AGREEMENT
AGREEMENT, dated as of and effective the 29th day of March, 1996 by and between
STEPHAN M. THOMPSON ("Thompson"), CLIPPER INDUSTRIES, INC. ("Clipper"), GALLERY
RODEO INTERNATIONAL (the "Company") and KENNETH CAHILL, TIMOTHY MORRISSEY, RAY
BOUCHARD, DAREL TIEGS AND J. ROYCE RENFROW and/or Nominees, a group of real
estate creditors and shareholders of Gallery Rodeo International (the "Group").
WHEREAS: Thompson is a Director, Chairman of the Board of Directors, CEO and CFO
of the Company;
AND WHEREAS: the Company, a California corporation, is engaged in the separate
and distinct businesses of art galleries and gaming with assets primarily
concentrated in those businesses;
AND WHEREAS: individual members of the Group, either directly or as agents,
represent real estate creditors secured by the Company's gaming properties,
shareholders of the Company and/or signatories upon real estate contracts with
the Company;
AND WHEREAS: Clipper is record owner of shares of Company controlled by
Thompson;
AND WHEREAS: questions have arisen with respect to the ability or desire of the
Company, Thompson or the Group to simultaneously pursue both the art business
and the gaming business in a manner which would be in the best interest of the
Company;
AND WHEREAS: it is the desire of Thompson to acquire the art business of the
Company and to relinquish control of the management of the Company;
AND WHEREAS: it is the desire of the Group to manage and operate the Company,
subject to Shareholder approval;
AND WHEREAS: it is the intention of the parties hereto to accomplish the
transactions set forth herein in a manner which is in the best interest of the
Company;
NOW THEREFORE, IT IS AGREED THAT:
I. Sale of Art Business
A. Sale. At the closing, the Company shall sell the stock of its art
business, subsidiaries, Gallery Rodeo Beverly Hills, Inc., a California
corporation, and Gallery Rodeo of Lake Arrowhead, a California corporation, to
include the use of the name
"Gallery Rodeo", set forth in Exhibit "A" to Thompson, and Thompson shall
purchase same.
B. Consideration. Thompson and Gallery agree that the consideration of
the sale for the art business in paragraph A above, shall be One Million Dollars
($1,000,000) payable by Promissory Note to Company.
B.1 Promissory Note shall bear interest at the rate of 8% per
annum, payable quarterly, in arrears, commencing nine (9) months following the
closing of said sale. Said Promissory Note shall contain no prepayment penalty
and shall provide that Thompson may make payments due pursuant to the terms of
said Note through transfer to the Company of shares of its stock held by
Thompson or some other form of acceptable securities acceptable to company, at
the average market value which said stock is trading during a ten (10) day
period during the month proceeding payment upon said Promissory Note through
stock transfer. In any event, Promissory Note shall be due and payable five (5)
years from the date set forth thereon. A copy of said Note is attached as
Exhibit "B."
B.2 Security. Promissory Note referred to hereinabove referred
to in paragraph B.1 shall be secured by 4,000,000 shares of common stock.
II. Management of Company.
A. Company shall make payment to Thompson, at closing, Three Hundred
and Fifty Thousand Dollars ($350,000) and issue sufficient additional shares in
Company to Thompson in order to bring Thompson's, and/or his assigns, direct and
indirect holdings in the Company to Four Million shares (4,000,000) in exchange
for Thompson's agreement to not compete with the Company in gaming or gaming
related businesses for a period of one (1) year, and further in exchange for the
termination and cancellation of any employment contract, deferred compensation,
stock option agreements, warrants, consulting agreements of Thompson or related
parties, and any other agreements preexisting this Agreement and/or employee
benefits Thompson may have with Company. Said Non-competition Agreement is
contained in Exhibit "C" attached hereto, which shall be executed at closing.
B. As further consideration, Company shall cancel any and all Notes
payable to Company by Thompson in excess of $75,000.00, as disclosed upon the
third Quarter of quarter ending September 30, 1995 as set forth on the Form
10-QSB ( a copy of which shall be attached hereto as Exhibit "Sch. 1" and
incorporated herein by reference), for that quarter on file with the Securities
and Exchange Commission, or as set forth on Form 10- KSB, for the year ending
December 31, 1995, in the event said Form is available and parties agree to its
substitution for the Form 10-QSB set forth hereinabove.
