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EXHIBIT 10.1
XXXXXXX.XXX, INC.
SUBSCRIPTION AGREEMENT AND
INVESTMENT LETTER
PURCHASE OF SERIES A CONVERTIBLE PREFERRED STOCK
Xxxxxxx.xxx, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx #000
Xxxxxxxxxx, XX 00000
The undersigned (the "Subscriber") hereby subscribes for and offers to
purchase from Xxxxxxx.xxx, Inc., a Minnesota corporation (the "Company"), six
hundred thousand (600,000) shares of Series A Convertible Preferred Stock (the
"Series A Preferred") at a purchase price of five dollars ($5.00) per share or
an aggregate purchase price of Three Million Dollars ($3,000,000) (the "Purchase
Price"), upon the terms and subject to the following conditions:
1. Subscription and Authorization of Securities. The Series A Preferred
shall be issued pursuant to and shall be entitled to such preferences, rights
and benefits as are set forth in the capital stock provisions of the Company's
Amended and Restated Articles of Incorporation and its Certificate of
Designation, which shall be in the form of the attached Exhibit A (the "Series A
Certificate").
2. Payment. The Subscriber herewith submits the Subscriber's check for
the Purchase Price, made payable to "Xxxxxxx.xxx, Inc.," representing the
aggregate purchase price for the Series A Preferred. In exchange therefor, the
Company herewith delivers to the Subscriber a stock certificate, dated as of the
date hereof, representing the Series A Preferred purchased by the Subscriber
registered in the name of Lakes Gaming, Inc.
3. Representations of Subscriber. To induce the Company to accept this
offer, the Subscriber represents and warrants as follows:
a. The Subscriber agrees that Subscriber may not sell or
otherwise transfer all or any interest in the Series A Preferred except
as expressly provided in this Subscription Agreement and Investment
Letter.
b. The Subscriber understands that the Company must comply
with the securities laws of the jurisdiction in which the Subscriber is
domiciled. The Subscriber therefore represents and warrants to the
Company as follows:
(1) The Subscriber is a business organization organized
and validly existing under the laws of, and with its
principal office located in, the State of Minnesota. The
Subscriber represents and warrants that it was not
organized, either directly or indirectly, for the
specific purpose of acquiring the Series A Preferred.
c. The Subscriber realizes that purchase of the Series A
Preferred is a speculative investment and that the economic benefits
which may be derived therefrom are uncertain. In determining whether or
not to make an investment in the Company, the Subscriber has relied
solely upon the written materials provided to it by the Company,
including the Certificate of
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Designation which sets forth the rights, preferences and limitations of
the Series A Preferred (the "Series A Certificate"), receipt of which
is hereby acknowledged, and upon independent investigations made by
Subscriber or its representatives. The shares of Series A Preferred
will have the rights and preferences as set forth in the Series A
Certificate, including without limitation the following: (i) each share
of the Series A Preferred is convertible into one share of the
Company's common stock (the "Common Stock") on a one-to-one basis
subject to adjustment in certain events, (ii) the shares of Series A
Preferred will have a liquidation preference over the Common Stock,
(iii) the Subscriber will be entitled to appoint one director of the
Company, which right will terminate upon the Company's Qualified Public
Offering (as defined in the Series A Certificate), and (iv) shares of
Series A Preferred will not be automatically entitled to receive or
accrue dividends.
d. The Subscriber has read and understands the Series A
Certificate and understands the rights, preferences and limitations
pertaining to the Series A Preferred.
e. The Subscriber has had full opportunity to conduct, and
has conducted, a complete and thorough due diligence investigation of
the Company, and such opportunity has been made available to the
Subscriber's professional representative(s), to ask questions of and
receive answers from representatives of the Company concerning the
Company and its financial condition and prospects and the terms and
conditions of the Series A Certificate, as well as to obtain additional
information necessary to verify the accuracy of the written materials
provided to the Subscriber and its representatives by the Company.
f. The information presented and statements made by the
Subscriber in the attached questionnaire completed and delivered by the
Subscriber and returned to the Company with this letter, and any
additional information supplied by the Subscriber at the Company's
request relating to the Subscriber's income, net worth, investment
experience or other matters, are complete and accurate as of this date
or any future date upon which such information will be supplied, and
may be relied upon by the Company in determining whether to accept this
offer.
g. The Subscriber is acquiring the Series A Preferred for
its own account for investment purposes and not with a view to or for
resale in connection with any distribution thereof and not for the
personal accounts of its shareholders. The Subscriber understands that
the Series A Preferred have not been registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws, in
reliance on exemptions from registration which depend, in part on the
Subscriber's investment intention; and, accordingly, the truth and
accuracy of the foregoing representation will be relied upon by the
Company to establish such exemptions. The Subscriber acknowledges that
the Company is not required to recognize any transfer of the Series A
Preferred unless, in the opinion of counsel to the Company, such
transfer would not result in a violation of any federal or state law
regarding the offer and sale of securities and unless the other
restrictions on transfer set forth in the Series A Preferred are
complied with.
h. The Subscriber agrees to the placing on the instruments
or certificates representing the Series A Preferred of legends, in
substantially the following form, referring to the restrictions set
forth in the preceding paragraph:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. NO SALE OR ASSIGNMENT OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE MADE UNLESS THE HOLDER SHALL HAVE OBTAINED AN
OPINION OF COUNSEL SATISFACTORY
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TO THE COMPANY THAT SUCH PROPOSED DISPOSITION OR TRANSFER LAWFULLY MAY
BE MADE WITHOUT REGISTRATION OF SUCH SHARES PURSUANT TO APPLICABLE
SECURITIES LAWS, OR SUCH REGISTRATION.
