PURCHASE AGREEMENT
dated as of April 15, 1997
among
TRANS WORLD GAMING CORP.;
JAMES R. HARDMAN, Jr.;
MULTIPLE APPLICATION TRACKING SYSTEM,
a sole proprietorship owned by James R. Hardman, Jr.,
doing business as "MATS of Colorado";
and
MULTIPLE APPLICATION TRACKING SYSTEM, INC.
TABLE OF CONTENTS
PAGE
1.Purchase of Stock of Corporation and Assets of the Business. . . . . . . . . 1
2.Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . 2
3.Representations and Warranties of Purchaser. . . . . . . . . . . . . . . . .18
4.Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.Conditions to Obligations of Purchaser . . . . . . . . . . . . . . . . . . .21
6.Conditions to Seller's Obligations . . . . . . . . . . . . . . . . . . . . .22
7.INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
8.Survival and Indemnification . . . . . . . . . . . . . . . . . . . . . . . .23
9.Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . .25
LIST OF EXHIBITS
NAME OF EXHIBIT NUMBER OF EXHIBIT
Assets of Business. . . . . . . . . . . . . . . . . . . . . . Exhibit 1(a)
Promissory Note . . . . . . . . . . . . . . . . . . . . . . . Exhibit 1(b)(i)
Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . Exhibit 2
Bill of Sale. . . . . . . . . . . . . . . . . . . . . . . . . Exhibit 2.1(dd)
Employment Agreement. . . . . . . . . . . . . . . . . . . . . Exhibit 5(j)
License Agreement . . . . . . . . . . . . . . . . . . . . . . Exhibit 5(l)
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of April 15, 1997, is by and among
TRANS WORLD GAMING CORP., a Nevada corporation ("Purchaser"), and the sole
shareholder of MULTIPLE APPLICATION TRACKING SYSTEM, INC., a Colorado
corporation ("Corporation"), and a sole proprietorship, Multiple Application
Tracking System doing business as MATS of Colorado (the "Business") both the
Business and Corporation operated and owned solely by JAMES R. HARDMAN, JR.,
(the "Seller").
A. The parties hereto wish to provide for the terms and conditions
upon which Purchaser will acquire all of the shares of capital stock of the
Corporation owned or controlled by Seller, and all the assets of the Business
owned by Seller
B. The parties hereto wish to make certain representations,
warranties, covenants and agreements in connection with such acquisition of
assets and stock and also to prescribe various conditions to such transactions
Accordingly, and in consideration of the representations, warranties,
covenants, agreements and conditions herein contained, the parties hereto
agree as follows:
SECTION 1
1. PURCHASE OF STOCK OF CORPORATION AND ASSETS OF THE BUSINESS
(a) SHARES AND ASSETS TO BE PURCHASED. Upon satisfaction of all
conditions to the obligations of the parties contained herein (other than
such conditions as shall have been waived in accordance with the terms
hereof), the Seller shall sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser shall purchase from such Seller, at the Closing
(as hereinafter defined), (i) one million (1,000,000) shares of the common
voting stock no par value of Corporation constituting all the issued and
outstanding shares of the Corporation's stock (the "Shares"); and (ii) all
the Assets of the Business (the "Assets") as described in EXHIBIT 1(a)
attached hereto and incorporated herein used in conjunction with the
Business.
(b) PURCHASE PRICE. Purchaser will, in full payment for the Shares
and Assets to be purchased from Seller pursuant to this Agreement, pay the
Seller two hundred fifty thousand dollars ($250,000) payable as follows:
(i) Purchaser shall pay a sum of two hundred thirty-five
thousand dollars ($235,000) (equaling two hundred fifty thousand dollars
($250,000) less the Purchaser's fifteen thousand dollar ($15,000) down
payment paid by Purchaser to Seller, pursuant to that certain Letter of
Intent between the parties of November 26, 1996 to Seller), payable
from Purchaser to Seller pursuant to a Promissory Note, attached here to as
EXHIBIT 1(b)(i) and made a part hereof, in the amount of two hundred
thirty-five thousand dollars ($235,000) payable in three (3) equal annual
installments of seventy-
eight thousand three hundred and thirty-three dollars ($78,333) payable on
November 1, 1998, November 1, 1999, and November 1, 2000.
(c) For purposes of this Agreement, the parties agree that the purchase
price shall be allocated as follows:
Shares of Corporation $1,000.00
Inventory 8,045.00
Accounts Receivable - Crooks Palace Casino 500.00
Ongoing business, including goodwill
know-how, customer lists, trade names 240,455.00
TOTAL.................................................$250,000.00
(d) CLOSING. The "Closing" or the "Closing Date" shall mean the date
first above written. The Closing shall be held at the offices of
Oppenheimer Wolff & Donnelly, 26th Floor, One Citicorp Center, 153 East
53rd Street, New York, New York, or such other place or manner as the
parties may agree, at 10:00 a.m., local New York, New York time or such
other time as the parties may agree, at which time and place the documents
and instruments necessary or appropriate to effect the transactions
contemplated herein will be exchanged by the parties effective as of the
date first above written.
SECTION 2
2. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof
as follows;
(a) DISCLOSURE SCHEDULE. The disclosure schedule marked as
EXHIBIT 2 hereto (the "Disclosure Schedule") is divided into sections
which correspond to the subsections of this Section 2. The Disclosure
Schedule is accurate and complete and the disclosures in any subsection
thereof shall constitute disclosure for purposes of any other subsection
and any other section or subsection of this Agreement or any exhibit to or
other appendix, writing, instrument or agreement which is designated herein
as being part of this Agreement.
(b) CORPORATE ORGANIZATION. Corporation is a corporation duly
organized, validly existing and in good standing under the law of the state
of its incorporation; Corporation and Business have full power and
authority to carry on their businesses as are now being conducted and to
own, lease and operate their properties and assets (if any), are duly
qualified or licensed to do business, and are in good standing in every
other jurisdiction in which the character or location of the properties and
assets owned, leased or operated by them or the conduct of their business
requires such qualification or licensing, except in such jurisdictions in
which the failure to be so qualified or licensed and in good standing would
not, individually or in the aggregate, have a material adverse effect on
its or their condition (financial or otherwise), working capital, assets,
properties,
-2-
liabilities, obligations, reserves, businesses, prospects, goodwill or
going concern value; and has heretofore delivered to Purchaser complete
and correct copies of Corporation's articles or certificate of
incorporation, bylaws, and corporate minutes of board of directors and
Sellers, as presently in effect, and equivalent licenses of Business. The
Disclosure Schedule contains a list of all jurisdictions in which
Corporation is qualified or Business is licensed to do business. Neither
Corporation nor Business owns (and has not at any time during the preceding
five (5) years owned) of record or beneficially more than five percent (5%)
of the outstanding equity securities having ordinary voting rights or power
of any corporation, limited liability corporation, limited liability
partnership, limited partnership, or partnership or other legal entity.
(c) CAPITALIZATION. The authorized capital stock of Corporation
is set forth on the Disclosure Schedule. The number of shares of capital
stock of Corporation issued and outstanding, the holders thereof and the
number of shares of capital stock of Corporation held in treasury as of the
date of this Agreement are set forth on the Disclosure Schedule. All
issued and outstanding shares of capital stock of Corporation are duly
authorized, validly issued, fully paid, nonassessable and are without, and
were not issued in violation of, preemptive rights. Except as set forth on
the Disclosure Schedule: (i) there are no shares of capital stock or other
equity securities of Corporation or outstanding or any securities
convertible into or exchangeable for such shares, securities or rights;
(ii) there are no outstanding options, warrants, conversion privileges or
other rights to purchase or acquire any capital stock or other equity
interest of Corporation or Business, or any securities convertible into
or exchangeable for such shares, securities, rights of Business, and
(iii) there are no contracts, commitments, understandings, arrangements or
restrictions by which Corporation or Business are bound to issue any equity
interest or acquire any additional shares of its capital stock or other
equity securities, interest or any options, warrants, conversion privileges
or other rights to purchase or acquire any capital stock or other equity
securities or interests of Corporation or Business, or any securities
convertible into or exchangeable for such shares, securities, interests or
rights.