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C. By way of set-off of obligations and notes referred to herein set
forth in paragraph IIB, Thompson shall set-off, cancel and return to Company a
$75,000.00 Promissory Note representing funds loaned to Company by Thompson.
D. Company shall execute a Hold Harmless Agreement of standard form
holding Thompson harmless from any acts or omissions of Thompson while an
employee of Company to the full extent permitted by law, a copy of which is
attached hereto as Exhibit "C."
E. Stock. Following closing, Thompson and Clipper, and/or their
assigns, will hold directly or indirectly four million shares (4,000,000) of
stock in the Company. Thompson and Clipper, and/or their assigns, shall place
the four million shares of stock in a voting trust and lock up agreement, a copy
of which is attached hereto as Exhibit "D", said stock for a two (2) year period
following closing, during which time said stock shall be voted in favor of a
slate of directors appointed by the Group. The Voting Trust will permit Thompson
to sell not more than 10% (400,000 shares) of said stock during year one and not
more than an additional 10% of the shares remaining subsequent to the Voting
Trust (360,000 shares) in year two. The Voting Trust Agreement will be executed
at closing.
F. Anti Dilution. Thompson and/or Clipper and/or Carthew and their
assigns, shall have a share option agreement as more fully set forth in Exhibit
"F", a copy of which is attached hereto. The agreement shall grant Thompson,
Clipper and Carthew an option to purchase additional shares in Company during
the two (2) year period as provided herein above in Paragraph "E" at a "strike"
price (the price assigned to shares of common stock in Company at the time of
the exchange of stock for the purchase of assets by Company) in the event
Company acquires assets in exchange for common stock, so as to permit Thompson
and/or Clipper and/or Carthew to retain the same percentage of ownership of
common stock in Company as they currently own.
G. Board Seat. The Group shall include Thompson, or nominee, on the
slate of directors referred to in paragraph F hereinabove. The Group agrees to
vote its shares of stock in the Company in favor of placing Thompson on the
Board of Directors for a period of one (1) year following the Special Meeting of
Shareholders and Directors to be held as set forth hereinbelow.
H. Announcement. Any announcements or press releases of Thompson
leaving Company as an officer and/or director shall be stated in a positive
light, noting that Thompson is to be re-elected as a director of the Company,
and that any members of the Group joining the Board of Directors of Company will
be bringing additional and increased value to the Company. Such announcement
shall include reference to pending management, and/or consulting contracts of
Kenneth Cahill and Rubin Martinez, or other gaming professional selected by
Cahill, as joining Company with respect to
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anticipated hotel and gaming operations. Any such announcement and press release
shall be approved by Thompson and Group. Copies of the Letter of Intent
regarding the Cahill contract is attached hereto as Exhibit "E."
I. Group shall cause Promissory Notes secured by Deeds of Trust upon
Company's Wandering Star Property coming due in 1996 to be refinanced, satisfied
or extended, and shall further cause any executory contracts between Company and
a member of the Group to be consummated. The Wandering Star Property shall
remain an asset of Company as its gaming development.
III. General Provisions.
A. Shareholders Meeting. The parties acknowledge that a Special
Meeting of Shareholders will be necessary in order to elect a new slate of
directors to the Board of Company. Accordingly, Thompson shall provide or shall
cause the stock transfer agent of Company to provide, for notification purposes
of said special meeting, a current list of shareholders, together with a copy of
the current By-Laws and all amendments thereto of the Company, to the Group.
Group shall bear cost of such special meeting of shareholders and shall provide
a Proxy Statement and other appropriate notices and documentation to
shareholders pertaining to said meeting.
A.1 The parties agree to act in concert and cooperatively to
accomplish the meeting as expediently as possible following execution of this
Agreement.
A.2 In the event Thompson is unable to provide said list of
shareholders to the Group, Thompson shall specifically authorize the specific
stock transfer company to provide the requested information to a representative
of the Group.
B. REPRESENTATIONS and WARRANTIES of Thompson. Thompson
represents and warrants, to the best of his knowledge, as follows:
B.1 That the debts of Company at closing shall be no greater
than disclosed on the 10-QSB, or if 10-KSB is substituted as set forth
hereinabove, for the year ending December 31, 1995.
B.2 That the assets of the Company at the date of closing
shall be substantially the same as set forth in Form 10-QSB, or if 10-KSB is
substituted as set forth hereinabove, for the year ending December 31, 1995.
B.3 That Thompson has the power to enter into this Agreement
and to carry out his obligations hereunder.
