SUBSCRIPTION AGREEMENT
This Subscription Agreement (this "Agreement") is made and
entered into as of the 22nd day of September 1999, between
Casinovations Incorporated, a Nevada corporation (the "Company"),
and ____________________________ ("Purchaser"), and is delivered
and executed in connection with the Company's sale of the
Company's common stock, $0.001 par value (the "Common Stock").
1. DESCRIPTION OF SHARES
This Agreement sets forth the terms and conditions under
which Purchaser will purchase ____________________________
(________) shares of the Company's Common Stock (the "Shares").
2. PURCHASE AND SALE OF SHARES
(a) Purchaser agrees to purchase and the Company agrees to
issue to Purchaser the Shares for ____________________________
($_______) (based upon Two Dollars Sixty Cents ($2.60) per share)
(the "Investment Amount"). Purchaser shall pay the Investment
Amount as follows: No later than November 1, 1999, Purchaser
shall pay the entire balance of the Investment Amount, and upon
the receipt of the funds, the Company will immediately cause the
correct number of the Shares (based upon $2.60 per share) to be
issued to Purchaser.
(b) All funds payable by Purchaser shall be in cash or by
certified or cashiers check or wire transfer in same day funds.
3. RECEIPT OF DOCUMENTS
Purchaser hereby acknowledges receipt of a copy of: (1)
this Agreement; (2) the Company's Annual Report for the Year
ended December 31, 1998 on Form 10-KSB; (3) the Company's
Quarterly Report for the Quarter ended March 31, 1999 on Form 10-
QSB; (4) the Company's Notice of Annual Meeting of Stockholders
dated March 6, 1999 for the Meeting of Stockholders on March 29,
1999; (5) the Company's Current Report on Form 8-K dated March
29, 1999; (6) the Company's Current Report on Form 8-K dated
April 30, 1999; (7) the Company's Current Report on Form 8-K
dated May 28, 1999; (8) the Company's Current Report on Form 8-K
dated June 24, 1999; (9) the Company's Quarterly Report for the
Quarter ended June 30, 1999 on Form 10-QSB; and (10) the
Company's Current Report on Form 8-K dated August 18, 1999
(collectively, the "Documents").
4. USE OF PROCEEDS; NO REFUNDS
The Investment Amount shall be used to for general working
capital purposes. Upon execution and delivery of this Agreement,
the Investment Amount shall not, under any circumstances, be
refunded to Purchaser.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
(a) Purchaser, either alone or through Purchaser's
purchaser representative (as that term is defined under Rule
501(h) of Regulation D under the Securities Act of 1933, as
amended (the "Securities Act") ("Purchaser's Representative,"
herein)), if any, has had an opportunity to ask questions of and
receive answers from duly designated representatives of the
Company concerning the terms and conditions of this Agreement and
has been afforded an opportunity to examine such documents and
other information which Purchaser or Purchaser's Representative,
if any, has requested for the purpose of answering any question
Purchaser or Purchaser's Representative, if any, may have
concerning the business and affairs of the Company.
(b) Purchaser's principal residence is located in the State
of ____________. Purchaser has received and reviewed this
Agreement and the Documents and acknowledges the Company made
available to Purchaser at a reasonable time prior to the
execution of this Agreement the opportunity to ask questions and
receive answers concerning the business and affairs of the
Company and the terms and conditions of the sale of the Shares as
contemplated by this Agreement and to obtain any additional
information (which the Company possesses or can acquire without
unreasonable effort or expense) as may be necessary to verify the
accuracy of information furnished to Purchaser. Purchaser (i) is
able to bear the loss of his entire investment without any
material adverse effect on his economic stability, and (ii) has
such knowledge and experience in financial and business matters
that he is capable of evaluating the merits and risks of the
investment to be made by him pursuant to this Agreement.
(c) Purchaser and Purchaser's Representative, if any,
understand that the Shares are being offered and sold only to
"accredited investors" (as that term is defined under Rule 501(a)
of Regulation D), and PURCHASER REPRESENTS THAT PURCHASER IS AN
ACCREDITED INVESTOR. Purchaser understands the Company is relying
on Purchaser with respect to the accuracy of this representation.
