Document:

9th Amendment to Common Stock Rights Agreement

 

Exhibit 4(k)

EIGHTH AMENDMENT TO KOGER EQUITY, INC.

COMMON STOCK RIGHTS AGREEMENT

DATED AS OF MAY 12, 2004

     This Eighth Amendment to the Common Stock Rights Agreement dated as of
May 12, 2004 (the “Amendment”), is between Koger Equity, Inc., a Florida
corporation (the “Company”), and Wells Fargo Bank Minnesota, N. A. (the “Rights
Agent”), and amends the Common Stock Rights Agreement dated as of September 30,
1990 (the “Rights Agreement” as amended and in effect on the date hereof, prior
to giving effect to the Amendment, the “Amended Rights Agreement”). Unless
otherwise defined herein, capitalized terms in the Amendment shall have the
same meaning as those contained in the Amended Rights Agreement.

WITNESSETH:

     WHEREAS, on September 30, 1990, the Board of Directors of the Company
authorized the issuance of Rights to purchase, on the terms and subject to the
provisions of the Rights Agreement, shares of the Company’s Common Stock; and

     WHEREAS, on September 30, 1990, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right for every share of
Common Stock of the Company outstanding on the Dividend Record Date and
authorized the issuance of one Right (subject to certain adjustments) for each
share of Common Stock of the Company issued between the Dividend Record Date
and the Distribution Date; and

     WHEREAS, the Distribution Date has not occurred; and

     WHEREAS, pursuant to Section 27 of the Amended Rights Agreement, the
Continuing Directors have unanimously approved an amendment to the provisions
of the Amended Rights Agreement as set forth below;

     NOW, THEREFORE, in consideration of the premises, the mutual promises
herein set forth and other good and valid consideration the sufficiency hereof
and thereof being hereby acknowledged, the parties hereto hereby agree as
follows:

     1. Section 23 is amended by adding the following new paragraph at the end
thereof:

     “The Nominating and Corporate Governance Committee of the Company’s Board
of Directors, or such other committee consisting entirely of independent
directors selected by the Board of Directors, shall review this Agreement in
order to consider whether the maintenance of this Agreement continues to be in
the best interests of the Company and its stockholders. The committee shall
conduct such review periodically when, as and in such manner as the committee
deems appropriate, after giving due regard to all relevant circumstances;
provided, however, that the committee shall take such action at least once
every three (3) years. Following each such review, the committee will report
its conclusions to the Board of Directors of the Company, including any
recommendation in light thereof as to whether this Agreement should be modified
or the Rights should be redeemed. The committee is authorized to retain such
legal counsel, financial advisors and other advisors as the committee deems
appropriate in order to assist the committee in carrying out its foregoing
responsibilities under this Agreement.”

     2. Section 1 of the Amended Rights Agreement is hereby amended by
deleting subsection (m) thereof in its entirety and replacing it with the
following:

     “(m) Intentionally Omitted.”

     3. The Amended Rights Agreement is hereby further amended such that all
references in the Amended Rights Agreement, including without limitation in
Sections 1(s), 1(v), 11(a)(iii),

 

11(b), 11(c), 11(d), 11(m), 22, 23, 24, 27, and 29, to the phrase “Continuing
Directors” shall hereafter instead be deemed references to “the Board of
Directors of the Company.”

     4. Except as amended hereby, the Amended Rights Agreement shall remain
unchanged and shall remain in full force and effect.

     5. This Amendment may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same
instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and set their respective hands and seals all as of the date and
year first above written.

	 	 	 	 	 
	 	KOGER EQUITY, INC.

 	 
	 	By: 	
/s/ Stephen A. Abney
	 
	 	 	Title: Vice President, Finance and Chief
          Accounting Officer	 
	 	 	 	 
	 

Attest:

By: /s/ William J. Wedge

Title: Senior Vice President and

        General Counsel

	 	 	 	 	 
	 	WELLS FARGO BANK MINNESOTA, N.A.

As Rights Agent

 	 
	 	By:  	/s/
 Claudine Anderson	 
	 	 	Title: Officer	 
	 	 	 	 
	 

Attest:

By: /s/ Barbara M. Novak

Title: Vice Presidentexv10w1

 

EXHIBIT 10.1

PURCHASE AGREEMENT

     THIS PURCHASE AGREEMENT (the “Agreement") is entered into as of the 20th
day of May, 2004, by and among Spectre Gaming, Inc., a Minnesota corporation
(the “Company"), and Pandora Select Partners L.P., a British Virgin Islands
limited partnership (the “Purchaser").

R E C I T A L S :

     WHEREAS, in consideration of $1,100,000, the Company proposes to issue to
the Purchaser, and the Purchaser desires to purchase, a $1,100,000 secured
convertible promissory note in the form attached as Exhibit A (the “Note") and
a warrant in the form of Exhibit B (the “Warrant") to purchase (subject to
certain adjustments) 200,000 shares of the Company’s common stock, $0.01 par
value (the “Common Stock").

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:

SECTION 1. AGREEMENT TO SELL AND PURCHASE

     1.1. Authorization of Transaction. On or prior to the closing of the
transactions contemplated in this Agreement (the “Closing"), the Company shall
have authorized the sale and issuance to the Purchaser of the Note, the Warrant
and the shares of Common Stock issuable as payment under the Note, upon
conversion of the Note and upon exercise of the Warrant (collectively, the
“Shares”).

     1.2. Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing, the Company hereby agrees to issue and sell to the Purchaser, and
the Purchaser agrees to purchase from the Company, the Note and the Warrant for
an aggregate purchase price of $1,100,000 (the “Purchase Price”).