B.4 That this Agreement has been duly executed and delivered
by and constitutes a valid obligation binding on Thompson.
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B.5 That the execution and performance of this Agreement by
Thompson does not violate or result in a breach of or constitute a default in
any judgment, order or decree to which Thompson may be subject.
B.6 That neither the execution and delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, nor compliance
with the terms and provisions hereof will result in the violation, creation, or
imposition of any lien, charge or encumbrance upon any of Thompson's assets
subject to the terms of this Agreement, or will conflict in any way with the
provisions of or constitute a default under or require the consent of any other
party to any indenture, deed of trust, agreement, lease or other instrument to
which Thompson is a party or by which he may be bound, or to which he may be
subject.
B.7 Thompson does not have any knowledge of any claim,
litigation, threatened litigation or any other action which has been instituted
or threatened affecting Thompson's ability to perform his obligations under this
agreement.
B.8 That Thompson will cooperate with the Company and the
Group in arranging for shareholder consent to the extent legally permissible to
the transfer of management of the Company to be presented to the Special Meeting
of Shareholders from existing management to that proposed by the Group.
C. REPRESENTATIONS and WARRANTIES of Clipper. Clipper represents
and warrants as follows:
C.1 Clipper represents and warrants that it is a corporation
in good standing pursuant to the laws of the State of Nevada.
C.2 That Clipper has the power to enter into this Agreement
and to carry out its obligations hereunder.
C.3 That this Agreement has been duly executed and delivered
by and constitutes a valid obligation binding on Clipper.
C.4 That the execution and performance of this Agreement by
Clipper does not violate or result in a breach of or constitute a default in any
judgment, order or decree to which Clipper may be subject.
C.5 Clipper does not have any knowledge of any claim,
litigation, threatened litigation or any other action which has been instituted
or threatened affecting Clipper's ability to perform its obligation under this
Agreement.
C.6 That Clipper will cooperate with the Company and the Group
in
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arranging for shareholder consent to the extent legally permissible to the
transfer of management of the Company to be presented to the Special Meeting of
Shareholders from existing management to that proposed by the Group.
D. REPRESENTATIONS and WARRANTIES of the Company. The Company
represents and warrants as follows:
D.1 Company represents and warrants that it is a corporation
in good standing pursuant to the laws of the State of California.
D.2 That the debts of Company at closing shall be no greater
than disclosed on the 10-QSB, or in 10-KSB if it is substituted as set forth
hereinabove, for the year ending December 31, 1995.
D.3 That the assets of the Company at the date of closing
shall be substantially the same as set forth in Form 10-QSB, or in10-KSB if it
is substituted as hereinabove set forth, for the year ending December 31, 1995.
D.4 That Company has the power to enter into this Agreement
and to carry out his obligations hereunder.
D.5 That the Company will convey to Thompson at closing good
and marketable title to all Company's interest in the stock set forth on Exhibit
"A", free and clear of all liens and encumbrances except as set forth on Exhibit
"A" and those arising involuntarily by operation of law, and the Company
presently has title and possession of all stock to be so conveyed. Company will
specifically convey to Thompson in addition to said stock, the corporate names
of Gallery Rodeo Beverly Hills, Inc., and Gallery Rodeo of Lake Arrowhead. The
name "Gallery Rodeo International, Inc.", remains property of Company.
D.6 That the Company is current upon all filings with the
Securities and Exchange Commission and will cause Form 10-QSB for the fiscal
year ending December 31, 1995, to be filed in a timely fashion with the
Securities and Exchange Commission.
D.7 That this Agreement has been duly executed and delivered
by and constitutes a valid obligation binding on Company.
D.8 That the execution and performance of this Agreement by
Company does not violate or result in a breach of or constitute a default in any
judgment, order or decree to which Company may be subject.
D.9 That neither the execution and delivery of this Agreement,
nor the
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consummation of the transactions contemplated hereby, nor compliance with the
terms and provisions hereof will result in the violation, creation or imposition
of any lien, charge or encumbrance upon any of Company's assets subject to the
terms of this Agreement, or will conflict in any way with the provisions of or
constitute a default under or require the consent of any other party to any
indenture, deed of trust, agreement, lease or other instrument to which Company
is a party or by which it may be bound, or to which it may be subject.
D.10 Company does not have any knowledge of any claim,
litigation, threatened litigation or any other action which has been instituted
or threatened affecting Company's ability to perform his obligations under this
agreement.