(d) Purchaser and Purchaser's representative, if any,
understand that this Agreement may not comply with the
information requirements of Regulation D for offers and sales to
non-accredited investors (see Regulation D, Rule 502(b)), and,
consequently, Purchaser understands the significance of its
representation to the Company that it is an accredited investor.
Purchaser and Purchaser's representative, if any, acknowledge
that they were encouraged by the Company to request all
additional information which might be material or important in
order for Purchaser to make an informed investment decision with
respect to the Company.
(e) The Shares are being purchased for investment purposes
only for such Purchaser's own account and not with the view to,
or for resale in connection with, any distribution or public
offering thereof. Purchaser understands that the Shares have not
been registered under the Securities Act or any state securities
laws by reason of their contemplated issuance in transactions
exempt from the registration requirements of the Securities Act
and applicable state securities laws, and that the reliance of
the Company and others upon these exemptions is predicated in
part upon the representation by Purchaser.
(f) Purchaser has taken the time to carefully read this
Agreement, the Documents and any other information furnished to
Purchaser by the Company in connection with this Agreement.
(g) Purchaser was not solicited to purchase the Shares by
any means of general solicitation, including but not limited to
the following: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio; (ii) any meeting
where attendees were invited by any general solicitation or
general advertising.
(h) Purchaser and Purchaser's Representative, if any, are
aware that the Shares are and will be, when issued, "restricted
securities" as that term is defined in Rule 144 (the "Rule") of
the rules and regulations promulgated under the Securities Act.
Purchaser and Purchaser's Representative, if any, are fully aware
of the applicable limitations on the resale of the resulting
shares. The Rule only permits sales of "restricted securities"
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held for not less than one year upon compliance with the
requirements of such Rule. If the Rule is available to
Purchaser, Purchaser may make only routine sales of the Shares in
limited amounts in accordance with the terms and conditions of
the Rule. Purchaser is fully aware that in any event, there is
not likely to be any market for the Shares and that finding a
purchaser for the Shares could be extremely difficult.
(i) Purchaser and Purchaser's Representative, if any,
understand that any and all certificates representing the
resulting shares shall bear a legend substantially as follows,
which legend Purchaser has read and understands:
The Shares represented by this Certificate have not
been registered under the Securities Act of 1933 (the
"Act") or the securities laws of any state and are
"restricted securities" as that term is defined in Rule
144 under the Act. Such Shares may not be offered for
sale, sold or otherwise transferred except pursuant to
an effective registration statement under the Act and
the applicable state securities laws or pursuant to an
exemption from registration thereunder, the
availability of which is to be established to the
satisfaction of counsel to the issuer.
(j) Purchaser acknowledges that in making its investment
decision Purchaser has relied upon its examination of the Company
and its officers, directors and employees regarding the merits
and risks involved. Purchaser has consulted its own attorney,
business or tax advisor as to legal, business or tax advice.
(k) Purchaser represents and warrants that Purchaser can
bear the economic risk of loss of Purchaser's entire investment
in the Company. Purchaser understands that an investment in the
Company involves substantial risks, including, without
limitation, the risk factors described in the Documents and the
following:
(i) NEED FOR ADDITIONAL FINANCING. The Company, at
this time, has limited capital resources. To continue
operations, the Company may require additional financing for
working capital and general business purposes. No assurance
can be given that the Company will obtain any additional
outside financing on terms that are favorable to the Company
or in amounts necessary to fund its cash requirements.
(ii) DILUTION. If the Company obtains additional funds
through private or public equity or debt financings,
Purchaser may experience substantial dilution as a
consequence of such future financings, including, without
limitation, a reduction in his respective percentage
ownership in the Company.
(iii) COMPETITION. The gaming and gaming related
products industry is characterized by intense competition.
Many of the Company's competitors have far greater
experience and financial resources than the Company. No
assurance can be given that the Company will be able to
compete effectively against its competitors.
(iv) DEPENDENCE ON KEY PERSONNEL. The Company's
success depends to a significant extent on the performance
of certain key personnel. The loss of such key personnel
could materially and adversely affect the Company. The
Company has not executed employment agreements with all such
key personnel.