SECTION 2. CLOSING, DELIVERY AND PAYMENT

     2.1. Closing. The Closing shall take place at 10:00 a.m. on the date
hereof at the offices of the Purchaser’s legal counsel, Messerli & Kramer P.A.,
in Minneapolis, Minnesota, or at such other time or place as the Company and
the Purchaser may mutually agree (the “Closing Date"). At the Closing, subject
to the terms and conditions hereof, the Company will issue, sell and deliver to
the Purchaser the Note and the Warrant, against payment of the Purchase Price
by certified check or wire transfer of immediately available funds. At that
time, the Company shall also execute and deliver to the Purchaser the
Registration Rights Agreement in the form attached as Exhibit C (the
“Registration Rights Agreement") and the Security Agreement in the form
attached as Exhibit D (the “Security Agreement").

 

 

SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

     The Company hereby makes the following representations and warranties to
the Purchaser as of the Closing Date and, as to the agreements described in
Section 3.16, covenants to so comply therewith from and after the Closing Date
so long as any portion of the Note remains outstanding.

     3.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Minnesota. The Company has no subsidiaries. The Company
has all requisite corporate power and authority to own and operate its
properties and assets, to execute and deliver this Agreement, the Note, the
Warrant, the Registration Rights Agreement and the Security Agreement
(together, the “Transaction Documents"), to pledge certain of the Company’s
assets as described on the attached Exhibit E as security for the Note (the
“Collateral"), to issue and sell the Shares as payment under the Note, upon
conversion of the Note and upon exercise of the Warrant, to carry out the
provisions of the Transaction Documents, and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in good standing in each
jurisdiction in which the nature of its activities and of its properties (both
owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to be so qualified would not have a materially
adverse effect on the Company or its business, taken as a whole.

     3.2. Capitalization. The Company is authorized to issue 466,666 shares of
Series A Convertible Preferred Stock, par value $0.01 per share, of which
440,000 shares are issued and outstanding, and 13,333,333 shares of Common
Stock, par value $0.01 per share, of which 10,425,187 shares are issued and
outstanding. Except as set forth on Schedule 3.2 or in the Company’s
quarterly, annual and periodic filings (the “SEC Reports") with the U.S.
Securities and Exchange Commission (the “Commission"), the Company has no
outstanding options, warrants or other rights to acquire any capital stock, or
securities convertible or exchangeable for capital stock or for securities
themselves convertible or exchangeable for capital stock (together,
“Convertible Securities"). Except as set forth on Schedule 3.2 or in the SEC
Reports, the Company has no agreement or commitment to sell or issue any shares
of capital stock or Convertible Securities. All issued and outstanding shares
of the Company’s capital stock (i) have been duly authorized and validly
issued, (ii) are fully paid and nonassessable, (iii) are free from any
preemptive and cumulative voting rights and (iv) were issued pursuant to an
effective registration statement filed with the Commission and applicable state
securities authorities or pursuant to valid exemptions under federal and state
securities laws. Except as set forth on Schedule 3.2, there are no outstanding
rights of first refusal or proxy or shareholder agreements of any kind relating
to any of the Company’s securities to which the Company or any of its executive
officers and directors is a party or as to which the Company otherwise has
knowledge of. When issued in compliance with the provisions of the Note and
the Warrant (and upon payment as provided by the Warrant), the Shares will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares

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may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at
the time a transfer is proposed.

     3.3. Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of the Transaction Documents, the performance of all obligations
of the Company hereunder and thereunder at the Closing, including the pledge of
the Collateral as security for the Note, and the authorization, sale, issuance
and delivery of the Shares as payment under the Note, upon conversion of the
Note and upon exercise of the Warrant has been taken. The Transaction
Documents, when executed and delivered, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors’ rights,
(ii) according to general principles of equity that restrict the availability
of equitable remedies and (iii) to the extent that the enforceability of the
indemnification provisions of the Registration Rights Agreement may be limited
by applicable laws. The sale of the Shares upon exercise of the Warrant, upon
conversion of the Note or as payment under the Note is not and will not be
subject to any preemptive rights or rights of first refusal.

     3.4. Financial Statements. The Company’s audited balance sheets at, and
the audited statements of operations, cash flows and changes in shareholders’
equity of the Company for the fiscal years ended, December 31, 2003 and 2002
and the Company’s unaudited balance sheet at, and the unaudited statements of
operations and cash flows of the Company for the three months ended March 31,
2004 (all of the foregoing together, the “Financial Statements,” with March 31,
2004 being the “Latest Statement Date” and the financial statements at and for
the three months ended March 31, 2004 being the “Latest Financial Statements"),
as contained in the SEC Reports, fairly present in all material respects the
financial position, results of operations, cash flows and changes in
shareholders’ equity of the Company as of the respective dates and for the
respective periods covered thereby in accordance with generally accepted
accounting principles consistently applied.

     3.5. Liabilities. The Company has no material liabilities and, to the
best of its knowledge, the Company knows of no material contingent liabilities
not disclosed in the Latest Financial Statements or SEC Reports, except current
liabilities incurred in the ordinary course of business subsequent to the
Latest Statement Date that have not been, either in any individual case or in
the aggregate, materially adverse.

     3.6. Certain Agreements and Actions. Except as disclosed in the SEC
Reports, the Company has not (i) declared or paid any dividends, or authorized
or made any distribution upon or with respect to any class or series of its
capital stock, (ii) since the Latest Statement Date, incurred any indebtedness
for money borrowed or any other material liabilities out of the ordinary course
of business, (iii) made any loans or advances to any person, other than
ordinary advances for travel or entertainment expenses or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than in the
ordinary course of business.