THE SHARES OF THE COMPANY ARE SUBJECT TO CERTAIN DESIGNATIONS,
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS AS SET FORTH IN THE
COMPANY'S ARTICLES OF INCORPORATION, AS FILED WITH THE MINNESOTA
SECRETARY OF STATE, AS AMENDED FROM TIME TO TIME. THE COMPANY WILL
FURNISH TO ANY SHAREHOLDER UPON REQUEST MADE TO THE SECRETARY OF THE
COMPANY AND WITHOUT CHARGE A FULL STATEMENT (A) OF THE DESIGNATIONS,
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF EACH
CLASS AND SERIES AUTHORIZED TO BE ISSUED, INSOFAR AS THE SAME HAVE BEEN
DETERMINED AND (B) OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO DIVIDE
THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES.
i. The Subscriber is aware that there are restrictions on
the transferability of the Series A Preferred, that there is no market
for the Series A Preferred, and that it is possible that such a market
will never develop. Accordingly, it is unlikely that the Subscriber
will be able to liquidate an investment in the Company in case of an
emergency or for any other reason.
j. The Subscriber's commitment to investments that are not
readily marketable is not disproportionate to its net worth, and an
investment in the Series A Preferred will not cause such commitment to
become excessive. The Subscriber has adequate means of providing for
its current needs and contingencies and has no need for liquidity with
respect to its investment in the Series A Preferred, and can withstand
a complete loss of such investment in the Series A Preferred. The
Subscriber has, either alone or with a purchaser representative, such
knowledge and experience in financial and business matters that the
Subscriber is capable of evaluating the merits and risks of an
investment in the Series A Preferred.
k. The Subscriber acknowledges receipt of the documents and
information which the Company has represented to Subscriber under
Section 4.t. of this Agreement that it has delivered to the Subscriber.
4. Representations of the Company. The Company represents and
warrants to the Subscriber as follows:
a. 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 own its properties and carry on its business in all material
respects as it is now being conducted. The Company has the requisite
corporate power and authority to issue the Series A Preferred and the
Common Stock into which it is convertible (the "Conversion Shares") and
to otherwise perform its obligations under this Agreement.
b. Status of the Preferred Shares and Conversion Shares. The
Series A Preferred, when issued and paid for pursuant to the terms of
this Subscription Letter, will be duly authorized, validly issuedand
outstanding, fully paid and nonassessable, free and clear of all
pledges, liens, encumbrances and restrictions, except as set forth
herein, and the Conversion Shares have been reserved for issuance based
upon a one-for-one Conversion Ratio (as defined in the Series A
Certificate), and when issued upon conversion will be duly authorized,
validly issued
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and outstanding, fully paid and nonassessable, and free and clear of
all pledges, liens, encumbrances and restrictions, except as set forth
herein. The certificates representing the Series A Preferred to be
delivered by the Company hereunder, and the certificates representing
the Conversion Shares will, when issued upon conversion, be genuine,
and the Company has no knowledge of any fact which would impair the
validity thereof.
c. Corporate Acts and Proceedings. This Agreement has been
duly authorized by all necessary corporate action on behalf of the
Company, and has been duly executed and delivered by authorized
officers of the Company, and is the valid and binding agreement upon
the part of the Company that is enforceable against the Company in
accordance with its 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 to judicial limitations on the enforcement of the remedy of
specific performance and other equitable remedies. All corporate action
necessary to the investment by the Subscriber in the Company and the
authorization, creation, issuance and delivery of the Preferred Shares
and the Conversion Shares has been taken by the Company.
d. Brokers. Other than Xx. Xxxxx Xxxxxx, who will be granted
a warrant to purchase 37,500 shares of Common Stock at an exercise
price of $1.00 per share, no other person, firm or corporation has or
will have, as a result of any act or omission of the Company, any
interest, right or valid claim against or upon the Company for any
commission, fee or other compensation as a finder or broker in
connection with the transactions contemplated by this Agreement. The
Company will indemnify and hold the Subscriber harmless against any and
all liability with respect to any such commission, fee or other
compensation, except as set forth above, which may be payable or
determined to be payable in connection with the transactions
contemplated by this Agreement.
e. Litigation; Governmental Proceedings. Except with respect
to its defense of a lawsuit brought by Xxxx Security to collect $2,000
alleging non-payment for services rendered, which the Company is
disputing in good faith, there are no legal actions, suits,
arbitrations or other legal, administrative or governmental proceedings
or investigations pending or, to the knowledge of the Company,
threatened against the Company, its properties, assets or business, and
the Company is not aware of any facts which are likely to result in or
form the basis for any such action, suit or other proceeding which
would have a material adverse impact on the Company. The Company is not
in default with respect to any judgment, order or decree of any court
or any governmental agency or instrumentality.
f. Governing Instruments. The copies of the Amended and
Restated Articles of Incorporation and Bylaws of the Company which have
been delivered to legal counsel for the Subscriber prior to the
execution of this Agreement are true and complete copies of the duly
and legally adopted Amended and Restated Articles of Incorporation and
Bylaws of the Company in effect as of the date of this Agreement.
g. Subsidiaries. Etc. The Company does not have any direct
or indirect ownership interest in any corporation, partnership, joint
venture, limited liability company or partnership, association or other
business enterprise.
h. Qualification. The Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each
jurisdiction wherein the nature of its activities or the properties
owned or leased by it makes such qualification, licensing or
domestication necessary
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and in which failure to so qualify or be licensed or domesticated would
have a material adverse impact upon its business.
i. Financial Statements. The Company has delivered to
Subscriber true and correct copies of its unaudited balance sheets for
the Company dated as at June 30, 1996, June 30, 1997, June 30, 1998 and
June 8, 1999 (the "1999 Balance Sheet") together with the related
statements of profit and loss for the periods then ended. Such
financial statements (i) are in accordance with the books and records
of the Company, (ii) present fairly the financial condition of the
Company at the balance sheets dates and the results of its operations
for the periods therein specified, and (iii) have, in all material
respects, been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior
accounting periods. Without limiting the generality of the foregoing,
the balance sheets or notes thereto disclose all of the debts,
liabilities and obligations of any nature (whether absolute, accrued or
contingent and whether due or to become due) of the Company at their
respective dates, which, individually or in the aggregate, are material
and which in accordance with generally accepted accounting principles
would be required to be disclosed in such balance sheets and include
appropriate reserves for all taxes and other liabilities accrued as of
such dates but not yet payable.
j. Tax Returns and Audits. All required federal, state and
local tax returns or appropriate extension requests of the Company have
been filed, and all federal, state and local taxes required to be paid
with respect to such returns have been paid or due provision for the
payment thereof has been made. The Company is not delinquent in the
payment of any such tax or in the payment of any assessment or
governmental charge. The Company has not received notice of any tax
deficiency proposed or assessed against it, and it has not executed any
waiver of any statute of limitations on the assessment or collection of
any tax. None of the Company's tax returns has been audited by
governmental authorities in a manner to bring such audits to the
Company's attention. The Company does not have any tax liabilities
except those reflected on the financial statements referred to above or
those which were incurred in the ordinary course of business since June
8, 1999 and are not delinquent.
