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                                                                    EXHIBIT 10.2
                    INNOVATIVE GAMING CORPORATION OF AMERICA
                              4725 Aircenter Circle
                               Reno, Nevada 89502


                             SUBSCRIPTION AGREEMENT
                      Including Investment Representations


                      Series C Convertible Preferred Stock


Ladies and Gentlemen:

The Shaar Fund, Ltd. ("Buyer") desires to purchase upon the terms and conditions
set forth below from Innovative Gaming Corporation of America, a Minnesota
corporation (the "Company"), Series C Convertible Preferred Stock of the Company
(the "Preferred Shares") convertible into shares of Common Stock of the Company
(the "Common Shares," and collectively with the Preferred Shares, the "Shares")
pursuant to the terms of that certain Certificate of Designation of Series C
Convertible Preferred Stock (the "Certificate of Designation"). This Agreement,
the Certificate of Designation and the Registration Rights Agreement by and
between Buyer and the Company dated the date hereof (the "Registration Rights
Agreement") shall be collectively referred to herein as the "Transaction
Documents").

     1. AGENT. The name of Buyer's agent or sub-agent for this offering is
                                            .
--------------------------------------------
(INSERT NAME OF AGENT/SUB-AGENT, IF ANY)

     2. SUBSCRIPTION.

          a.   Buyer hereby subscribes to purchase 1,400 Preferred Shares and
               agrees to pay to the Company the purchase price of: $1,400,000.

          b.   Buyer shall pay the purchase price by delivering at the Closing
               same day funds in United States Dollars to the Company, to be
               delivered to the order of the Company upon delivery of the
               Preferred Shares.

          c.   Company and Buyer are executing and delivering this Agreement in
               reliance upon the exemption from securities registration afforded
               by Rule 506 under Regulation D ("Regulation D") as promulgated by
               the United States Securities and Exchange Commission under the
               Securities Act of 1933, as amended (the "Securities Act").



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         3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. In connection
with the sale of the Preferred Shares to it, Buyer hereby acknowledges,
represents, warrants and covenants as follows:

                    a.   In purchasing the Preferred Shares, Buyer has not
                         relied on any information or representation other than
                         that which is publicly disclosed or that which is
                         contained in this Agreement, the Registration Rights
                         Agreement or the Certificate of Designation relating to
                         the Preferred Shares.

                    b.   Buyer has been given access to full and complete
                         information regarding the Company (including the
                         opportunity to meet with Company officers), including
                         the SEC Documents (as defined herein) and has utilized
                         such access to its satisfaction.

                    c.   Buyer is experienced and knowledgeable in financial and
                         business matters, and is capable of evaluating the
                         merits and risks of investing in the Preferred Shares.

                    d.   Buyer believes the investment is suitable for it based
                         on its investment objectives and financial needs. Buyer
                         can bear the economic risk of an investment in the
                         Preferred Shares for an indefinite period of time and
                         can afford a complete loss of such investment.

                    e.   Buyer understands that there will be no market for the
                         Preferred Shares, that there are significant
                         restrictions on the transferability of the Preferred
                         Shares, and that for these and other reasons, Buyer may
                         not be able to liquidate an investment in the Preferred
                         Shares for an indefinite period.

                    f.   Buyer acknowledges that the Company's Articles of
                         Incorporation provide that no person or entity may
                         become the beneficial owner of 5% or more of the
                         Company's shares of capital stock of every series and
                         class unless such person or entity agrees to provide
                         personal background and financial information to gaming
                         authorities, consent to a background investigation, and
                         respond to questions from gaming authorities. Buyer
                         further acknowledges that the Company may, pursuant to
                         the terms of its Articles of Incorporation and Section
                         6(g) of the Certificate of Designation, repurchase
                         shares held by any person or entity whose status as a
                         shareholder, jeopardizes the approval, continued
                         existence, or renewal by any gaming authority of a
                         tribal, federal or state license or franchise held by
                         the Company or any of its subsidiaries. The foregoing
                         restrictions will be contained in a legend on each
                         certificate of Common Stock.

                  g.     Buyer has no existing short position with respect to
                         the Common Stock of the Company and agrees not to
                         enter into any short sales or other hedging
                         transactions with respect to the Common Stock of the
                         Company, or cause others to do so, at any time after
                         the execution of this Agreement by it and

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                         prior to the date of effectiveness of the Registration
                         Statement relating to the Common Shares with the
                         Securities and Exchange Commission ("SEC
                         Effectiveness"). After SEC Effectiveness, so long as
                         Preferred Shares remain outstanding, Buyer agrees not
                         to enter into any short sales or hedging transactions
                         in Common Stock that would exceed the number of
                         Preferred Shares that are available for conversion
                         pursuant to the Certificate of Designation relating to
                         the Preferred Shares. Buyer further agrees that, at all
                         times after the execution of this Agreement by it and
                         prior to ten days after the closing of the purchase of
                         the Preferred Shares, it will keep its purchase of the
                         Preferred Shares confidential, except as required by
                         law and except as necessary in the ordinary course of
                         its business.