(d) AUTHORIZATION. Seller has the legal capacity to enter into
this Agreement and to carry out the transactions contemplated herein,
including without limitation the legal capacity to execute, deliver and
perform the agreements or contracts, if any, required by this Agreement,
including, without limitation, those of Section 5 to be executed and
delivered by any of them as a condition to the Closing. This Agreement
has been duly and validly executed by Seller and is the valid and binding
legal obligation of Seller, enforceable against Seller in accordance with
its terms.
(e) NON-CONTRAVENTION. Except as set forth in the Disclosure
Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated herein
will: (i) violate or be in conflict with any provision of the articles
or certificate of incorporation or bylaws of Corporation; or (ii) be in
conflict with, or constitute a default, however defined (or an event which,
with the giving of due notice or lapse of time, or both, would constitute
such a default), under, or cause or
-3-
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation, imposition of fees or penalties under, any debt,
note, bond, lease, mortgage, indenture, license, obligation, contract,
commitment, franchise, permit, instrument or other agreement or obligation
to which Corporation, Business or Seller is a party or by which the
Corporation, Business or Seller or any of their properties or assets is or
may be bound (unless with respect to which defaults or other rights,
requisite waivers or consents shall have been obtained at or prior to the
Closing to Purchaser's satisfaction) or result in the creation or
imposition of any mortgage, pledge, lien, security interest, encumbrance,
restriction, adverse claim or charge of any kind, upon any property or
assets of Corporation, Business or Seller under any debt, obligation,
contract, agreement or commitment to which Corporation, Business or
Seller is a party or by which Corporation, Business or Seller or any of
their assets or properties is or may be bound; or (iii) violate any
statute, treaty, law, judgment, writ, injunction, decision, decree, order,
regulation, ordinance or other similar authoritative matters of any
foreign, federal, state or local governmental or quasi-governmental,
administrative, regulatory or judicial court, department, commission,
agency, board, bureau, instrumentality or other authority (hereinafter
sometimes separately referred to as an "Authority" and sometimes
collectively as "Authorities") (sometimes hereinafter separately referred
to as a "Law" and sometimes collectively as "Laws").
(f) CONSENTS AND APPROVALS. Except as set forth in the
Disclosure Schedule, with respect to Corporation, Business and the Seller,
no consent, approval, order or authorization of or from, or registration,
notification, declaration or filing with (hereinafter sometimes separately
referred to as a "Consent" and sometimes collectively as "Consents") any
individual or entity, including without limitation any Authority, is
required in connection with the execution, delivery or performance of this
Agreement by the Seller or the consummation by Seller of the transactions
contemplated herein. All such Consents shall be obtained by Seller prior
to Closing in form and substance satisfactory to Purchaser.
(g) FINANCIAL STATEMENTS. Seller has furnished to Purchaser the
balance sheets and statements of operations (or income or loss) and changes
in cash flow (or financial position) described on the Disclosure Schedule.
The most recent audited balance sheet so described is referred to herein as
the "Latest Balance Sheet" attached hereto. At Closing, Seller will
furnish the financial statements and reports described on the Disclosure
Schedule. Except as disclosed therein, the aforesaid financial statements
(i) are or will be, as the case may be, in accordance with the books and
records of Business and Corporation and have been, or will be, as the case
may be, prepared in conformity with generally accepted accounting
principles consistently applied for all periods, and (ii) fairly present
and will fairly present, as the case may be, the financial position of
Business or Corporation as of the respective dates thereof, and the results
of operations (or income or loss) and changes in cash flow (or financial
position) for the periods then ended, all in accordance with generally
accepted accounting principles consistently applied for all periods.
-4-
(h) LOSS CONTINGENCIES; OTHER NON-ACCRUED LIABILITIES. Except as
described in the Disclosure Schedule or in the footnotes to the Latest
Balance Sheet, Corporation and Business do not have (i) any loss
contingencies which are not required by generally accepted accounting
principles to be accrued; (ii) any loss contingencies involving an
unasserted claim or assessment which are not required by generally accepted
accounting principles to be disclosed because the potential claimants have
not manifested to Corporation or Business an awareness of a possible claim
or assessment; or (iii) any categories of known liabilities or obligations
(other than non-pension post-retirement medical care, dental care, life
insurance or other benefits) which are not required by generally accepted
accounting principles to be accrued. For purposes of this Agreement,
"Loss Contingency" shall have the meaning accorded to it by generally
accepted accounting principles.
(i) ABSENCE OF CERTAIN CHANGES. Except as set forth in the
Disclosure Schedule, since the date of the Latest Balance Sheet,
Corporation, Business and Seller have owned and operated their assets,
properties and businesses in the ordinary course of business and consistent
with past practice; without limiting the generality of the foregoing,
Seller, Business or Corporation have not (as the case may be) subject to
the aforesaid exceptions:
(i) suffered any adverse change in their respective condition
(financial or otherwise), working capital, assets, properties,
liabilities, obligations, reserves, businesses, prospects, goodwill or
going concern value or experienced any event or failed to take any
action which reasonably could be expected to result in such an adverse
change;
(ii) suffered any loss, damage, destruction or other casualty
(whether or not covered by insurance) or suffered any loss of
officers, employees, dealers, distributors, independent contractors,
customers, or suppliers or other favorable business relationships;
(iii) declared, set aside, made or paid any dividend or other
distribution in respect of its capital stock; or purchased or redeemed
any shares of its capital stock;
(iv) issued or sold any shares of its capital stock, or any
options, warrants, conversion, exchange or other rights to purchase or
acquire any such shares or any securities convertible into or
exchangeable for such shares;
(v) incurred any indebtedness for borrowed money;
(vi) mortgaged, pledged, or subjected to any lien, lease,
security interest or other charge or encumbrance any of its properties
or assets, tangible or intangible;
(vii) acquired or disposed of any assets or properties;
-5-
(viii) forgiven or canceled any debts or claims, or waived any
rights;
(ix) entered into any material transaction;
(x) granted to any officer or salaried employee or any other
employee any increase in compensation in any form or paid any
severance or termination pay;
(xi) entered into any commitment for capital expenditures for
additions to plant, property or equipment; or
(xii) agreed, whether in writing or otherwise, to take any action
described in this subsection.
(j) REAL PROPERTIES.
A. Except as set forth in the Disclosure Schedule, Business and
Corporation have good and marketable fee simple record title in and
to, or a leasehold interest in and to, all of its real property assets
and fixtures reflected in the Latest Balance Sheet and all of its real
property assets and fixtures purchased or otherwise acquired since the
date of the Latest Balance Sheet (except for real property assets and
fixtures sold in the ordinary course of business since the date of the
Latest Balance Sheet). Except as set forth in the Disclosure
Schedule, such leasehold interests are valid and in full force and
effect and enforceable in accordance with their terms and there
does not exist any violation, breach or default thereof or thereunder.
Except as set forth in the Disclosure Schedule, none of the real
property assets or fixtures owned by Corporation or Business is
subject to any mortgage, pledge, lien, security interest, encumbrance,
claim, easement, right-of-way, tenancy, covenant, encroachment,
restriction or charge of any kind or nature (whether or not of
record), except the following (herein called "Permitted Liens"):
(i) liens securing specified liabilities or obligations shown on the
Latest Balance Sheet with respect to which no breach, violation or
default exists; (ii) mechanics', carriers', workers' and other similar
liens arising in the ordinary course of business; (iii) minor
imperfections of title which do not impair the existing use of such
real property assets or fixtures; and (iv) liens for current taxes not
yet due and payable or being contested in good faith by appropriate
proceedings. Except as set forth in the Disclosure Schedule, all real
properties owned by and leased to Corporation or Business used in the
conduct of its business are free from structural defects, in good
operating condition and repair, with no material maintenance, repair
or replacement having been deferred or neglected, suitable for the
intended use and free from other material defects. Except as set
forth in the Disclosure Schedule, each such real property and its
present use conform in all respects to all occupational, safety or
health, zoning, planning, subdivision, platting and similar Laws, and
there is, to the knowledge of Corporation and Business, no such Law
contemplated that would affect adversely the right of Corporation or
Business to own or lease and operate and use such real
-6-
properties. Except as set forth in the Disclosure Schedule, all
public utilities necessary for the use and operation of any facilities
on the aforesaid real properties are available for use or access at
such properties and there is no legal or physical impairment to free
ingress or egress from any of such facilities or real properties.