3

 

     3.7. Obligations of or to Related Parties. Except as disclosed on
Schedule 3.7 or in the SEC Reports, there are no obligations of the Company to
officers, directors, shareholders, employees or consultants of the Company, or
to any members of their immediate families or other affiliates, other than (i)
for payment of salary for services rendered since the commencement of the
Company’s most recent payroll period, (ii) reimbursement for expenses
reasonably incurred on behalf of the Company and (iii) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as disclosed on Schedule 3.7 or in the
SEC Reports, none of the officers, directors, shareholders, employees or
consultants of the Company, or any members of their immediate families or other
affiliates, are indebted to the Company or have any direct or indirect
ownership interest in any firm, corporation or other entity with which the
Company is affiliated or with which the Company has a business relationship, or
any firm, corporation or other entity that competes with the Company. Except
as disclosed in the SEC Reports, no officer, director, shareholder, employee or
consultant of the Company, or, to the Company’s knowledge, any member of their
immediate families or other affiliates, is, directly or indirectly, interested
in or a party to any material contract with the Company. Except as disclosed
on Schedule 3.7 or in the SEC Reports, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

     3.8. Changes. Since the Latest Statement Date, and except as disclosed in
the SEC Reports, there has not been, to the Company’s knowledge, any event or
condition of any character that, either individually or cumulatively, has
materially and adversely affected the business, assets, liabilities, financial
condition, operations or prospects of the Company.

     3.9. Title to Properties and Assets; Liens. Except as set forth on
Schedule 3.9 or in the SEC Reports, the Company has good and marketable title
to its properties and assets, including the properties and assets reflected in
the Latest Financial Statements, and good title to its leasehold estates, in
each case subject to no mortgage, pledge, lien, lease, encumbrance or charge,
other than (i) those resulting from taxes that have not yet become delinquent,
(ii) minor liens and encumbrances that do not materially detract from the value
of the property subject thereto or materially impair the operations of the
Company and (iii) those that have otherwise arisen in the ordinary course of
business. All facilities, machinery, equipment, fixtures and other properties
owned, leased or used by the Company are in good operating condition and repair
and are reasonably fit and usable for the purposes for which they are being
used, reasonable wear and tear excepted.

     3.10. Patents and Trademarks. Except as set forth on Schedule 3.10 or in
the SEC Reports, the Company owns or licenses all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information and other
proprietary rights and processes necessary for its business as now conducted
and as proposed to be conducted, without any known infringement of the rights
of others. The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would

4

 

interfere with their duties to the Company or that would conflict with the
Company’s business as proposed to be conducted. None of the execution or
delivery of, or the performance of the transactions contemplated by, the
Transaction Documents, the pledge of the Collateral by the Company to secure
the Note, the carrying on of the Company’s business by the employees of the
Company nor the conduct of the Company’s business as currently conducted or
proposed will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.

     3.11. Compliance with Other Instruments. Except as disclosed in the SEC
Reports, the Company is not in violation or default of any term of its Articles
of Incorporation or Bylaws, or of any provision of any mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which it
is bound or of any judgment, decree, order, writ or, to its knowledge, any
statute, rule or regulation applicable to the Company that would materially and
adversely affect the business, assets, liabilities, financial condition,
operations or prospects of the Company. The execution and delivery of, and the
performance of and compliance with the transactions contemplated by, the
Transaction Documents, and the issuance and sale of the Shares as payment under
the Note, upon conversion of the Note or upon exercise of the Warrant, will
not, with or without the passage of time or giving of notice, result in any
such material violation, or be in conflict with or constitute a default under
any such term, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties.

     3.12. Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, proceeding or investigation pending or, to the Company’s
knowledge, currently threatened against the Company that questions the validity
of this Agreement or the other agreements contemplated hereby or the right of
the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby. Except as disclosed in the SEC
Reports, there is no action, suit, proceeding or investigation or, to the
Company’s knowledge, currently threatened against the Company that might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company, financial or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
employees of the Company, their use in connection with the Company’s business
of any information or techniques allegedly proprietary to any of their former
employers or their obligations under any agreements with prior employers.
Except as disclosed in the SEC Reports, the Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality.

5

 

     3.13. Tax Returns and Payments. The Company has timely filed all tax
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and, to the
Company’s knowledge, all other taxes due and payable by the Company on or
before the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised (i) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof
or (ii) of any deficiency in assessment or proposed judgment to its federal,
state or other taxes. The Company has no knowledge of any liability of any tax
to be imposed upon the properties or assets of the Company as of the date of
this Agreement that is not adequately provided for.

     3.14. Employees. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or,
to the Company’s knowledge, threatened with respect to the Company. Except as
set forth on Schedule 3.14 or in the SEC Reports, no employee has any agreement
or contract, written or verbal, regarding his employment. Except as disclosed
on Schedule 3.14 or in the SEC Reports, the Company is not a party to or bound
by any currently effective employment contract, deferred compensation
arrangement, bonus plan, incentive plan, profit sharing plan, retirement
agreement or other employee compensation plan or agreement. To the Company’s
knowledge, no employee of the Company, nor any consultant with whom the Company
has contracted, is in violation of any material term of any employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business to be conducted by the Company;
and, to the Company’s knowledge, the continued employment by the Company of its
present employees, and the performance of the Company’s contracts with its
independent contractors, will not result in any such violation. The Company
has not received any notice alleging that any such violation has occurred.
Except as disclosed on Schedule 3.14 or in the SEC Reports, no employee of the
Company has been granted the right to continued employment by the Company or to
any material compensation following termination of employment with the Company.
The Company is not aware that any officer or key employee, or that any group
of key employees, intends to terminate their employment with the Company, nor
does the Company have a present intention to terminate the employment of any
officer, key employee or group of key employees.