k. Changes, Dividends, etc. Except for the transactions
contemplated by this Agreement, since June 8, 1999 the Company has not:
(i) incurred any debts, obligations or liabilities, absolute, accrued
or contingent and whether due or to become due, except current
liabilities incurred in the ordinary course of business which
(individually or in the aggregate) will not materially and adversely
affect the business, properties or prospects of the Company; (ii) paid
any obligation or liability other than, or discharged or satisfied any
liens or encumbrances other than those securing, current liabilities,
in each case in the ordinary course of business; (iii) declared or made
any payment to or distribution to its shareholders as such, or
purchased or redeemed any of its shares of capital stock, or obligated
itself to do so; (iv) mortgaged, pledged or subjected to lien, charge,
security interest or other encumbrance any of its assets, tangible or
intangible, except in the ordinary course of business; (v) sold,
transferred or leased any of its assets except in the ordinary course
of business; (vi) suffered any physical damage, destruction or loss
(whether or not covered by insurance) materially and adversely
affecting the properties, business or prospects of the Company; (vii)
entered into any transaction other than in the ordinary course of
business; (viii) encountered any labor difficulties or labor union
organizing activities; (ix) issued or sold any shares of capital stock
or other securities or granted any options, warrants, or other purchase
rights with respect thereto; (x) made any acquisition or disposition of
any material assets; other than for fair value in the ordinary course
of business; (xi) increased the compensation payable, or to become
payable, to any of its directors, officers or employees, or made any
bonus payment or similar arrangement with any of its directors,
officers or employees or increased the scope or nature of any fringe
benefits provided for its directors, officers or
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employees; or (xii) agreed to do any of the foregoing other than
pursuant hereto. There has been no material adverse change in the
financial condition, operations, results or operations or business of
the company since June 8, 1999.
l. Title to Properties and Encumbrances. The Company does
not have an ownership interest in any parcels of real property. The
Company has good and marketable title to all of its properties and
assets, including without limitation the properties and assets
reflected on the 1999 Balance Sheet and the properties and assets used
in the conduct of its business, which properties and assets are not
subject to any mortgage, pledge, lease, lien, charge, security
interest, encumbrance or restriction, except (a) those which are shown
and described on the 1999 Balance Sheet, (b) liens for taxes and
assessments or governmental charges or levies not at the time due or in
respect of which the validity thereof shall currently be contested in
good faith by appropriate proceedings, or (c) those which do not
materially affect the value of or interfere with the use made of such
properties and assets.
m. Conditions of Properties. The offices and equipment of
the Company have been kept in good condition and repair in the ordinary
course of business.
n. Compliance With Applicable Laws and Other Instruments.
The business and operations of the Company have been and are being
conducted in accordance with all applicable laws, rules and regulations
of all governmental authorities, except where the failure to so conduct
the business and operations of the Company would not have a material
adverse effect on the business, properties or prospects of the Company.
Neither the execution nor delivery of, nor the performance of or
compliance with, this Agreement nor the consummation of the
transactions contemplated hereby will, with or without the giving of
notice or passage of time, result in any breach of, or constitute a
default under, or result in the imposition of any lien or encumbrance
upon any asset or property of the Company pursuant to any agreement or
other instrument to which the Company is a party or by which it or any
of its properties, assets or rights is bound or affected, and will not
violate the Amended and Restated Articles of Incorporation or Bylaws of
the Company. The Company is not in violation of its Amended and
Restated Articles of Incorporation or Bylaws nor in violation of, or in
default under, any lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement in any material respect. The
Company is not subject to any restriction which would prohibit it from
entering into or performing its obligations under this Agreement.
o. Securities Laws. Based in part upon the representations
of the Subscriber in Section 3 of this Agreement, no consent,
authorization, approval, permit or order of or filing with any
governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the, Series A
Preferred or the Conversion Shares, other than the qualification
thereof, if required, under applicable state securities laws. The
Company has not, directly or through an agent, offered the Series A
Preferred or any similar securities for sale to, or solicited any
offers to acquire such securities from, persons other than the
Subscriber and other accredited investors. Under the circumstances
contemplated by this Agreement and assuming the accuracy of the
representations of the Subscriber in Section 4, the offer, issuance,
sale and delivery of the Series A Shares and the Conversion Shares will
not, under current laws and regulations, require compliance with the
prospectus delivery or registration requirements of the federal
Securities Act of 1933, as amended (the "Securities Act").
p. Intellectual Property. The Company owns or possesses
sufficient trademarks, tradenames, copyrights, licenses, approvals and
other similar rights, which are to the Company's
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knowledge free and clear of all liens, claims and restrictions
(collectively, the "Intellectual Property Rights") reasonably necessary
to conduct its business as now conducted; and the expected expiration
of any of such Intellectual Property Rights would not result in a
material adverse change in the business, properties, financial
condition or results of operations of the Company. The Company has not
received any notice of, nor to its knowledge is there any claim
threatened regarding, infringement or conflict with asserted
Intellectual Property Rights of others, which infringement or conflict,
if the object of an unfavorable decision, would result in a material
adverse change in the business, properties, financial condition or
results of operation of the Company. The Company is not obligated or
under any liability whatsoever to make any payments of a material
nature by way of royalties, fees or otherwise to any owner of, licensor
of or other claimant to, any patent, trademark, tradename, copyright or
other intangible asset, with respect to the use thereof or in
connection with the conduct of its business. To its knowledge, the
Company owns or has the unrestricted right to use all trade secrets,
including know-how, customer lists, inventions, designs, processes,
computer programs and technical data necessary for the development,
operation and sale of the products and services sold or proposed to be
sold by it, free and clear of all rights, liens, or claims of others.
q. Capital Stock. At the date hereof the authorized capital
stock of the Company consists of 5,000,000 shares of common stock, $.01
par value (the "Common Stock"), of which 1,919,716 shares are issued
and outstanding, which such shares are owned by the persons and in the
amounts indicated on Schedule 4.q. hereto, and 5,000,000 shares of
Series A Preferred Stock, none of which are outstanding (without giving
effect to the sale of Preferred Shares offered hereby). All of the
outstanding shares of capital stock of the Company were duly authorized
and validly issued and are fully paid and nonassessable, except that
(i)stock certificates have not been issued and delivered by the Company
to purchasers of Common Stock in the private placement of Company
common stock sold in March and April 1999, and (ii) common shareholders
approved the increase of authorized common stock to five million shares
in June 1999, effective April 20, 1999, after an amendment to the
Company's articles of incorporation were filed on April 20, 1999.