                    h.   Buyer is not subscribing for the Preferred Shares as a
                         result of or pursuant to any advertisement, article,
                         notice, or other communication published in any
                         newspaper, magazine, or similar media or broadcast over
                         television or radio.

                    i.   Buyer acknowledges that in no event shall Buyer be
                         entitled to convert any portion of the principal of or
                         interest on the Preferred Shares in excess of that
                         amount upon conversion of which the sum of 1) the
                         number of Common Shares beneficially owned by Buyer and
                         its affiliates (other than shares of Common Shares
                         which may be deemed beneficially owned through
                         ownership of the unconverted portion of the principal
                         amount of, and interest on, the Preferred Shares); and
                         2) the number of Common Shares issuable upon conversion
                         of the Preferred Shares, would result in beneficial
                         ownership by Buyer and its affiliates of more than 4.9%
                         of the outstanding shares of the Company's issued and
                         outstanding Common Stock. Buyer acknowledges that any
                         beneficial ownership in excess of 4.9% may require
                         filing certain documents with the Securities and
                         Exchange Commission and certain state gaming regulatory
                         agencies and that beneficial ownership in excess of 10%
                         could trigger certain Minnesota anti-takeover statutes.

                    j.   Buyer acknowledges that the Company or any transfer
                         agent of the Company shall register the transfer or
                         exchange of any of the Preferred Shares only upon
                         receipt of the certificate(s) evidencing such Preferred
                         Shares with the transfer notice set forth thereon
                         appropriately completed, upon the receipt of an opinion
                         of counsel acceptable to the Company, that the transfer
                         is exempt from registration under the Securities Act of
                         1933 and upon receipt in writing from the transferee or
                         the recipient of such Preferred Shares in such transfer
                         or exchange (as the case may be) of a certificate
                         setting forth the representations, warrants and
                         covenants in Paragraphs 3 and 4 hereof transferee or
                         any affiliated person of such transferee, provided,
                         however, that the Buyer may not transfer or exchange
                         any of the Preferred Shares to any proposed transferee
                         who the Company reasonably believes is: (1) a convicted
                         felon; (2) convicted of gaming-related offenses or (3)
                         publicly known to be associated with organized crime.
                         With respect to such transferee, the

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                           Company has ten (10) business days following receipt
                           of written notice of the identity of such transferee
                           to conduct any investigation and make any objection
                           to such transfer.

                  k.       Buyer acknowledges that it is not acquiring the
                           Shares for the purpose of exerting any control over
                           the Company.

                  l.       The Company acknowledges and agrees that the Buyer
                           makes no representations or warranties with respect
                           to the transactions contemplated hereby other than
                           those specifically set forth in this Section 3, and
                           in Sections 4, 5 and 7 of this Agreement.

       4.         INVESTMENT INTENT; RESTRICTIONS ON TRANSFER OF PREFERRED
                  SHARES.

                  a.       Buyer represents and warrants that it is purchasing
                           the Preferred Shares for its own account, for
                           investment and without the current intention of
                           reselling or redistributing the Preferred Shares
                           except pursuant to the terms of this Agreement and
                           pursuant to an effective registration statement under
                           the 1933 Act and State Laws or pursuant to an
                           exemption from such registration. Buyer has made no
                           arrangement or agreement with others regarding any of
                           the Preferred Shares.

                  b.       Buyer understands that Preferred Shares have not been
                           registered as of the date of the closing of this
                           offering under the Securities Act of 1933, as amended
                           (the "1933 Act"), or applicable state securities laws
                           (the "State Laws"), and are being offered and sold
                           pursuant to exemptions from registration under the
                           1933 Act and the State Laws. Buyer understands that
                           the Company's reliance on such exemptions is
                           predicated in part on its representations and
                           warranties contained herein.

                  c.       Buyer understands that neither the Preferred Shares
                           nor the underlying Common Shares may be sold by it
                           except pursuant to an effective registration
                           statement under the 1933 Act and State Laws, or an
                           exemption from such registration.

                  d.       Buyer understands that any transfer of the Preferred
                           Shares by it will be further restricted by a legend
                           placed on the certificate(s) representing the
                           Preferred Shares containing substantially the
                           following language:

                           "THE SHARES REPRESENTED BY THIS CERTIFICATE
                           HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
                           ACT OF 1933 OR THE SECURITIES LAW OF ANY STATE.
                           THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
                           AND WITHOUT A VIEW TO THEIR DISTRIBUTION AND
                           MAY NOT BE SOLD OR OTHERWISE DISPOSED OF IN

