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EXHIBIT 99.3
INNOVATIVE GAMING CORPORATION OF AMERICA
0000 Xxxxx Xxxxxx
Xxxx, Xxxxxx 00000
SUBSCRIPTION AGREEMENT
Including Investment Representations
Series A Convertible Preferred Stock
Ladies and Gentlemen:
[ ] ("Buyer") desires to purchase upon the terms
and conditions set forth below from Innovative Gaming Corporation of America, a
Minnesota corporation (the "Company"), Series A 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 A Convertible Preferred Stock. The Preferred Shares being offered
are described in the Company's Confidential Private Placement Memorandum, dated
March 14, 1997 (the "Memorandum").
1. AGENT. The name of Buyer's agent or sub-agent for this offering is
____________________________________________.
(INSERT NAME OF AGENT/SUB-AGENT, IF ANY)
2. SUBSCRIPTION.
a. Buyer hereby subscribes to purchase [
] Preferred Shares and agrees to pay to the Company the
purchase price of: $[ ].
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. Buyer has received and carefully reviewed a copy
of the Memorandum and the Company's Annual Report on Form 10-K
for Fiscal 1996. In purchasing the Preferred Shares, Buyer
has not relied on any information or representation other than
those contained in the Memorandum or that 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. Without effecting Buyer's right to rely on the
representations and warranties of the Company contained
herein, Buyer has been given access to full and complete
information regarding the Company (including the opportunity
to meet with Company officers) and has utilized such access to
its satisfaction for the purpose of obtaining information in
addition to, or verifying information included in, the
Memorandum.
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(h) 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
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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 at any time after
the execution of this Agreement by it and prior to the date on
which Buyer files a notice of conversion with the Company.
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
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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 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.
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 THE ABSENCE OF ANY EFFECTIVE REGISTRATION
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STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF
1933 OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE UNDER THE SECURITIES LAWS."
5. RESIDENCE. BUYER REPRESENTS AND WARRANTS AS FOLLOWS.
a. Buyer's principal executive office is located in
the State of ____________.
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 A 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
sixth (6th) 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
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.
7. THIRD PARTY BENEFICIARY. The parties acknowledge and agree that LG
Partners, Inc. ("LG Partners") shall be deemed a third party beneficiary of the
Company's agreements and representations set forth in this Agreement, entitled
to enforce the terms thereof, and to indemnification for any damages resulting
to LG Partners from any actual or threatened breach thereof by the Company,
both in LG Partner's personal capacity and, should LG Partners so elect, on
behalf of Buyer.
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8. INVESTOR QUALIFICATIONS.
ACCREDITED INVESTOR. The undersigned subscriber is an ENTITY and
represents and warrants as follows:
/ / 1. The undersigned (or, in the case of a trust, the undersigned
trustee) is a bank, or savings and loan association as defined in
Sections 3(a)(2) and 3(a)(5)(A), respectively, of the 1933 Act,
acting either in its individual or fiduciary capacity.
/ / 2. The undersigned is an insurance company as defined in Section 2(13)
of the 0000 Xxx.
/ / 3. The undersigned is an investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act.
/ / 4. The undersigned is a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d)
of the Small Business Investment Act of 1959.
/ / 5. The undersigned is an employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974 and
either (check one or more, as applicable):
/ / a. the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered
investment adviser; or
/ / b. the employee benefit plan has total assets in
excess of $5,000,000; or
/ / c. the plan is a self-directed plan with investment
decisions made solely by persons who are "Accredited
Investors" as defined under the 0000 Xxx.
/ / 6. The undersigned has total assets in excess of $5,000,000, was not
formed for the specific purpose of acquiring shares of the Company
and is one or more of the following (check one or more, as
appropriate):
/ / a. an organization described in Section 501(c)(3) of the
Internal Revenue Code; or
/ / b. a corporation; or
/ / c. a Massachusetts or similar business trust; or
/ / d. a partnership.
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/ / 7. The undersigned is a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of
1940.
/ / 8. The undersigned is a trust with total assets exceeding $5,000,000
which was not formed for the purpose of acquiring shares of the
Company and whose purchase is directed by a person who has such
knowledge and experience in financial and business matters that he
or she is capable of evaluating the merits and risks of the
investment in the Preferred Shares.
/ / 9. All of the equity owners of the undersigned meet one of the tests
set forth in I.a through I.c or II.a through II.h above. Please
indicate the names of each such equity owner and which test applies
to each:
9. 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:
9.1 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.
9.2 Qualification. The Company 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.
9.3 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 (provided the per share price of the Common Stock exceeds
$.15), 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 enforcement of creditors' rights
generally, and except for judicial
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limitations on the enforcement of the remedy of specific enforcement
and other equitable remedies.
