Document:

FUELCELL ENERGY, INC - Exhibit 10.58

Exhibit 10.58

   

FUELCELL ENERGY, INC.

3 Great Pasture Road

Danbury, Connecticut 06813-1305

 

 

	
 
	
June 20, 2002

 

Mr. Jerry Leitman

c/o FuelCell Energy, Inc.

3 Great Pasture Road

Danbury, CT 06813-1305

Dear Jerry:

          As you know, you and FuelCell Energy, Inc. ("FuelCell") are parties to an Employment Agreement, effective as of August 1, 1997 (the "Employment Agreement"). Certain benefits provided you in the Employment Agreement are about to terminate. For and in consideration of your years of service and commitment to FuelCell, FuelCell (by action of its Board of Directors) hereby agrees to modify the Employment Agreement as follows:

          If you cease to be employed by FuelCell at any time on or after August 4, 2002, as a result of FuelCell's termination of you pursuant to Section 7.4 of the Employment Agreement (which shall not include any termination that is otherwise within Article 6 of the Employment Agreement) or your termination of your employment pursuant to Section 7.1 of the Employment Agreement, FuelCell shall pay you as a severance benefit an amount equal to (a) two times your then base salary plus (b) an amount equal to your bonus from FuelCell, if any, for the immediately preceding year. This severance benefit shall be payable by FuelCell through (i) the continuation of your base salary for a period of one year and (ii) the payment of the balance in four equal quarterly installments, with the first such payment due three months after the termination and the final payment due one year after the termination. The severance obligation set forth herein shall be in lieu of and not in addition to any other severance benefits made available to other employees of FuelCell.

               The last sentence of Section 1.1 of the Employment Agreement shall be modified to read in its entirety as follows: "In connection therewith, the Employee shall report to and be subject to the supervision of the Board of Directors."

          As modified above, the Employment Agreement is in full force and effect. If this sets forth your understanding, please indicate below, whereupon it will be a binding agreement between us.

	
 
	
Very truly yours,

FUELCELL ENERGY, INC.

By  /s/ Bernard
Baker                   

 

Agreed and Accepted by

/s/ Jerry Leitman                      

           Jerry LeitmanSECURITIES PURCHASE AGREEMENT

         THIS SECURITIES  PURCHASE  AGREEMENT,  dated as of August 20, 2002 (the
"Agreement")  is entered into by and between  Innovative  Gaming  Corporation of
America, a Minnesota  corporation with its principal executive office located at
333 Orville Wright Court, Las Vegas, Nevada 89119 (the "Company"), and the party
named on the signature page below (the "Buyer").

                                  INTRODUCTION

          A. The Company has  authorized  its officers to execute and deliver to
one or more  parties,  including  the  Buyer,  one or more  convertible  secured
promissory  notes in the form  attached  hereto  as  Exhibit  A in an  aggregate
principal amount not to exceed Five Million and No/Dollars  ($5,000,000.00) (the
"Notes") and the Company  desires to sell the Notes in a series of  transactions
exempt from  registration  under the  Securities  Act of 1933,  as amended  (the
"Securities Act") (such transactions, collectively, the "Private Placement").

         B. The  Notes  are  convertible  into  the  Company's  Series  A-1 5.5%
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Shares"),
upon the terms and conditions  set forth in the Note.  The Preferred  Shares are
convertible into shares of the Company's common stock, par value $0.01 per share
(the "Common  Stock"),  upon the terms and conditions set forth in the Company's
Certificate of Designation of Series A-1 Convertible Preferred Stock in the form
attached hereto as Exhibit B (the "Certificate of  Designation").  The Preferred
Shares to be issued  upon  conversion  of the Notes and the  Common  Stock to be
issued upon  conversion  of the  Preferred  Shares are referred to herein as the
"Conversion Shares."

          C.  The  Buyer  and  the  Company  wish  to  set  forth  their  mutual
understandings  with  respect  to the terms and  conditions  of the  Notes,  the
Preferred Shares and the Buyer's participation in the Private Placement.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained herein, the parties hereto,  intending to be legally bound,
hereby agree as follows:

                                   ARTICLE I

                         PRIVATE PLACEMENT OF SECURITIES

          A. Initial Issuance of Notes. On the terms and conditions contained in
this  Agreement,  the Buyer  hereby  agrees to purchase  from the Company at the
Initial  Closing (as defined below) that principal  amount of Notes indicated on
Schedule A and the Company hereby agrees to issue to the Buyer, in a transaction
exempt  from  the  registration  and  prospectus-delivery  requirements  of  the
Securities  Act,  a Note for such  principal  amount  substantially  in the form
attached hereto as Exhibit A.

<PAGE>

          B. Second Issuance of Notes. On the terms and conditions  contained in
this  Agreement,  the Buyer  hereby  agrees to purchase  from the Company at the
Second Closing (as defined below) that  principal  amount of Notes  indicated on
Schedule A and the Company hereby agrees to issue to the Buyer, in a transaction
exempt  from  the  registration  and  prospectus-delivery  requirements  of  the
Securities  Act,  a Note for such  principal  amount  substantially  in the form
attached hereto as Exhibit A.

          C. Third Issuance of Notes.  On the terms and conditions  contained in
this  Agreement,  the Buyer  hereby  agrees to purchase  from the Company at the
Final Closing (as defined  below) that  principal  amount of Notes  indicated on
Schedule A and the Company hereby agrees to issue to the Buyer, in a transaction
exempt  from  the  registration  and  prospectus-delivery  requirements  of  the
Securities  Act,  a Note for such  principal  amount  substantially  in the form
attached hereto as Exhibit A.

          D. Purchase Price; Manner of Payment. The purchase price for each Note
shall be the original principal amount thereof (the "Purchase Price"). Except as
otherwise  indicated on Schedule A, the Purchase Price shall be ----------  paid
by means of funds wired as follows:

         Wire to:                        Wells Fargo Bank
                                         3800 Howard Hughes Pkwy #400
                                         Las Vegas, NV 89109
                                         Account Name:  Innovative Gaming, Inc.
                                         ABA Routing:  121000248
                                         Account No:  4435611090

                                   ARTICLE II

                     BUYER'S REPRESENTATIONS AND WARRANTIES

         The Buyer  represents and warrants to and covenants and agrees with the
Company as follows:

          A.  Buyer is  purchasing  the  Notes  for  Buyer's  own  account,  for
investment  purposes only, and not with a view towards or in connection with the
public sale or distribution thereof in violation of the Securities Act.

          B. Buyer is (i) an  "accredited  investor"  within the meaning of Rule
501 of  Regulation  D under  the  Securities  Act,  (ii)  experienced  in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of Buyer's business and financial experience,  of evaluating the relative merits
and risks of an  investment  in the  Notes  and (iv) able to afford  the loss of
Buyer's investment in the Notes.

          C. Buyer  understands that the Notes are being offered and sold by the
Company in reliance on an exemption from the  registration  requirements  of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's  compliance  with,  Buyer's
representations,  warranties  and  covenants  set  forth  in this  Agreement  to

<PAGE>

determine the  availability  of such  exemption and the  eligibility of Buyer to
purchase the Notes.

          D.  Buyer  understands  that  the  Notes  have not  been  approved  or
disapproved by the Securities and Exchange  Commission (the "Commission") or any
state securities commission.

          E. This Agreement has been duly and validly  authorized,  executed and
delivered by Buyer,  and is a valid and binding  agreement of Buyer  enforceable
against Buyer in accordance  with its terms,  subject to applicable  bankruptcy,
insolvency, fraudulent conveyance,  reorganization,  moratorium and similar laws
affecting  creditors'  rights  and  remedies  generally  and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.

          F. Neither Buyer nor Buyer's  affiliates,  nor any other person acting
on their behalf, has the intention of entering,  or prior to the Initial Closing
Date (as defined below) will enter into, any put option, short position or other
similar  instrument or position  with respect to the Common  Stock,  and neither
Buyer nor any of Buyer's  affiliates  nor any person acting on their behalf will
at any time use shares of Common Stock  acquired  pursuant to this  Agreement to
settle any put option,  short  position or other similar  instrument or position
that may have been entered into prior to the execution of this Agreement.

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

          H. 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,  consents to a background investigation,  and responds to
questions from gaming authorities.  Buyer further  acknowledges that the Company
may, pursuant to the terms of its articles of  incorporation,  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.

                                  ARTICLE III

                    COMPANY'S REPRESENTATIONS AND WARRANTIES

         The Company represents and warrants to the Buyer that:

          A. Capitalization.

          1. As of the date of this Agreement,  the Company's authorized capital
stock  consisted  solely of 100,000,000  shares of capital  stock,  of which (i)
32,327,566  shares are issued and  outstanding  as shares of Common Stock,  (ii)
6,523,559  shares have been  reserved  for issuance as shares of Common Stock in
pending  transactions  (which  shares are reflected as  outstanding  on Schedule

<PAGE>

III.A.1)  (iii)  400,000  shares  have  been  designated  Series  E  Convertible
Preferred  Stock,  par value $0.01 per share,  of which 30,000 shares are issued
and outstanding,  (iv) 400,000 shares have been designated  Series F Convertible
Preferred  Stock,  par value $0.01 per share, of which 200,000 shares are issued
and  outstanding,  (v) 5,000 shares have been  designated  Series K  Convertible
Preferred  Stock,  $0.01  par  value,  of which  4,062  shares  are  issued  and
outstanding  and  (vi)  5,000  shares  have  been  designated  Series  A-1  5.5%
Convertible  Preferred Stock, $0.01 par value, of which no shares are issued and
outstanding.  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  nonassessable.  Schedule  III.A.1 hereto sets forth a complete and accurate
capitalization  table of the  Company  reflecting,  both  prior to and after the
transactions  contemplated by the Private Placement, the fully-diluted ownership
of the Company.

          2.  Except as  disclosed  on  Schedule  III.A.2  hereto,  there are no
options, warrants, conversion, preemptive, subscription, "call," rights of first
refusal or other  similar  rights to acquire any capital stock of the Company or
any of its Subsidiaries or other voting securities of the Company that have been
issued or granted to any person and no other  obligations  of the Company or any
of its Subsidiaries to issue, grant, extend or enter into any security,  option,
warrant, "call," right, commitment,  agreement,  arrangement or undertaking with
respect to any of their respective  capital stock. With respect to the Company's
convertible  preferred stock outstanding as of the date hereof,  each holder has
agreed to conversion  into Common Stock on the terms  (including  the conversion
prices) set forth on Schedule III.A.2.

          3. Schedule  III.A.3 hereto lists all the  subsidiaries of the Company
(the  "Subsidiaries").  Attached to Schedule III.A.3 hereto is an organizational
chart of the Company and the Subsidiaries. No Person other than the Company owns
any  interest in the  Subsidiaries.  Except as  disclosed  on  Schedule  III.A.3
hereto,  the  Company  does not own or  control,  directly  or  indirectly,  any
interest  in any other  corporation,  partnership,  limited  liability  company,
unincorporated  business  organization,  association,  trust or  other  business
entity.

          4. The Company has delivered or made  available to each Buyer complete
and correct copies of the  Certificate of  Incorporation  and the By-Laws of the
Company  as  amended  to the  date of this  Agreement.  Except  as set  forth on
Schedule  III.A.4  hereto,  the Company has delivered or made available to Buyer
true and complete copies of all minutes of the Board of Directors of the Company
(the "Board of Directors") since September 1, 1997.

          5. Schedule  III.A.5  hereto sets forth (a) all issuances and sales by
the Company since December 31, 2001 of its capital stock,  and other  securities
convertible,  exercisable or exchangeable for capital stock of the Company,  (b)
the amount of such securities sold,  including any underlying  shares of capital
stock,  (c) the purchaser  thereof,  (d) the amount paid  therefor,  and (e) the
material terms of all  outstanding  capital stock of the Company (other than the
Common Stock).