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                         THE  ABSENCE OF ANY EFFECTIVE REGISTRATION STATEMENT
                         FOR THE SHARES UNDER THE SECURITIES ACT OF 1933 OR
                         UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE
                         UNDER THE SECURITIES LAWS."

                    e.   Certificates for Common Shares issued on conversion of
                         Preferred Shares shall not contain any legend, other
                         than the legends indicated on Annex A, if the
                         conversion of Preferred Shares occurs at any time while
                         a Registration Statement relating to the Common Stock
                         issuable upon conversion of the Preferred Shares (the
                         "Common Shares Registration Statement") is effective
                         under the Securities Act or, in the event there is not
                         an effective Common Shares Registration Statement at
                         such time, if in the opinion of counsel to the Company
                         such legend is not required under applicable
                         requirements of the Securities Act (including judicial
                         interpretations and pronouncements issued by the staff
                         of the Commission). The Company agrees that it will
                         provide the Buyer, upon request, with a certificate or
                         certificates representing the Common Shares issuable
                         upon exercise of the Preferred Shares free from such
                         legend, other than the legends indicated on Annex A, at
                         such time as such legend is no longer required
                         hereunder. The Company may not make any notation on its
                         records or give instructions to any transfer agent of
                         the Company which enlarge the restrictions of transfer
                         set forth in this Section 4(e).

         5.       RESIDENCE.  Buyer represents and warrants as follows.

                  a.     Buyer is a corporation organized and existing under the
                         laws of British Virgin Islands.

                  b.     The Preferred Shares are being purchased by Buyer in
                         its name solely for its own beneficial interest and not
                         as nominee for, on behalf of, for the beneficial
                         interest of, or with the intention to transfer to, any
                         other person, trust, or organization, except as
                         specifically set forth in this Subscription Agreement.

         6.       CONVERSION. The Company shall use its best efforts to issue
and deliver to Buyer a certificate or certificates for the number of Common
Shares to which Buyer shall be entitled within three (3) business days after
Buyer has fulfilled all conditions required for conversion as set forth in this
Agreement and the Certificate of Designation of Series C Preferred Stock (the
"Deadline"). The Company understands that a delay in the issuance of the
registered Common Shares beyond the Deadline could result in economic loss to
Buyer. The Company agrees to pay liquidated damages to Buyer for late issuance
of registered Common Shares to Buyer upon conversion in the amount of one
percent (1%) of the requested conversion amount, per day, beginning on the fifth
(5th) business day from the date of receipt by the Company of a duly executed
notice of conversion accompanied by the certificate representing the Preferred
Shares, all in accordance with this Agreement, the Preferred Shares and the
requirements of the Company's transfer agent. Said liquidated damages

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shall accrue each day through the date the registered Common Shares are issued
to Buyer upon conversion, and shall be paid by wire transfer to an account
designated by Buyer upon the earlier to occur of (i) issuance of the Preferred
Shares to Buyer, or (ii) each monthly anniversary of the receipt by the Company
of such Buyer's notice of conversion. Nothing herein shall waive the Company's
obligations to deliver Common Shares upon conversion of the Preferred Shares or
Buyer's other rights and remedies in the event of a breach of this Section 6.

         7. INVESTOR QUALIFICATIONS. The undersigned subscriber represents and
warrants that the undersigned was not formed for the specific purpose of
acquiring shares of the Company and is a corporation with total assets in excess
of $5,000,000.

         8. REPRESENTATIONS, WARRANTS AND COVENANTS OF THE COMPANY. In
connection with the sale of the Preferred Shares by it, the Company hereby
acknowledges, represents, warrants and covenants as follows:

            8.1      Corporate Organization. The Company is a corporation
                     duly organized, validly existing and in good standing
                     under the laws of the State of Minnesota, and has the
                     requisite corporate power and authority to carry on
                     its business in all material respects as it is now
                     being conducted and to enter into this Agreement and
                     the Registration Rights Agreement by and between the
                     Company and Buyer dated as of the date hereof (the
                     "Registration Rights Agreement") and to issue
                     Preferred Shares and Common Stock pursuant to the
                     Certificate of Designation. Each of the Company's
                     subsidiaries is duly organized, validly existing and
                     in good standing under the laws of its respective
                     incorporation, with all requisite corporate power and
                     authority to carry out its business in all material
                     respects as it is now being conducted.

            8.2      Qualification. The Company and each of its
                     subsidiaries is duly qualified or licensed as a
                     foreign corporation in good standing in each
                     jurisdiction wherein the nature of its activities
                     makes such qualification or licensing necessary and
                     failure to be so qualified or licensed would have a
                     material adverse impact on its business.