9.4 Brokers or Finders. Other than fees paid to LG Partners, Inc.,
for which the Company is responsible, 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.
9.5 Governmental Approvals. Based upon the representations and the
warranties of the Buyer made herein, no registration or filing,
consent or approval of or other action by any federal, state or
other governmental agency or instrumentality is necessary for the
valid execution, delivery and performance of the Company of this
Agreement and the issuance of the Preferred Shares, except for the
filing of a Form D with the Securities and Exchange Commission.
9.6 Adverse Governmental 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 contemplated by this Agreement, the Registration
Rights Agreement and the Certificate of Designation.
9.7 Disclosure. To the best knowledge of the Company, neither this
Agreement, the Registration Rights Agreement nor the Memorandum
contains any untrue statement of a material fact or omits a
material fact necessary to make the statements made by the Company
herein or therein, in light of the circumstances in which made, not
misleading. The Company has not provided to Buyer any material
non-public information regarding the Company.
9.8 Capitalization. Except for stock options issued to employees
of the Company pursuant to the Company's 1992 Stock Option and
Incentive Compensation Plan, 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, 1996.
9.9 Conflicts. This Agreement, the Registration Rights Agreement,
the Certificate of Designation and the performance of the
transactions contemplated hereby and thereby, will not conflict
with or violate the Company's Articles, Bylaws nor conflict with,
violate or cause a default of any lien, indenture, mortgage, lease,
agreement, or instrument to which the Company is a party in any
material respect or, to the best of our knowledge, result in a
violation of any law, rule, order or decree applicable to the
Company.
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9.10 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.
9.11 Nasdaq National Market Listing. The Company will use its
best efforts to list the shares of Common Shares on the NASDAQ
National Market and to maintain such listing. To the best of the
Company's knowledge, the Company is not in material violation of
the NASDAQ National Market listing requirements.
9.12 Exchange Act Reports. The Company will use its best efforts
to timely file all Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Reports on Form 8-K or other reports required to be
filed with the Securities and Exchange Commission by the Company.
The Company has not had any material adverse changes since its last
filing with the Securities and Exchange Commission. The Company
has filed all such documents historically on a timely basis with
the Securities and Exchange Commission and such financial
statements contained in such documents have been prepared in
accordance with GAAP.
10. OPINION OF COUNSEL. As a condition to Closing, the Buyer shall
receive an opinion from the Company's counsel substantially in the form
attached hereto as Annex A.
11. MISCELLANEOUS.
a. Buyer agrees to furnish any additional
information that the Company or its counsel deem necessary in
order to verify the responses set forth above.
b. Buyer represents and warrants that it has not
reproduced or distributed the Memorandum, in whole or in part,
or divulged any of its contents, and that it will not do so
without the prior written consent of the Company.
c. Buyer understands the meaning and legal
consequences of the agreements, representations, warranties
and covenants contained herein. Buyer further agrees to
indemnify and hold harmless the Company, and each current and
future officer, director, employee, agent and shareholder of
the Company, and each current and future officer, director,
employee, agent and shareholder of the Company, from and
against any and all loss, damage or liability due to, or
arising out of, a breach of any of Buyer's agreements,
representations or warranties contained herein, which shall
survive the execution hereof.
d. The Company understands the meaning and legal
consequences of the agreements, representations, warranties
and covenants contained herein.
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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 loss, damage or liability due to, or arising out
of, a breach of any of the Company's agreements,
representations or warranties contained herein, which shall
survive the execution hereof.
e. 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.
f. This Subscription Agreement shall be governed by,
and construed and enforced in accordance with, Minnesota law,
without reference to principles of conflicts of laws.
g. 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.
SIGNATURES/SUBSCRIBER INFORMATION
Entity Subscriber:
Dated: April 9, 1997
[____________________________________________________]
Name of Entity (Typed or Printed)
_________________________________________________
Signature
_________________________________________________
Name (Typed or printed) and Title
_________________________________________________
Contact Person (If different from person signing)
_________________________________________________
Tax I.D. No.
( )___________________________________________
Telephone No.
_________________________________________________
Principal Executive Office Address
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__________________________________________________________
(Must be same state indicated in question 7)
__________________________________________________________
Mailing Address (Only if different from residence address)
__________________________________________________________
City, State & Zip Code
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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 [________________] for [_______] shares of
the Company's Convertible Preferred Stock is hereby accepted by Innovative
Gaming Corporation of America.
Dated: April ___, 1997
INNOVATIVE GAMING CORPORATION OF AMERICA
By __________________________________________________________
Xxxxxx X. Xxxxxxxxx, President and Chief Executive Officer
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