     3.15. Registration Rights. Except as disclosed on Schedule 3.15 or
required pursuant to the Registration Rights Agreement, the Company is
presently not under any obligation, and has not granted any rights, to register
(as defined in the Registration Rights Agreement) any of the Company’s
presently outstanding securities or any of its securities that may hereafter be
issued.

     3.16. Compliance with Laws; Permits; Covenants Regarding Gaming
Machines. Except as disclosed in the SEC Reports, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties that
would materially and adversely affect the business, assets, liabilities,
financial

6

 

condition, operations or prospects of the Company. No governmental orders,
permissions, consents, approvals or authorizations are required to be obtained
and no registrations or declarations are required to be filed in connection
with the execution and delivery of, and the performance of the transactions
contemplated by, the Transaction Documents, the pledge of the Collateral to
secure the Note or the issuance of the Shares as payment under the Note, upon
conversion of the Note or upon exercise of the Warrant, except such as has been
duly and validly obtained or filed, or with respect to any filings that must be
made after the Closing, as will be filed in a timely manner. The Company has
all franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or
financial condition of the Company and the Company believes it can (and
covenants to Purchaser that it will) obtain any similar authority for the
conduct of its business as planned to be conducted (including as to the
shipment of Gaming Machines, as defined below, in interstate commerce and as to
entering into participation or revenue-sharing arrangements with Tribes, as
defined below).

     With respect to the Company’s sale or license to, or participation or
other revenue-sharing arrangements with, one or more unaffiliated Native
American tribal customers (the “Tribes") of or regarding slot-machine games
(the “Gaming Machines"), and for so long as any portion of the Note is
outstanding, the Company covenants and agrees as follows:

     (i) Each such Gaming Machine will be, and each such Gaming Machine’s
proposed operation and use by each of the Tribes will qualify it as, a Class
III game (within the meaning of the Indian Gaming Regulatory Act of 1998); and

     (ii) Prior to placing any Gaming Machine in service on a Tribe’s property,
the Company will:

     (A) use its best efforts to procure, contractually with such Tribe:

     (1) a written acknowledgement in form satisfactory to Purchaser of
Purchaser’s security interest pursuant to the Security Agreement in (i) each
such Gaming Machine placed in service on the Tribal property and in which the
Company retains an ownership or other proprietary interest as seller or lessor
or under a participation, revenue-sharing or other similar arrangement and (ii)
any accounts receivable relating to any such Gaming Machine’s sale, lease,
participation or revenue-sharing or other similar arrangement and

     (2) a written confirmation of such Tribe’s limited waiver of its sovereign
immunity with respect to the enforcement of Purchaser’s security interest; or

     (B) deliver to Purchaser an opinion of the Company’s counsel (which may be
special counsel experienced in Tribal affairs), in form satisfactory to
Purchaser, that the Purchaser has an enforceable first priority security
interest as described in subsection (ii)(A)(1) above and that the Tribe has
waived its sovereign immunity with respect to Purchaser’s enforcement of
Purchaser’s security interest as described above.

7

 

     Despite the above, the Company is not required to comply with subsection
(ii) above for an aggregate of six Gaming Machines placed in service at any
particular time across all Tribal properties so long as the Company has placed
such Gaming Machines in service solely for the purpose of limited testing. The
Company’s failure to comply with the foregoing covenants will require
prepayment of the Note as provided by the terms thereof.

     3.17. Environmental and Safety Laws. Except as disclosed in the SEC
Reports, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and
to the Company’s knowledge, no material expenditures are or will be required in
order to comply with any such existing statute, law or regulation. Without
limiting the foregoing, and except as disclosed in the SEC Reports:

     (a) with respect to any real property owned, leased or otherwise utilized
by the Company (“Real Property"), the Company is not or has not in the past
been in violation of any Hazardous Substance Law which violation could
reasonably be expected to result in a material liability to the Company or its
properties and assets;

     (b) the Company nor, to the knowledge of the Company, any third party has
used, Released, generated, manufactured, produced or stored, in, on, under, or
about any Real Property, or transported thereto or therefrom, any Hazardous
Substances that could reasonably be expected to subject the Company to material
liability, under any Hazardous Substance Law;

     (c) to the knowledge of the Company, there are no underground tanks,
whether operative or temporarily or permanently closed, located on any Real
Property that could reasonably be expected to subject the Company to material
liability under any Hazardous Substance Law;

     (d) there are no Hazardous Substances used, stored or present at, or on,
or to the knowledge of the Company that could reasonably be expected to migrate
onto any Real Property, except in compliance with Hazardous Substance Laws;
and

     (e) to the knowledge of the Company, there neither is nor has been any
condition, circumstance, action, activity or event that could reasonably be
expected to be a material violation by the Company of any Hazardous Substance
Law, or to result in liability to the Company under any Hazardous Substance
Law.

     For purposes hereof, “Hazardous Substances” means (statutory acronyms and
abbreviations having the meaning given them in the definition below of
“Hazardous Substances Laws") substances defined as “hazardous substances,”
“pollutants” or “contaminants” in Section 101 of the CERCLA; those substances
defined as “hazardous waste,” “hazardous materials” or “regulated substances”
by the RCRA; those substances designated as a “hazardous substance” pursuant
to Section 311 of the CWA; those substances defined as “hazardous materials”
in Section 103 of the HMTA; those substances regulated as a hazardous chemical