            8.3      Corporate Acts and Proceedings. This Agreement and
                     the Registration Rights Agreement and the
                     consummation of the transactions contemplated by the
                     Certificate of Designation have been duly authorized
                     by all necessary corporate action on behalf of the
                     Company, and have been duly executed and delivered by
                     authorized officers of the Company. All corporate
                     action necessary for the authorization, creation,
                     issuance and delivery of the Preferred Shares and the
                     Common Shares, including reservation of such Common
                     Shares has been taken on the part of the Company.
                     This Agreement and the Registration Rights Agreement
                     are valid and binding agreements of the Company
                     enforceable in accordance with their respective
                     terms, except as the enforceability thereof may be
                     limited by bankruptcy, insolvency, moratorium,
                     reorganization or other similar laws affecting the

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                           enforcement of creditors' rights generally, and
                           except for judicial limitations on the enforcement of
                           the remedy of specific enforcement and other
                           equitable remedies.

                  8.4      Brokers or Finders. No person, firm or corporation
                           has or will have any right, interest or valid claim
                           against the Company for any commission, fee or other
                           compensation as a finder or broker, or in any similar
                           capacity, in connection with the transactions
                           contemplated by this Agreement.

                  8.5      Adverse Government or Legal Actions. There are no
                           legal or governmental actions, suits or
                           proceedings/pending, or to the best of the Company's
                           knowledge, threatened to which the Company is or may
                           be a party to which would adversely affect the
                           Company or the transactions

                  8.6      Capitalization. Except for stock options issued to
                           employees of the Company pursuant to the Company's
                           1992 Stock Option and Incentive Compensation Plan,
                           the Company's 1997 Director's Stock Option Plan, and
                           the Company's 1998 Non-Executive Stock Option Plan
                           and, except for issuances of convertible securities
                           indicated on Annex A, there have been no issuances of
                           capital stock, warrants, outstanding subscriptions,
                           contracts, calls, commitments or any purchase rights
                           of any nature or character (including preemptive
                           rights) relating to the Company's capital stock since
                           December 31, 1998. The authorized capital stock of
                           the Company consists of 100,000 shares of Common
                           Stock, of which 6,690,688 shares are outstanding on
                           the date hereof and 4,000 shares of Series B
                           Preferred Stock of which 2,375 are outstanding on the
                           date hereof. All of the issued and outstanding shares
                           of Common Stock and Preferred Stock have been duly
                           authorized and validly issued and are fully paid and
                           non-assessable. As of the date hereof, the Company
                           has outstanding stock options and warrants to
                           purchase shares of Common Stock. There are no
                           preemptive, subscription, "call" or other similar
                           rights to acquire the Common Stock that have been
                           issued or granted to any person.

                  8.7      Issuance of Shares. The Preferred Shares and the
                           Common Shares have been duly authorized and the
                           Preferred Shares, when issued, delivered and paid for
                           pursuant to the terms hereof and the Common Shares,
                           when issued pursuant to the terms of the Certificate
                           of Designation relating to the Preferred Shares, will
                           be duly authorized, validly issued, fully paid and
                           nonassessable and free from all taxes, liens and
                           other encumbrances and will not be subject to
                           preemptive rights. The Company has duly and validly
                           authorized and reserved for issuance 1,331,500 shares
                           of Common Stock for the conversion of 1,400 Preferred
                           Shares. The Company understands and acknowledges the
                           potentially dilutive effect to the Common Stock of
                           the issuance of the Common Stock and upon conversion
                           of the Preferred Stock, subject to enforceability in
                           bankruptcy. The Company further acknowledges that its

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                           obligation to issue Common Stock upon conversion of
                           the Preferred Shares, the Certificate of Designations
                           is absolute and unconditional regardless of the
                           dilutive effect that such issuance may have on the
                           ownership interests of other stockholders of the
                           Company and, subject to enforceability in bankruptcy,
                           notwithstanding the commencement of any case under 11
                           U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). In
                           the event the Company is a debtor under the
                           Bankruptcy Code, the Company hereby waives to the
                           fullest extent permitted any rights to relief it may
                           have under 11 U.S.C. ss. 362 in respect of the
                           conversion of the Preferred Stock. The Company
                           agrees, without cost or expense to the Buyer, to take
                           or consent to any and all action necessary to
                           effectuate relief under 11 U.S.C. ss. 362.