D.11 That Company will cooperate with Thompson and the Group
in arranging for shareholder consent to the extent legally permissible to the
transfer of management of the Company to be presented to the Special Meeting of
Shareholders.
E. REPRESENTATIONS and WARRANTIES of the Group. The Group
represents and warrants as follows:
E.1 That the Group has the power to enter into this Agreement
and to carry out its obligations hereunder.
E.2 That this Agreement has been duly executed and delivered
by and constitutes a valid obligation binding on Group.
E.3 That the execution and performance of this Agreement by
Group does not violate or result in a breach of or constitute a default in any
judgment, order or decree to which Group may be subject.
E.4 Group does not have any knowledge of any claim,
litigation, threatened litigation or any other action which has been instituted
or threatened affecting its ability to perform its obligations under this
agreement.
E.5 That Group will cooperate with Thompson in arranging for
shareholder consent to the extent legally permissible to the transfer of
management of the Company to be presented to the Special Meeting of
Shareholders.
E.6 Group has the ability to maintain, in compliance with
existing Agreements, satisfy, and/or renegotiate existing levels of debt service
with respect to Company-owned real estate located in Cripple Creek, Colorado, in
timely fashion.
F. Termination. This Agreement may be terminated by the Group
under any of the following circumstances by notice in writing if during the
period from the date hereof to the closing date any of the following shall
occur:
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F.1 Should the Group shall learn of any fact or condition with
respect to the Company's business or its assets which is substantially at
variance with one or more of the representations or warranties as set forth
above or any other written information provided to the Group by Thompson, the
Company or others, and after written notice thereof Thompson and/or the Company
shall be unable to furnish reasonable assurance satisfactory to the Group.
F.2 In the event of non-consummation of this Agreement based
upon levels of debts, assets, or balance sheet review of the Group, Thompson and
Company agree to cooperate with and facilitate an outside audit of the Company
to be conducted at Group's expense, which audit shall be conducted by current
auditors, Grant Thornton and Company.
G. Closing. The closing date shall be ten (10) days following
the end of the due diligence period as set forth hereinbelow, or such earlier or
later date as may be mutually agreed upon by the parties. The closing shall take
place on the closing date at the offices of the Company, 421 North Rodeo Drive,
Beverly Hills, California 90210. The parties recognize necessary Shareholder
approval may not be able to be obtained in timely fashion due to Notice
requirements in scheduling the required Special Meeting of Shareholders. In such
event, the parties agree to close the Agreement into escrow if possible, pending
such approval.
G.1 Prior to the Closing: Prior to the Closing, and during the
due diligence period commencing upon execution of this Agreement and extending
for a fifteen (15) day period, Thompson and Company shall permit members of the
Group and its authorized representatives access to the premises and records of
Company, as Group may reasonably request. Group shall treat all information
supplied as confidential, and will not use or permit the use of that information
detrimentally to the interests of Company. Thompson and Company will exercise
all powers allowed them to cause Company to:
(A) Carry on Company's business as it was previous to
this Agreement.
(B) Introduce no new methods of management, operation,
or accounting.
(C) Maintain all property and assets of company in as
good condition as at the effective date of this Agreement, ordinary wear and
tear excepted.
(D) Perform its obligations under contracts.
(E) Maintain current insurance policies and comparable
coverage.
(F) Use best efforts to preserve company's
organization, retain employees, and maintain business relationships.
G.2 Thompson and Company will not allow Company, without prior
8
written consent of group, to:
(A) Make any change in the Articles of Incorporation.
(B) Authorize any new issue of securities.
(C) Declare dividends, or make payments to
Shareholders.
(D) Buy, redeem, or retire for value, any of Company's
shares.
(E) Enter into any contracts, make expenditures, or
incur liabilities, except in the ordinary course of business.
(F) Increase the compensation of, or award bonuses to
officers, employees, or agents.
(G) Mortgage, pledge or otherwise encumber any
property owned or acquired.
(H) Dispose of any property, except in the ordinary
course of business, or
(I) Agree to merge or consolidate with any other
corporation.