Neither Corporation nor Business is a foreign person or is controlled
by a foreign person, as the term foreign person is defined in
Section 1445(f)(3) of the Code.
B. The Disclosure Schedule sets forth all real property owned,
leased or used by the Corporation or Business.
(k) MACHINERY, EQUIPMENT, VEHICLES AND PERSONAL PROPERTY. Except as
set forth in the Disclosure Schedule, Corporation and Business have good
and merchantable right, title and interest in and to, or a leasehold
interest in and to, all its machinery, equipment, vehicles and other
personal property reflected in the Latest Balance Sheet and purchased or
otherwise acquired since the date of the Latest Balance Sheet (except for
such items sold or leased in the ordinary course of business since the date
of the Latest Balance Sheet). Except as set forth in the Disclosure
Schedule, all of such leasehold interests relating to machinery, equipment,
vehicles and other personal property are valid and in full force and effect
and enforceable in accordance with their terms and there does not exist
any violation, breach or default thereof or thereunder. Except as set forth
in the Disclosure Schedule, none of such machinery, equipment, vehicles or
other personal property owned by Corporation or Business is subject to any
mortgage, pledge, lien or security interest of any kind or nature (whether
or not of record) except Permitted Liens. Except as set forth in the
Disclosure Schedule, the machinery, equipment, vehicles and other personal
property of Corporation or Business which are necessary to the conduct of
its business are in good operating condition and repair and fit for the
intended purposes thereof and no material maintenance, replacement or
repair has been deferred or neglected.
(l) INVENTORIES. Except as set forth in the Disclosure Schedule, all
inventory of Corporation and Business, whether reflected in the Latest
Balance Sheet or otherwise, consists of a quality and quantity usable and
salable in the ordinary course of business, and the present quantities of
all inventory of Corporation and Business are reasonable in the present
circumstances of the businesses as currently conducted or as proposed to be
conducted.
(m) RECEIVABLES AND PAYABLES.
(i) Except as set forth on the Disclosure Schedule,
(A) Corporation and Business have good right, title and interest in
and to all its accounts and notes receivable and trade notes and trade
accounts reflected in the Latest Balance Sheet and those acquired and
generated since the date of the Latest Balance Sheet (except for those
paid since the date of the Latest Balance Sheet); (B) none of such
accounts and notes receivable and trade notes and trade accounts is
subject to
-7-
any mortgage, pledge, lien or security interest of any kind or nature
(whether or not of record); (C) except to the extent of applicable
reserves shown in the Latest Balance Sheet, all of the accounts and
notes receivable, trade notes and trade accounts owing to Corporation
or Business constitute valid and enforceable claims arising from bona
fide transactions in the ordinary course of business, and there are no
claims, refusals to pay or other rights of set-off against any
thereof; (D) no account or note debtor whose account or note balance
exceeds the amount set forth in the Disclosure Schedule at the date
set forth therein was delinquent in payment by more than ninety (90)
days; (E) the aging schedule of the accounts and notes receivable and
trade notes and trade accounts of Corporation and Business previously
furnished to Purchaser is complete and accurate; and (F) there is no
reason why any account or note receivable or trade note or trade
account will not be collected in accordance with its terms, other
than for such accounts and notes which are not in excess of the
reserves established therefor and reflected in the Latest Balance
Sheet.
(ii) All accounts payable and notes payable by Corporation and
Business arose in bona fide transactions in the ordinary course of
business and no such account payable or note payable is delinquent
by more than ninety (90) days in its payment.
(n) INTELLECTUAL PROPERTY RIGHTS.
(i) Seller, Business and Corporation own the industrial and
intellectual property rights, including without limitation the
patents, patent applications, patent rights, trademarks, trademark
applications, trade names, service marks, service mark applications,
copyrights, computer programs and other computer software, inventions,
know-how, trade secrets, technology, proprietary processes and
formulae (collectively, "Intellectual Property Rights") described on
the Disclosure Schedule. Except as set forth on the Disclosure
Schedule, the use of all Intellectual Property Rights necessary or
required for the conduct of the businesses of Corporation and Business
as presently conducted and as proposed to be conducted does not and
will not infringe or violate or allegedly infringe or violate the
intellectual property rights of any person or entity. Except as
described on the Disclosure Schedule, Corporation, Business and Seller
do not own or use any Intellectual Property Rights pursuant to any
written license agreement and have not granted any person or entity
any rights, pursuant to written license agreement or otherwise, to
use the Intellectual Property Rights.
(ii) All Intellectual Property Rights used by the Seller, Business
or Corporation are owned by Seller who, pursuant thereto, shall
license exclusive rights to Purchaser to use such rights as well as
various options to acquire title to such rights pursuant to the terms
of the License Agreement, a copy of which is set forth in
EXHIBIT 1(C).
-8-
(o) LITIGATION. Except as set forth in the Disclosure Schedule, there
is no legal, administrative, arbitration, or other proceeding, suit, claim
or action of any nature or investigation, review or audit of any kind
(including without limitation a proceeding, suit, claim or action, or an
investigation, review or audit, involving any environmental Law or matter),
judgment, decree, decision, injunction, writ or order pending, noticed,
scheduled or, to the knowledge of Seller, threatened or contemplated by or
against or involving Business, Corporation or Seller, their assets
including, without limitation, its Intellectual Property Rights, properties
or businesses or its directors, officers, agents or employees (but only in
their capacity as such), whether at law or in equity, before or by any
person or entity or Authority, or which questions or challenges the
validity of this Agreement or any action taken or to be taken by the
parties hereto pursuant to this Agreement or in connection with the
transactions contemplated herein.
(p) TAX RETURNS. Seller, Business and Corporation have duly and
timely filed all tax and information reports, returns and related documents
required to be filed by it with respect to the income-type, sales/use-type
and employment-related taxes of the United States and the states and other
jurisdictions set forth in the Disclosure Schedule (and the political
subdivisions thereof). Except as set forth in the Disclosure Schedule,
Corporation, Seller and Business have duly and timely filed all other tax
and information reports, returns and related documents required to be filed
by them with any Authority, including without limitation all returns and
reports of income, franchise, gross receipts, sales, use, occupation,
employment, withholding, excise, transfer, real and personal property and
other taxes, charges and levies (collectively, the "Tax Returns") and,
except as set forth in the Disclosure Schedule, has duly paid, or made
adequate provision for the due and timely payment of all such taxes and
other charges, including without limitation interest, penalties,
assessments and deficiencies, due or claimed to be due from them by any
such Authorities; the reserves for all of such taxes and other charges
reflected in the Latest Balance Sheet are adequate; and there are no liens
for such taxes or other charges upon any property or assets of Business,
Corporation or Seller. There is no omission, deficiency, error,
misstatement or misrepresentation, whether innocent, intentional or
fraudulent, in any Tax Return filed by Seller, Corporation or Business
for any period. The federal income tax returns of Corporation have been
examined by the Internal Revenue Service for all periods to and including
those expressly set forth in the Disclosure Schedule, and, except to the
extent shown therein, all deficiencies asserted as a result of such
examinations have been paid or finally settled and no issue has been raised
by the Internal Revenue Service in any such examination which, by
application of similar principles, reasonably could be expected to result
in a proposed deficiency for any other period not so examined. Except as
set forth in the Disclosure Schedule, all deficiencies and assessments
resulting from examination of the Tax Returns of Business, Seller or
Corporation have been paid. Except as set forth in the Disclosure
Schedule, there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Return for any period.
If Corporation is an "S corporation", Corporation has had in effect a valid
election under Code Section 1362 to be treated as an "S corporation" for
each of its taxable years ended after the date set forth in the Disclosure
Schedule, neither Corporation nor any of its Sellers have taken any
-9-
action to revoke that election, neither Corporation nor any of its Sellers
are aware of any basis or the existence of any facts that would permit the
Internal Revenue Service to revoke that election for any period prior to
the Closing Date, and, except as described on the Disclosure Schedule,
since the effective date of its election as an S corporation to and
including the Closing Date, Corporation will not have incurred or become
liable for the payment of any corporate-level income tax, or any related
penalties or interest.