8

 

substance or mixture or as an imminently hazardous chemical substance or
mixture pursuant to Sections 6 or 7 of the TSCA; those substances defined as
“contaminants” by Section 1401 of the SDWA, if present in excess of permissible
levels; those substances regulated by the Oil Pollution Act; those substances
defined as a pesticide pursuant to Section 2(u) of the FIFRA; those substances
defined as a source, special nuclear or by-product material by Section 11 of
the AEA; those substances defined as “residual radioactive material” by
Section 101 of the UMTRCA; those substances defined as “toxic materials” or
“harmful physical agents” pursuant to Section 6 of the OSHA; those substances
defined as hazardous wastes in 40 C.F.R. Part 261.3; those substances defined
as hazardous waste constituents in 40 C.F.R. Part 260.10, specifically
including Appendix VII and VIII of Subpart D of 40 C.F.R. Part 261; those
substances designated as hazardous substances in 40 C.F.R. Parts 116.4 and
302.4; those substances defined as hazardous substances or hazardous materials
in 49 C.F.R. Part 171.8; those substances regulated as hazardous materials,
hazardous substances, or toxic substances in 40 C.F.R. Part 1910; any
chemical, material, toxin, pollutant, or waste regulated by or in any other
Hazardous Substances Laws; and in the regulations adopted and publications
promulgated pursuant to said laws, whether or not such regulations or
publications are specifically referenced herein.

     "Hazardous Substances Law” means any of:

     (i) the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) (“CERCLA”);

     (ii) the Federal Water Pollution Control Act (33 U.S.C. Section 1251 et
seq.) (“Clean Water Act” or “CWA”);

     (iii) the Resource Conservation and Recovery Act (42 U.S.C. Section 6901
et seq.) (“RCRA”);

     (iv) the Atomic Energy Act of 1954 (42 U.S.C. Section 2011 et seq.)
(“AEA”);

     (v) the Clean Air Act (42 U.S.C. Section 7401 et seq.) (“CAA”);

     (vi) the Emergency Planning and Community Right to Know Act (42 U.S.C.
Section 11001 et seq.) (“EPCRA”);

     (vii) the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.) (“FIFRA”);

     (viii) the Oil Pollution Act of 1990 (33 U.S.C.A. Section 2701 et seq.);

     (ix) the Safe Drinking Water Act (42 U.S.C. Sections 300f et seq.)
(“SDWA”);

     (x) the Surface Mining Control and Reclamation Act of 1974 (30 U.S.C.
Sections 1201 et seq.) (“SMCRA”);

9

 

     (xi) the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.)
(“TSCA”);

     (xii) the Hazardous Materials Transportation Act (49 U.S.C. Section 5101
et seq.) (“HMTA”);

     (xiii) the Uranium Mill Tailings Radiation Control Act of 1978 (42 U.S.C.
Section 7901 et seq.) (“UMTRCA”);

     (xiv) the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.) (“OSHA”); and

     (xv) all other federal, state and local governmental rules which govern
Hazardous Substances, and the regulations adopted and publications promulgated
pursuant to all such foregoing laws.

     3.18. Offering Valid. Assuming the accuracy of the representations and
warranties of the Purchaser contained in Section 4, the offer, sale and
issuance of the Note and the Warrant (and the Shares issuable as payment under
the Note, upon conversion of the Note or upon exercise of the Warrant) will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act"), and will have been registered or qualified (or
are exempt from registration and qualification) under the registration, permit
or qualification requirements of the State of Minnesota.

     3.19. Full Disclosure. None of this Agreement, the Note, the Warrant, the
Registration Rights Agreement, the Security Agreement or the SEC Reports
contain any untrue statement of a material fact nor, to the Company’s knowledge
and belief, omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There are no facts that
(individually or in the aggregate) materially adversely affect the business,
assets, liabilities, financial condition or operations of the Company that have
not been set forth in the Agreement, the Note, the Warrant, the Registration
Rights Agreement, the Security Agreement, the SEC Reports or in other documents
delivered to the Purchaser or its attorneys or agents in connection herewith.

     3.20. Insurance. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.

     3.21. Investment Company Act. The Company is not, and will not use the
proceeds from the Note in a manner so as to become, an “investment company,” or
a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

10

 

     3.22. Security Interest in Collateral. The Company owns the Collateral
free and clear of all claims, liens or encumbrances of any kind. Upon
consummation of the transactions as contemplated hereby, the Purchaser will
have a first priority security interest in the Collateral.

     3.23. NASDAQ Compliance. The Company’s Common Stock is registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act"), and is listed on the Over-the-Counter Bulletin Board
administered by The Nasdaq Stock Market, Inc. (the “OTCBB”). The Company has
taken no action designed to, or likely to have the effect of, and the
transactions contemplated by this Agreement will not have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing of the Common Stock from the OTCBB. The Company has not received
any notification that the Commission, the National Association of Securities
Dealers, Inc., the OTCBB or any other self-regulatory organizational body is
contemplating terminating such registration or listing. Without limiting the
foregoing, the Transaction Documents and the transactions contemplated by them
require no shareholder approval under the rules or interpretations of the
OTCBB.

     3.24. Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Exchange Act during
the 12 months preceding the date of this Agreement, except that (i) the
Company’s Annual Report on Form 10-KSB for the year ended December 31, 2002 was
filed on May 27, 2003 (88 days late) and (ii) the Company’s Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2003 was filed on June 19, 2003 (35
days late). The SEC Reports complied in all material respects with the
Commission’s requirements as of their respective filing dates, and the
information contained therein as of the date thereof did not contain 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, in light of the
circumstances under which they were made, not misleading. As of the date
hereof, the Company satisfies the eligibility requirements for the use of Form
SB-2 under the Securities Act of 1933, as amended.

     3.25. No Manipulation of Stock. Neither the Company, nor any of its
directors, officers or controlling persons, has taken or will, in violation of
applicable law, take, any action designed to or that might reasonably be
expected to cause or result in, or which has constituted, stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the securities issued or issuable in connection with the transactions
contemplated hereunder.