          B. Organization; Reporting Company Status.

          1. Except as  indicated on Schedule  III.B.1,  each of the Company and
the Subsidiaries is a corporation duly organized,  validly existing, and in good
standing under the laws of the state or jurisdiction in which it is incorporated
and is duly qualified as a foreign corporation in all jurisdictions in which the

<PAGE>

failure to so qualify would  reasonably  be expected to have a material  adverse
effect  on  the  business,   properties,   prospects,  condition  (financial  or
otherwise) or results of operations of the Company and the Subsidiaries taken as
a whole or on the consummation of any of the  transactions  contemplated by this
Agreement (a "Material Adverse Effect").

          2. The Company has  registered its Common Stock pursuant to Section 12
of the  Securities  Exchange Act of 1934, as amended (the "Exchange  Act").  The
Common Stock is listed and traded on the Nasdaq SmallCap  Market  ("Nasdaq") and
except as indicated on Schedule III.B.2, the Company has not received any notice
regarding,  and to its  knowledge  there is no threat  of,  the  termination  or
discontinuance of the eligibility of the Common Stock for such listing.

          C. Authority; Validity and Enforceability.

          1. For all purposes of this Agreement,  the term "Documents" means (i)
this Agreement,  (ii) the Certificate of Designation,  (iii) the Notes, (iv) the
Security Agreement by and among the Company, the Buyer and certain other parties
of even date  herewith,  a form of which is  attached  hereto as  Exhibit C (the
"Security  Agreement") and (v) the Registration  Rights Agreement by and between
the  Company  and the Buyer of even date  herewith,  a form of which is attached
hereto as Exhibit D (the "Registration Rights Agreement").

          2. The Company has the requisite corporate power and authority to file
and perform its obligations under the Certificate of Designation,  to enter into
the  Documents  (as  defined  above),  and to  perform  all  of its  obligations
thereunder  (including  the  issuance,  sale and delivery to Buyer of the Notes)
(with respect to the Initial Closing,  the preceding shall be qualified  insofar
as the Company has not yet received  shareholder  approval to amend its Articles
of Incorporation to increase the number of authorized shares of capital stock to
be able to reserve a  sufficient  number of shares of Common  Stock to be issued
upon conversion of the Preferred Shares).

          3. The Company's execution, delivery and performance of the Documents,
and  the  Company's  consummation  of  the  transactions   contemplated  thereby
(including  without limitation the filing of the Certificate of Designation with
the Minnesota  Secretary of State's  office,  the  reservation  for issuance and
issuance of the Conversion  Shares),  have been duly authorized by all necessary
action on the part of the  Company  (with  respect to the Initial  Closing,  the
preceding  shall  be  qualified  insofar  as the  Company  has not yet  received
shareholder  approval to amend its  Articles of  Incorporation  to increase  the
number of authorized  shares of capital stock to be able to reserve a sufficient
number of shares of Common Stock to be issued upon  conversion  of the Preferred
Shares).

          4. Each of the  Documents  (other  than the  Notes)  has been duly and
validly  executed and delivered by the Company,  the  Certificate of Designation
has been duly filed with the  Minnesota  Secretary of State's  office,  and each
Document  (other than the Notes)  constitutes a valid and binding  obligation of
the Company  enforceable  against it in  accordance  with its terms,  subject to
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting  creditors' rights and remedies  generally
and except as rights to indemnity and  contribution may be limited by federal or
state securities laws or the public policy underlying such laws (with respect to

<PAGE>

the Initial Closing, the preceding shall be qualified insofar as the Company has
not yet received  shareholder approval to amend its Articles of Incorporation to
increase the number of authorized  shares of capital stock to be able to reserve
a sufficient  number of shares of Common Stock to be issued upon  conversion  of
the Preferred Shares).

          5. The Notes have been duly and validly authorized for issuance by the
Company and each Note,  when  executed and  delivered by the Company,  will be a
valid and binding obligation of the Company enforceable against it in accordance
with  its  terms,  subject  to  applicable  bankruptcy,  insolvency,  fraudulent
conveyance,  reorganization,  moratorium and similar laws  affecting  creditors'
rights and remedies generally.

          D. Validity of Issuance of the Securities.

          1. The  Company  has duly and  validly  authorized  and  reserved  for
issuance a  sufficient  number of  Preferred  Shares for  issuance  upon initial
conversion of all Notes that may be issued  hereunder.  Such  Preferred  Shares,
when  issued by the  Company  upon  conversion  of the  Notes,  will be duly and
validly  issued,  fully paid and  nonassessable,  not subject to any  preemptive
rights,  rights of first refusal,  tag-along rights,  drag-along rights or other
similar  rights,  will not subject the holder  thereof to personal  liability by
reason of being such  holder and will be free and clear of all  pledges,  liens,
encumbrances  and  restrictions   other  than  restrictions  on  transfer  under
applicable state and federal securities laws.

          2. On or prior to October 15,  2002,  the  Company  will have duly and
validly  authorized  and reserved for issuance a sufficient  number of shares of
Common Stock for issuance upon conversion of the Preferred  Shares.  Such Common
Stock, when issued by the Company upon conversion of the Preferred Shares,  will
be duly and validly  issued,  fully paid and  nonassessable,  not subject to any
preemptive rights, rights of first refusal,  tag-along rights, drag-along rights
or other  similar  rights,  will not  subject  the holder  thereof  to  personal
liability  by  reason  of being  such  holder  and will be free and clear of all
pledges,  liens,  encumbrances  and  restrictions  other  than  restrictions  on
transfer under applicable state and federal securities laws.

          E. Commission Filings.  The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the  Commission  under the  Securities Act and the Exchange Act
since February 1, 1998 (the "Commission Filings"). As of their respective dates,
(i)  the  Commission   Filings  complied  in  all  material  respects  with  the
requirements  of the Securities Act or the Exchange Act, as applicable,  and the
rules and  regulations of the Commission  promulgated  thereunder  applicable to
such Commission  Filings,  and (ii) none of the Commission Filings 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.  The
Company's  financial  statements  included in the Commission  Filings, as of the
dates of such  documents,  were true and complete in all  material  respects and
complied with  applicable  accounting  requirements  and the published rules and
regulations of the Commission with respect thereto,  were prepared in accordance
with  generally  accepted  accounting  principles in the United States  ("GAAP")
(except in the case of unaudited statements, as permitted by Form 10-Q under the

<PAGE>

Exchange Act) applied on a consistent  basis during the periods involved (except
as may be indicated in the notes thereto) and fairly  presented the consolidated
financial  position of the Company and its  Subsidiaries as of the dates thereof
and the consolidated  results of their operations and cash flows for the periods
then ended  (subject,  in the case of unaudited  statements,  to normal year-end
audit  adjustments  that in the  aggregate  are not  material  and to any  other
adjustment described therein).

          F. Non-Contravention. The execution and delivery by the Company of the
Documents, the issuance of the Notes, and the consummation by the Company of the
other transactions  contemplated  thereby,  including,  without limitation,  the
filing of the Certificate of Designation with the Minnesota Secretary of State's
office,  do not, and compliance  with the provisions of this Agreement and other
Documents  will not,  conflict  with,  or result in any violation of, or default
(with or  without  notice or lapse of time,  or both)  under,  or give rise to a
right of termination,  cancellation or acceleration of any obligation or loss of
a material  benefit  under,  or result in the  creation  of any Lien (as defined
below)  upon  any of the  properties  or  assets  of the  Company  or any of its
Subsidiaries under, or result in the termination of, or require that any consent
be  obtained  or any  notice be given  with  respect  to,  (i) the  Articles  of
Incorporation   or  By-Laws  of  the  Company  or  the  comparable   charter  or
organizational documents of any of its Subsidiaries, (ii) except as indicated in
Schedule III.F, any loan or credit agreement,  note, bond, mortgage,  indenture,
lease,  contract or other  agreement,  instrument  or permit  applicable  to the
Company or any of its Subsidiaries or their respective  properties or assets, or
(iii) other than the gaming  regulatory  approvals  described on Schedule III.F,
any Law (as defined below)  applicable to the Company or any of its Subsidiaries
or their respective properties or assets.

          G.  Approvals.  Except  as set  forth on  Schedule  III.G  hereto,  no
authorization,  approval  or  consent  of any court or  public  or  governmental
authority is required to be obtained by the Company for the issuance and sale of
the Notes or the Conversion  Shares to Buyer as  contemplated  by this Agreement
and the other Documents,  except such authorizations,  approvals and consents as
have been obtained by the Company prior to the date hereof.

          H. Absence of Certain  Changes.  Except as set forth on Schedule III.H
hereto,  since the Balance Sheet Date (as defined in Section  III.K),  there has
not  occurred  any  change,  event or  development  in the  business,  financial
condition,  prospects  or results  of  operations  of the  Company or any of the
Subsidiaries, there has not existed any condition having or reasonably likely to
have a Material  Adverse  Effect,  and the  Company  and the  Subsidiaries  have
conducted their respective businesses only in the ordinary course.

          I. Absence of Litigation. Except as set forth on Schedule III.I, there
are (i) no suits,  actions or  proceedings  pending or, to the  knowledge of the
Company,  threatened  against  the Company or any of its  Subsidiaries,  (ii) no
complaints,  lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing  alleging breach of any express or implied  contract
of  employment,  any  applicable  law governing  employment  or the  termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment  relationship,  and (iii) no judgments,  decrees,  injunctions or
orders of any governmental entity or arbitrator  outstanding against the Company
or any Subsidiary.

<PAGE>

          J.  Absence  of Events  of  Default.  Except as set forth on  Schedule
III.J, no "Event of Default" (as defined in any agreement or instrument to which
the Company is a party) and no event which, with notice,  lapse of time or both,
would  constitute  an Event of Default  (as so  defined),  has  occurred  and is
continuing which could have a Material Adverse Effect on the Company.

          K. Financial Statements;  No Undisclosed  Liabilties.  The Company has
delivered  to each Buyer true and  complete  copies of the (i)  audited  balance
sheet of the Company and the  Subsidiaries  as at December  31,  2001,  2000 and
1999,  respectively,  and the related audited  statements of income,  changes in
stockholders'  equity and cash flows for the three fiscal  years ended  December
31, 2001,  including  the related notes and schedules  thereto,  (ii)  unaudited
balance sheets of the Company and the Subsidiaries and the statements of income,
changes in  stockholders'  equity and cash flows for each fiscal  quarter  ended
since  December 31, 2001 and (iii)  unaudited  balance sheets of the Company and
the Subsidiaries and the statements of income,  changes in stockholders'  equity
and cash flows for the month ended July 31, 2002 and the seven month period then
ended, including in each case the related notes and schedules,  all certified by
the  chief  financial  officer  of the  Company  (collectively,  the  "Financial
Statements"), and all management letters, if any, from the Company's independent
auditors relating to the dates and periods covered by the Financial  Statements.
The Financial  Statements at and for the period ended July 31, 2002 are attached
as Schedule III.K.  Each of the Financial  Statements is complete and correct in
all material  respects,  has been prepared in accordance with GAAP (subject,  in
the case of the interim Financial Statements, to normal year end adjustments and
the absence of footnotes),  and fairly presents the financial position,  results
of operations  and cash flows of the Company as at the dates and for the periods
indicated.  For purposes hereof,  the audited balance sheet of the Company as at
December 31, 2001 is hereinafter referred to as the "Balance Sheet" and December
31, 2001 is hereinafter referred to as the "Balance Sheet Date." The Company has
no  indebtedness,  obligations  or  liabilities  of any kind  (whether  accrued,
absolute,  contingent or otherwise, and whether due or to become due), which was
not fully reflected in, reserved  against or otherwise  described in the Balance
Sheet or the notes  thereto  or  incurred  in the  ordinary  course of  business
consistent with the Company's past practices since the Balance Sheet Date.