(q) INSURANCE. The Disclosure Schedule contains an accurate and
complete list of all policies of fire and other casualty, general
liability, theft, life, workers' compensation, health, directors and
officers, business interruption and other forms of insurance owned or held
by Business, Corporation or Seller, specifying the insurer, the policy
number, the term of the coverage and, in the case of any "claims made"
coverage, the same information as to predecessor policies for the previous
five (5) years. All present policies are in full force and effect and all
premiums with respect thereto have been paid. Business, Corporation or
Seller have not been denied any form of insurance and no policy of
insurance has been revoked or rescinded during the past five (5) years,
except as described on the Disclosure Schedule.
(r) BENEFIT PLANS. Except as set forth in the Disclosure Schedule:
(i) Neither Business nor Corporation sponsors, maintains or
contributes to, and has never sponsored, maintained, contributed to
or been required to contribute to any "employee pension benefit plan"
("Pension Plan") as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
including without limitation, solely for purposes of this subsection,
a plan excluded from coverage by Section 4(b)(5) of ERISA and,
including without limitation any such Pension Plan which is a
"Multiemployer Plan" within the meaning of Section 4001(a)(3) of
ERISA. Each such Pension Plan is in compliance with the applicable
provisions of ERISA for which deadlines for compliance have passed,
the applicable provisions of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder (the "Code") for
which deadlines of compliance have passed and all other applicable
Law. No Pension Plan is subject to Title IV of ERISA or to Section 412
of the Code.
(ii) Business and Corporation have never ceased operations at any
facility or withdrawn from any Pension Plan or otherwise acted or
omitted to act in a manner which could subject it to liability under
Section 4062, Section 4063, Section 4064 or Section 4069 of ERISA and
there are no facts or circumstances which might give rise to any
liability of Business and Corporation to the Pension Benefit Guaranty
Corporation ("PBGC") under Title IV of ERISA or which could reasonably
be anticipated to result in any claims being made against Purchaser;
or Seller, Business or Corporation to the PBGC. Neither Business nor
Corporation has incurred any withdrawal liability (including without
limitation any contingent or secondary withdrawal liability) within
the meaning of Section 4201 and
-10-
Section 4204 of ERISA to any Multiemployer Plan. Neither Corporation
nor Business has, with respect to any Pension Plan which is a
Multiemployer Plan, suffered or otherwise caused a "complete
withdrawal" or a "partial withdrawal," as such terms are defined
respectively in Sections 4201, 4203, 4204 and 4205 of ERISA. Neither
Business nor Corporation has any liability to any such Multiemployer
Plan in the event of a complete or partial withdrawal therefrom as of
the close of the most recent fiscal year of any such Multiemployer
Plan ended prior to the date hereof.
(iii) Corporation and Business do not sponsor, maintain, contribute
to, and have never sponsored, maintained, contributed to, or been
required to contribute to any "employee welfare benefit plan"
("Welfare Plan"), as such term is defined in Section 3(1) of ERISA
(including without limitation a plan excluded from coverage by Section
4(b)(5) of ERISA), whether insured or otherwise, and any such Welfare
Plan maintained by Corporation or Business is in compliance with the
provisions of ERISA and all other applicable Laws, including without
limitation Code Section 162(k) and 162(i) and the related provisions
of ERISA and Code Section 4980B. Neither Corporation nor Business has
established or contributed to any "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code.
(iv) Corporation and Business do not maintain or contribute to any
bonus plan, incentive plan, stock plan or any other current or
deferred compensation agreement, arrangement or policy, or any
individual employment agreement ("Compensation Plans").
(v) Neither any of Pension Plans or Welfare Plans or Compensation
Plans nor any trust created or insurance contract issued thereunder
nor any trustee or administrator thereof nor any officer, director or
employee of Corporation or Business, custodian or any other
"disqualified person" within the meaning of Section 4975(e)(2) of the
Code, or "party in interest" within the meaning of Section 3(14) of
ERISA, with respect to any such Pension Plans or Welfare Plans or
Compensation Plans or any such trust or insurance contract or any
trustee, custodian or administrator thereof, or any disqualified
person, party in interest or person or entity dealing with such
Pension Plans or Compensation Plans or any such trust, insurance
contract or any trustee is subject to a tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or to a civil penalty
imposed by Section 502 of ERISA. There are no facts or circumstances
which could subject Corporation or Business to any excise tax under
Section 4972 or Sections 4976 through 4980, both inclusive, of the
Code.
(vi) Full payment has been made of all amounts which Corporation or
Business is required, under applicable Law, with respect to any
Pension Plan or Welfare Plan or Compensation Plan, or any agreement
relating to any Pension Plan or Welfare Plan or Compensation Plan, to
have paid as a contribution
-11-
thereto. No accumulated funding deficiency (as defined in Section 302
of ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any Pension Plan. Business and Corporation do not
sponsor, maintain or contribute to, and have never sponsored,
maintained or contributed to or been required to contribute to, any
Pension Plan subject to Part 3 of Title I of ERISA or Section 412(n)
of the Code. Business and Corporation have made adequate provisions
for reserves to meet contributions which have not been made because
they are not yet due under the terms of any Pension Plan or Welfare
Plan or Compensation Plan or related agreements. All Pension Plans
which Business or Corporation operates as plans that are qualified
under the provisions of Section 401(a) of the Code satisfy the
requirements of Section 401(a) and all other sections of the Code
incorporated therein, including without limitation Sections 401(m) and
401(1) of the Code; and the Internal Revenue Service has issued
favorable determination letters with respect to the current statement
of all Pension Plans and, to Business's and Corporation's knowledge,
nothing has occurred since the issuance of any such letters that could
adversely affect such favorable determination. There will be no
change on or before Closing in the operation of any Pension Plan,
Welfare Plan or Compensation Plan or any documents with respect
thereto which will result in an increase in the benefit liabilities
under such plans, except as may be required by Law.
(vii) Business and Corporation have complied with all reporting and
disclosure obligations with respect to the Pension Plans, Welfare
Plans and Compensation Plans imposed by Title I of ERISA or other
applicable Law.
(viii) There are no pending or, to Corporation's or Business's
knowledge, threatened claims, suits or other proceedings against
Corporation or Business, any other party by present or former
employees of Corporation, plan participants, beneficiaries or spouses
of any of the above, including, without limitation, claims against the
assets of any trust, involving any Pension Plan, Welfare Plan, or
Compensation Plan, or any rights or benefits thereunder, other than
the ordinary and usual claims for benefits by participants or
beneficiaries.
(ix) The transactions contemplated herein do not result in the
acceleration or accrual, vesting, funding or payment of any
contribution or benefit under any Pension Plan, Welfare Plan or
Compensation Plan.
(x) No action or omission of Corporation or Business or any
director, officer, employee, or agent thereof in any way restricts,
impairs or prohibits Purchaser or Corporation, Seller or Business or
any successor from amending, merging, or terminating any Pension Plan,
Welfare Plan or Compensation Plan in accordance with the express
terms of any such plan and applicable Law.
(s) BANK ACCOUNTS; POWERS OF ATTORNEY. The Disclosure Schedule sets
forth: (i) the names of all financial institutions, investment banking and
brokerage houses, and
-12-
other similar institutions at which the Corporation or Business maintain
accounts, deposits, safe deposit boxes of any nature, and the names of all
persons authorized to draw thereon or make withdrawals therefrom; (ii) the
terms and conditions thereof and any limitations or restrictions as to use,
withdrawal or otherwise; and (iii) the names of all persons or entities
holding general or special powers of attorney from Corporation or Business
and a summary of the terms thereof.
(t) CONTRACTS AND COMMITMENTS; NO DEFAULT.