Except with respect to outstanding options to purchase 251,250 shares
of Company common stock held by Company employees and consultants,
there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible securities or other
agreements or arrangements of any character or nature whatever, other
than as contemplated by this Agreement under which the Company is
obligated to issue any securities of any kind representing an ownership
interest in the Company. Neither the offer nor the issuance or sale of
the Preferred Shares or the Conversion Shares constitute, or will
constitute, an event under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with
respect to the issuance of securities by the Company, which will either
increase the number of shares issuable pursuant to such provisions or
decrease the consideration per share to be received by the Company
pursuant to such provisions. Except as contemplated by this Agreement,
no holder of any security of the Company is entitled to any preemptive
or similar rights to purchase any securities of the Company from the
Company; provided, however that nothing in this Section 4.q. shall
affect, alter or diminish any right granted to the Subscriber in this
Agreement. All outstanding securities of the Company have been issued
in full compliance with an exemption or exemptions from the
registration and prospectus delivery requirements of the Securities Act
and from the registration and qualification requirements of all
applicable state securities laws.
r. Outstanding Debt. The Company has no indebtedness
incurred as a result of direct borrowing of money (excluding any
indebtedness incurred with respect to trade accounts), except as
otherwise set forth in the financial statements or the notes thereto
provided to the Subscriber. The Company is not in default in the
payment of the principle of or interest or
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premium on any such indebtedness, and no event has occurred or is
continuing under the provisions of any instrument, document or
agreement evidencing or relating to any such indebtedness which, with
the lapse of time or the giving of notice or both, would constitute an
event of default thereunder.
s. Insurance Coverage. There are in full force and effect
policies of insurance issued by insurers of recognized responsibility
which are insuring the Company and its properties against such losses
and risks, and in such amounts, as in the Company's best judgment,
after advice from its insurance broker, are acceptable for the nature
and extent of its business and the Company's resources.
t. Schedule of Assets and Contracts. The Company has
previously delivered to Subscriber, to the extent they exist, copies of
the documents described on the schedule of assets and contracts to be
attached to this Agreement no later than one week after the date
hereof:
(1) each written or oral contract or agreement between
the Company and any shareholder of the Company;
(2) each indenture, lease, sublease, license or other
instrument under which the Company claims or holds a leasehold
interest in real property;
(3) each lease of personal property involving
payments remaining to or from the Company;
(4) except with respect to Xxxxxx Xxxxxxxx and Xxxx
Xxxxxxxxx, each of whom have verbal agreements with the
Company regarding salary, each written or oral contract,
agreement, subcontract, purchase order, commitment or
arrangement involving payments remaining to or from the
Company and each other agreement material to the Company's
business to which the Company is a party or by which it is
bound, under which full performance (including payment) has
not been rendered by any party thereto;
(5) any collective bargaining agreements, employment
agreements, consulting agreement, noncompetition agreements,
nondisclosure agreements, executive compensation plans, profit
sharing plans, bonus plans, deferred compensation agreements,
employee pension retirement plans and employee benefit stock
option or stock purchase plans and other employee benefit
plans, entered into or adopted by the Company;
(6) a current statement of balance of account in the
account at Richfield Bank and Trust maintained by the Company,
together with the persons authorized to make withdrawals from
such accounts; and
(7) the name of each employee of the Company and the
remuneration currently payable to each such employee;
(8) all accounts receivable of the Company that are
or were outstanding on the Balance Sheet Date, and the aging
of each such account receivable;
(9) all accounts payable of the Company that are or
were outstanding on the June 1999 Balance Sheet, and the aging
of each such account payable;
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(10) all insurance policies in force;
(11) all patents, royalty and license agreements,
trademarks, trade names, service marks and copyrights relating
to products of the Company (including applications therefor);
and
(12) all licenses, permits, authorizations,
approvals, franchises and rights granted to the Company by any
governmental or other regulatory authority.
The Company has performed in all material respects
all obligations required to be performed by it to
date and is not in default under any of the
contracts, agreements, leases, documents, commitments
or other arrangements to which it is a party or by
which it is otherwise bound. All instruments referred
to above are in effect and enforceable according to
their respective terms, and there is not under any of
such instruments any existing default or event of
default or event which, with notice or lapse of time
or both, would constitute an event of default
thereunder on the part of the Company, or, to the
best knowledge of the Company, on the part of any
other party thereto. All parties having contractual
arrangements with the Company are in compliance
therewith and none are in default thereunder. All
plans or arrangements described above are fully
funded to the extent that such funding is required by
generally accepted accounting principles.
u. Conflicts of Interest. No officer, director or
shareholder of the Company or any affiliate (as the term "affiliate" is
defined in Rule 405 under the Securities Act) of any such person has
any direct or indirect interest (a) in any entity which does business
with the Company, (b) in any property, asset or right which is used by
the Company in the conduct of its business, or (c) in any contractual
relationship with the Company other than as an employee. For the
purpose of this Section 4.u., there shall be disregarded any interest
which arises solely from the ownership of less than a 1% equity
interest in a corporation whose stock is regularly traded on any
national securities exchange or in the over-the-counter market.
v. Licenses. To the Company's knowledge, the Company
possesses from the appropriate agency, commission, board and government
body and authority, whether state, local or federal, all licenses,
permits, authorizations, approvals, franchises and rights which are (a)
necessary for it to engage in the business currently conducted by it,
and (b) if not possessed by the Company would have a material adverse
impact on the Company's business. The Company has no knowledge that
would lead it to believe that it will not be able to obtain all
licenses, permits, authorizations, approvals, franchises and rights
that may be required for any business the Company proposes to conduct.
w. Registration Rights. Except as set froth under this
Agreement, the Company has not agreed to register any of its authorized
or outstanding securities under the Securities Act.
x. Retirement Plans. The Company does not have any
retirement plan in which any employees of the Company participates that
is subject to any provisions of the Employee Retirement Income Security
Act of 1974 and of the regulations adopted pursuant thereto ("ERISA").
y. Minute Books. A true and correct copy of all minute books
and stock record books of the Company has been delivered to the
Subscriber.