                  8.8      No Conflicts. The execution, delivery and performance
                           of the Transaction Documents by the Company and the
                           consummation by the Company of the transactions
                           contemplated hereby and thereby do not and will not
                           (i) conflict with or violate any provision of its
                           certificate of incorporation, bylaws or other charter
                           documents (each as amended through the date hereof)
                           or (ii) subject to obtaining the consents referred to
                           in Section 8.9, conflict with, or constitute a
                           default (or an event which with notice or lapse of
                           time or both would become a default) under, or give
                           to others any rights of termination, amendment,
                           acceleration or cancellation of, any agreement,
                           indenture or instrument (evidencing a Company debt or
                           otherwise) to which the Company is a party or by
                           which any property or asset of the Company or any of
                           its subsidiaries is bound or affected, or (iii)
                           result in a violation of any law, rule, regulation,
                           order, judgment, injunction, decree or other
                           restriction of any court or governmental authority to
                           which the Company or any of its subsidiaries is
                           subject (including federal and state securities laws
                           and regulations), or by which any property or asset
                           of the Company or any of its subsidiaries is bound or
                           affected, except in the case of each of clauses (ii)
                           and (iii), as could not, individually or in the
                           aggregate, have or result in a material adverse
                           effect on the financial condition of the Company and
                           its subsidiaries taken as a whole ("Material Adverse
                           Effect"). The business of the Company and its
                           subsidiaries is not being conducted in violation of
                           any law, ordinance or regulation of any governmental
                           authority, except for violations which, individually
                           or in the aggregate, do not have a Material Adverse
                           Effect.

                  8.9      Consents and Approvals. Except for consents and
                           approvals required by the Nevada Gaming Commission
                           and the Mississippi Gaming Commission, neither the
                           Company nor any of its subsidiaries is required to
                           obtain any consent, waiver, authorization or order
                           of, or make any filing or registration with, any
                           court or other federal, state, local or other
                           governmental authority or other Person in connection
                           with the execution, delivery and performance by the
                           Company of the Transaction Documents other than (i)
                           the filing of a Registration Statement with the
                           Securities and Exchange Commission (the
                           "Commission"), which shall be filed in the time
                           period set forth in the

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                         Registration Rights Agreement and (ii) other than, in
                         all other cases, where the failure to obtain such
                         consent, waiver, authorization or order, or to give or
                         make such notice or filing, could not have or result
                         in, individually or in the aggregate, a Material
                         Adverse Effect (together with the consents, waivers,
                         authorizations, orders, notices and filings referred to
                         in herein, the "Required Approvals"). The consummation
                         of the transactions contemplated hereby does not and
                         will not require the approval of the Company's
                         shareholders under the rules of the NASDAQ National
                         Market.

                    8.10 Litigation; Proceedings. Except as specifically
                         disclosed in the Disclosure Materials (as hereinafter
                         defined), there is no action, suit, notice of
                         violation, proceeding or investigation pending or, to
                         the best knowledge of the Company, threatened against
                         or affecting the Company or any of its subsidiaries or
                         any of their respective properties before or by any
                         court, governmental or administrative agency or
                         regulatory authority (Federal, state, county, local or
                         foreign) which (i) adversely affects or challenges the
                         legality, validity or enforceability of any of the
                         Transaction Documents or the Shares or (ii) could,
                         individually or in the aggregate, have or result in a
                         Material Adverse Effect.

                    8.11 No Default or Violation. None of the Company or any of
                         its subsidiaries (i) is not in default under or in
                         violation of (and no event has occurred which has not
                         been waived which, with notice or lapse of time or
                         both, would result in a default by the Company under),
                         nor has the Company received notice of a claim that it
                         is in default under or that it is in violation of, any
                         indenture, loan or credit agreement or any other
                         agreement or instrument to which it is a party or by
                         which it or any of its properties is bound except as
                         could not individually or in the aggregate, have or
                         result in, individually or in the aggregate, Material
                         Adverse Effect, (ii) is in violation of any order of
                         any court, arbitrator or governmental body, or (iii) is
                         in violation of any statute, rule or regulation of any
                         governmental authority, except as could not
                         individually or in the aggregate, have or result in,
                         individually or in the aggregate, a Material Adverse
                         Effect.

                    8.12 Private Offering. Assuming the accuracy of the
                         representations and warranties of the Buyer set forth
                         herein, the issuance and sale of the Preferred Shares
                         to the Buyer as contemplated hereby are exempt from the
                         registration requirements of the Securities Act. Except
                         as provided in the Transaction Documents, neither the
                         Company nor any person acting on its behalf has taken
                         or will take any action which might subject the
                         offering, issuance or sale of the Preferred Shares to
                         the registration requirements of the Securities Act.