(A) Except as set forth in the Disclosure Schedule, neither
Corporation nor Business
(i) have any written contract, commitment, agreement or
arrangement with any person or, to Corporation's or Business's
knowledge, any oral contract, commitment, agreement or
arrangement which (1) requires payments individually in excess
of two thousand dollars ($2,000) annually or in excess of five
thousand dollars ($5,000) over its term (including without
limitation periods covered by any option to extend or renew by
either party) and (2) is not terminable on thirty (30) days' or
less notice without cost or other Liability;
(ii) does not pay any person or entity cash remuneration
at the annual rate (including without limitation guaranteed
bonuses) of more than ten thousand dollars ($10,000) for services
rendered;
(iii) is not restricted by agreement from carrying on its
businesses or any part thereof anywhere in the world or from
competing in any line of business with any person or entity;
(iv) is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any person or entity;
(v) is not party to any agreement, contract, commitment
or loan to which any of its directors, officers or Sellers
(including Seller) or any "affiliate" or "associate" (as defined
in Rule 405 as promulgated under the Securities Act of 1933) (or
former affiliate or associate) thereof is a party;
(vi) is not subject to any outstanding sales or purchase
contracts, commitments or proposals which will result in any loss
upon completion or performance thereof;
(vii) is not party to any purchase or sale contract or
agreement that calls for aggregate purchases or sales in excess
over the course of such contract or agreement of five thousand
dollars ($5,000) or which continues for a period of more than
twelve (12) months (including without limitation periods covered
by any option to renew or extend by either party) which is
-13-
not terminable on sixty (60) days' or less notice without cost or
other Liability at or any time after the Closing;
(viii) is not subject to any contract, commitment, agreement
or arrangement with any "disqualified individual" (as defined in
Section 280G(c) of the Code) which contains any severance or
termination pay liabilities which would result in a disallowance
of the deduction for any "excess parachute payment" (as defined
in Section 280G(b)(1) of the Code) under Section 280G of the
Code; and
(ix) has no distributorship, dealer, manufacturer's
representative, sales representative, agent, broker, franchise or
similar sales contract relating to the payment of a commission.
(B) True and complete copies (or summaries, in the case of oral
items) of all items disclosed pursuant to subsection 2(t)(i) have been
made available to Purchaser for review, and are set forth in the
Disclosure Schedule. Except as set forth in the Disclosure Schedule,
all such items are valid and enforceable by and against Corporation or
Business in accordance with their respective terms; Corporation and
Business are not in breach, violation or default, however defined, in
the performance of any of their obligations thereunder, and no facts
and circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof; and, to Corporation's or Business's
knowledge, no other parties thereto are in a breach, violation or
default, however defined, thereunder or thereof, and no facts or
circumstances exist which, whether with the giving of due notice,
lapse of time, or both, would constitute such a breach, violation or
default thereunder or thereof.
(u) ORDERS, COMMITMENTS AND RETURNS. Except as set forth in the
Disclosure Schedule, all accepted and unfulfilled orders for the sale of
products and the performance of services entered into by Corporation or
Business and all outstanding contracts or commitments for the purchase of
supplies, materials and services were made in bona fide transactions in the
ordinary course of business. Except as set forth in the Disclosure
Schedule, there are no claims against Corporation or Business to return
products by reason of alleged over-shipments, defective products or
otherwise, or of products in the hands of customers, retailers or
distributors under an understanding that such products would be returnable.
(v) LABOR MATTERS. Except as set forth in the Disclosure Schedule:
(i) Corporation and Business are and have been in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation
any such Laws respecting employment discrimination and occupational safety
and health requirements, and has not and is not engaged in any unfair labor
practice; (ii) there is no unfair labor practice complaint against the
Corporation or Business pending or, to Corporation's or Business's
-14-
knowledge, threatened before the National Labor Relations Board or any
other comparable Authority; (iii) there is no labor strike, dispute,
slowdown or stoppage actually pending or, to Corporation's or Business's
knowledge, threatened against or directly affecting Corporation or
Business; (iv) no labor representation question exists respecting the
employees of Corporation or Business, and there is not pending or, to
Corporation's or Business's knowledge, threatened any activity intended or
likely to result in a labor representation vote respecting the employees
of the Corporation or Business; (v) no grievance or any arbitration
proceeding arising out of or under collective bargaining agreements is
pending and no claims therefor exist or, to Corporation's or Business's
knowledge, have been threatened; (vi) no collective bargaining agreement is
binding and in force against Corporation or Business or is currently being
negotiated by Corporation or Business; (vii) Corporation and Business have
not experienced any significant work stoppage or other significant labor
difficult; (viii) Corporation and Business are not delinquent in payments
to any persons for any wages, salaries, commissions, bonuses or other
direct or indirect compensation for any services performed by them or
amounts required to be reimbursed to such persons, including without
limitation any amounts due under any Pension Plan, Welfare Plan or
Compensation Plan; (ix) upon termination of the employment of any person,
neither Corporation, Business, Seller, Purchaser or any subsidiary of
Purchaser will, by reason of anything done at or prior to or as of the
Closing Date, be liable to any of such persons for so-called "severance
pay" or any other payments; and (x) within the twelve (12) month period
prior to the date hereof there has not been any expression of intention to
Corporation, Seller or Business by any officer or key employee to
terminate such employment.
(w) DEALERS AND SUPPLIERS. Except as set forth in the Disclosure
Schedule, there has not been in the twelve (12) month period prior to the
date hereof any adverse change in the business relationship of Corporation
or Business with any dealer or supplier to Corporation or Business.
(x) PERMITS AND OTHER OPERATING RIGHTS. Except as set forth in the
Disclosure Schedule, neither Corporation nor Business requires the Consent
of any Authority to permit it to operate in the manner in which it
presently is being operated, and Corporation or Business possesses all
permits and other authorizations from all Authorities presently required
necessary to permit it to operate it businesses in the manner in which they
presently are conducted.
(y) COMPLIANCE WITH LAW. Except as set forth in the Disclosure
Schedule, and without limiting the scope of any other representations or
warranties contained in this Agreement, but without intending to duplicate
the scope of such other representations and warranties, the assets,
properties, businesses and operations of Business and Corporation are and
have been in compliance with all Laws applicable to the ownership and
conduct of their assets, properties, businesses and operations, including
without limitation all franchising and similar licensing Laws, all
applicable rules of the Civil Rights Act of 1964, as amended, Executive
Order No. 11246, the Occupational Safety and Health Act of 1970, as
amended, the Clayton Act, as amended, the Sherman Act, as amended, the
-15-
Foreign Corrupt Practices Act, as amended, the boycott and export control
regulations promulgated by the U.S. Department of Commerce, the boycott
regulations promulgated by the Internal Revenue Service, the Equal
Employment Opportunity Act of 1974, as amended, the Clean Air Act as
amended, the Clean Water Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Toxic Substances Control Act, as amended, the
Comprehensive Environmental Response, Liability and Compensation Act of
1980, as amended, and the related employee and public right-to-know
provisions. There are no outstanding and unsatisfied deficiency reports,
plans of correction, notices of noncompliance or work orders relating to
any such Authorities, and no such discussions with any such Authorities are
scheduled or pending.
(z) ASSETS OF BUSINESS. The assets (including the Assets) owned or
leased by Business or Corporation constitute all of the assets held for use
or used primarily in connection with their businesses and are adequate to
carry on such businesses as presently conducted and as contemplated by
Business and Corporation to be conducted.
(aa) BUSINESS GENERALLY. To Seller's, Corporation's and Business's
knowledge, except as set forth in the Disclosure Schedule, there has been
no event, transaction or information which has come to the attention of any
of them which, as it relates directly to the businesses of Corporation and
Business, could, individually or in the aggregate, reasonably be expected
to have a material adverse effect on such businesses.
(bb) HAZARDOUS SUBSTANCES AND HAZARDOUS WASTES. Except as set forth
in the Disclosure Schedule:
(i) there is not now, nor has there ever been, any disposal,
release or threatened release of Hazardous Materials (as defined
below) on, from or under properties now or ever owned or leased by or
to Corporation or Business or by or to any former subsidiary (the
"Properties"). There has not been generated by or on behalf of
Corporation, Business or any former subsidiary or predecessor (while
owned by Corporation or Business) any Hazardous Material. No
Hazardous Material has been disposed of or allowed to be disposed of
on or off any of the Properties which may give rise to a clean-up
responsibility, personal injury liability or property damage claim
against Corporation or Business, or Corporation or Business being
named a potentially responsible party for any such clean-up costs,
personal injuries or property damage or create any cause of action by
any third party against Corporation or Business. For purposes of this
subsection, the terms "disposal," "release," and "threatened release"
shall have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, and the term "Hazardous Material" means any hazardous or
toxic substance, material or waste or pollutants, contaminants or
asbestos containing material which is or becomes regulated by any
Authority in any jurisdiction in which any of the Properties is
located. The term "Hazardous Material" includes without limitation
any material or substance which is (i) defined as a "hazardous waste"
or a "hazardous substance" under
-16-
applicable Law, (ii) designated as a "hazardous substance" pursuant
to Section 311 of the Federal Water Pollution Control Act, (iii)
defined as a "hazardous waste" pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, or (iv) defined as a
"hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended.