(v) LIMITATIONS ON TRANSFERABILITY. Transferability
of the Shares sold pursuant to this Agreement will be
restricted. Purchaser will be required to bear the economic
risk of his investment in the Company for an indefinite
period of time.
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(vi) ABSENCE OF MARKET FOR THE SHARES. The Shares are
being offered exclusively to accredited investors for
investment purposes only. There is presently no public
market for the Shares. Although the Company intends to
cause its common stock to begin trading, there is no
assurance that this will occur or that if trading does
occur, that there will be an active or liquid trading market
for the Company's common stock. THE SHARES ARE ONLY
SUITABLE FOR PERSONS WHO HAVE SUBSTANTIAL FINANCIAL
RESOURCES, HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT IN
THE COMPANY AND WHO ARE PREPARED TO LOSE THEIR INVESTMENT IN
THE COMPANY IN ITS ENTIRETY.
(vii) TAX RISKS. An investment in the Shares may
involve material and substantial tax consequences to
Purchaser. Purchaser is urged to consult with tax counsel
and/or a tax accountant or Purchaser's own choice concerning
the tax consequences particular to Purchaser which may arise
from subscribing to, holding and/or disposing of the Shares.
6. REGISTRATION RIGHTS
(a) Purchaser shall have the right at any time to include
any and all of the Shares (together with other shares of Common
Stock beneficially owned by Purchaser, hereunder collectively,
the "Shares") as part of any registration of securities filed by
the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Securities Act,
or pursuant to Form S-8 or any equivalent form); provided,
however, that, (i) if such Shares are freely saleable without
restriction under an exemption from the registration requirements
of the Securities Act or if such Shares are already covered by an
effective registration statement; or (ii) if, in the opinion of
the Company's managing underwriter, underwriters, placement agent
or placement agents, if any, for such offering, the inclusion of
the Shares, when added to the shares of Common Stock being
registered by the Company, will exceed the maximum amount of
Common Stock that can be marketed (A) at a price reasonably
related to their then current market value, or (B) without
materially and adversely affecting the entire offering, the
Company shall nevertheless register all or any portion of the
Shares required to be so registered but such Shares shall not be
sold by Purchase until the later of (Y) ninety (90) days after
the registration statement for such offering has become effective
and (Z) thirty (30) days after the offering of the Company's
shares has been completed; and provided further that, if any
shares of Common Stock are being registered for sale on behalf of
other stockholders in such offering and such stockholders have
not agreed to defer such sale until the expiration of such ninety
(90) day period, the number of securities to be sold by all
stockholders in such public offering during such ninety (90) day
period shall be apportioned pro rata among all such selling
stockholders, including Purchaser, according to the total amount
of shares of Common Stock proposed to be sold by said selling
stockholders, including Purchaser.
(b) All expenses incurred in connection with any
registration, qualification or compliance pursuant to the
registrations pursuant to this Section 6 shall be borne by the
Company, but Purchaser shall pay any and all commissions in
connection with the sale of the Shares and shall be responsible
for the costs of Purchaser's own counsel or other consultants in
connection with such registration or the subsequent sale of
Shares. Purchaser shall exercise the "piggy-back" registration
rights provided for in this Section 6 by giving written notice
within five (5) business days of the receipt of the Company's
notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to
the "piggy-back" registration rights to remain effective until
all Shares registered thereunder are sold or are otherwise freely
saleable without restriction under an exemption from the
registration requirements of the Securities Act.
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(c) In the case of each registration effected by the
Company pursuant to this Section 6, the Company will keep
Purchaser advised in writing as to the initiation of each
registration statement and as to the completion thereof. At its
expense, the Company will use its reasonable best efforts to:
(i) Prepare and file with the Commission, and
applicable state securities regulatory agencies, such
amendments and supplements to such registration statement
and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions
of the Securities Act, and applicable state securities laws,
with respect to the disposition of all securities covered by
such registration statement;
(ii) Furnish such number of prospectuses and other
documents incident thereto, including any amendment of or
supplement to the prospectus, as Purchaser from time to time
may reasonably request;
(iii) Notify Purchaser, when a prospectus relating
to the registration of the Shares is required to be
delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such
registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in
the light of the circumstances then existing, and at the
request of Purchaser, prepare and furnish to Purchaser a
reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Shares, such
prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the
circumstances then existing; and
(iv) Cause all such Shares registered pursuant
hereunder to be listed on each securities exchange or
quotation medium on which similar securities issued by the
Company are then listed or quoted, if any.