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z. Disclosure. The Company has not withheld from the
Subscriber any material facts relating to the assets, business,
operations, financial condition or prospects of the Company. No
representation or warranty in this Agreement or in any certificate,
schedule, statement or other document furnished or to be furnished to
any Subscriber pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact required
to be stated herein or therein or necessary to make the statements
herein or therein, in light of all the circumstances in which they were
made, not misleading.
5. Right to Purchase Additional Securities. If the Company should
decide to issue and sell for cash additional shares of any capital stock of the
Company, other than Additional Shares of Common Stock (as defined in the Series
A Certificate), and at such time, the Subscriber and its affiliates then own
19.9% or less of the outstanding Common Stock of the Company (including for
purposes of such calculation on an as converted basis all outstanding shares of
Series A Preferred and any other outstanding securities, options or warrants
convertible into Common Stock, but not including performance based options that
have not yet vested) then such issuances and sales shall be subject to the
following terms and conditions:
a. the Company shall first offer to sell to the Subscriber,
upon the same terms and conditions as the Company is proposing to issue
and sell such additional shares of capital stock to others, such number
of additional securities as would result in the Subscriber and its
affiliates maintaining their then current aggregate ownership
percentage, as such percentage may decrease from time to time but in no
event in excess of nineteen and nine-tenths percent (19.9%) of the
outstanding Common Stock of the Company;
b. if Subscriber's and its affiliates' aggregate ownership
percentage upon completion of such proposed issuance and sale of
additional securities would be greater than their then current
aggregate ownership percentage at the time of the proposed issuance and
sale of additional securities (as such percentage may decrease from
time to time but in no event in excess of 19.9%), then this right to
purchase additional securities shall not apply to the extent the
Subscriber's and its affiliates' ownership would be, upon completion of
such proposed issuance and sale of additional securities, greater than
their then current aggregate ownership percentage (as such percentage
may decrease from time to time but in no event in excess of 19.9%); and
c. this right to purchase additional securities hereunder
shall automatically terminate upon the date that the Company completes
a Qualified Public Offering, as defined in the Series A Certificate.
The Company and Subscriber understand that based on current
stock ownership levels as of the date of this Agreement, this right to purchase
additional securities shall not apply to the extent that the Company issues and
sells additional securities that would result in the Subscriber's and its
affiliates' aggregate ownership percentage exceeding 19.9%. By way of
illustration and not as a limitation, if, at a future date, the Subscriber's and
its affiliates' aggregate ownership percentage decreases from its level as of
the date of this Agreement to ten percent (10%), for example, then this right to
purchase additional securities would be a right to maintain a ten percent (10%)
aggregate ownership percentage in the Company.
6. Affirmative Covenants of the Company. Subject to Section 8 of
this Agreement, the Company covenants and agrees that:
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a. Corporate Existence. The Company will maintain its
corporate existence in good standing and comply in all material
respects with all applicable laws and regulations of the United States
or of any state or states thereof or any political subdivision thereof
where failure to so comply would have a material adverse impact on the
company or its business or operations.
b. Books of Account and Records. The Company will keep books
of record and account in which full, true and correct entries are made
of all of its and their respective dealings, business and affairs, in
accordance with generally accepted accounting principles. The Company
will deliver to the Subscriber as soon as practicable the following:
(i) after the close of each fiscal quarter, unaudited consolidated
balance sheets of the Company as of the end of such quarter, together
with the related statements of operations for such quarter; and (ii)
after the end of each fiscal year, a nonaudited balance sheet of the
Company as of the end of such fiscal year, together with related
statements of operations, stockholders equity and cash flow for such
fiscal year. The Company will engage a certified public accountant from
a "Big 5 Accounting Firm" selected by the Board of Directors of the
Company who are "independent" within the meaning of the accounting
regulations of the Securities and Exchange Commission (the
"Commission"), and have annual audits made by such independent public
accountants.
c. Payment of Taxes. The Company will pay and discharge
promptly, or cause to be paid and discharged promptly when due and
payable, all taxes, assessments and governmental charges or levies
imposed upon its income or upon any of its properties, as well as all
material claims of any kind which, if unpaid, might by law become a
lien or charge upon its property; provided, however, that the Company
shall not be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings and if the
Company shall set aside on its books reserves deemed adequate by it
with respect thereto; and (ii) maintain and keep or cause to be
maintained and kept, its properties in good repair, working order and
condition, and from time to time make, or cause to be made, all repairs
and renewals and replacements which in the opinion of the Company are
necessary and proper so that the business carried on in connection
therewith will be properly and advantageously conducted at all times.
d. Insurance. The Company will obtain and maintain in force
such property damage, public liability, workers compensation, indemnity
bonds and other types of insurance as the Company executive officers,
after consultation with its insurance broker, shall determined to be
necessary or appropriate to protect the Company from the insurable
hazards or risks associated with the conduct of the Company's business.
All insurance company maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of
Directors, and all such insurance shall be effected and maintained in
force under a policy or policies issued by insurers of recognized
responsibility, except that the Company may affect workers company or
similar insurance in respect of operations in any state or other
jurisdiction either through an insurance fund operated by such state or
other jurisdiction or by causing to be maintained a system or systems
of self insurance which is in accord with applicable laws.
e. Inspection. The Company will permit the Subscriber and
any of its representatives designated by it, to visit and inspect, at
the Subscriber's expense, any of the properties of the Company,
including its books and records (and to make photocopies thereof or
make extracts therefrom), and to discuss its affairs, finances and
accounts with its officers and accountants, all to such reasonable
extent and at such reasonable times and intervals as the Subscriber may
reasonably describe and request in advance. The Subscriber shall
maintain, and shall require its representatives to maintain, all
information obtained from the Company pursuant to this Agreement on a
confidential basis.