(ii) None of Properties is (or, with respect to past Properties
and Properties of former subsidiaries, was at the time of disposition)
in violation of any Law (with respect to past Properties and
Properties of former subsidiaries, Laws in effect at the time of
disposition) relating to industrial hygiene or to the environmental
conditions on, under or about such Properties, including without
limitation soil and ground water condition and there are (or at the
time of disposition were) no underground tanks or related piping,
conduits or related structures. During the period that Corporation,
Business and their former subsidiaries and predecessors owned or
leased the Properties, neither of them nor any third party used,
generated, manufactured or stored on, under or about such Properties
or transported to or from such Properties any Hazardous Materials and
there has been no litigation brought or threatened against Corporation
or Business or any settlements reached by Corporation with any third
party or third parties alleging the presence, disposal, release or
threatened release of any Hazardous Materials on, from or under any of
such Properties.
(cc) BROKERS. Except as set forth in the Disclosure Schedule, neither
Seller, Business nor Corporation nor any of its directors, officers or
employees has employed any broker, finder, or financial advisor or incurred
any liability for any brokerage fee or commission, finder's fee or
financial advisory fee, in connection with the transactions
contemplated hereby, nor is there any basis known to Seller, Business or
Corporation for any such fee or commission to be claimed by any person or
entity. Seller shall be solely responsible to pay (and Purchaser shall have
no liability for) any amounts due to the parties listed on the Disclosure
Schedule.
(dd) SELLER REPRESENTATIONS. Seller has full legal right, power and
authority to sell, transfer, assign and deliver the Shares and Assets to
Purchaser at Closing and delivery of the Shares and Assets at Closing will
transfer to Purchaser valid legal and beneficial ownership thereto free and
clear of all claims, security interests, liens, charges and encumbrances of
any kind or nature whatsoever. A bill of sale for the Business including
the Assets in the form of EXHIBIT 2.1(dd) shall be presented to Purchaser
by Seller at Closing.
(ee) ACCURACY OF INFORMATION. No representation or warranty by Seller
in this Agreement contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary in order
to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading as of the date
-17-
of the representation or warranty. All representations and warranties of
Corporation and Business herein shall be deemed made also by Seller.
(ff) DUE DILIGENCE. Seller represents and warrants that he has
furnished to Purchaser any and all information, documentation, records
and otherwise necessary for Purchaser to fully understand the Corporation
and Business, their businesses, activities, assets and liabilities.
SECTION 3
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Seller as of the date hereof as
follows:
(a) CORPORATE ORGANIZATION. Purchaser is a corporation duly
organized, validly existing and in good standing under the law of the State
of Nevada.
(b) AUTHORIZATION. Purchaser has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
herein. The Board of Directors of Purchaser has taken all action required
by law, its articles or certificate of incorporation and bylaws or
otherwise to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein.
This Agreement is the valid and binding legal obligation of Purchaser
enforceable against it in accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated herein will: (i) violate any provision of the articles or
certificates of incorporation or bylaws of Purchaser; or (ii) except for
such violations, conflicts, defaults, accelerations, terminations,
cancellations, impositions of fees or penalties, mortgages, pledges, liens,
security interests, encumbrances, restrictions and charges which would not,
individually or in the aggregate, have a material adverse affect on the
business of Purchaser as a whole, (A) violate, be in conflict with, or
constitute a default, however defined (or an event which, with the giving
of due notice or lapse of time, or both, would constitute such a default),
under, or cause or permit the acceleration of the maturity of, or give rise
to, any right of termination, cancellation, imposition of fees or penalties
under, any debt, note, bond, lease, mortgage, indenture, license,
obligation, contract, commitment, franchise, permit, instrument or other
agreement or obligation to which Purchaser or any subsidiary of Purchaser
is a party or by which they or any of their properties or assets is or may
be bound (unless with respect to which defaults or other rights, requisite
waivers or consents shall have been obtained at or prior to the Closing)
which would materially impede Purchaser, or (B) result in the creation or
imposition of any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind, upon any property or assets of Purchaser
or any subsidiary of Purchaser under any debt, obligation, contract,
agreement or commitment to which Purchaser or any subsidiary of Purchaser
is a party or by which Purchaser or any subsidiary of Purchaser or any of
their assets or properties is
-18-
or may be bound; or (iii) to the knowledge of Purchaser violate any Law any
of which would materially impede Purchaser's ability to perform its
obligations hereunder.
(d) DISCLOSURE. No representation or warranty by Purchaser in this
Agreement contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
made, not misleading as of the date of the representation or warranty.
(e) CONSENTS AND APPROVALS. No Consent is required by any person or
entity, including without limitation any Authority, in connection with the
execution, delivery and performance by Purchaser of this Agreement, or the
consummation of the transactions contemplated herein, other than any
Consent which, if not made or obtained, will not, individually or in the
aggregate, have a material adverse effect on the business of Purchaser and
its subsidiaries taken as a whole.
(f) BROKERS. Except as disclosed in the Disclosure Schedule,
EXHIBIT 2 hereto, neither Purchaser nor any of its directors, officers or
key employees have employed any broker, finder or financial advisor, or
incurred any liability for any brokerage fee or commission, finder's fee or
financial advisory fee, in connection with the transactions contemplated
hereby, nor is there any basis known to Purchaser for any such fee or
commission to be claimed by any person or entity. Purchaser shall be
solely responsible to pay (and Seller shall have no liability for) any
amounts due to the parties listed on the Disclosure Schedule.
SECTION 4
4. COVENANTS
(a) CONFIDENTIALITY. Each of the parties hereto agrees that it will
not use, or permit the use of, any of the information relating to any other
party hereto furnished to it in connection with the transactions
contemplated herein ("Information") in a manner or for a purpose
detrimental to such other party or otherwise than in connection with the
transaction, and that they will not disclose, divulge, provide or make
accessible (collectively, "Disclose"), or permit the Disclosure of, any of
the Information to any person or entity, other than their responsible
directors, officers, employees, investment advisors, accountants, counsel
and other authorized representatives and agents, except as may be required
by judicial or administrative process or, in the opinion of such party's
regular counsel, by other requirements of Law; provided, however, that
prior to any Disclosure of any Information permitted hereunder, the
disclosing party shall first obtain the recipients' undertaking to comply
with the provisions of this subsection with respect to such information.
The term "Information" as used herein shall not include any information
relating to a party which the party disclosing such information can show:
(i) to have been in its possession prior to its receipt from another party
hereto; (ii) to be now or to later become generally available to the public
through no fault of the disclosing party; (iii) to have been available to
the public at the time of its receipt by the disclosing
-19-
party; (iv) to have been received separately by the disclosing party in an
unrestricted manner from a person entitled to disclose such information; or
(v) to have been developed independently by the disclosing party without
regard to any information received in connection with this transaction.
Each party hereto also agrees to promptly return to the party from whom
originally received all original and duplicate copies of written materials
containing Information should the transactions contemplated herein not
occur. A party hereto shall be deemed to have satisfied its obligations to
hold the Information confidential if it exercises the same care as it takes
with respect to its own similar information. This provision shall survive
closing.
(b) FILINGS; CONSENTS; REMOVAL OF OBJECTIONS. Subject to the terms
and conditions herein provided, the parties hereto shall use their best
efforts to take or cause to be taken all actions and do or cause to be done
all things necessary, proper or advisable under applicable Laws to
consummate and make effective, as soon as reasonably practicable, the
transactions contemplated hereby, including without limitation obtaining
all Consents of any person or entity, whether private or governmental,
required in connection with the consummation of the transactions
contemplated herein. In furtherance, and not in limitation of the
foregoing, it is the intent of the parties to consummate the transactions
contemplated herein at the earliest practicable time, and they respectively
agree to exert their best efforts to that end. This provision shall
survive Closing.
(c) FURTHER ASSURANCES; COOPERATION; NOTIFICATION.
Before, at and after closing
(i) Each party hereto shall, before, at and after Closing,
execute and deliver such instruments and take such other actions as
the other party or parties, as the case may be, may reasonably require
in order to carry out the intent of this Agreement and the
transactions contemplated hereunder.
