and enforceable by the Buyer) the Company is
not required to file reports pursuant to such sections,
it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c)
promulgated under the Securities Act annual and
quarterly financial statements, together with a
discussion and analysis of such financial statements in
form and substance substantially similar to those that
would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act
in the time period that such filings would have been
required to have been made under the Exchange Act.
d. The Company shall (i) not later than the tenth trading
day following the closing date prepare and file with
the NASDAQ National Market (as well as any other
national securities exchange or market on which the
Common Stock is then listed) an additional shares
listing application or a letter acceptable to the
NASDAQ National Market covering and listing at least
1,331,500 shares of Common Stock, (ii) take all
reasonable steps necessary to cause the Common Shares
to be approved for listing in the NASDAQ National
Market (as well as on any other national securities
exchange or market on which the Common Stock is then
listed) as soon as possible thereafter, and (iii)
provide to the Buyers, if requested, evidence of such
listing, and the Company shall take all steps
reasonably necessary to maintain the listing of its
Common Shares on such exchange. In addition, if at any
time following the listing of the Common Shares in
accordance with the foregoing, the number of shares of
Common Stock issuable on conversion of all then
outstanding Preferred Shares, and on account of accrued
and unpaid dividends thereon is greater than the number
of shares of Common Stock theretofore listed, the
Company shall promptly take such action to file an
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additional shares listing application covering at least
a number of shares as the Buyer shall reasonably
request.
e. If at any time while the Buyer (or any assignee
thereof) owns any Preferred Shares, the shares of
Common Stock cease to be Actively Traded (as defined
below), or the Common Shares Registration Statement
ceases to be effective, or the prospectus included in
the Common Shares Registration Statement may not be
used by the Buyer, in each case for more than five
trading days in the aggregate, at the option of the
Buyer exercisable by written notice to the Company
delivered after the expiration of such five trading day
period, the Company shall redeem all Preferred Shares
and Common Shares in cash, then held by such Buyer, at
an aggregate purchase price equal to the sum of (I) the
number of shares of Preferred Shares then held by the
Buyer multiplied by the product of (1) the average Per
Share Market Value for the five (5) Trading Days
immediately preceding (a) the day of such notice or (b)
the date of payment in full of the redemption price
calculated under this Section, whichever is greater and
(2) the Conversion Ratio on the date of the repurchase
notice, (II) the aggregate of all accrued but unpaid
dividends payable in respect of all shares of Preferred
Stock to be redeemed, (III) the number of Shares and
Common Shares then held by such Purchaser multiplied by
the average Per Share Market Value for the five (5)
Trading Days immediately preceding (A) the date of the
notice or (B) the date of payment in full by the
Company of the redemption price calculated under this
Section, whichever is greater, and (IV) interest on the
amounts set forth in (I) - (III) above accruing from
the 5th Trading Day after such notice until the
repurchase price under this Section is paid in full at
the rate of 12% per annum for the first three months
after the date due, and 15% per annum thereafter. For
purposes of this Section 10(f), the Common Stock shall
not be "Actively Traded" if trading in the Common Stock
is suspended (other than as a result of the suspension
of trading in securities on such market generally or
temporary suspensions pending the release of material
information) or the Common Stock is delisted from the
NASDAQ National Market other than in connection with a
listing of the shares on the NASDAQ SmallCap, the New
York Stock Exchange or the American Stock Exchange (a
"Major Exchange"), or trading is suspended (other than
as a result of the suspension of trading in securities
on such exchange or market generally or temporary
suspensions pending the release of material
information) or the Common Stock is delisted from a
Major Exchange without being immediately thereafter
listed on another Major Exchange or on the NASDAQ
National Market; provided, however, that if the Common
Stock is delisted from the NASDAQ National Market or a
Major Exchange and is immediately thereafter quoted in
the OTC Bulletin Board, the Common Stock shall be
deemed to be Actively Traded so long as there are at
all times not less than four market makers actively
entering quotations for the Common Stock and the daily
reported trading volume for the Common Stock is not
less than 80%
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of the reported average daily volume for the shares
during the 30 days immediately preceding the date on
which the delisting occurred. For purposes of this
Section 10(f), "Conversion Ratio" at any date with
respect to a Preferred Share shall mean the Liquidation
Value of such Preferred Shares (as defined in the
Certificate of Designation) divided by the applicable
Conversion Price.
f. The Company shall use $1.1 million of the proceeds from
the sale of the Preferred Shares to redeem such amount
of the Company's Series B Preferred Stock.
g. The Company at all times from and after the date hereof
shall have 1,331,500 shares of Common Stock duly and
validly authorized and reserved for issuance to satisfy
the conversion (pursuant to the Certificate of
Designations), in full, of the 1,400 Preferred Shares.
The Company shall irrevocably instruct its transfer
agent to reserve such number of shares for issuance
upon conversion of the Preferred Stock.
h. The Company understands the meaning and legal
consequences of the agreements, representations,
warranties and covenants contained herein. Company
further agrees to indemnify and hold harmless the
Buyer, and each current and future officer, director,
employee, agent and shareholder of the Buyer, from and
against any and all losses, claims, damages, judgments,
penalties, liabilities and deficiencies (collectively,
"Losses"), and agrees to reimburse such parties for all
out-of-pocket expenses (including the fees and expenses
of legal counsel, in each case promptly as incurred and
to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of
any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company
pursuant to this Agreement, all of which shall survive
the execution hereof; or
2. any failure by the Company to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this
Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this
Agreement.
i. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and to the
successors and assigns of the Company and to the legal
representatives, successors and permitted assignees of
the undersigned.
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j. This Subscription Agreement shall be governed by, and
construed and enforced in accordance with, Minnesota
law, without reference to principles of conflicts of
laws.
k. This instrument contains the entire agreement of the
parties, and there are no representations, covenants
or other agreements except as stated or referred to
herein.
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SIGNATURES/SUBSCRIBER INFORMATION
Entity Subscriber:
Dated: June 1, 1999
------------------------------------------
Name of Entity (Typed or Printed)
Xxxxxx Xxxxxxxx
------------------------------------------
Signature
------------------------------------------
Name (Typed or printed) and Title
------------------------------------------
Contact Person (If different from person signing)
Address for Notices:
The Shaar Fund, Ltd.
c/x Xxxxxxxx Capital Management
Two Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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ENTITY SUBSCRIBER TYPE OF OWNERSHIP:
The Shares subscribed for are to be registered in the following form of
ownership (check only one):
[ ] Partnership [ ] Trust or Estate
(Describe and
enclose evidence of signer's authority)
[ ] Corporation
[ ] XXX Trust Account
[ ] Other (Describe) -----------------------------------------
---------------------
ACCEPTANCE
This Subscription Agreement of The Shaar Fund, Ltd. for 1,400 shares of the
Company's Series C Convertible Preferred Stock is hereby accepted by Innovative
Gaming Corporation of America.
Dated: June 1, 1999
INNOVATIVE GAMING CORPORATION OF AMERICA
By s/ Xxxxxx X. Xxxxxxxxx
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Xxxxxx X. Xxxxxxxxx, Chairman and Chief Executive Officer
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