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f. Preparation and Approval of Budgets. Commencing with its
fiscal year ending June 30, 2000, at least one month prior to the
beginning of each fiscal year of the Company, the Company shall prepare
and submit to its board of directors, for its review and approval, an
annual plan/budget for such year, which shall include monthly capital
and operating expense budgets, cash flow statements and profit and loss
projections itemized in such detail as the board of directors may
reasonably request. The Company will, simultaneously with the
submission thereof to the board of directors, deliver a copy of such
annual plan/budget to the Subscriber.
g. Payment of Indebtedness and Discharge of Obligations. The
Company will make timely payment of all amounts due under, and will
observe, perform and discharge all of the covenants, conditions and
obligations which are imposed on it by, any and all indentures and
other agreements securing or evidencing all indebtedness resulting from
bank or other borrowings or pursuant to which such indebtedness is
issued.
h. Representation on Board of Directors; Directors' and
Shareholders' Meetings. The Subscriber shall have the right to appoint
one director to the Company's Board of Directors (the "Board"). In the
event of the death, resignation or removal of any director designated
by the Subscriber, the Subscriber shall be entitled to designate such
director's successor. The Company agrees that in submitting to the
Company's shareholders or board of directors the names and nominees for
election as directors or in filling interim vacancies, it will use its
good faith reasonable efforts to cause any person designated by the
Subscriber to be elected as a director. The Company further agrees to
call meetings of its board of directors at least quarterly and during
each year to hold an annual meeting of shareholders within a reasonable
time after the end of each of its fiscal years. The Company also agrees
to reimburse the directors for the reasonable out-of-pocket travel
expenses incurred by the directors in connection with attending
meetings of the board of directors and meetings of shareholders, and
shall maintain a provision in its by-laws providing for the
indemnification of its directors to the full extent permitted by the
law of the state of its incorporation.
i. Application of Proceeds. Unless otherwise approved by the
Subscriber, the net proceeds received by the Company from the sale of
the Series A Preferred will be used by the Company for sales,
marketing, advertising, acquisitions and general working capital
purposes.
Pending use of the net proceeds in the business, they shall be
deposited in a bank or financial institution having assets of
$150,000,000 or more or a bank or financial institution
otherwise approved by the Investors, invested in certificate
of deposit or repurchase agreements of a bank or financial
institution having assets of $150,000,000 or more, invested in
money market mutual funds having assets of $500,000,000 or
more, or invested in securities issued or guaranteed by the
United States Government.
j. Provision of Information and Filing of Reports. The
Company shall, from and after the Closing Date, deliver to any holder
of Series A Preferred upon request such information as may be required
to be provided to enable the holder of Series A Preferred to comply
with Rule 144A under the Securities Act in connection with the sale
or transfer of any of the Preferred Shares. The Company shall, from and
after such time as it has securities registered pursuant to Section 2
of the Security Exchange Act of 1934 or has an offering of securities
registered pursuant to the Securities Act, make timely filings of such
reports as are required to be filed by it with the Commission so that
Rule 144 under the Securities Act or any successor provision thereto
will be available to the security holders of the Company who are
otherwise able to take advantage of the provisions of such rule.
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k. Subsidiaries. If the Company establishes or maintains any
subsidiary corporations, it shall cause each such subsidiary
corporation to comply with the covenants set forth in this Section 6
(other than Sections 6.h).
l. Gaming. The Company understands that Subscriber is
engaged in businesses that are regulated by various gaming authorities
and regulation. Company covenants that it will provide prior written
notice (which may be in the form of providing copies of minutes of
meetings of the Company's Board of Directors) to the Subscriber
concerning its planned activities and potential activities in the
development stage that involve, directly or indirectly, contests or
gaming which the Company may engage in prior to actually undertaking
such activities. Subscriber agrees that, based on such prior notice and
information, Subscriber will on a reasonably prompt basis notify the
Company about any aspect of the proposed or developed plans regarding a
new activity that could effect the subscribers compliance with the
requirements of any gaming authority or regulation. The Company further
covenants and agrees that it will not engage in any such activity that
will in any way adversely effect Subscriber's compliance with the
requirements of any such gaming authority or regulation, unless
consented to in advance by subscriber, which consent may be withheld by
Subscriber in its sole discretion.
m. Issuance of Stock and Rights to Acquire Stock. The
Company shall comply with Section 5 hereof.
n. Intellectual Property Rights. The Company will apply for,
or obtain assignments of, or license to use, all patents, trademarks,
tradenames and copyrights which the Board of Directors so directs for
the conduct and protection of the business of the Company.
o. Consents to Subchapter S Status Termination. The Company
agrees to undertake to obtain the consent from each shareholder of the
Company to whom the Company was contractually obligated to obtain
consent for termination of Subchapter S status under the Internal
Revenue Code of 1986, as amended.
7. Negative Covenants of the Company. Subject to Section 8 of
this Agreement, the Company covenants and agrees that:
a. Registration. Except any registration expressly permitted
by Section 11 of this Agreement, and except for an underwriting
agreement between the Company and one or more professional underwriters
of securities, the Company shall not agree with the holders of any
securities issued or to be issued by the Company to register such
securities under the Securities Act nor will it grant any incidental
registration rights to any such persons, unless such agreement
specifically provides that (i) in the opinion of the managing
underwriter or underwriters, if any, of any registration in which
Conversion Shares are included pursuant to Section 1 of Exhibit B, the
public offering or sale of such other securities would not interfere
with the successful public offering and sale of such Conversion Shares,
such other securities will not be included in a registration statement
in which such Conversion Shares are so included, (ii) such subsequent
purchasers shall not be granted registration rights more favorable than
those granted to the Subscriber, and (iii) such securities may not be
publicly offered or sold for a period of at least one hundred eighty
(180) days after the closing of any public offering of Conversion
Shares registered pursuant to Exhibit B.
b. Other Restrictions. The Company will not, nor will it
permit any subsidiary to, without the prior written consent of the
Subscriber:
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(1) take any action that constitutes or results in
amendment or waiver of any provision of the Company's Articles
of Incorporation, as amended, the Series A Certificate or
Bylaws, if such amendment or waiver in any way adversely
affects the rights of the Series A Preferred or the holders
thereof; or
(2) alter, amend or change any existing rights,
preferences privileges or provisions relating to the Series A
Preferred or the holders thereof; or
(3) take any action that results in the redemption of
any share(s) of Common Stock (other than repurchases of shares
of Common Stock issued pursuant to the Employee Pool).
8. Termination of Covenants. The obligations of the Company under
Sections 5, 6 and 7, notwithstanding any provisions hereof to the contrary,
shall automatically terminate and shall be of no further force or effect on the
date on which the Company completes its Qualified Public Offering (as defined in
the Series A Certificate).