     3.26. Foreign Corrupt Practices; Sarbanes-Oxley.

     (a) Neither the Company, nor to the knowledge of the Company, any agent or
other person acting on behalf of the Company, has (i) directly or indirectly,
used any corrupt funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law, or

11

 

(iv) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended.

     (b) The Company is in compliance in all material respects with all
provisions of the Sarbanes-Oxley Act of 2002 that are applicable to it as of
the Closing Date.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser hereby represents and warrants to the Company as of the
Closing Date, and agrees, as follows:

     4.1. Investment Representations. The Purchaser understands that neither
the offer nor the sale of the Note, the Warrant or the Shares has been
registered under the Securities Act. The Purchaser also understands that the
Note and Warrant are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon the Purchaser’s
representations contained in the Agreement. The Purchaser hereby represents
and warrants as follows:

     (a) Purchaser Bears Economic Risk. The Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. The Purchaser must bear the economic
risk of this investment indefinitely unless the Note or Warrant (or the Shares)
are registered pursuant to the Securities Act, or an exemption from
registration is available. Except as contemplated by the Registration Rights
Agreement, the Purchaser has no present intention of selling or otherwise
transferring the Note, the Warrant or the Shares, or any interest therein. The
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow the Purchaser to transfer all or any
portion of the Note, the Warrant or the Shares under the circumstances, in the
amounts or at the times the Purchaser might propose.

     (b) Acquisition for Own Account. Except as contemplated by the
Registration Rights Agreement, the Purchaser is acquiring the Note, the Warrant
and the Shares for the Purchaser’s own account for investment only, and not
with a view towards their public distribution.

     (c) Purchaser Can Protect Its Interest. The Purchaser represents that by
reason of its, or of its management’s, business or financial experience, the
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, the Note, the Warrant and the
Registration Rights Agreement. Further, the Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in the Agreement.

12

 

     (d) Accredited Investor. The Purchaser represents that it is an
accredited investor within the meaning of Regulation D of the Securities Act.

     (e) Residence. The Purchaser represents that it is organized under the
laws of the British Virgin Islands and that its principal office is located in
the State of Minnesota.

     (f) Rule 144. The Purchaser acknowledges and agrees that the Note and
Warrant, and, if issued, the Shares, must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. The Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being through an unsolicited “broker’s
transaction” or in transactions directly with a market maker (as such term is
defined under the Securities Exchange Act of 1934, as amended) and the number
of shares being sold during any three-month period not exceeding specified
limitations.

     4.2. Transfer Restrictions. The Purchaser acknowledges and agrees that
the Note and Warrant and, if issued, the Shares, are subject to restrictions on
transfer and will bear restrictive legends.

     4.3. Acquisition of Shares. Until the Note is paid in full, the Purchaser
may not acquire “beneficial ownership” (as defined by Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of Shares except for those which
are or may be acquired as payment on the Note or upon exercise of the Warrant.
The foregoing covenant shall lapse if the Company defaults in the timely
payment of any amount due under the Note.

SECTION 5. CONDITIONS FOR CLOSING

     5.1. Conditions for the Company to Satisfy. The obligation of the
Purchaser to purchase the Note and Warrant as contemplated by this Agreement is
subject to satisfaction of the following contingencies at or prior to Closing:

     (a) The Company shall have obtained all third party consents required in
connection herewith, including consents to pledge the Collateral to the
Purchaser as security for the Note (excluding acknowledgements from Tribes as
contemplated by Section 3.16 above in connection with future sales, leases,
participation rights, revenue-sharing or other similar arrangements between the
Company and such Tribes relating to Gaming Machines placed in service on Tribal
property).

     (b) The Company shall have executed and delivered to the Purchaser at
Closing the Transaction Documents.

13

 

     (c) The Company shall have paid Gary S. Kohler and Scot W. Malloy,
together, a $33,000 cash origination fee related to the transactions
contemplated hereby.

     (d) Maslon Edelman Borman & Brand, LLP, legal counsel to the Company,
shall have delivered an opinion to the Purchaser with respect to the following
matters:

     (i) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota. The Company has all
requisite corporate power and authority to own and operate its properties and
assets, to execute and deliver the Transaction Documents, to pledge the
Collateral as security for the Note, to issue and sell the Shares, to carry out
the provisions of the Transaction Documents and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company has
no subsidiaries. The Company is duly qualified and is authorized to do
business and is in good standing in each jurisdiction in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to be
so qualified would not have a materially adverse effect on the Company or its
business, taken as a whole.

     (ii) The Company is authorized to issue 466,666 shares of Series A
Convertible Preferred Stock, par value $0.01 per share, of which 440,000 shares
are issued and outstanding, and 13,333,333 shares of Common Stock, par value
$0.01 per share, of which, to the firm’s knowledge, 10,425,187 shares are
issued and outstanding. To the firm’s knowledge, the Company has no
outstanding Convertible Securities or any agreement or commitment to sell or
issue any shares of capital stock or Convertible Securities, except as
described herein. All issued and outstanding shares of the Company’s capital
stock (a) have been duly authorized and validly issued, (b) are fully paid and
nonassessable, (c) are free from any preemptive and cumulative voting rights
and (d) were issued pursuant to an effective registration statement filed with
the Commission and applicable state securities authorities or pursuant to valid
exemptions under federal and state securities laws. To the firm’s knowledge,
there are no outstanding rights of first refusal or proxy or shareholder
agreements of any kind relating to any of the Company’s securities to which the
Company or any of its executive officers and directors is a party. When issued
in compliance with the provisions of the Note and the Warrant (and upon payment
as provided by the Warrant), the Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided,
however, that the Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.