          L.  Compliance  with  Laws;  Permits.  Each  of the  Company  and  its
Subsidiaries  is  in  compliance  with  all  laws,  rules,  regulations,  codes,
ordinances  and  statutes  (collectively,  "Laws")  applicable  to it or to  the
conduct  of its  business  except  for such  violations  of Laws as  would  not,
individually or in the aggregate, have a Material Adverse Effect. Schedule III.L
lists all instances of noncompliance with Laws known to the Company,  whether or
not such noncompliance would have a Material Adverse Effect. Each of the Company
and its Subsidiaries possesses all material permits, approvals,  authorizations,
licenses, certificates and consents from all public and governmental authorities
which are necessary to conduct its business  except for such permits,  approval,
authorizations,  licenses,  certificates and consents as would not, individually
or in the aggregate, have a Material Adverse Effect. Set forth on Schedule III.L
hereto  is a list of each  jurisdiction  in  which  the  Company  holds a gaming
license.

          M. Related Party  Transactions.  Except as set forth on Schedule III.M
hereto,  neither the Company nor any of its officers,  directors or "Affiliates"
(as such term is defined in Rule 12b-2  under the  Exchange  Act) nor any family

<PAGE>

member of any  officer,  director or  Affiliate  of the Company has borrowed any
money from or has outstanding any  indebtedness or other similar  obligations to
the Company or any of the  Subsidiaries.  Except as set forth on Schedule  III.M
hereto, neither the Company nor any of its officers, directors or Affiliates nor
any family member of any officer,  director or Affiliate of the Company (i) owns
any direct or indirect  interest  constituting more than a 1% equity (or similar
profit  participation)  interest  in, or  controls  or is a  director,  officer,
partner,  member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor,  supplier,  customer,  landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any  Subsidiary,  or (z) a participant  in any  transaction to
which  the  Company  or any  Subsidiary  is a party  or  (ii) is a party  to any
contract,  agreement,  commitment or other  arrangement  with the Company or any
Subsidiary.

          N.  Insurance.  Each of the  Company  and the  Subsidiaries  maintains
property and casualty, general liability,  workers' compensation,  environmental
hazard,  personal  injury and other similar types of insurance with  financially
sound and  reputable  insurers  that is adequate and  consistent  with  industry
standards and the Company's historical claims experience,  all of which policies
are set forth on Schedule  III.N hereto.  Except as set forth on Schedule  III.N
hereto,  none of the Company and the  Subsidiaries has received notice from, and
none of them has  knowledge  of any threat by, any insurer  (that has issued any
insurance  policy to the Company or any Subsidiary) that such insurer intends to
deny coverage  under or cancel,  discontinue  or not renew any insurance  policy
presently in force.

          O.   Securities   Law   Matters.   Assuming   the   accuracy   of  the
representations  and warranties of the Buyer set forth in Article II hereof, the
offer and sale by the Company of the Notes and the  Conversion  Shares is exempt
from (i) the registration and prospectus delivery requirements of the Securities
Act and the rules and  regulations of the Commission  thereunder as in effect on
the  date of this  Agreement  and  (ii) the  registration  and/or  qualification
provisions of all applicable  state  securities and "blue sky" laws as in effect
on the date of this Agreement.  Other than pursuant to an effective registration
statement under the Securities Act, the Company has not issued,  offered or sold
any  Notes,  Preferred  Shares or shares of  Common  Stock  (including  for this
purpose any  securities of the same or a similar  class as the Notes,  Preferred
Shares or Common Stock,  or any securities  convertible  into or exchangeable or
exercisable  for  Notes,  Preferred  Shares  or Common  Stock or any such  other
securities)  since  December  31, 2001,  except as  disclosed on Schedule  III.O
hereto,  and the Company  shall not directly or indirectly  take,  and shall not
permit any of its  directors,  officers or Affiliates  directly or indirectly to
take, any action  (including,  without  limitation,  any offering or sale to any
person or entity of  Notes,  Preferred  Shares or shares of Common  Stock or any
securities  convertible into or exchangeable or exercisable for Notes, Preferred
Shares  or  Common  Stock  or  any  such  other  securities),  which  will  make
unavailable the exemption from Securities Act registration  being relied upon by
the Company for the offer and sale to the Buyer of the Notes and the  Conversion
Shares as  contemplated  by this Agreement and the other  Documents.  No form of
general  solicitation  or advertising has been used or authorized by the Company
or any of its officers,  directors or Affiliates in connection with the offer or
sale of the Notes or the Conversion Shares.

          P.  Environmental  Matters.  Except  as set  forth on  Schedule  III.P
hereto:

<PAGE>

          1. The Company,  the Subsidiaries and their respective  operations are
in compliance with all applicable  Environmental Laws and all permits (including
terms,  conditions,  and limitations  therein) issued pursuant to  Environmental
Laws or otherwise;

          2. Each of the Company and the Subsidiaries has all permits, licenses,
waivers,  exceptions, and exemptions required under all applicable Environmental
Laws necessary to operate its business;

          3. None of the  Company  or the  Subsidiaries  is the  subject  of any
outstanding  written order of or agreement  with any  governmental  authority or
person  respecting (i)  Environmental  Laws or permits,  (ii) Remedial Action or
(iii) any Release or threatened Release of Hazardous Materials;

          4. None of the Company or the  Subsidiaries  has  received any written
communication  alleging that it may be in violation of any  Environmental Law or
any permit issued pursuant to any  Environmental  Law, or may have any liability
under any Environmental Law;

          5.  None  of  the  Company  or the  Subsidiaries  has  any  liability,
contingent or otherwise,  in connection with any presence,  treatment,  storage,
disposal or Release of any  Hazardous  Materials  whether on  property  owned or
operated by the Company or any Subsidiary or property of third parties, and none
of  the  Company  or  the  Subsidiaries   has   transported,   or  arranged  for
transportation  of, any  Hazardous  Materials  for  treatment or disposal on any
property;

          6.  There  are no  investigations  of  the  business,  operations,  or
currently or previously owned, operated or leased property of the Company or any
Subsidiary  pending or threatened which could lead to the imposition of any case
or liability pursuant to any Environmental Law;

          7. There is not located at any of the properties  owned or operated by
the  Company  or  any  Subsidiary  any  (A)  underground   storage  tanks,   (B)
asbestos-containing   material  or  (C)  equipment  containing   polychlorinated
biphenyls;

          8. Each of the Company and the Subsidiaries has provided to each Buyer
all environmentally related assessments, audits, studies, reports, analyses, and
results of investigations that have been performed with respect to the currently
or previously owned,  leased or operated properties or activities of the Company
and such Subsidiaries;

          9. There are no liens arising  under or pursuant to any  Environmental
Law on any real  property  owned,  operated,  or  leased by the  Company  or any
Subsidiary,  and no action of any  governmental  authority has been taken or, to
the  knowledge of the Company,  is in process of being taken which could subject
any  of  such  properties  to  such  liens,  and  none  of  the  Company  or the
Subsidiaries  has been or is  expected  to be  required  to place any  notice or
restriction  relating to the presence of Hazardous Material at any real property
owned, operated, or leased by it in any deed to such property;

          10. Neither the Company nor any of the Subsidiaries owns, operates, or
leases any hazardous waste generation, treatment, storage, or disposal facility,
as such terms are used  pursuant  to the RCRA and  related or  analogous  state,

<PAGE>

local, or foreign law. None of the properties owned,  operated, or leased by the
Company,  any of the Subsidiaries or any predecessor thereof are now, or were in
the past,  used in any part as a dump,  landfill,  or disposal site, and neither
the Company,  any of the  Subsidiaries  nor any  predecessor  of any of them has
filled any wetlands;

          11.  The  purchase  that is the  subject  of this  Agreement  will not
require any governmental  approvals under  Environmental  Laws,  including those
that are  triggered  by sales  or  transfers  of  businesses  or real  property,
including,  as examples and without  limitation,  the New Jersey Industrial Site
Recovery  Act,  N.J.  Stat.  13:1K-7 et seq.,  and the  Connecticut  Transfer of
Establishments Act, Conn. Gen. Stat.. 22a-134 et seq.;

          12. There is no currently  existing  requirement  or requirement to be
imposed in the future by any  Environmental  Law or  Environmental  Permit which
could result in the  incurrence of a cost that could be  reasonably  expected to
have a Material Adverse Effect; and

          13. Each of the Company and each of the  Subsidiaries has disclosed to
Buyer all other acts or conditions that could result in any costs or liabilities
under Environmental Laws.

         For purposes of this Section III.P

         "Environmental Law" means any foreign, federal, state or local statute,
regulation,  ordinance,  or common law as now or  hereafter in effect in any way
relating  to  the  protection  of  human  health,  safety  or  welfare,  or  the
environment  including,  without  limitation,  the  Comprehensive  Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource  Conservation and Recovery Act ("RCRA"),  the Clean Water Act,
the Clean Air Act, the Toxic  Substances  Control Act, the Federal  Insecticide,
Fungicide,  and Rodenticide Act, and the Occupational Safety and Health Act, and
the regulations promulgated pursuant to any of them.

         "Hazardous Material" means any substance that is listed,  classified or
regulated pursuant to any Environmental Law, including petroleum,  gasoline, and
any other petroleum  product,  by-product,  fraction or derivative,  asbestos or
asbestos-containing   material,   lead-containing  paint,  water,  or  plumbing,
polychlorinated biphenyls, radioactive materials and radon;

         "Release" means any placement,  release, spill,  filtration,  emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through,  or under the indoor or outdoor  environment,  or into,
through, under, or out of any property; and

         "Remedial Action" means any action to (x) clean up, remove,  remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material; or (z) perform studies and investigations
or post-remedial monitoring and care in relation to (x) or (y) above.

          Q. Labor Matters.  Neither the Company nor any of the  Subsidiaries is
party to any labor or collective bargaining agreement, and there are no labor or
collective  bargaining  agreements which pertain to any employees of the Company
or any Subsidiary.  No employees of the Company or any of the  Subsidiaries  are
represented  by any labor  organization  and none of such  employees  has made a

<PAGE>

pending demand for recognition,  and there are no representation  proceedings or
petitions  seeking a  representation  proceeding  presently  pending  or, to the
Company's knowledge,  threatened to be brought or filed, with the National Labor
Relations  Board or  other  labor  relations  tribunal.  There is no  organizing
activity  involving  the Company or any  Subsidiary  pending or to the Company's
knowledge,  threatened  by any labor  organization  or group of employees of the
Company or any of the  Subsidiaries.  There are no (i) strikes,  work stoppages,
slowdowns,  lockouts or arbitrations or (ii) material  grievances or other labor
disputes  pending or, to the  knowledge  of the Company,  threatened  against or
involving  the  Company or any of the  Subsidiaries.  There are no unfair  labor
practice charges,  grievances or complaints  pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.