9. Co-Sale Agreements. Within thirty (30) days after the date
hereof, the Company undertakes and agrees to obtain written co-sale agreements
to be executed and delivered by Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxx
(and their related affiliates) who in the aggregate own at least 25,000 shares
of Company common stock, which co-sale agreements shall provide that to the
extent any such holder desires to sell at least 25,000 shares of Common Stock to
a third party, other than a transfer pursuant to a pledge, estate plan, gift or
registered public offering, then such holder will include, if Subscriber so
desires, as an additional seller of shares of Common Stock to such third party
the shares of Common Stock that Subscriber owns in such proposed sale
transaction on a pro rata basis. Such co-sale agreements shall include a
provision that expressly permits sale transactions of up to 25,000 shares during
any twelve (12) month period on a cumulative basis and shall be in a form
reasonably satisfactory to Subscriber and such shareholders.
10. Conversion of Preferred Shares.
a. Conversion of Preferred Shares. Any holder of any Series
A Preferred may, at its option, from and after the occurrence of such
events as are set forth in the relevant provisions of the Series a
Certificate, convert such Preferred Shares, or any portion thereof,
into Conversion Shares at the rate and upon the terms and conditions
and subject to the adjustments set forth it the Series A Certificate.
Each Series A Preferred Share shall be automatically converted into
Conversion Shares on the terms and conditions set forth in the Series A
Certificate.
b. Stock Fully Paid; Reservation of Preferred Shares. The
Company covenants and agrees that all Conversion Shares that may be
issued upon the exercise of the conversion privilege referred to in
Section 9.a. will, upon issuance in accordance with the terms of the
Series A Certificate, be fully paid and nonassessable and free from all
taxes, liens and charges except for liens or changes created or
incurred by the holder) with respect to the issue thereof, and that the
issuance thereof shall not give rise to any preemptive rights on the
part of any person. The Company further covenants and agrees that the
Company will at all times have authorized and reserved a sufficient
number of its shares of Common Stock for the purpose of issue upon the
exercise of such conversion privilege.
c. Adjustment of Number of Conversion Shares. The number of
shares of Common Stock issuable upon conversion of the Series A
Preferred and the conversion ratio with respect thereto shall be
subject to adjustment from time to time as set forth in the Series A
Certificate.
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11. Registration Rights. The Subscriber shall have the right to
have any Conversion Shares acquired by the Subscriber upon conversion of any
Series A Preferred held by such Subscriber issued upon the exercise of the
conversion rights set forth in the Series A Certificate registered by the
Company in accordance with the terms and conditions set forth in Exhibit B of
this Agreement.
12. Default.
a. Events of Default. Each of the following events shall be
an event of default (an "Event of Default") for purposes of this
Agreement:
(1) if the Company shall default in any material
respect in the due and punctual performance of any covenant or
agreement in any note, bond, indenture, loan agreement, note
agreement, mortgage, security agreement or other instrument
evidencing or related to indebtedness of the company, such
default shall continue for more than the period of notice
and/or grace, if any, therein specified and shall not have
been waived, and such creditor shall have accelerated the
maturity of such indebtedness or otherwise shall have
initiated action to collect such indebtedness;
(2) (A) if any representation or warranty made by or
on behalf of the Company in this Agreement or in any
certificate, report or other instrument delivered under or
pursuant to any term hereof shall prove to have been untrue or
incorrect in any material respect as of the date of this
Agreement; or (B) if any report, certificate, financial
statement or financial schedule or other instrument prepared
or purported to be prepared by the Company or any officer of
the Company hereafter furnished or delivered under or pursuant
to this Agreement shall prove to be untrue or incorrect in any
material respect as of the date it was made, furnished or
delivered;
(3) if the Company defaults in the due and punctual
performance or observance of any covenant contained in this
Agreement, and such default continues for a period of 30 days
after written notice thereof to the Company by any Subscriber;
provided, however, that an Event of Default shall not be
deemed to have occurred if, at the end of such 30-day period,
the Company is diligently attempting to cure such default and
the existence of such default is not adversely affecting the
business or financial condition of the Company; or
(4) if the Subscriber's designees to the Company's
board of directors shall fail to be elected to the board of
directors in the manner and under the terms and conditions set
forth in Section 6.i of this Agreement.
b. Remedy Upon Events of Default. Upon the occurrence of an
Event of Default, then the holders of Series A Preferred and/or
Conversion Shares shall have all remedies available under applicable
law or in equity.
c. Notice of Defaults. When, to its knowledge, any Event of
Default has occurred or exists, the Company shall give written notice
within three business days of such Event of Default to the holders of
all outstanding Series A Preferred. If the holder of any of the Series
A Preferred shall give any notice or take any other actions in respect
of a claimed Event of Default, the Company will forthwith given written
notice thereof to all other holders of Preferred Shares at the time
outstanding, describing such notice or action and the nature of the
claimed Event of Default.
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d. Remedies Not Waived. No course of dealing between the
Company and the Subscriber or any holder of any Series A Preferred and
no delay in exercising any right, power or remedy conferred hereby or
by any such security or now or hereafter existing at law or in equity
or by statute or otherwise, shall operate as a waiver of or otherwise
prejudice any such right, power or remedy; provided, however, that this
Section shall not be construed or applied so as to negate the
provisions and intent of any statute which is otherwise applicable.
e. Remedies Cumulative. No right, power or remedy conferred
upon any holder of the Series A Preferred shall be exclusive, and each
such right, power or remedy shall be cumulative and in addition to
every other right, power or remedy, whether conferred hereby or by any
such security or now or hereafter available at law or in equity or by
statute or otherwise.
f. Attorney Fees to the Prevailing Party. The parties hereto
agree that in the event either party brings an action for breach of
this Agreement or for indemnification, the prevailing party shall be
entitled to receive all attorney fees, costs and expenses incurred,
including without limitation such reasonable fees and expenses of
attorneys (whether or not litigation is commenced) and reasonable fees,
costs and expenses of appeals.
13. Lock-up Agreement. The Subscriber agrees, in connection with
the initial underwritten public offering of the Common Stock, (1) not to sell,
make short sale of, loan, grant any options for the purchase of, or otherwise
dispose of any shares of Series A Preferred or the Common Stock into which it is
converted held by the Subscriber (other than those shares, if any, included in
the applicable registration statement) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
for 180 days from the effective date of such registration statement and (2) to
execute any written instrument reflecting the agreement set forth in (1) above
as may be requested by the underwriters at the time of the initial public
offering.