(ii) Seller, Corporation and Business shall cooperate with
Purchaser to promptly develop plans for the management of the Business
and Corporation's businesses after the Closing, including without
limitation plans relating to productivity, marketing, operations and
improvements, and to further cooperate with Purchaser to provide for
the implementation of such plans as soon as practicable after the
Closing. Subject to applicable Law, Seller, Business and Corporation
shall confer on a regular and reasonable basis with one or more
representatives of Purchaser to report on material operational matters
and the general status of ongoing operations.
(iii) Each party shall promptly notify the other in writing of the
occurrence of any event which it reasonably believes will or may
result in a failure by such party to satisfy the conditions specified
in Article 5 and Article 6 hereof.
-20-
(d) PUBLIC ANNOUNCEMENTS. None of the parties hereto shall make any
public announcement with respect to the transactions contemplated herein
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed; provided, however, that any of the
parties hereto may at any time make any announcements which are required by
applicable Law so long as the party so required to make an announcement
promptly upon learning of such requirement notifies the other party of such
requirement and discusses with the other party in good faith the exact
proposed wording of any such announcement. This provision shall survive
Closing.
SECTION 5
5. CONDITIONS TO OBLIGATIONS OF PURCHASER
Notwithstanding any other provision of this Agreement to the contrary,
the obligation of Purchaser to effect the transactions contemplated herein
shall be subject to the satisfaction at or prior to the Closing of each of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Seller contained in this Agreement, including without
limitation in the Disclosure Schedule delivered to Purchaser as EXHIBIT 2
shall be in all material respects true, complete and accurate as of the
date when made and at and as of the Closing as though such representations
and warranties were made at and as of such time, except for changes
specifically permitted or contemplated by this Agreement, and except
insofar as the representations and warranties relate expressly and solely
to a particular date or period, in which case they shall be true and
correct in all material respects at the Closing with respect to such date
or period.
(b) PERFORMANCE. Seller shall have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with by
Seller on or prior to the Closing.
(c) REQUIRED APPROVALS AND CONSENTS.
(i) All action required by law and otherwise to be taken by the
Seller to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
shall have been duly and validly taken.
(ii) All Consents of or from all authorities required hereunder
to consummate the transactions contemplated herein, and all Consents
of all third parties, persons and entities other than Authorities that
are identified in the Disclosure Schedule shall have been delivered,
made or obtained, and Purchaser shall have received copies thereof.
(d) ADVERSE CHANGES. No material adverse change shall have occurred
in the businesses of Corporation or Business.
-21-
(e) NO PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any Authority or
other person or entity shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated
hereby or which, if successfully asserted, would individually or in the
aggregate, otherwise have a material adverse effect on the conduct
of the businesses of Corporation or Business.
(f) INTENTIONALLY OMITTED
(g) LEGISLATION. No Law shall have been enacted which prohibits,
restricts or delays the consummation of the transactions
contemplated hereby or any of the conditions to the consummation of such
transaction.
(h) CERTIFICATES. Purchaser shall have received such
certificates, if any, of Seller, in a form and substance reasonably
satisfactory to Purchaser, dated the Closing Date, to evidence
compliance with the conditions set forth in this Section 5 and such
other matters as may be reasonably requested by Purchaser.
(i) DUE DILIGENCE. Purchaser shall have received all information
requested by it.
(j) EMPLOYMENT AGREEMENTS. On or before the Closing Date Seller
shall have executed and delivered to Purchaser the employment
agreement annexed hereto as EXHIBIT 5(j).
(k) FINANCIAL STATEMENTS AND CORPORATION'S SELLER'S EQUITY.
Purchaser shall have received the Latest Balance Sheet of
Corporation and Business as being effective as of the Closing, and
Seller hereby certifies that as of the Closing Date, Corporation's
and Business' equity has been determined consistently in accordance with
the generally accepted accounting principles used with respect to
preparation of the Latest Balance Sheet.
(l) Execution and delivery of the License Agreement set forth on
EXHIBIT 5(l) hereto.
SECTION 6
6. CONDITIONS TO SELLER'S OBLIGATIONS
Notwithstanding anything in this Agreement to the contrary, the
obligation of Seller to effect the transactions contemplated herein shall be
subject to the satisfaction at or prior to the Closing of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Purchaser contained in this Agreement shall be in all
material respects true, complete and accurate as of the date when made
and at and as of the Closing, as though such
-22-
representations and warranties were made at and as of such time,
except for changes permitted or contemplated in this Agreement, and
except insofar as the representations and warranties relate expressly
and solely to a particular date or period, in which case they shall be
true and correct in all material respects at the Closing with respect to
such date or period.
(b) PERFORMANCE. Purchaser shall have performed and complied in
all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied
with by Purchaser at or prior to the Closing.
(c) APPROVALS. All Consents hereto, if any, shall have been
delivered, made or obtained. All action required to be taken by
Purchaser to authorize the execution, delivery and performance of this
Agreement by Purchaser and the consummation of the transactions
contemplated hereby shall have been duly and validly taken.
(d) NO PROCEEDING OR LITIGATION. No suit, action, investigation,
inquiry or other proceeding by any Authority or other person or
entity shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby.
(e) INTENTIONALLY OMITTED.
(f) DUE DILIGENCE. Seller shall have received all information
requested by it.
(g) ADVERSE CHANGES. No material adverse change shall have
occurred in the business of Purchaser and its subsidiaries taken as
a whole since the date hereof.
(h) Execution and delivery of the License Agreement (EXHIBIT 5(i)
hereto) and Employment Agreement (EXHIBIT 5(j) hereto).
SECTION 7
7. INTENTIONALLY OMITTED.
SECTION 8
8. SURVIVAL AND INDEMNIFICATION
(a) SURVIVAL. This Agreement including, without limitation, the
representations and warranties of each of the parties hereto shall
survive pursuant to the terms hereof.
(b) INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify
Seller from and against any and all loss, liability or damage suffered
or incurred by it by reason of (i) any untrue representation of, or
breach of warranty by, Purchaser in any part of this Agreement,
provided, however, that no claim for indemnity may be made pursuant to
this
-23-
subsection after the first eighteen (18) months after the Closing
Date; and (ii) any nonfulfillment of any covenant, agreement or
undertaking of Purchaser in any part of this Agreement which by its
terms is to remain in effect after the Closing and has not been
specifically waived in writing at the Closing by the party or parties
hereof entitled to the benefits thereof.
(c) INDEMNIFICATION BY SELLER -- UNTRUE REPRESENTATION OR BREACH
OF WARRANTY. Seller agrees to indemnify Purchaser from and against
any and all loss, liability or damage suffered or incurred by it by
reason of any untrue representation of, or breach of warranty by
Seller, Corporation or Business in this Agreement, provided, however,
that no claim for indemnity may be made pursuant to this subsection
after the first eighteen (18) months after the Closing Date.
Notwithstanding anything to the contrary in this subsection, no claim
may be made under this subsection if it (or the principal facts
with respect to it) were known or reasonably should have been known and
the claim could have been asserted at a time when it would have
resulted in a required adjustment which would be reflected in the
Audited Closing Balance Sheet.
(d) INDEMNIFICATION BY SELLER -- OTHER. Seller agrees to
indemnify Purchaser from and against: (i) any and all loss,
liability or damage suffered or incurred by it by reason of any
nonfulfillment of any covenant, agreement or undertaking of Seller,
Corporation or Business in this Agreement which by its terms is to
remain in effect after the Closing and has not been specifically
waived in writing at the Closing by the party or parties hereto entitled
to the benefits thereof; and (ii) any and all costs and expenses,
including without limitation reasonable legal fees and expenses, in
connection with enforcing the indemnification rights of Purchaser
pursuant to subsections 8(c) and 8(d).
(e) BASKET AMOUNT. Notwithstanding anything in subsections 8 (c)
and (d) to the contrary, Purchaser shall not be entitled to any
indemnification under such subsections if the aggregate amount of all
claims thereunder is less than twenty-five thousand dollars
($25,000) (the "Exception Amount"), but if the aggregate amount of all
claims equals or exceeds the Exception Amount, then Purchaser shall
be entitled to full indemnification of all claims and there shall be no
Exception Amount. The parties hereto do not intend that the
Exception Amount be deemed to be a definition of what is "material" for
any purpose in this Agreement.
(f) CLAIMS FOR INDEMNIFICATION. The parties intend that all
indemnification claims hereunder be made as promptly as practicable
by the party seeking indemnification (the "Indemnified Party").