     (iii) All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization of the Transaction
Documents, the performance of all obligations of the Company under the
Transaction Documents at the Closing, including the pledge of the Collateral as
security for the Note, and the authorization, sale, issuance and delivery of
the Shares as payment under the Note, upon conversion of the Note or upon
exercise of the Warrant has been taken. The Transaction Documents, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms,

14

 

except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors’ rights, (b) according to general principles of equity that restrict
the availability of equitable remedies; and (c) to the extent that the
enforceability of the indemnification provisions of the Registration Rights
Agreement may be limited by applicable laws. The sale of the Shares upon
exercise of the Warrant or upon payment under the Note is not and will not be
subject to any preemptive rights or rights of first refusal.

     (iv) The execution and delivery to the Purchaser of the Transaction
Documents does not violate or constitute a default under the Articles of
Incorporation or Bylaws, as amended, of the Company, or under any agreement
known to such firm to which the Company or the Subsidiaries is a party or by
which any of their respective properties or assets are bound.

     (v) To such firm’s knowledge, except as disclosed in the SEC Reports,
there is no action, suit, proceeding or investigation pending or currently
threatened against the Company, including any that questions the validity of
the Agreement or the other agreements contemplated thereby or the right of the
Company to enter into any of such agreements, or to consummate the transactions
contemplated thereby. To such firm’s knowledge, and except as disclosed in the
SEC Reports, the Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality.

     (vi) Upon tender of the funds by the Purchaser to the Company as
contemplated by the Agreement and filing of a UCC Financing Statement covering
the Collateral, a security interest in the Collateral will attach in favor of
the Purchaser.

SECTION 6. MISCELLANEOUS

     6.1. Governing Law. This Agreement shall be governed by the laws of the
State of Minnesota as such laws are applied to agreements between Minnesota
residents entered into and performed entirely in Minnesota.

     6.2. Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by the parties and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.

     6.3. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Note, the Warrant or the Shares from time
to time.

15

 

     6.4. Entire Agreement. The Transaction Documents and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and no party
shall be liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein.

     6.5. Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

     6.6. Amendment and Waiver. This Agreement may be amended or modified, and
any provision hereunder may be waived, only upon the written consent of the
Company and the Purchaser.

     6.7. Notices. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and
received when delivered in person or by national overnight courier service or
by certified or registered mail, return receipt requested, or by telecopier,
addressed as follows:

	 	 	 	 	 
	

	 	(a)
	 	if to the Company, at

	 
	

	 	 	 	Spectre Gaming, Inc.

800 Nicollet Mall, Suite 2690

Minneapolis, Minnesota 55402

Attention: Brian D. Niebur, Chief Financial Officer

Facsimile: (612) 338-7332

	 
	

	 	 	 	with a copy to:

	 
	

	 	 	 	Maslon Edelman Borman & Brand, LLP

90 South Seventh Street, Suite 3300

Minneapolis, Minnesota 55402

Attention: William M. Mower, Esq.

Facsimile: (612) 642-8358

	 
	

	 	(b)
	 	if to the Purchaser, in care of:

	 
	

	 	 	 	Whitebox Advisors, LLC

3033 Excelsior Boulevard, Suite 300

Minneapolis, Minnesota 55416

Attention: Jonathan Wood, Chief Financial Officer

Facsimile: (612) 253-6151

16

 

	 	 	 	 	 
	

	 	 	 	with a copy to:

	 
	

	 	 	 	Messerli & Kramer P.A.

150 South Fifth Street, Suite 1800

Minneapolis, Minnesota 55402

Attention: Jeffrey C. Robbins, Esq.

Facsimile: (612) 672-3777.

     6.8. Indemnification by the Company. The Company agrees to indemnify and
hold the Purchaser harmless against any loss, liability, damage or expense
(including reasonable legal fees and costs) that the Purchaser may suffer,
sustain or become subject to as a result of or in connection with the breach by
the Company of any representation, warranty, covenant or agreement of the
Company contained in this Agreement, the Note, the Warrant, the Registration
Rights Agreement or the Pledge Agreement.

     6.9. Expenses. At Closing, the Company shall pay the Purchaser’s counsel,
Messerli & Kramer P.A., $10,000 for its legal fees and expenses in representing
the Purchaser in connection with the transactions contemplated hereby. In
addition, the Purchaser agrees to pay or reimburse the Purchaser for its
reasonable legal fees and expenses that it may incur after the date hereof in
connection with the review and approval of any opinion provided pursuant to
Section 3.16 above and the granting of any waiver with respect to, the
modification of any of the terms or provisions of, or the enforcement of any of
the Transaction Documents.

     6.10. Titles and Subtitles. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

     6.11. Counterparts. This Agreement may be delivered via facsimile or
other means of electronic communication, and may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.

     IN WITNESS WHEREOF, the parties hereto have hereunto affixed their
signatures.

	 	 	 
	Spectre Gaming, Inc.

	 	Pandora Select Partners L.P.
	 
	By

	 	By
	
 

	 	
 
	Russell Mix, President and
Chief Executive Officer

	 	Its
	

	 	
 

17

 

Exhibit A

Form of Note

18

 

Exhibit B

Form of Warrant

19

 

Exhibit C

Form of Registration Rights Agreement

20

 

Exhibit D

Form of Security Agreement

21

 

Exhibit E

Description of Collateral

     All assets (except as excluded in the last paragraph below) of Spectre
Gaming, Inc., a Minnesota corporation (the “Company”), including without
limitation, the following:

     Inventory: All inventory of the Company as that term is defined in the
Uniform Commercial Code, whether now owned or hereafter acquired or in which
the Company obtains rights, whether consisting of whole goods, spare parts or
components, supplies or materials whether acquired, held or furnished for sale,
for lease, for participation, revenue-sharing or other similar arrangements, or
under contracts or for manufacture or processing, and wherever located, to
include, without limitation, all slot-machine games now owned or hereafter
acquired by the Company;