                    8.13 SEC Documents; Financial Statements; No Adverse Change.
                         The Company has filed all reports required to be filed
                         by it under the Securities Exchange

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                         Act  of 1934, as amended (the "Exchange Act"),
                         including pursuant to Section 13(a) or 15(d) thereof,
                         for the two years preceding the date hereof (or such
                         shorter period as the Company was required by law to
                         file such material) (the foregoing materials being
                         collectively referred to herein as the "SEC Documents"
                         and, together with the Schedules to this Agreement, the
                         "Disclosure Materials") on a timely basis or has
                         received a valid extension of such time of filing and
                         has filed any such SEC Documents prior to the
                         expiration of any such extension. As of their
                         respective dates, the SEC Documents complied in all
                         material respects with the requirements of the
                         Securities Act and the Exchange Act and the rules and
                         regulations of the Commission promulgated thereunder,
                         and none of the SEC Documents,
                         when filed, contained any untrue statement of a
                         material fact or omitted to state a material fact
                         required to be stated therein or necessary in order to
                         make the statements therein, in light of the
                         circumstances under which they were made, not
                         misleading. All material agreements to which the
                         Company is a party or to which the property or assets
                         of the Company are subject have been filed as exhibits
                         to the SEC Documents as required. The financial
                         statements of the Company included in the SEC Documents
                         comply in all material respects with applicable
                         accounting requirements and the rules and regulations
                         of the Commission with respect thereto as in effect at
                         the time of filing. Such financial statements have been
                         prepared in accordance with generally accepted
                         accounting principles applied on a consistent basis
                         during the periods involved, except as may be otherwise
                         specified in such financial statements or the notes
                         thereto, and fairly present in all material respects
                         the financial position of the Company as of and for the
                         dates thereof and the results of operations and cash
                         flows for the periods then ended, subject, in the case
                         of unaudited statements, to normal year end audit
                         adjustments. Since the date of the financial statements
                         included in the last filed Annual Report on Form 10-K
                         for the year ended December 31, 1998 for the Company,
                         there has been no event, occurrence or development that
                         has had a Material Adverse Effect which has not been
                         specifically disclosed to the Buyer by the Company. The
                         Company last filed audited financial statements with
                         the Commission in connection with its 1998 Form 10-K,
                         and has not received any comments from the Commission
                         in respect thereof.

                    8.14 Form S-3 Eligibility. The Company is, and at the
                         Closing Date will be, eligible to register securities
                         for resale with the Commission under Form S-3
                         promulgated under the Securities Act.

                    8.15 Investment Company. The Company is not, and is not an
                         affiliate of, an "investment company" within the
                         meaning of the Investment Company Act of 1940, as
                         amended.

                    8.16 Solicitation Materials. The Company has not (i)
                         distributed any offering materials in connection with
                         the offering and sale of the Preferred Shares

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                           other than, or that are materially different from,
                           the Disclosure Materials and any amendments and
                           supplements thereto or (ii) solicited any offer to
                           buy or sell the Preferred Shares by means of any form
                           of general solicitation or advertising.

                  8.17     Listing and Maintenance Requirements Compliance.
                           Except as indicated on Schedule 8.17, since the date
                           on which the Company's Common Stock was initially
                           listed on the NASDAQ National Market, the Company has
                           not received written notice from the NASDAQ to the
                           effect that the Company is not in compliance with the
                           listing, maintenance or other requirements of such
                           market. The Company has no reason to believe that it
                           does not now or will not in the future meet any such
                           requirements.

                  8.18     Disclosure. All information relating to or concerning
                           the Company set forth in the Transaction Documents or
                           the Disclosure Materials, or provided to the Buyer or
                           its respective representatives and counsel in
                           connection with the transactions contemplated hereby
                           is true and correct in all material respects and does
                           not fail to state any material fact necessary in
                           order to make the statements herein or therein, in
                           light of the circumstances under which they were
                           made, not misleading. The Company confirms that it
                           has not provided to the Buyer or any of its
                           representatives, agents or counsel any information
                           that constitutes or might constitute material
                           nonpublic information. The Company understands and
                           confirms that the Buyer shall be relying on the
                           foregoing representation in effecting transactions in
                           securities of the Company.

         9. CONDITIONS OF CLOSING. Buyer shall have no obligation to consummate
the transactions contemplated hereby until the following conditions have been
met:

                  a.       The Certificate of Designation shall have been duly
                           filed with the Secretary of State of the State of
                           Minnesota.

                  b.       The Buyer shall have received the opinion of Maslon
                           Edelman Borman & Brand LLP, counsel to the Company,
                           with respect to the issuance and sale of the
                           Preferred Shares and the Common Shares, in form
                           attached hereto as Annex B.

                  c.       No events or circumstances shall have occurred that
                           would have a Material Adverse Effect.

                  d.       The Company shall have delivered reimbursement of
                           Buyer's out-of-pocket costs and expenses incurred in
                           connection with the transactions contemplated by this
                           Agreement (including the fees and disbursements of
                           Buyer's legal counsel) in the aggregate amount of
                           $35,000.