          R. ERISA  Matters.  All Plans  maintained by the Company or any of its
Subsidiaries and ERISA Affiliates are listed in Schedule III.R and copies of all
documentation  relating to such Plans (including,  but not limited to, copies of
written Plans,  written  descriptions of oral Plans,  summary plan descriptions,
trust agreements,  the three most recent annual returns, employee communications
and IRS  determination  letters)  have been  delivered to or made  available for
review by the Buyer. Except as indicated in Schedule III.R, each Plan has at all
times been maintained and  administered  in all material  respects in accordance
with its terms and the  requirements of applicable law,  including ERISA and the
Code,  and each Plan intended to qualify under section 401(a) of the Code has at
all times since its  adoption  been so  qualified,  and each trust which forms a
part of any such plan has at all times since its adoption been tax-exempt  under
section 501(a) of the Code. The Company and each of its  Subsidiaries  and ERISA
Affiliates  are in  compliance in all material  respects with all  provisions of
ERISA applicable to it. No Reportable Event has occurred,  been waived or exists
as to which the  Company or any of its  Subsidiaries  and ERISA  Affiliates  was
required  to  file a  report  with  the  PBGC,  and  the  present  value  of all
liabilities  under each  Pension Plan (based on those  assumptions  used to fund
such  Plans)  listed in Schedule  III.R did not,  as of the most  recent  annual
valuation  date  applicable  thereto,  exceed  the  value of the  assets of such
Pension Plan. None of the Company,  its  Subsidiaries  and ERISA  Affiliates has
incurred,  or reasonably expects to incur, any Withdrawal Liability with respect
to any Multi-employer  Plan that could result in a Material Adverse Effect. None
of  the  Company,  its  Subsidiaries  and  ERISA  Affiliates  has  received  any

<PAGE>

notification  that  any  Multi-employer  Plan is in  reorganization  or has been
terminated within the meaning of Title IV of ERISA, and no  Multi-employer  Plan
is  reasonably  expected  to be in  reorganization  or  termination  where  such
reorganization  or termination  has resulted or could  reasonably be expected to
result in  increases  to the  contributions  required to be made to such Plan or
otherwise. No direct,  contingent or secondary liability has been incurred or is
expected to be incurred by the Company or any of its Subsidiaries under Title IV
of ERISA to any party  with  respect to any Plan,  or with  respect to any other
Plan  presently  or  heretofore  maintained  or  contributed  to  by  any  ERISA
Affiliate.  Neither the Company nor any of its Subsidiaries and ERISA Affiliates
has incurred any liability for any tax imposed under sections 4971 through 4980B
of the Code or civil  liability  under section 502(i) or (l) of ERISA.  No suit,
action or other litigation or any other claim which could reasonably be expected
to result in a  material  liability  or  expense  to the  Company  or any of its
Subsidiaries or ERISA Affiliates  (excluding claims for benefits incurred in the
ordinary course of plan activities) has been brought or, to the knowledge of the
Company,  threatened  against or with respect to any Plan and there are no facts
or  circumstances  known  to the  Company  or any of its  Subsidiaries  or ERISA
Affiliates  that could  reasonably  be  expected  to give rise to any such suit,
action or other litigation.  All contributions to Plans that were required to be
made  under  such  Plans have been  made,  and all  benefits  accrued  under any
unfunded  Plan have been  paid,  accrued or  otherwise  adequately  reserved  in
accordance  with  GAAP,  all of  which  accruals  under  unfunded  Plans  are as
disclosed  in  Schedule  III.R,  and the  Company,  its  Subsidiaries  and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans.  The execution,  delivery and performance of this Agreement and
the other Documents and the consummation of the transactions contemplated hereby
and thereby  (including,  without  limitation,  the offer, issue and sale by the
Company,  and the purchase by the Buyer, of the Notes,  the Preferred Shares and
the Conversion Shares) will not involve any "prohibited  transaction" within the
meaning of ERISA or the Code with respect to any Plan.

         As used in this Agreement:

         "Code" means the Internal Revenue Code of 1986, as amended.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.

         "ERISA   Affiliate"  means  any  trade  or  business  (whether  or  not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single  employer under section
414 of the Code.

         "Multi-employer Plan" means a multi-employer plan as defined in section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate  (other than one
considered an ERISA  Affiliate only pursuant to subsection (m) or (o) of section
414 of the Code) is making or accruing an obligation to make  contributions,  or
has within any of the  preceding six plan years made or accrued an obligation to
make contributions.

         "PBGC" means the Pension Benefit Guaranty  Corporation  referred to and
defined in ERISA or any successor thereto.

         "Pension  Plan"  means any pension  plan  (other than a  Multi-employer
Plan)  subject to the  provision of Title IV of ERISA or section 412 of the Code
that is maintained for employees of the Company or any of its  Subsidiaries,  or
any ERISA Affiliate.

         "Plan" means any bonus, incentive compensation,  deferred compensation,
pension,  profit  sharing,  retirement,  stock  purchase,  stock  option,  stock
ownership,  stock appreciation rights, phantom stock, leave of absence,  layoff,
vacation,  day or dependent  care,  legal  services,  cafeteria,  life,  health,
accident,  disability,  workmen's  compensation or other  insurance,  severance,
separation or other employee  benefit plan,  practice,  policy or arrangement of
any kind,  whether  written  or oral,  or  whether  for the  benefit of a single
individual  or more than one  individual  including,  but not  limited  to,  any
"employee  benefit plan" within the meaning of section 3(3) of ERISA,  including
any Pension Plan.

         "Reportable  Event"  means any  reportable  event as defined in section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.

<PAGE>

         "Withdrawal  Liability" means liability to a  Multi-employer  Plan as a
result of a complete or partial  withdrawal  from such  Multi-employer  Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.

          S. Tax Matters.

          1. Except as  indicated on Schedule  III.S,  the Company has filed all
Tax Returns  which it is required to file under  applicable  Laws;  all such Tax
Returns are true and accurate in all material respects and have been prepared in
compliance  with all  applicable  Laws;  the  Company has paid all Taxes due and
owing by it (whether or not such Taxes are required to be shown on a Tax Return)
and has withheld and paid over to the appropriate  taxing  authorities all Taxes
which it is required to withhold  from  amounts  paid or owing to any  employee,
stockholder,  creditor or other third parties; and since the Balance Sheet Date,
the  charges,  accruals  and  reserves  for Taxes with  respect  to the  Company
(including any provisions for deferred  income taxes)  reflected on the books of
the Company  are  adequate  to cover any Tax  liabilities  of the Company if its
current tax year were treated as ending on the date hereof.

          2. No claim  has been  made by a Taxing  authority  in a  jurisdiction
where  the  Company  does not file Tax  Returns  that the  Company  is or may be
subject to taxation by such jurisdiction.  There are no foreign,  federal, state
or local tax audits or administrative or judicial  proceedings  pending or being
conducted with respect to the Company; no information related to Tax matters has
been requested by any foreign,  federal,  state or local Taxing authority;  and,
except as disclosed  above,  no written  notice  indicating an intent to open an
audit or other  review  has  been  received  by the  Company  from any  foreign,
federal,  state or local  Taxing  authority.  There are no  material  unresolved
questions or claims concerning the Company's Tax liability.  The Company (A) has
not executed or entered into a closing agreement pursuant to section 7121 of the
Code or any  predecessor  provision  thereof or any similar  provision of state,
local or  foreign  law;  or (B) has not  agreed  to or is  required  to make any
adjustments  pursuant to section 481(a) of the Code or any similar  provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its  Subsidiaries or has any knowledge that the IRS has
proposed  any  such  adjustment  or  change  in  accounting  method,  or has any
application  pending with any taxing  authority  requesting  permission  for any
changes in  accounting  methods that relate to the business or operations of the
Company.  The  Company  has not  been a  United  States  real  property  holding
corporation  within  the  meaning of section  897(c)(2)  of the Code  during the
applicable period specified in section 897(c)(1)(A)(ii) of the Code.

          3. The Company has not made an election  under  section  341(f) of the
Code.  The  Company is not liable for the Taxes of another  person that is not a
subsidiary of the Company under (A) Treas.  Reg. Section 1.1502-6 (or comparable
provisions of state,  local or foreign  law),  (B) as a transferee or successor,
(C) by contract or indemnity or (D) otherwise. The Company is not a party to any
Tax sharing agreement.  The Company has not made any payments,  is not obligated
to make  payments and is not a party to an agreement  that could  obligate it to
make any payments that would not be deductible under section 280G of the Code.

         For purposes of this Section III.S:

<PAGE>

         "IRS" means the United States Internal Revenue Service.

         "Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise,  profits, sales or use, transfer,
registration, excise, utility, environmental,  communications,  real or personal
property,   capital  stock,   license,   payroll,  wage  or  other  withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum,  estimated and other taxes of any kind whatsoever  (including,  without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

         "Tax  Return"  means any  return,  information  report  or filing  with
respect to Taxes,  including  any schedules  attached  thereto and including any
amendment thereof.

          T.  Property.  Except  as set  forth on  Schedule  III.T,  each of the
Company and the  Subsidiaries has good and marketable title to all of its assets
and  properties  material to the conduct of its business,  free and clear of any
liens, pledges, security interests,  claims,  encumbrances or other restrictions
of any kind (collectively, "Liens"). With respect to any assets or properties it
leases,  each of the Company and its  Subsidiaries  holds a valid and subsisting
leasehold  interest therein,  free and clear of any Liens, is in compliance,  in
all  material  respects,  with the terms of the  applicable  lease,  and  enjoys
peaceful  and  undisturbed  possession  under such lease.  All of the assets and
properties of the Company and any of its  Subsidiaries  that are material to the
conduct of business as presently  conducted or as proposed to be conducted by it
are in good  operating  condition  and  repair.  Except  as  reserved  for,  the
inventory  of the  Company  and  its  Subsidiaries  is in  good  and  marketable
condition,  does not include any material  quantity of items which are obsolete,
damaged or slow moving,  and is salable (or may be leased) in the normal  course
of business as currently conducted by it.

          U. Intellectual  Property.  The Company owns or possesses adequate and
enforceable  rights  to  use  all  patents,  patent  applications,   trademarks,
trademark  applications,  trade  names,  service  marks,  copyrights,  copyright
applications,  licenses,  know-how (including trade secrets and other unpatented
and/or  unpatentable  proprietary  or  confidential   information,   systems  or
procedures)  and other similar rights and proprietary  knowledge  (collectively,
"Intangibles")  necessary for the conduct of its business as now being conducted
and  currently  proposed to be  conducted  including,  but not limited to, those
described on Schedule III.U hereto.  Except as set forth on Schedule III.U,  the
Company has all right,  title and interest in all of the  Intangibles,  free and
clear of any and all Liens.  The Company is not  infringing  upon or in conflict
with any right of any other  person with respect to any  Intangibles.  Except as
disclosed  on Schedule  III.U  hereto,  (i) no claims have been  asserted by any
individual,   partnership,    corporation,    unincorporated   organization   or
association,  limited liability company, trust or other entity (collectively,  a
"Person")  contesting  the  validity,  enforceability,  use or  ownership of any
Intangibles,  and the Company has no knowledge of any basis for such claim,  and
(ii) neither the Company nor the  Subsidiaries has any knowledge of infringement
or  misappropriation  of the  Intangibles by any third party.  Each employee and
officer of the Company has executed a  proprietary  information  and  inventions
agreement  substantially  in the form or forms which have been delivered or made
available  to the Buyer.  The Company is not aware that any of its  employees or
officers is in violation thereof. Each consultant and vendor to the Company with

<PAGE>

access  to  confidential  information  of the  Company  is a party to a  written
agreement  under  which,  among  other  things,  such  consultant  or  vendor is
obligated to maintain the  confidentiality  of  confidential  information of the
Company.  The Company is not aware that any of its  consultants or vendors is in
violation thereof.