(d) The "piggy-back" registration rights granted to
Purchaser by the Company under this Section 6 may not be
transferred or assigned to a transferee or assignee without the
express written consent of the Company.
(e) The Company shall have the right to include the Shares
in any Registration Statement the Company should file under the
Securities Act for the public offering of shares of the Company's
Common Stock. In the event the Company should exercise its right
under this section, the Company is bound by the registration
procedures of Section 6.
7. INDEMNIFICATION BY PURCHASER
Purchaser agrees that it shall indemnify and hold harmless
the Company and its officers, directors, employees, agents and
professional advisors from and against any and all loss, damage,
liability, or expense, including costs and reasonable attorneys'
fees, that the foregoing, or any of them, may incur by reason of,
or in connection with, any misrepresentation, inaccurate
statement or material omission made by Purchaser herein, any
breach of any of Purchaser's warranties, or any failure on
Purchaser's part to fulfill any of Purchaser's covenants,
agreements or obligations set forth herein.
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8. AUTHORIZATION
Purchaser hereby authorizes the Company and its officers,
employees and agents to investigate Purchaser's personal and
business background including, without limitation, communication
with any employer, former employer, business associate,
government agency, bank or other credit reference. Purchaser
hereby authorizes any person, organization or entity that may
have any knowledge or information Purchaser personal or business
background to provide such information to the Company as the
Company may request.
9. NO BROKERS OR FINDERS
No person, firm or corporation has or will have, as a result
of any act or omission by such Purchaser, any right, interest or
valid claim against Purchaser or the Company for any commission,
fee or other compensation as a finder or broker, or in any
similar capacity, in connection with the transactions
contemplated by this Agreement.
10. MISCELLANEOUS
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Nevada, disregarding
any principles of conflicts of law that would otherwise provide
for the application of the substantive law of another
jurisdiction. The Company and Purchaser agree that any legal
suit, action or proceeding arising out of or relating to this
Agreement shall be instituted exclusively in Nevada State
District Court or in the United States District Court for the
District of Nevada, waive any objection to the venue of any such
suit, action or proceeding and the right to assert that such
forum is not a convenient forum, and consent to the jurisdiction
of the Nevada State District Court or the United States District
Court for the District of Nevada in any such suit, action or
proceeding.
(b) This Agreement contains the entire agreement between
the Company and Purchaser with regard to the subject matter
hereof and may not be modified or waived except in a writing
signed by both the Company and Purchaser.
(c) The headings of this Agreement are for convenience and
reference only, and shall not limit or otherwise affect the
interpretation of any term or provision hereof.
(d) This Agreement and the rights, powers, and duties set
forth herein shall, except as otherwise expressly provided
herein, be binding upon and inure to the benefit of, the heirs,
executors, administrators, legal representatives, successors, and
assigns of the parties hereto.
(e) Purchaser may not assign any of Purchaser's rights or
interests in and under this Agreement without the prior written
consent of the Company, and any attempted assignment without such
consent shall be null and void and without any force or effect
whatsoever.
(f) If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or
because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of
this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any
other relief to which it may be entitled.
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(g) This Agreement shall be construed in accordance with
its intent and without regard to any presumption or any other
rule requiring construction against the party causing the same to
be drafted.
(h) Each party to this Agreement agrees that this Agreement
may be executed at different times and in multiple counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(i) If any provision of this Agreement, or any portion of
any provision, shall be deemed invalid or unenforceable for any
reason whatsoever, such invalidity or unenforceability shall not
affect the enforceability and validity of the remaining
provisions hereof.
In Witness Whereof, the undersigned has executed this
Agreement as of the date first set forth above.
"Purchaser" CASINOVATIONS INCORPORATED
---------------------------- By: -------------------------
-------------------- XXXXXX X. XXXX
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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