                                      -11-

<PAGE>   12



         10.        MISCELLANEOUS.

                    a.   Buyer agrees to furnish any additional information that
                         the Company or its counsel reasonably deem necessary in
                         order to verify the responses set forth above.

                    b.   Buyer understands the meaning and legal consequences of
                         the agreements, representations, warranties and
                         covenants contained herein.

                    c.   As long as the Buyer owns any Preferred Shares or
                         Common Shares, the Company covenants to use its best
                         efforts to timely file (or obtain extensions in respect
                         thereof and file within the applicable grace period)
                         all reports required to be filed by the Company after
                         the date hereof pursuant to Section 13(a) or 15(d) of
                         the Exchange Act. If at any time prior to the date on
                         which the Purchasers may resell all of the Common
                         Shares without volume restrictions pursuant to Rule
                         144(k) promulgated under the Securities Act (as
                         determined by counsel to the Company pursuant to a
                         written opinion letter to such effect, addressed and
                         acceptable to the Company's transfer agent for the
                         benefit of and enforceable by the Buyer) the Company is
                         not required to file reports pursuant to such sections,
                         it will prepare and furnish to the Purchasers and make
                         publicly available in accordance with Rule 144(c)
                         promulgated under the Securities Act annual and
                         quarterly financial statements, together with a
                         discussion and analysis of such financial statements in
                         form and substance substantially similar to those that
                         would otherwise be required to be included in reports
                         required by Section 13(a) or 15(d) of the Exchange Act
                         in the time period that such filings would have been
                         required to have been made under the Exchange Act.

                    d.   The Company shall (i) not later than the tenth trading
                         day following the closing date prepare and file with
                         the NASDAQ National Market (as well as any other
                         national securities exchange or market on which the
                         Common Stock is then listed) an additional shares
                         listing application or a letter acceptable to the
                         NASDAQ National Market covering and listing at least
                         1,331,500 shares of Common Stock, (ii) take all
                         reasonable steps necessary to cause the Common Shares
                         to be approved for listing in the NASDAQ National
                         Market (as well as on any other national securities
                         exchange or market on which the Common Stock is then
                         listed) as soon as possible thereafter, and (iii)
                         provide to the Buyers, if requested, evidence of such
                         listing, and the Company shall take all steps
                         reasonably necessary to maintain the listing of its
                         Common Shares on such exchange. In addition, if at any
                         time following the listing of the Common Shares in
                         accordance with the foregoing, the number of shares of
                         Common Stock issuable on conversion of all then
                         outstanding Preferred Shares, and on account of accrued
                         and unpaid dividends thereon is greater than the number
                         of shares of Common Stock theretofore listed, the
                         Company shall promptly take such action to file an

                                      -12-

<PAGE>   13



                         additional shares listing application covering at least
                         a number of shares as the Buyer shall reasonably
                         request.

                    e.   If at any time while the Buyer (or any assignee
                         thereof) owns any Preferred Shares, the shares of
                         Common Stock cease to be Actively Traded (as defined
                         below), or the Common Shares Registration Statement
                         ceases to be effective, or the prospectus included in
                         the Common Shares Registration Statement may not be
                         used by the Buyer, in each case for more than five
                         trading days in the aggregate, at the option of the
                         Buyer exercisable by written notice to the Company
                         delivered after the expiration of such five trading day
                         period, the Company shall redeem all Preferred Shares
                         and Common Shares in cash, then held by such Buyer, at
                         an aggregate purchase price equal to the sum of (I) the
                         number of shares of Preferred Shares then held by the
                         Buyer multiplied by the product of (1) the average Per
                         Share Market Value for the five (5) Trading Days
                         immediately preceding (a) the day of such notice or (b)
                         the date of payment in full of the redemption price
                         calculated under this Section, whichever is greater and
                         (2) the Conversion Ratio on the date of the repurchase
                         notice, (II) the aggregate of all accrued but unpaid
                         dividends payable in respect of all shares of Preferred
                         Stock to be redeemed, (III) the number of Shares and
                         Common Shares then held by such Purchaser multiplied by
                         the average Per Share Market Value for the five (5)
                         Trading Days immediately preceding (A) the date of the
                         notice or (B) the date of payment in full by the
                         Company of the redemption price calculated under this
                         Section, whichever is greater, and (IV) interest on the
                         amounts set forth in (I) - (III) above accruing from
                         the 5th Trading Day after such notice until the
                         repurchase price under this Section is paid in full at
                         the rate of 12% per annum for the first three months
                         after the date due, and 15% per annum thereafter. For
                         purposes of this Section 10(f), the Common Stock shall
                         not be "Actively Traded" if trading in the Common Stock
                         is suspended (other than as a result of the suspension
                         of trading in securities on such market generally or
                         temporary suspensions pending the release of material
                         information) or the Common Stock is delisted from the
                         NASDAQ National Market other than in connection with a
                         listing of the shares on the NASDAQ SmallCap, the New
                         York Stock Exchange or the American Stock Exchange (a
                         "Major Exchange"), or trading is suspended (other than
                         as a result of the suspension of trading in securities
                         on such exchange or market generally or temporary
                         suspensions pending the release of material
                         information) or the Common Stock is delisted from a
                         Major Exchange without being immediately thereafter
                         listed on another Major Exchange or on the NASDAQ
                         National Market; provided, however, that if the Common
                         Stock is delisted from the NASDAQ National Market or a
                         Major Exchange and is immediately thereafter quoted in
                         the OTC Bulletin Board, the Common Stock shall be
                         deemed to be Actively Traded so long as there are at
                         all times not less than four market makers actively
                         entering quotations for the Common Stock and the daily
                         reported trading volume for the Common Stock is not
                         less than 80%