          V. Contracts.  Except as indicated on Schedule  III.V,  all contracts,
agreements,  notes,  instruments,  franchises,  leases,  licenses,  commitments,
arrangements  or  understandings,  written or oral  (collectively,  "Contracts")
which are  material  to the  business  and  operations  of the  Company  and the
Subsidiaries  are in full  force and  effect  and  constitute  legal,  valid and
binding  obligations of the Company and the  Subsidiaries  and, to the Company's
knowledge,  the other parties thereto;  the Company and the Subsidiaries and, to
the Company' knowledge, each other party thereto, have performed in all material
respects all  obligations  required to be performed by them under the Contracts,
and no material  violation or default exists in respect  thereof,  nor any event
that with notice or lapse of time, or both,  would constitute a default thereof,
on the part of the Company and the Subsidiaries or, to the Company's  knowledge,
any other party thereto;  none of the Contracts is currently being renegotiated;
and the validity,  effectiveness  and  continuation of all Contracts will not be
materially   adversely  affected  by  the  transactions   contemplated  by  this
Agreement.

          W.  Registration  Rights.  Except as set forth on Schedule  III.W,  no
Person has, and as of the relevant  Closing (as defined below),  no Person shall
have,  demand,  "piggy-back"  or other  rights to cause the  Company to file any
registration  statement  under  the  Securities  Act,  relating  to  any  of its
securities or to participate in any such registration statement.

          X. Interest; Dividends. The timely payment of interest on the Notes as
specified  therein and  dividends  on the  Preferred  Shares as specified in the
Certificate of Designation is not prohibited by the Certificate of Incorporation
or  By-Laws  of the  Company  or any  agreement,  contract,  document  or  other
undertaking to which the Company or any of the Subsidiaries is a party.

          Y.  Investment  Company  Act.  Neither  the  Company  nor  any  of the
Subsidiaries  is an  "investment  company"  within the meaning of the Investment
Company Act of 1940,  as amended  (the  "Investment  Company  Act"),  nor is the
Company nor any of the  Subsidiaries  directly or  indirectly  controlled  by or
acting on behalf of any  Person  which is an  "investment  company"  within  the
meaning of the Investment Company Act.

          Z. Business Plan. Any business  information of the Company  previously
submitted to any Buyer in any form, including the projections contained therein,
was prepared by the senior  management of the Company in good faith and is based
on  assumptions  that the Company  believes are  reasonable.  The Company is not
aware of any fact or condition  that could  reasonably  be expected to result in
the Company not achieving the results described in such business plan.

          AA. Internal Controls and Procedures.  The Company maintains  accurate
books and records and  internal  accounting  controls  that  provide  reasonable
assurance  that  (i)  all  transactions  to  which  the  Company  or each of the
Subsidiaries  is a party or by which its  properties are bound are executed with
management's  authorization;  (ii) the reported  accountability of the Company's
and the  Subsidiaries'  assets is  compared  with  existing  assets  at  regular
intervals;  (iii)  access  to the  Company's  and the  Subsidiaries'  assets  is
permitted  only in  accordance  with  management's  authorization;  and (iv) all

<PAGE>

transactions  to which any of the Company and the  Subsidiaries is a party or by
which its properties  are bound are recorded as necessary to permit  preparation
of the financial statements of the Company in accordance with GAAP.

          BB.  Payments  and  Contributions.  Neither the Company nor any of its
Subsidiaries  nor any of  their  respective  directors,  officers  or,  to their
respective  knowledge,  other  employees  has (i) used any company funds for any
unlawful  contribution,  endorsement,  gift,  entertainment  or  other  unlawful
expense  relating  to  political  activity;  (ii) made any  direct  or  indirect
unlawful payment of company funds to any foreign or domestic government official
or employee,  (iii)  violated or is in violation of any provision of the Foreign
Corrupt  Practices  Act of 1977,  as  amended;  or (iv) made any bribe,  rebate,
payoff, influence payment,  kickback or other similar payment to any person with
respect to Company matters.

          CC. Finder's Fees. No person, firm or corporation has or will have, as
a result of any act or omission  of the  Company,  any right,  interest or valid
claim  against  the  Company  or any  Buyer  for any  commission,  fee or  other
compensation  as  a  finder  or  broker  in  connection  with  the  transactions
contemplated by this Agreement.  The Company shall indemnify and hold each Buyer
harmless against any and all liability with respect to any such commission,  fee
or other  compensation  which may be payable or be  determined  to be payable in
connection with the  transactions  contemplated by this Agreement as a result of
any act or omission of the Company.

          DD.  Accounts  Payable.  Attached to Schedule III.DD is a complete and
accurate  listing,  as of  the  most  recent  practicable  date,  of  all of the
Company's and Subsidiaries' accounts payable.

          EE. GET Merger.  The Company's  proposed  acquisition of GET USA, Inc.
pursuant  to an  Agreement  and Plan of Merger by and among GET USA,  Inc.,  the
Company and Innovative  Gaming  Technology  Corp.,  dated February 15, 2002, has
been terminated.

          FF. Disclosure

          1. Except as set forth in Schedule  III.FF,  there is no fact known to
the Company  (other than general  economic or industry  conditions  known to the
public generally) that has not been fully disclosed in writing to Buyer that (i)
reasonably  could  be  expected  to  have a  Material  Adverse  Effect  or  (ii)
reasonably  could be expected to materially and adversely  affect the ability of
the Company to perform its obligations pursuant to the Documents.

          2. No  representation  or warranty of the  Company  contained  in this
Agreement or any of the other Documents,  any schedule,  annex or exhibit hereto
or thereto or any agreement,  instrument or certificate furnished by the Company
to any Buyer  pursuant to this  Agreement,  contains  any untrue  statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading.

<PAGE>

                                   ARTICLE IV

                      CERTAIN COVENANTS AND ACKNOWLEDGMENTS

          A. Restrictive  Legend.  The Buyer  acknowledges and agrees that, upon
issuance  pursuant to this Agreement,  the Conversion Shares shall have endorsed
thereon legends in substantially  the following form (and a stop-transfer  order
may be placed against  transfer of the  Conversion  Shares until such legend has
been removed):

           THE  OFFER  AND  SALE  OF  THE  SHARES   REPRESENTED  BY  THIS
           CERTIFICATE  HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
           OF 1933 OR THE  SECURITIES  LAW OF ANY STATE.  THE SHARES HAVE
           BEEN  ACQUIRED  FOR  INVESTMENT  AND  WITHOUT  A VIEW TO THEIR
           DISTRIBUTION  AND MAY NOT BE SOLD OR OTHERWISE  DISPOSED OF IN
           THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT  FOR SUCH
           TRANSACTION UNDER THE SECURITIES ACT OF 1933 OR UNLESS, IN THE
           OPINION OF COUNSEL  SATISFACTORY TO THIS  CORPORATION (IF THIS
           CORPORATION SO REQUESTS),  AN EXEMPTION FROM  REGISTRATION  IS
           AVAILABLE UNDER THE SECURITIES LAWS.

           THE  ARTICLES  OF  INCORPORATION  OF  THE  CORPORATION  IMPOSE
           CERTAIN  RESTRICTIONS ON THE OWNERSHIP OF FIVE PERCENT OR MORE
           OF THE CAPITAL STOCK OF THE  CORPORATION AND EMPOWER THE BOARD
           OF   DIRECTORS   TO  REDEEM   CAPITAL   STOCK  UNDER   CERTAIN
           CIRCUMSTANCES.

           THE CORPORATION  WILL FURNISH ANY SHAREHOLDER UPON REQUEST AND
           WITHOUT CHARGE, A COPY OF THE ARTICLES OF INCORPORATION  AND A
           FULL STATEMENT OF THE DESIGNATIONS,  PREFERENCES, LIMITATIONS,
           AND  RELATIVE  RIGHTS OF THE  SHARES  OF EACH  CLASS OR SERIES
           AUTHORIZED TO BE ISSUED,  SO FAR AS THEY HAVE BEEN DETERMINED,
           AND THE  AUTHORITY  OF THE  BOARD TO  DETERMINE  THE  RELATIVE
           RIGHTS AND PREFERENCES OF SUBSEQUENT CLASSES OR SERIES.

           THESE SECURITIES ARE SUBJECT TO THE MISSISSIPPI GAMING CONTROL
           ACT AND THE REGULATIONS OF THE MISSISSIPPI GAMING COMMISSION.

           THESE  SECURITIES ARE SUBJECT TO THE NEVADA GAMING CONTROL ACT
           AND THE REGULATIONS OF THE NEVADA GAMING COMMISSION.

<PAGE>

          B. Filings.  The Company  shall timely make all  necessary  Commission
Filings and "blue sky" filings  required to be made by the Company in connection
with the sale of the Notes to the Buyer as required by all applicable  Laws, and
shall provide a copy thereof to the Buyer promptly after such filing.

          C. Reporting Status. So long as the Buyer beneficially owns any of the
Notes or  Conversion  Shares,  the Company  shall use its best efforts to timely
file all  reports  required  to be filed by it with the  Commission  pursuant to
Section 13 or 15(d) of the Exchange Act.

          D. Listing. Except to the extent the Company lists its Common Stock on
the Nasdaq National Market or the New York Stock Exchange, the Company shall use
its best  efforts  to  maintain  its  listing  of the  Common  Stock on  Nasdaq,
including,  if  applicable,  seeking  shareholder  approval of the  transactions
contemplated by this Agreement at the special  shareholder's  meeting to be held
as provided in Section IV.E;  provided that the Company's sale of Notes pursuant
to this Agreement shall not be deemed to be a violation of this Section IV.D. If
the Common Stock is delisted from Nasdaq,  the Company will use its best efforts
to list the Common  Stock on the most  liquid  national  securities  exchange or
quotation system that the Common Stock is qualified to be listed on.

          E. Covenant Regarding  Shareholder  Approval.  The Company will call a
special  meeting of  shareholders  to be held on or before  October 15, 2002 and
seek shareholder  support at such meeting for (i) a resolution which would amend
the  Company's  Articles  of  Incorporation  to  increase  the  number of shares
authorized  thereunder  to such  number as shall be  sufficient  to  enable  the
Company to reserve a  sufficient  number of shares of Common  Stock for issuance
upon  conversion  of the  Preferred  Shares and (ii) a resolution  to ratify and
approve the transactions  contemplated hereby. To the extent that the Buyer is a
holder of capital stock of the Company  entitled to vote at the special meeting,
then the Buyer  agrees to vote for  approval  of the  matters  specified  in the
preceding sentence at that meeting.

          F. Covenants  Regarding  Conversion  Shares.  The Company at all times
from and after the date  hereof  shall  have a  sufficient  number of  Preferred
Shares duly and validly  authorized  and  reserved  for  issuance to satisfy the
conversion  in full of the Notes and the Company's  obligations  with respect to
the  Preferred  Shares.  The  Company  at all  times  from and after the date of
shareholder  approval  referenced in Section IV.G shall have a sufficient number
of shares of Common Stock duly and validly  authorized and reserved for issuance
to  satisfy  the  conversion  in  full  of the  Preferred  Shares.  The  Company
understands and  acknowledges  the potentially  dilutive effect on the Company's
currently  outstanding capital stock of the issuance of the Preferred Shares and
the Conversion Shares.  The Company further  acknowledges that its obligation to
issue the  Conversion  Shares  upon  conversion  of the Notes and the  Preferred
Shares is absolute and unconditional regardless of the dilutive effect that such
issuance  may  have on the  ownership  interests  of other  shareholders  of the
Company and notwithstanding the commencement of any case under 11 U.S.C. Section
101 et seq. (the "Bankruptcy  Code"). In the event the Company is a debtor under

P
the Bankruptcy  Code, the Company hereby waives to the fullest extent  permitted
any rights to relief it may have under 11 U.S.C.  Section  362 in respect of the
conversion of the Notes and the Preferred  Shares.  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. Section 362.