G.3 During the Closing: The parties shall deliver to each
other such receipts, certifications, notices and further assurances as each
party may reasonably request, including a certificate executed by Company's
Chairman of the Board, President, or Treasurer, that the representations and
warranties made in this Agreement, by Company, are correct as of the closing
date, with the same force as though made on closing date, with the following
effect:
(A) That all corporate action necessary for the
Company to authorize execution and delivery of this Agreement, and the
transactions contemplated thereby, have been duly and validly taken, and the
agreements constitute legal, valid, binding, and enforceable obligations, except
as limited by any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law as affecting the rights and remedies of creditors, generally, and
except as the remedy of specific performance rests in the discretion of the
court.
G.4 As a part of and condition of Closing, the Shareholders
meeting set forth in IIIA, hereinabove, and the appropriate meetings of the
Board of Directors, have been accomplished, or shall be accomplished, at
closing, unless this Agreement is closed into escrow as set forth in paragraph G
above.
G.5 After the Closing. Subsequent to the Closing, each party
to this agreement shall at the request of any other furnish, execute and deliver
such documents, instruments, opinions of counsel, certificates, notices or other
further
9
assurances as counsel of the requesting party shall reasonably deem necessary or
desirable for effecting complete consummation of this agreement.
H. Notices.
H.1 The parties hereto recognize that from time to time,
Notices must be given to and made by the parties to each other. Accordingly,
Notices, approvals or the communications to be sent or given to Thompson and
Clipper, shall deemed validly and properly given, or made if in writing and
delivered by hand or registered or certified mail, return receipt requested and
addressed to Stephan M. Thompson, 6399 Wilshire Boulevard, Suite #504, Los
Angeles, California, 90048, with a copy to Karen Krasney, Esq. 135 S. Thornton,
Los Angeles, California, 90049.
H.2 All Notices, approvals or other communications to be sent
or given to the Company shall deemed validly and properly given, or made if in
writing and delivered by hand or registered or certified mail, return receipt
requested and addressed to Gallery Rodeo International, 421 North Rodeo Drive,
Beverly Hills, California 90210 with a copy to Karen Krasney, Esq., 135 S.
Thornton, Los Angeles, California, 90049.
H.3 All Notices, approvals or other communications to be sent
or given to the Group shall deemed validly and properly given, or made if in
writing and delivered by hand or registered or certified mail, return receipt
requested and addressed to J. Royce Renfrow, P.C., 320 E. Costilla, Colorado
Springs, Colorado 80903 with a copy to Kenneth Cahill, Arcadia International,
Inc., 2333 Blairs Ferry Road, N.E., Cedar Rapids, Iowa 52402.
H.4 Any of the parties hereto may give Notice to the others at
any time by the methods specified above of a change in address at which, or the
person to whom, Notices addressed to it are to be delivered in the future.
I. This Agreement, together with the Exhibits attached hereto and other
documents delivered pursuant hereto, constitutes the entire agreement among the
parties hereto and supersedes all prior correspondence, conversations and
negotiations. This Agreement may be executed in several counterparts that
together shall constitute but one and the same agreement. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
parties. The title of the Sections of this Agreement have been assigned thereto
for convenience only and shall not be construed as limiting, defining or
affecting the substantive terms of the agreement. This Agreement may be amended
only by a writing executed by the parties hereto. This Agreement shall be
construed and interpreted according to the laws of the State of California, with
the exception of construction and interpretation of this Agreement as to
Clipper, which shall be according to the laws of the State of Nevada.
J. The parties agree, upon the request of any other party, to execute
any agreements, documents or instruments consistent with this Agreement which
are necessary to consummate the transactions contemplated in this Agreement.
K. No modification of this Agreement shall be valid unless such
modification is in writing and signed by all of the parties to this Agreement.
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L. No waiver of any provision of this Agreement shall be valid unless
in writing and signed by the person or party against whom charged.
M. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions of this Agreement, and this
Agreement shall be construed as if such invalid or unenforceable provision was
omitted. All parties hereto having participated actively in the negotiation and
drafting of this agreement, and each party having been represented by counsel,
the terms of this Agreement shall not be construed against, nor more favorably
to, any party, regardless of their responsibility for its preparation.
N. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective heirs, legal representatives, executors,
administrators, successors and assigns.
O. This Agreement and any documents or instruments delivered pursuant
to this Agreement constitute the entire Agreement and understanding between the
parties and supersede any prior agreement and understanding relating to the
subject matter of this Agreement.
P. Whenever in this Agreement words, including pronouns, are used in
the masculine, they shall be read and construed in the feminine or neuter
wherever they would so apply, and wherever in this Agreement words, including
pronouns, are used in the singular, they shall be read and construed in the
plural, wherever they would so apply.