                                      -13-

<PAGE>   14



                         of the reported average daily volume for the shares
                         during the 30 days immediately preceding the date on
                         which the delisting occurred. For purposes of this
                         Section 10(f), "Conversion Ratio" at any date with
                         respect to a Preferred Share shall mean the Liquidation
                         Value of such Preferred Shares (as defined in the
                         Certificate of Designation) divided by the applicable
                         Conversion Price.

                    f.   The Company shall use $1.1 million of the proceeds from
                         the sale of the Preferred Shares to redeem such amount
                         of the Company's Series B Preferred Stock.

                    g.   The Company at all times from and after the date hereof
                         shall have 1,331,500 shares of Common Stock duly and
                         validly authorized and reserved for issuance to satisfy
                         the conversion (pursuant to the Certificate of
                         Designations), in full, of the 1,400 Preferred Shares.
                         The Company shall irrevocably instruct its transfer
                         agent to reserve such number of shares for issuance
                         upon conversion of the Preferred Stock.

                    h.   The Company understands the meaning and legal
                         consequences of the agreements, representations,
                         warranties and covenants contained herein. Company
                         further agrees to indemnify and hold harmless the
                         Buyer, and each current and future officer, director,
                         employee, agent and shareholder of the Buyer, from and
                         against any and all losses, claims, damages, judgments,
                         penalties, liabilities and deficiencies (collectively,
                         "Losses"), and agrees to reimburse such parties for all
                         out-of-pocket expenses (including the fees and expenses
                         of legal counsel, in each case promptly as incurred and
                         to the extent arising out of or in connection with:

                         1. any misrepresentation, omission of fact or breach of
                         any of the Company's representations or warranties
                         contained in this Agreement, the annexes, schedules or
                         exhibits hereto or any instrument, agreement or
                         certificate entered into or delivered by the Company
                         pursuant to this Agreement, all of which shall survive
                         the execution hereof; or

                         2. any failure by the Company to perform in any
                         material respect any of its covenants, agreements,
                         undertakings or obligations set forth in this
                         Agreement, the  annexes, schedules or exhibits hereto
                         or any instrument, agreement or certificate entered
                         into or delivered by the Company pursuant to this
                         Agreement.

                    i.   This Agreement shall be binding upon and shall inure
                         to the benefit of the parties hereto and to the
                         successors and assigns of the Company and to the legal
                         representatives, successors and permitted assignees of
                         the undersigned.


                                      -14-

<PAGE>   15



                  j.       This Subscription Agreement shall be governed by, and
                           construed and enforced in accordance with, Minnesota
                           law, without reference to principles of conflicts of
                           laws.

                  k.       This instrument contains the entire agreement of the
                           parties, and there are no representations, covenants
                           or other agreements except as stated or referred to
                           herein.




                                      -15-

<PAGE>   16



                        SIGNATURES/SUBSCRIBER INFORMATION

Entity Subscriber:

Dated:  June 1, 1999
                          ------------------------------------------
                          Name of Entity (Typed or Printed)

                          Samuel Levinson
                          ------------------------------------------
                          Signature


                          ------------------------------------------
                          Name (Typed or printed) and Title


                          ------------------------------------------
                          Contact Person (If different from person signing)




Address for Notices:

The Shaar Fund, Ltd.
c/o Levinson Capital Management
Two World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
Telephone No.: (212) 432-7711
Facsimile No.: (212) 432-7771





                                      -16-

<PAGE>   17



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

                                                 [ ] IRA Trust Account

  [ ]   Other (Describe)     -----------------------------------------
                                                 ---------------------



                                   ACCEPTANCE



     This Subscription Agreement of The Shaar Fund, Ltd. for 1,400 shares of the
Company's Series C Convertible Preferred Stock is hereby accepted by Innovative
Gaming Corporation of America.


Dated: June 1, 1999

                    INNOVATIVE GAMING CORPORATION OF AMERICA



         By   s/ Edward G. Stevenson
              ------------------------------------------------------------------
                  Edward G. Stevenson, Chairman and Chief Executive Officer


                                      -17-