          G.  Covenant  Regarding  Issuance of Additional  Securities  and Other
Borrowing.  Except for "Excluded Issuances" (as defined below), from the Initial
Closing Date until such time as 75% of all Notes issued in the Private Placement
have been either (a) repaid in full or (b) converted into Common Stock (by means
of conversion into Preferred  Shares and thereafter into shares of Common Stock)
(the  date on which  this  occurs  is  hereafter  referred  to as the  "Covenant
Termination  Date"),  the Company will not issue any other equity  securities or
securities   exchangeable  for,  exercisable  for  or  convertible  into  equity
securities  of the Company,  or borrow money (other than (i)  borrowings  in the
ordinary  course of business under the existing  relationships  with New Horizon
Capital  and/or PDS Gaming  Corporation  and (ii)  additional  borrowings not to
exceed  $500,000  in the  aggregate  at any given  time)  unless the Company has
obtained the written consent of the holders of 75% of the Preferred  Shares that
are (x) issued and  outstanding  as of the relevant  date and (y) issuable as of
the relevant date with respect to then  outstanding  Notes issued in the Private
Placement  (assuming  conversion into Preferred  Shares of all then  outstanding
principal  under all then  outstanding  Notes) (the  "Required  Buyer  Consent")
(which  Required  Buyer  Consent  shall be separate from any consent that may be
required by the Certificate of Designation).

         Notwithstanding  anything to the  contrary in this  Section  IV.G,  the
Company  shall not be required to obtain the  Required  Buyer  Consent  prior to
borrowing money or issuing any equity securities or securities exchangeable for,
exercisable  for or  convertible  into equity  securities  of the Company if the
Company's Board  unanimously  determines in good faith,  following  consultation
with outside counsel for the Company, that either (i) any delay in acquiring the
Required Buyer Consent or (ii) abiding by the  withholding of the Required Buyer
Consent  could  constitute  a breach of its  fiduciary  duties to the  Company's
shareholders  under  applicable law;  provided,  however,  that in such case the
Company shall offer the Buyer the  opportunity  to purchase the Buyer's pro rata
portion of any such  borrowing or issuance of equity  securities  or  securities
exchangeable  for,  exercisable for or convertible into equity securities of the
Company on the  following  terms and  conditions.  Promptly  after the Company's
Board shall have made the determination  provided in the preceding sentence, the
Company shall provide Buyer with a notice (the "First Offer Notice") stating (A)
its bona fide  intention  to take  action  pursuant  to this  paragraph  of this
Section IV.G,  (B) the total amount of borrowing to be sought or total number of
securities to be offered,  (C) the Buyer's "pro rata share" of such borrowing or
securities  and (D) the price and terms upon which the Company  proposes to seek
such loans or offer such  securities.  The Buyer  shall have a period of 15 days
from the  effective  date of the  First  Offer  Notice  to elect to  provide  or
purchase,  at the price and on the terms specified in the First Offer Notice, up
to the Buyer's pro rata share of such  borrowings  or  securities.  If the Buyer
elects to provide or purchase  the Buyer's pro rata share,  then the Buyer shall
have a right of over-allotment such that if any other party with a similar right
fails to provide or purchase  such party's pro rata share,  the parties who have
elected to do so may  provide or  purchase,  on a pro rata  basis  (taking  into
account  only the  rights of  parties  who did so  elect),  that  portion of the
proposed  borrowing or securities which any other party had the right to provide
or purchase  but elected not to provide or  purchase.  If all the  borrowing  or
securities  referred to in the First Offer  Notice which  parties to  agreements

<PAGE>

with the  Company  are  entitled  to provide or  purchase  are not elected to be
provided or purchased,  the Company may, during the 60-day period  following the
expiration of the 15-day period provided above,  obtain the remaining portion of
such borrowing or sell the remaining  unsubscribed portion of such securities to
any person or persons at a price not less than, and upon terms no more favorable
to the lender or purchaser than,  those specified in the First Offer Notice.  If
the Company does not obtain all  borrowings or sell all such  securities  within
such 60-day period,  the right provided  hereunder shall be deemed to be revived
and such  borrowings or securities  shall not be offered unless first  reoffered
pursuant to this paragraph of this Section IV.G. For purposes of this paragraph,
the Buyer's "pro rata  portion"  shall be equal to (x) the  principal  amount of
Notes  purchased by the Buyer through the date of  determination  divided by (y)
the aggregate  principal  amount of Notes sold through the date of determination
in the Private Placement.

         For purposes of this Section IV.G, the term "Excluded  Issuances" means
(i) the  issuance of  Conversion  Shares on  conversion  of the Notes,  (ii) the
issuance of Conversion Shares on conversion of the Preferred  Shares,  (iii) the
issuance of up to 17,367,652 shares of Common Stock (appropriately  adjusted for
any subdivision,  split, combination or reverse split with respect to the Common
Stock or declaration of any dividend  payable in Common Stock) upon the exercise
of  options  and  warrants  outstanding  on the date  hereof,  (iv) the grant of
options to  purchase  up to  56,690,722  shares of Common  Stock  (appropriately
adjusted for any subdivision,  split,  combination or reverse split with respect
to the Common  Stock or  declaration  of any dividend  payable in Common  Stock)
under the Company's  2002 stock option plan and the issuance of shares of Common
Stock on the exercise of such options, (v) the issuance of: (A) 1,428,571 shares
of Common  Stock  upon the  conversion  of the  shares  of Series E  Convertible
Preferred  Stock  outstanding  as of the date of this  Agreement,  (B) 9,523,810
shares of Common Stock upon the conversion of the shares of Series F Convertible
Preferred  Stock  outstanding as of the date of this  Agreement,  (C) 13,540,000
shares of Common Stock upon the conversion of the shares of Series K Convertible
Preferred  Stock  outstanding as of the date of this Agreement and (D) 4,062,500
shares of Common  Stock  upon the  conversion  of  convertible  debt  securities
outstanding  as of the date of this  Agreement  and (vi)  the  issuance,  to the
holders of shares of the Company's Series E Convertible  Preferred Stock, Series
F  Convertible   Preferred  Stock  and  Series  K  Convertible  Preferred  Stock
outstanding as of the date of this Agreement,  of shares of Common Stock in lieu
of the  payment of cash  dividends  that have  become due and  payable (it being
acknowledged and agreed that this clause (vi) has been deliberately omitted from
the definition of Excluded Issuances under the Certificate of Designation).

          H. Reverse Split.  The Company shall effectuate a reverse split of its
Common Stock on a not less than  one-for-ten  basis, on or before  September 15,
2002.

          I. Release of Security  Interest.  On or before  January 30, 2003, the
Company shall pay off all indebtedness  then owed to Crown Bank pursuant to that
certain  Promissory  Note in favor of Crown Bank,  dated  February 15, 2002 (the
"Crown Note"), as amended,  obtain a release of any security interest or lien in
favor of Crown Bank,  and furnish to Buyer  evidence of the  foregoing  promptly
after the date on which it is  obtained  (and in any event  before  January  30,
2003).

<PAGE>

          J.  Exemption from  Investment  Company Act. The Company shall conduct
its business,  and shall cause the Subsidiaries to conduct their businesses,  in
such a manner  that  neither  the Company  nor any  Subsidiary  shall  become an
"investment company" within the meaning of the Investment Company Act.

          K. Accounting and Reserves.  The Company shall maintain a standard and
uniform  system of  accounting  and shall  keep  proper  books and  records  and
accounts  in  which  full,  true  and  correct  entries  shall  be  made  of its
transactions,  all in accordance with GAAP applied on a consistent basis through
all  periods,  and shall set aside on such books for each  fiscal  year all such
proper  reserves for  depreciation,  obsolescence,  amortization,  bad debts and
other  purposes  in  connection  with its  operations  as are  required  by such
principles so applied.

          L.  Transactions  with Affiliates.  Neither the Company nor any of its
Subsidiaries  shall,  directly  or  indirectly,  enter into any  transaction  or
agreement with any stockholder,  officer director or Affiliate of the Company or
family member of any officer,  director or Affiliate of the Company,  unless the
transaction  or  agreement  is  (i)  reviewed  and  approved  by a  majority  of
Disinterested  Directors (as defined  below) and (ii) on terms no less favorable
to the  Company  or the  applicable  Subsidiary  than  those  obtainable  from a
non-affiliated  person. A "Disinterested  Director" shall mean a director of the
Company  who is not and has not been an officer or  employee  of the Company and
who is not a member of the  family of,  controlled  by or under  common  control
with, any such officer or employee.

          M. Certain Restrictions.

          1. For so long as any  principal  or interest  under any Note  remains
unpaid, unless any Preferred Shares have been issued pursuant to this Agreement,
the Company shall not without obtaining the prior written consent of the holders
of 75% of the issued and outstanding principal amount of the Notes (i) amend the
terms and conditions of the Series A-1 5.5%  Convertible  Preferred Stock as set
forth in the Certificate of Designation, (ii) take any action that would require
the approval of the holders of the  Preferred  Shares under the  Certificate  of
Designation,  (iii)  declare,  pay or set aside for  payment  any  dividends  or
declare or make any other distribution upon Junior Securities (as defined in the
Certificate of  Designation),  (iv) directly or indirectly  redeem,  purchase or
otherwise acquire any Junior  Securities  (other than a redemption,  purchase or
other  acquisition  of shares  of Common  Stock  approved  in good  faith by the
Company's  Board of Directors in advance of such  redemption,  purchase or other
acquisition  for purposes of an employee  incentive or benefit plan (including a
stock  option plan) of the  Corporation  or any  subsidiary)  or (v) directly or
indirectly pay any moneys to or make any moneys available for a sinking fund for
the redemption of any Junior Securities.

          2. For so long as at least 25% of the principal and accrued but unpaid
interest under the Notes remains unpaid or at least 25% of the Preferred  Shares
remain outstanding,  the Company shall not, without obtaining the Required Buyer
Consent, issue any Preferred Shares other than upon conversion of the Notes.

          3. Until the Covenant  Termination  Date,  if any amount due under any
Note remains unpaid,  the Company will not, without obtaining the Required Buyer
Consent,  take any action with respect to the matters  described in Article 8 of
the  Certificate of Designation  (which Required Buyer Consent shall be separate
from any consent that may be required by the Certificate of Designation).

<PAGE>

          N. Approvals.  The Company shall use its best efforts to obtain,  in a
timely fashion, any authorization, approval or consent of any court or public or
governmental  authority  that is  required to be obtained by the Company for the
consummation of any of the transactions contemplated by any of the Documents.

          O. Use of Proceeds.  Unless the Company shall have obtained a Required
Buyer Consent to do  otherwise,  the Company shall use the net proceeds from the
sale of the  Notes  (excluding  amounts  paid  by the  Company  for the  Buyer's
out-of-pocket costs and expenses,  whether or not accounted for or incurred,  in
connection with the transactions  contemplated by this Agreement  (including the
fees and  disbursements  of legal  counsel for the Buyer and any other buyers in
the Private Placement)) solely as set forth on Exhibit E.

          P. Option  Plans.  Unless the Company  shall have  obtained a Required
Buyer Consent to do otherwise,  the Company will not issue any options under its
1992, 1998 or Director's stock option plans.