     Equipment: All equipment of the Company, whether now owned or hereafter
acquired, including all present and future machinery, vehicles, furniture,
fixtures, office and recordkeeping equipment, parts, tools, supplies and all
other goods (except inventory) used or bought for use by the Company for any
business or enterprise and including specifically (without limitation) all
accessions thereto, all substitutions and replacements thereof, and all like or
similar property now owned or hereafter acquired by the Company, and all of
which is owned by the Company, and all deposits made on any such equipment;

     Deposit Accounts and Other Cash: All deposits and deposit accounts with
any bank, savings and loan association, credit union or like organization, and
all funds and amounts therein, and whether or not held in trust, or in custody
or safekeeping, or otherwise restricted or designated for a particular purpose,
and all other cash or marketable securities on hand, whether held in-vault or
otherwise;

     Receivables: Each and every right of the Company to the payment of money,
whether such right to payment now exists or hereafter arises, whether such
right to payment arises out of a sale, lease or other disposition of goods or
other property, out of a rendering of services, or of a loan, out of the
overpayment of taxes or other liabilities, or any other transaction or event,
whether such right to payment is created, generated or earned by the Company or
by some other person who subsequently transfers his, her or its interest to the
Company, whether such right to payment is or is not already earned by
performance, and howsoever such right to payment may be evidenced, together
with all other rights and interests (including all liens and other security
interests) which the Company may at any time have by law or agreement against
any account debtor or other person obligated to make such payment or against
any property of such account debtor or other persons including, but not limited
to, all present and future accounts, contract rights, chattel paper, bonds,
notes and other debt instruments, and rights to payment in the nature of
general intangibles; and to include, without limitation, each and every right
of the Company to the payment of money, whether such right to payment now
exists or hereafter arises, out of a sale, lease or other disposition of
Inventory or Equipment, including rights to payment on account of
participation, revenue-sharing or other similar arrangements relating to
Inventory or

22

 

Equipment placed in service with third parties;

     General Intangibles: All general intangibles of the Company whether now
owned or hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks, trade names, trade
secrets, customer or supplier lists and contracts, manuals, operating
instructions, permits, franchises, the right to use the Company’s name, the
Company’s internet domain names and address and the goodwill of the Company’s
business.

     Securities: All securities and other equity interests now owned or
hereafter acquired by the Company, including shares of capital stock of any
wholly owned or partially owned subsidiary of the Company.

     The Collateral shall include (i) all substitutes and replacements for and
proceeds of any and all of the foregoing property, and in the case of all
tangible Collateral, all accessions, accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or use in connection with
any such goods and (ii) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.

     Despite the foregoing, the Collateral shall not include slot-machine games
(or any substitutes and replacements of them or any accessions, accessories,
attachments, parts, equipment and repairs attached or affixed to or used in
connection therewith) acquired by the Company after the date hereof over which
the Company grants a purchase money security interest to an unaffiliated third
party lender of the Company in connection with the original acquisition
thereof; but the Collateral will include the Receivables related to such
slot-machine games and the proceeds therefrom.

23

 

Schedule 3.2

Stock Matters

     In addition to the options and warrants disclosed in the SEC Reports, the
Company has since December 31, 2003, issued the following options and warrants:

	•	 	Options to purchase up to 540,000 shares of common stock at a
per-share price of $2.50, to Games of Chance, Inc., pursuant to a
consulting agreement (pending).

	•	 	Warrants to purchase up to 100,000 shares of common stock at
a per-share price of $2.00, to Brent Chapman, pursuant to a
consulting agreement dated April 1, 2004. 6,250 shares of the
warrants vested immediately, and the remaining shares vested in
2,083 in equal monthly installments over the next 44 months
beginning on May 1, 2005.

	•	 	Options to purchase an as-yet undetermined amount of shares
of common stock to Muriel Allen, in partial compensation for past
employment services rendered.

	•	 	Options to purchase up to 600,000 shares of common stock at a
per-share price of $1.50, to Russell Mix, pursuant to an Employment
Agreement and Stock Option Agreement, each dated March 22, 2004.

	•	 	Warrant to purchase up to 83,400 shares of common stock, to
Feltl & Company, pursuant to an Agency Agreement and in connection
with the Company’s private placement of shares of common stock,
closed on March 18, 2004.

24

 

Schedule 3.7

Related Party Matters

The Company leases office space from Corporate Services, Inc., an affiliate of
Ronald E. Eibensteiner, the Company’s Chairman of the Board, on a
month-to-month basis for $3,000 per month. In addition, the Company has a
consulting agreement with Corporate Services, Inc., pursuant to which certain
services of Brian D. Niebur, the Company’s Chief Financial Officer, are paid
for on an hourly basis.

25

 

Schedule 3.9

Properties Matters

     No exceptions.

26

 

Schedule 3.10

Intellectual Property Matters

     No exceptions.

27

 

Schedule 3.14

Employment Matters

The Company has employment contracts with Russell Mix, the Company’s Chief
Executive Officer, pursuant to an agreement dated April 16, 2004, and with Gary
Watson, the Company’s Vice President of Operations — Oklahoma, pursuant to an
agreement dated March 4, 2004.

28

 

Schedule 3.15

Registration Rights

1,796,829 shares of common stock were sold in a private placement with
piggyback registration rights, which private placement closed on March 18,
2004.

In connection with the foregoing private placement, the Company issued a
warrant to purchase 83,400 shares of common stock at an exercise price of $0.75
per share. The warrant has piggyback registration rights, and limited demand
registration rights.

29

 

Schedule 3.22

Encumbrances on Collateral

     No exceptions.

30

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