Whenever any claim shall arise for indemnification hereunder), the
Indemnified Party shall promptly notify the party from whom
indemnification is sought (the "Indemnifying Party") of the claim
and, when known, the facts constituting the basis for such claim. In
the case of any such claim for indemnification hereunder resulting
from or in connection with any claim or legal proceedings of a third
party, the notice to the Indemnifying Party shall specify, if
known, the amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which it is
-24-
entitled to indemnification hereunder without the prior written consent
of the Indemnifying Party, which shall not be unreasonably withheld. If
the Indemnifying Party is of the opinion that the Indemnified Party is
not entitled to indemnification, or is not entitled to indemnification
in the amount claimed in such notice, it shall deliver, within ten (10)
business days after the receipt of such notice, a written objection
to such claim and written specifications in reasonable detail of the
aspects or details objected to, and the grounds for such objection.
If the Indemnifying Party shall file timely written notice of
objection to any claim for indemnification, the validity and amount of
such claim shall be determined by arbitration pursuant to
subsection 9(l) hereof. If timely notice of objection is not delivered
or if a claim by an Indemnified Party is admitted in writing by an
Indemnifying Party or if an arbitration award is made in favor of an
Indemnified Party, the Indemnified Party, as a non-exclusive
remedy, shall have the right to set-off the amount of such claim or
award against any amount yet owed, whether due or to become due, by
the Indemnified Party or any subsidiary thereof to any Indemnifying
Party by reason of this Agreement or any agreement or arrangement
or contract to be entered into at the Closing.
SECTION 9
9. MISCELLANEOUS PROVISIONS
(a) EXPENSES. Each of the parties hereto shall bear its own
costs, fees and expenses in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, including
without limitation fees, commissions and expenses payable to brokers,
finders, investment bankers, consultants, exchange or transfer
agents, attorneys, accountants and other professionals, whether or not
the transactions contemplated herein is consummated.
(b) AMENDMENT AND MODIFICATION. Subject to applicable Law, this
Agreement may be amended or modified by the parties hereto;
provided, however, that all such amendments and modifications must be in
writing duly executed by all of the parties hereto; and provided,
further, that after any approval of the transactions contemplated herein
by the Seller, no such amendment or modification without the
further approval of such Seller shall reduce the amount or form of the
consideration or in any way materially adversely affect the rights
of Seller with respect hereto.
(c) WAIVER OF COMPLIANCE; CONSENTS. Any failure of a party to
comply with any obligation, covenant, agreement or condition herein
may be expressly waived in writing by the party entitled hereby to such
compliance, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. No single or partial exercise of a right
or remedy shall preclude any other or further exercise thereof or
of any other right or remedy hereunder. Whenever this Agreement
-25-
requires or permits the consent by or on behalf of a party, such
consent shall be given in writing in the same manner as for waivers of
compliance.
(d) NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement shall
entitle any person or entity (other than a party hereto and his,
her or its respective successors and assigns permitted hereby) to any
claim, cause of action, remedy or right of any kind.
(e) NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be made in
writing and shall be deemed to have been duly given and effective:
(I) on the date of delivery, if delivered personally; (ii) on the
earlier of the fourth (4th) day after mailing or the date of the return
receipt acknowledgment, if mailed, postage prepaid, by certified or
registered mail, return receipt requested; or (iii) on the date of
transmission, if sent by facsimile, telecopy, telegraph, telex or
other similar telegraphic communications equipment:
If to Purchaser:
To: Trans World Gaming Corp.
One Penn Plaza, Suite 1503
New York, New York 10119-0002
Attn:Mr. Dominick Valenzano
Fax: (212) 563-3380
With a copy to: Oppenheimer Wolff & Donnelly
One Citicorp Center
153 East 53rd Street, 26th Floor
New York, New York 10022
Attn:Richard P. Altieri, Esq.
Fax: (212) 486-0708
If to Seller:
To: James R. Hardman, Jr.
14114 West 1st Drive
Golden, Colorado 80401
Fax: (303) 277-0688
or to such other person or address as Purchaser shall furnish to the other
parties hereto in writing in accordance with this subsection.
(f) ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned (whether voluntarily,
involuntarily, by operation of law or otherwise) by any of the
parties hereto without the prior written consent of the
-26-
other parties, provided, however, that Purchaser may assign this
Agreement, in whole or in any part, and from time to time, to a
wholly-owned, direct or indirect, subsidiary of Purchaser, if Purchaser
remains bound hereby).
(g) GOVERNING LAW. This Agreement and the legal relations among
the parties hereto shall be governed by and construed in accordance
with the internal substantive laws of the State of New York (without
regard to the laws of conflict that might otherwise apply) as to
all matters, including without limitation matters of validity,
construction, effect, performance and remedies.
(h) COUNTERPARTS. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(h) HEADINGS. The table of contents and the headings of the
sections and subsections of this Agreement are inserted for
convenience only and shall not constitute a part hereof.
(j) ENTIRE AGREEMENT. The Disclosure Schedule and the exhibits
and other writings referred to in this Agreement or in the
Disclosure Schedule or any such exhibit or other writing are part of
this Agreement, together they embody the entire agreement and
understanding of the parties hereto in respect of the transactions
contemplated by this Agreement and together they are referred to
as "this Agreement" or the "Agreement". There are no restrictions,
promises, warranties, agreements, covenants or undertakings, other
than those expressly set forth or referred to in this Agreement. This
Agreement supersedes all prior agreements and understandings
between the parties with respect to the transaction or transactions
contemplated by this Agreement. Provisions of this Agreement shall
be interpreted to be valid and enforceable under applicable Law to the
extent that such interpretation does not materially alter this
Agreement; provided, however, that if any such provision shall
become invalid or unenforceable under applicable Law such provision
shall be stricken to the extent necessary and the remainder of such
provisions and the remainder of this Agreement shall continue in full
force and effect.
(k) INJUNCTIVE RELIEF. It is expressly agreed among the parties
hereto that monetary damages would be inadequate to compensate a
party hereto for any breach by any other party of its covenants and
agreements in section 4 hereof. Accordingly, the parties agree and
acknowledge that any such violation or threatened violation will cause
irreparable injury to the other and that, in addition to any other
remedies which may be available, such party shall be entitled to
injunctive relief against the threatened breach of section 4 hereof
or the continuation of any such breach without the necessity or
roving actual damages and may seek to specifically enforce the terms
thereof.
(l) ARBITRATION. With the sole exception of the injunctive relief
contemplated by subsection 9(k), any controversy or claim arising
out of or relating to this Agreement, or the making, performance or
interpretation thereof, including without limitation alleged
-27-
fraudulent inducement thereof, shall be settled by binding arbitration
in New York City, New York by a panel of three (3) arbitrators in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then obtaining. Judgment upon any
arbitration award may be entered in any court having jurisdiction
thereof and the parties consent to the jurisdiction of the courts
of the State of New York for this purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PURCHASER:
TRANS WORLD GAMING CORP.
By: /s/ Andrew Tottenham
---------------------
Name: Andrew Tottenham
Title: President and Chief Executive Officer
(NO SEAL)
STATE OF NEW YORK )
) ss.
COUNTY OF QUEENS )
The foregoing instrument was acknowledged before me on April 11, 1997,
by Andrew Tottenham, the President and Chief Executive Officer of Trans World
Gaming Corp., a Nevada corporation, on behalf of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
this 11th day of April, 1997.
/s/ Maureen C. Weppler
-----------------------
Notary Public
[NOTARIAL SEAL]
My Commission expires January 23, 1999.
-28-
SELLER:
/s/ James R. Hardman, Jr.
--------------------------
James R. Hardman, Jr.,
Sole Shareholder of "Corporation"
(Multiple Application Tracking System, Inc.) and
Sole Proprietor of Business
(Multiple Application Tracking System
doing business as MATS of Colorado)
SS# ###-##-####
STATE OF NEVADA) (NO SEAL)
) ss.
COUNTY OF CLARK)
The foregoing instrument was acknowledged before me on April 8, 1997 by
James R. Hardman, Jr., who acknowledged this to be his free and voluntary act.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on
this 8th day of April, 1997.
/s/ [signature illegible]
- -------------------------
Notary Public
My Commission expires March 5, 2000.
-29-