                                   ARTICLE V

                           TRANSFER AGENT INSTRUCTIONS

         The Company  undertakes and agrees that no instruction,  other than the
instructions  referred  to  in  this  Article  V,  instructions   regarding  the
reservation  and issuance of the Conversion  Shares  pursuant to the connections
contemplated by this Agreement and customary stop-transfer instructions prior to
the  registration  and  sale  of  the  Common  Stock  pursuant  to an  effective
Securities Act registration statement,  shall be given to its transfer agent for
the  Conversion   Shares.  The  Conversion  Shares  shall  otherwise  be  freely
transferable on the Company's books and records as and to the extent provided in
this Agreement and  applicable  law.  Nothing  contained in this Article V shall
affect  in any  way  Buyer's  obligations  and  agreement  to  comply  with  all
applicable  securities  laws upon resale of such Conversion  Shares.  If, at any
time,  the Buyer  provides  the  Company  with an opinion of counsel  reasonably
satisfactory to the Company that registration of the resale by the Buyer of such
Conversion  Shares is not required under the Securities Act and that the removal
of  restrictive  legends is permitted  under  applicable  law, the Company shall
permit  the  transfer  of such  Conversion  Shares  and  promptly  instruct  the
Company's  transfer agent to issue one or more  certificates for such Conversion
Shares without any restrictive legends endorsed thereon.

                                   ARTICLE VI

                              DELIVERY INSTRUCTIONS

         The Company shall deliver the Notes to the Buyer  pursuant to Article I
hereof, on a delivery-against-payment basis on the relevant Closing Date.

<PAGE>

                                  ARTICLE VII

                                 CLOSING DATES

          A. The issuance and sale of the Notes provided for in Section I.A (the
"Initial Closing") shall be at such date as shall be mutually agreed upon by the
parties,  but in no event  later than  August  23,  2002 (the  "Initial  Closing
Date").

          B. The issuance and sale of the Notes provided for in Section I.B (the
"Second  Closing") shall be at such date as shall be mutually agreed upon by the
parties, but in no event later than October 30, 2002 (or such later date that is
15 days following the date of the special  shareholders  meeting  referred to in
Section IV.E) as the (the "Second Closing Date").

          C. The issuance and sale of the Notes provided for in Section I.C (the
"Final  Closing")  shall be at such date as shall be mutually agreed upon by the
parties, but in no event later than January 30, 2003 (the "Final Closing Date").
(Each of the Initial Closing Date, the Second Closing Date and the Final Closing
Date a "Closing Date.")

          D. The issuance and sale of the Notes shall occur on each Closing Date
at the offices of Maslon Edelman Borman & Brand, LLP.

                                  ARTICLE VIII

                     CONDITIONS TO THE COMPANY'S OBLIGATIONS

         The Buyer agrees and understands that the Company's  obligation to sell
the  Notes on each  Closing  Date to the Buyer  pursuant  to this  Agreement  is
conditioned upon:

          A. Delivery by the Buyer of the Purchase Price for the Notes the Buyer
is purchasing on such Closing Date;

          B. The accuracy in all material  respects on the relevant Closing Date
of the  representations  and warranties of the Buyer contained in this Agreement
as if  made  on the  relevant  Closing  Date  (except  for  representations  and
warranties  which by their  express  terms speak as of and relate to a specified
date, in which case such accuracy shall be measured as of such specified  date),
and the Buyer's  performance in all material  respects on or before the relevant
Closing  Date of all  covenants  and  agreements  of the  Buyer  required  to be
performed by it pursuant to this  Agreement  on or before the  relevant  Closing
Date; and

          C. There shall not be in effect any Law or order, ruling,  judgment or
writ of any court or public or governmental authority restraining,  enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.

<PAGE>

                                   ARTICLE IX

              CONDITIONS TO BUYER'S OBLIGATIONS AT INITIAL CLOSING

         The  Company  agrees and  understands  that the Buyer's  obligation  to
purchase Notes at the Initial Closing  pursuant to this Agreement is conditioned
upon:

          A. The  satisfactory  completion,  in the  Buyer's  absolute  and sole
discretion, of a due-diligence investigation of the Company, including financial
and legal due diligence and current client interests;

          B. The absence of any event,  development  or condition that has or is
reasonably likely to have a Material Adverse Effect on the Company;

          C. The  execution  and delivery to the Company by all persons  holding
shares  of  the  Company's  Series  E  Convertible  Preferred  Stock,  Series  F
Convertible  Preferred  Stock and  Series K  Convertible  Preferred  Stock  (the
"Convertible  Preferred  Stock"),  and by GET USA,  Inc.  and Cornell  Bank with
respect  to  any  securities  convertible  into  shares  of  Common  Stock  (the
"Convertible  Debt,"  and  together  with the  Convertible  Preferred  Stock the
"Convertible  Securities"),  of agreements  providing for the conversion of such
Convertible  Securities  into shares of Common Stock at a per-share price of not
less  than  Thirty  Cents  ($0.30)  before  giving  effect  to any  discount  on
conversion  required  by the  applicable  certificate  of  designation  or other
instrument for each respective series of Convertible Securities;

          D.  The  Company  shall  have  entered  into  incentive   compensation
arrangements  with its senior  management  that are  approved by the Buyer,  the
terms of which are indicated on Exhibit F;

          E.  The  Company  shall  have  executed  and  delivered  the  Security
Agreement;

          F. The Company  shall have  executed and  delivered  the  Registration
Rights Agreement;

          G.  The  delivery  by the  Company  to the  Buyer of  evidence  of the
Company's  efforts with respect to the  covenants  contained in Section IV.H and
IV.I that is satisfactory to the Buyer in Buyer's sole discretion.

          H. The  delivery  by the  Company  to the Buyer of  evidence  that the
Certificate of Designation has been filed and is effective;

          I.  Since  the date of this  Agreement,  the  Company  shall  not have
entered into any new financing  arrangements  or commitments  (in whatever form)
without the prior written consent of the Buyer;

          J. The Company  shall have entered into a  consulting  agreement  with
Edward  Harris  upon  terms  and  conditions  satisfactory  to the Buyer and the
Company;

          K. The extension of the maturity date of the Crown Note to January 30,
2003;

<PAGE>

          L. The accuracy in all material  respects on the Initial  Closing Date
of the representations and warranties of the Company contained in this Agreement
as if  made  on  the  Initial  Closing  Date  (except  for  representations  and
warranties  which by their  express  terms speak as of and relate to a specified
date, in which case such accuracy shall be measured as of such specified  date),
and the Company's  performance in all material respects on or before the Initial
Closing  Date of all  covenants  and  agreements  of the Company  required to be
performed  by it pursuant  to this  Agreement  on or before the Initial  Closing
Date;

          M.  Except  as  set  forth  on  Schedule  III.G  and  except  for  the
shareholder  approval  contemplated  by Section  IV.E,  the  Company  shall have
obtained all consents,  approvals or waivers from  governmental  authorities and
third persons  necessary for the  execution,  delivery and  performance  of this
Agreement and the other Documents and the transactions  contemplated  hereby and
thereby, all without material cost to the Company;

          N. The  Buyer  shall  have  received  such  additional  documents  and
certificates (including,  without limitation,  officers' certificates certifying
as to the  satisfaction of the conditions  contained in this Article IX that are
within the Company's  control) as Buyer or Buyer's legal counsel may  reasonably
request  and as are  customary  to effect a closing of  transactions  similar to
those contemplated by this Agreement; and

          O. There shall not be in effect any Law or order, ruling,  judgment or
writ of any court or public or governmental authority restraining, enjoining, or
otherwise prohibiting any of the transactions contemplated by this Agreement.

                                   ARTICLE X

         CONDITIONS TO BUYER'S OBLIGATIONS AT SECOND AND FINAL CLOSINGS

         The  Company  agrees and  understands  that the Buyer's  obligation  to
purchase Notes at either of the Second Closing or the Final Closing  pursuant to
this Agreement is conditioned upon:

          A. The Buyer's election,  in the Buyer's absolute and sole discretion,
to purchase Notes at such Closing;

          B. The release, on or prior to the Second Closing Date, of any and all
security  interests  against the Company  other than the security  interests (i)
held by Crown Bank,  New Horizon  Capital  and PDS Gaming  Corporation  and (ii)
created by the Security Agreement;

          C. The absence of any event,  development  or condition that has or is
reasonably likely to have a Material Adverse Effect on the Company;

          D. The  delivery  by the  Company  to the Buyer of  evidence  that the
Certificate of Designation is still effective;

          E. The accuracy in all material  respects on the relevant Closing Date
of the representations and warranties of the Company contained in this Agreement
as if  made  on the  relevant  Closing  Date  (except  for  representations  and
warranties  which by their  express  terms speak as of and relate to a specified

<PAGE>

date, in which case such accuracy shall be measured as of such specified  date),
and the Company's performance in all material respects on or before the relevant
Closing  Date of all  covenants  and  agreements  of the Company  required to be
performed by it pursuant to this  Agreement  on or before the  relevant  Closing
Date;

          F.  Except as set forth on  Schedule  III.G,  the  Company  shall have
obtained all consents,  approvals or waivers from  governmental  authorities and
third persons  necessary for the  execution,  delivery and  performance  of this
Agreement and the other Documents and the transactions  contemplated  hereby and
thereby, all without material cost to the Company;

          G. The  Buyer  shall  have  received  such  additional  documents  and
certificates (including,  without limitation,  officers' certificates certifying
as to the  satisfaction  of the conditions  contained in this Article X that are
within the  Company's  control)  as the Buyer or the Buyer's  legal  counsel may
reasonably  request  and as are  customary  to effect a closing of  transactions
similar to those contemplated by this Agreement; and

          H. There shall not be in effect any Law or order, ruling,  judgment or
writ of any court or public or governmental authority restraining, enjoining, or
otherwise prohibiting any of the transactions contemplated by this Agreement.

                                   ARTICLE XI

                                   TERMINATION

          A.  Termination  by Mutual  Written  Consent.  This  Agreement  may be
terminated and any of the transactions  contemplated hereby may be abandoned for
any  reason  and at any time  prior to the  Initial  Closing  Date by the mutual
written consent of the Company and the Buyer.

          B. Termination by the Buyer.  This Agreement may be terminated and any
transactions contemplated hereby may be abandoned by the Buyer at any time prior
to the Initial Closing Date, if (i) the Company shall have failed to comply with
any of its covenants or agreements contained in this Agreement, (ii) there shall
have been a breach by the Company of any  representation  or warranty made by it
in this Agreement,  or (iii) there shall have occurred any event or development,
or there shall be in existence any  condition  having,  or reasonably  likely to
have, a Material  Adverse  Effect.  In addition,  the Buyer may  terminate  this
Agreement if the  conditions  provided in Article IX hereof are not satisfied on
the Initial Closing Date.

          C.  Termination  by the Company.  This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Initial  Closing Date, if (i) the Buyer shall have failed to comply
with any of the Buyer's covenants or agreements contained in this Agreement,  or
(ii)  there  shall  have  been a breach by the  Buyer of any  representation  or
warranty  made by the Buyer in this  Agreement.  In  addition,  the  Company may
terminate this  Agreement if the conditions  provided in Article VIII hereof are
not satisfied on the Initial Closing Date.

          D. Effect of Termination.  If this Agreement is terminated pursuant to
this Article XI, this Agreement shall thereafter become void and have no effect,
and neither  party hereto shall have any  liability or  obligation  to the other
party hereto in respect of this Agreement except that the provisions of Articles

                                       2
<PAGE>

XII,  XIII,  XIV and XV, this Section  XI.D and  Sections  XVI.D and XVI.F shall
survive any such  termination;  provided,  however,  that neither party shall be
released from any liability  hereunder if this  Agreement is terminated  and the
transactions  contemplated  hereby abandoned by reason of (i) willful failure of
such party to perform its obligations  hereunder,  or (ii) any misrepresentation
made by such party of any matter set forth herein.

                                  ARTICLE XII

                            SURVIVAL; INDEMNIFICATION

          A. The representations, warranties and covenants made by the Buyer and
the Company in this Agreement,  the schedules and exhibits  hereto,  and in each
instrument,  agreement,  and  certificate  entered  into and  delivered  by them
pursuant to this Agreement,  shall survive the Closing Date and the consummation
of the transactions  contemplated  hereby (except for those  representations and
warranties made as of a specific date).