14. Indemnification. The Subscriber agrees to indemnify and hold
the Company harmless from and against any liability, loss or expense (including
reasonable attorneys' fees) if the Subscriber, alone or with others, defaults in
any of the Subscriber's representations, warranties or covenants set forth
herein. The Company agrees to indemnify and hold the Subscriber harmless from
and against any liability, loss or expense (including reasonable attorneys'
fees) (a) if the Company defaults in any of the Company's representations,
warranties or covenants set forth herein and (b) incurred by Subscriber in
connection with, or arising from, any claims of third parties that the Company
improperly terminated its Subchapter S tax status.
15. No Filing. The Subscriber understands that no federal or state
agency has made any finding or determination as to the fairness for investment
nor any recommendation or endorsement of the Series A Preferred.
16. Successors. The Subscriber's rights and obligations hereunder
shall inure to the benefit of, and be binding upon and enforceable against his
or her heirs, representatives and successors. Notwithstanding the foregoing,
neither this offer nor any rights granted to the Subscriber herein may be
transferred or assigned by the Subscriber.
17. Notices. All notices to the Subscriber will be deemed given
when mailed by first class mail, postage prepaid, to the address designated by
the Subscriber below.
18. Questionnaires. The Subscriber understands that he or she must
complete Part I of the Subscriber Information questionnaire, and Part II of the
Accreditation Criteria questionnaire.
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19. Governing Law. It is the intention of the Subscriber and the
Company that the laws of the State of Minnesota shall govern the validity of
this Subscription Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
20. Changes Waivers, Etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver discharge or termination is sought.
21. Survival of Representations and Warranties, Etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the
Subscribers or on their behalf, and the sale and purchase of the Series A
Preferred and the payment therefor. All statements contained in any certificate,
instrument or other writing delivered by or on behalf of the Company pursuant to
this Agreement (other than legal opinions) or in connection with or in
contemplation of the transactions herein contemplated shall constitute
representations and warranties by the Company hereunder.
IN WITNESS WHEREOF, the Subscriber has caused this Agreement to be
executed by its duly authorized representative and the Company has caused this
Agreement to be executed by signing in counterpart the acceptance form attached
to this Agreement.
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PART I
SUBSCRIBER INFORMATION
FOR
ENTITY SUBSCRIBER
-----------------------------------
Mailing Address
-----------------------------------
City State Zip
-----------------------------------
Telephone
IN WITNESS WHEREOF, the Subscriber has caused this Agreement to be
executed by its duly authorized representative by signing in counterpart the
acceptance form attached to this Agreement.
LAKES GAMING, INC.
By: /S/ Xxxx Xxxxxx
------------------------------------------------
Its: Chairman of the Board & Chief Executive Officer
------------------------------------------------
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CERTIFICATE OF SIGNATORY
(to be completed if the Series A Preferred are being subscribed for by
an entity)
I, Xxxx Xxxxxx, of the Lakes Gaming, Inc. (the "Entity"), hereby
certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Series A Preferred, and certify further that the Subscription Agreement has been
duly and validly executed on behalf of the Entity and constitutes a legal and
binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand as of this 15th day of June,
1999.
/s/ Xxxx Xxxxxx
----------------------------------------------
(Signature)
Xxxx Xxxxxx
----------------------------------------------
(Please Print Name)
Chairman of the Board & Chief Executive Officer
----------------------------------------------
(Position)
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PART II
ACCREDITATION CRITERIA
TO BE COMPLETED BY ALL SUBSCRIBERS
The shares are being offered only to "accredited investors" as defined within
the meaning of rule 501 (a) of Regulation D promulgated by the Securities and
Exchange Commission. An accredited investor is one who fulfills any one of the
following criteria.
Please indicate (by check) which criteria apply:
A. For an INDIVIDUAL INVESTOR (a natural person), please indicate (by a
check) which criteria apply:
[ ] (1) Individual income in excess of $200,000 in each
of the two most recent years or joint income (with
such investor's spouse) in excess of $300,000 in each
of those years and a reasonable expectation of
reaching the same income level in the current year.
[ ] (2) Individual net worth, or Joint net worth (with such
investor's spouse), of $1,000,000 or more.
[ ] (3) A director or executive officer of the Company.
B. For a LEGAL ENTITY (other than a natural person), please indicate (by a
check) which criteria apply:
[ ] (1) A bank, savings and loan association or similar
institution, as defined in the Securities Act of
1933, whether acting in its individual or fiduciary
capacity.
[ ] (2) A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934.
[ ] (3) An insurance company as defined in the Securities Act of
1933.
[ ] (4) An investment company registered under the Investment
Company Act of 1940.
[ ] (5) A business development company as defined in the
Investment Company Act of 1940.
[ ] (6) A private business development company as defined in the
Investment Advisors Act of 1940.
[ ] (7) A Small Business Investment Company licensed by the U.S.
Small Business Administration under the Small Business
Investment Act of 1958.
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[ ] (8) An organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts
or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000.
[ ] (9) A plan established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions, for the benefit of its employees, if
such plan has total assets in excess of $5,000,000.
[ ] (10) An employee benefit plan within the meaning of Title I of
the Employment Retirement Income Security Act of 1974, if
the investment decision is made by a plan fiduciary, as
defined in such Act, which is either a bank, savings and
loan association, insurance company, or registered
investment advisor, or if the employee benefit plan has
total assets in excess of $5,000,000, or if a
self-directed plan, the investment decisions are made
solely by persons that are accredited investors.
[ ] (11) A trust with total assets in excess of
$5,000,000, not formed for the specific purpose of
acquiring the Securities offered, whose purchase is
directed by a "sophisticated" person. the person or
persons making the investment decisions of the trust
should complete Part I (unless B(1) or B(2) also apply).
[ ] (12) An entity in which all of the equity owners are
"accredited investors."
Date: June 15, 1999
---------------- Lakes Gaming, Inc.
------------------------------
Name of Subscriber
/s/ Xxxx Xxxxxx
------------------------------
Signature of Subscriber
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ACCEPTANCE
This Subscription Agreement of Lakes Gaming, Inc. is hereby accepted by
Xxxxxxx.xxx, Inc. as of June 15, 1999.
XXXXXXX.XXX, INC.
By: Xxx Xxxxxxxx
------------------------------
Its: President
------------------------------
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