          B. The Company hereby agrees to indemnify and hold harmless the Buyer,
the Buyer's affiliates,  and their respective  officers,  directors,  employees,
shareholders, partners and members (collectively, the "Buyer Indemnitees"), for,
from and against  any and all losses,  claims,  damages,  judgments,  penalties,
liabilities and  deficiencies  (other than unrealized  losses on the Notes,  the
Preferred Shares or the Conversion  Shares)  (collectively,  the "Losses"),  and
agrees to reimburse Buyer Indemnitees for all out-of-pocket  expenses (including
the  reasonable  fees and expenses of legal  counsel),  in each case promptly as
incurred by Buyer  Indemnitees 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 any of the Documents,  or
the  schedules  or  exhibits  thereto,  or  the  Company's  representations  and
warranties contained in any instrument, agreement or certificate entered into or
delivered by the Company pursuant to any of the Documents; or

          2. the issuance of the Notes,  or the  conversion  of the Notes or the
Preferred Shares or issuance of any Conversion Shares.

          C. The Buyer hereby agrees to indemnify and hold harmless the Company,
its affiliates and their respective  officers,  directors,  partners and members
(collectively,  the "Company  Indemnitees"),  for,  from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies, and
agrees to  reimburse  the Company  Indemnitees  for all  out-of-pocket  expenses
(including  the  reasonable  fees and expenses of legal  counsel),  in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with any misrepresentation,  omission of fact, or breach of any
of the Buyer's  representations or warranties contained in any of the Documents,
or the annexes,  schedules or exhibits thereto, or any instrument,  agreement or
certificate  entered  into or  delivered  by the  Buyer  pursuant  to any of the
Documents.

          D.   Promptly   after   receipt  by  either   party   hereto   seeking
indemnification pursuant to this Article XII (an "Indemnified Party") of written
notice of any  investigation,  claim,  proceeding  or other action in respect of
which  indemnification  is being sought (each a "Claim"),  the Indemnified Party

                                       3
<PAGE>

shall notify the party against whom indemnification pursuant to this Article XII
is being sought (the "Indemnifying Party") of the commencement thereof within 15
days of commencement; provided that the failure of any Indemnified Party to give
notice as  provided  herein  shall not  relieve  the  Indemnifying  Party of its
obligations under this Agreement,  except to the extent, but only to the extent,
that the Indemnifying Party's ability to defend against such claim or litigation
is impaired as a result of such failure to give notice.  In connection  with any
Claim as to which  both the  Indemnifying  Party and the  Indemnified  Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding  the assumption of the defense of any Claim by the  Indemnifying
Party,  the  Indemnified  Party  shall have the right to employ  separate  legal
counsel and to  participate in the defense of such Claim,  and the  Indemnifying
Party shall bear the reasonable fees,  out-of-pocket  costs and expenses of such
separate  legal  counsel  to the  Indemnified  Party if (and only  if):  (1) the
Indemnifying Party shall have agreed to pay such fees,  out-of-pocket costs, and
expenses; (2) the Indemnified Party shall reasonably have concluded on the basis
of  advice of  counsel  that  representation  of the  Indemnified  Party and the
Indemnifying  Party by the same legal  counsel would not be  appropriate  due to
actual or potentially differing interests between such parties in the conduct of
the defense of such Claim,  or if there may be legal  defenses  available to the
Indemnified  Party that are in addition to or different from those  available to
the  Indemnifying  Party;  or (3) the  Indemnifying  Party  shall have failed to
employ legal counsel  reasonably  satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances  other than as
described in clauses (1), (2) or (3) above, the fees, costs and expenses of such
legal counsel shall be borne  exclusively by the  Indemnified  Party.  Except as
provided above, the  Indemnifying  Party shall not, in connection with any Claim
in the same  jurisdiction,  be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or  compromise  any Claim or consent to the entry of any judgment  that does not
include an unconditional  release of the Indemnified  Party from all liabilities
with respect to such Claim or judgment.

                                  ARTICLE XIII

                                  GOVERNING LAW

         This Agreement  shall be governed by and interpreted in accordance with
the laws of the  State of  Minnesota,  without  regard  to the  conflicts-of-law
principles of such state.

                                  ARTICLE XIV

                           SUBMISSION TO JURISDICTION

         Each of the parties hereto  consents to the exclusive  jurisdiction  of
the federal courts whose districts encompass any part of the City of Minneapolis
or the state courts of the State of Minnesota sitting in the City of Minneapolis
in connection  with any dispute  arising under the Documents.  Each party hereto
hereby  irrevocably  and  unconditionally  waives,  to the fullest extent it may
effectively do so, any defense of an inconvenient forum or improper venue to the

<PAGE>

maintenance  of such  action or  proceeding  in any such  court and any right of
jurisdiction on account of its place of residence or domicile. Each party hereto
irrevocably and  unconditionally  consents to the service of any and all process
in any such action or proceeding in such courts by the mailing of copies of such
process by certified or registered  airmail at its address  specified in Article
XVI.E.  Each party  hereto  agrees  that a final  judgment in any such action or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the judgment or in any other manner provided by law.

                                   ARTICLE XV

                              WAIVER OF JURY TRIAL

         TO THE FULLEST  EXTENT  PERMITTED  BY LAW,  EACH OF THE PARTIES  HERETO
HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING  OUT OF THIS
AGREEMENT  AND/OR ANY OF THE DOCUMENTS OR ANY DEALINGS  BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND SUCH OTHER DOCUMENTS. EACH PARTY HERETO
(1)  CERTIFIES  THAT  NEITHER  OF THEIR  RESPECTIVE  REPRESENTATIVES,  AGENTS OR
ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN
THE  EVENT  OF  LITIGATION,  SEEK TO  ENFORCE  THE  FOREGOING  WAIVERS,  AND (2)
ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

                                  ARTICLE XVI

                                  MISCELLANEOUS

          A. This Agreement may be executed in any number of counterparts and by
the different  parties  hereto on separate  counterparts,  each of which when so
executed and delivered shall be an original,  but all which counterparts when so
executed shall together  constitute one and the same instrument.  A facsimile or
digital  transmission of this signed Agreement shall be legal and binding on all
parties hereto.

          B. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.

          C. In the event any one or more of the provisions  contained in any of
the Documents  should be held invalid,  illegal or unenforceable in any respect,
the validity,  legality and enforceability of the remaining provisions contained
herein or therein  shall not in any way be  affected or  impaired  thereby.  The
parties  shall  endeavor in  good-faith  negotiations  to replace  the  invalid,
illegal,  or unenforceable  provisions with valid provisions the economic effect
of  which  comes  as  close  as  possible  to that of the  invalid,  illegal  or
unenforceable provisions.

          D.  This  Agreement  and the other  Documents  constitute  the  entire
agreement  among  the  parties  pertaining  to the  subject  matter  hereof  and
supersede all prior agreements,  understandings,  negotiations, and discussions,

                                       5
<PAGE>

whether oral or written, of the parties. No amendment, supplement, modification,
or waiver of this Agreement  shall be binding unless  executed in writing by all
parties. No waiver of any of the provisions of this Agreement shall be deemed or
shall  constitute  a  waiver  of any  other  provision  hereof  (whether  or not
similar),  nor shall such waiver constitute a continuing waiver unless otherwise
expressly  provided  in  writing.  Failure of a party to  exercise  any right or
remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.

          E. Except as may be  otherwise  provided  herein,  any notice or other
communication  or  delivery  required  or  permitted  hereunder  shall (1) be in
writing and shall be delivered personally,  by certified mail (postage prepaid),
by a nationally  recognized  overnight courier service, or by electronic mail or
facsimile  transmission,  and (2) and shall be deemed  given  when so  delivered
personally,  if  mailed,  three (3) days after the date of deposit in the United
States mails,  when delivered by overnight  courier service,  or, if transmitted
electronically  or by  facsimile,  upon receipt of  electronic  confirmation  of
transmission, as follows:

           If to the Company:          Innovative Gaming Corporation of America
                                       Attention: Loren A. Piel, General Counsel
                                       333 Orville Wright Court
                                       Las Vegas, Nevada  89119
                                       Tel: (702) 614-7199
                                       Fax: (703) 614-7114
                                       E-Mail: lpiel@igca.com
           With a copy to:             Maslon Edelman Borman & Brand, LLP
                                       Attention: Douglas T. Holod, Esq.
                                       3300 Wells Fargo Center
                                       90 South Seventh Street
                                       Minneapolis, Minnesota 55402
                                       Tel: (612) 672-8313
                                       Fax: (612) 642-8313
                                       E-Mail: doug.holod@maslon.com
           If to the Buyer:            To the address indicated on Schedule A
                                                                   ----------

         The  Company and the Buyer may change  their  respective  addresses  by
notice given pursuant to this Section XVI.E.

          F. Each of the Company and the Buyer agrees to keep  confidential  and
not to disclose to, or use for the benefit of, any third party the terms of this
Agreement  or any other  information  which at any time is  communicated  by the
other  party as being  confidential  without the prior  written  approval of the
other  party;  provided,  however,  that  this  provision  shall  not  apply  to
information  which,  at the time of  disclosure,  is already  part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including without limitation pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act and the Exchange Act).

                                       6
<PAGE>

          G. This  Agreement  shall not be  assignable  by either of the parties
hereto prior to the Final Closing Date without the prior written  consent of the
other party,  and any attempted  assignment  contrary to the  provisions  hereby
shall be null and void; provided, however, that the Buyer may assign the Buyer's
rights and obligations  hereunder,  in whole or in part, to any affiliate of the
Buyer.

          H.  The  Company   shall   promptly,   upon  receipt  of   appropriate
documentation,  reimburse the reasonable fees and expenses incurred with respect
to this Agreement and the transactions  contemplated  hereby by Dorsey & Whitney
LLP,  special  counsel to the Buyer and certain  other  potential  purchasers of
Notes, not to exceed $40,000.

          I. Except as otherwise  provided  herein,  the terms and conditions of
this Agreement  shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties  (including  permitted  transferees of any
Notes or Conversion Shares).  Nothing in this Agreement,  express or implied, is
intended  to  confer  upon any  party  other  than the  parties  hereto or their
respective  successors  and  assigns  any  rights,   remedies,   obligations  or
liabilities under or by reason of this Agreement,  except as expressly  provided
in this  Agreement.  The remedies  provided in this Agreement are cumulative and
not exclusive of any remedies provided by law.

          J. If any  action at law or in  equity  is  necessary  to  enforce  or
interpret  the  terms  of this  Agreement  or any of the  other  Documents,  the
prevailing  party shall be entitled to  reasonable  attorneys'  fees,  costs and
disbursements  in  addition  to any  other  relief  to which  such  party may be
entitled.

          K. The Buyer  acknowledges  that in making the  decision  to  purchase
Notes  pursuant  to this  Agreement,  and to elect to  convert  any  Notes  into
Conversion  Shares,  such Buyer is not relying upon any person,  firm or company
other than the Company and its  officers,  employees  and  directors.  The Buyer
agrees that no other  person will be liable for any actions  taken by the Buyer,
or  omitted  to be taken  by the  Buyer,  in  connection  with the  transactions
contemplated by this Agreement.

<PAGE>

         IN  WITNESS  WHEREOF,  the  undersigned  have set  their  hands to this
Securities Purchase Agreement as of the date first set forth above.

                                     Innovative Gaming Corporation of America:

                                     By:
                                     Name:  Laus M. Abdo
                                     Its: President, Chief Executive Officer and
                                          Chief Financial Officer

                                     BUYER:

                                     By:  ______________________________________

                                     Print Name: _______________________________

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