/s/ Stephan M. Thompson GROUP:
- -------------------------
Stephan M. Thompson
/s/ Ken cahill
-------------------
Kenneth Cahill
COMPANY:
---------------------
Gallery Rodeo International Timothy Morrissey
By: /s/ Stephan M. Thompson /s/ Ray Bouchard
------------------------- ------------------
Its President Ray Bouchard
Clipper Industries, Inc. /s/ Darel Tiegs
-------------------
Darel Tiegs
By: /s/ Stephan M. Thompson
-------------------------
Its President /s/ J. Royce Renfrow
----------------------
Jay Royce Renfrow
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EXHIBIT "SCH. 1"
Quarterly Report on Form 10-QSB for Quarter Ended September 30, 1995
The Company's Quarterly Report on Form 10-QSB for the quarter ended September
30, 1995, is incorporated by reference to the Form 10-QSB filed by the Company
with the Securities and Exchange Commission on November 21, 1995.
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EXHIBIT "B" TO AGREEMENT
PROMISSORY NOTE
$1,000,000.00 Los Angeles, California
March ____, 1996
STEPHAN M. THOMPSON ("Maker"), promises to pay to GALLERY RODEO
INTERNATIONAL, a California corporation, the principal sum of ONE MILLION AND
00/100 DOLLARS ($1,000,000.00), together with interest thereon at the rate of
Eight percent (8%) per annum (computed on the basis of a 360-day year) from the
date of this Note. Interest only shall be paid quarterly, in arrears, in the
amount of __________________________________ Dollars each quarter commencing the
31st day of March, 1996, and continuing in the on the same day of each quarter
thereafter until the full amount of principal and all accrued interest is paid
in full.
Principal and interest shall be paid in lawful money of the United
States.
The final payment of all principal and accrued interest is a balloon
payment due and payable five (5) years from the date of the Note. This final
payment is to be One Million Dollars ($1,000,000.00) together with all accrued
interest.
Maker reserves the right at any time to pay all or any part of the
principal due on this Note with interest to the time of payment, and with no
penalty. Additionally, Maker at his option may pay all or any part of the Note
by transfer to Payee shares of common stock in Payee, or other securities
acceptable to Payee. In such event, the value of such stock to be set off
against this Note shall be an average market value during a consecutive ten (10)
day period in the month next preceding the month in which payment by setoff is
made as determined by NASDAQ Bulletin Board trading records pertaining to said
stock. Said ten (10) day period shall be designated by Maker.
If legal action is necessary to enforce or collect this Note, the
prevailing party shall be entitled to reasonable attorneys' fees and costs in
addition to any other relief to which that party may be entitled. This provision
shall be applicable to the entire Note.
Maker waives trial by jury in any litigation arising out of or relating
to this Note in which Payee or a holder of this Note is an adverse party and
further waives the right to interpose any defense, set-off, or counterclaim of
any nature or description, which rights are expressly waived except as provided
by applicable law.
This Note shall be governed by and construed in accordance with the
laws of the State of California, including the Uniform Commercial Code in force
in the State of California. Maker hereby agrees that the federal and state
courts within the State of California shall have exclusive jurisdiction to
adjudicate any dispute arising out of this Note. Maker hereby expressly consents
to (i) the personal jurisdiction of the federal and state courts within
California, (ii) service of process being effected upon it by registered mail
sent to the address set forth below, and (iii) the uncontested enforcement of a
final judgment from such court in any other jurisdiction wherein Maker or any of
its assets are present.
STEPHAN M. THOMPSON
-----------------------------------------
EXHIBIT "C" TO AGREEMENT
DATED the ______ day of March, 1996, by and between STEPHAN M.
THOMPSON, GALLERY RODEO INTERNATIONAL, and KENNETH CAHILL, TIMOTHY MORRISSEY,
RAY BOUCHARD, DAREL TIEGS and J. ROYCE RENFROW (the "AGREEMENT").
HOLD HARMLESS AGREEMENT
AGREEMENT made this ______ day of March, 1996, between GALLERY RODEO
INTERNATIONAL, a California corporation (the "Company"), and STEPHAN M.
THOMPSON, ("Thompson").
WHEREAS: the Company and Thompson entered into a written employment
contract on the ______ day of _____________________, 19____, a copy of which is
incorporated herein as Exhibit B-1, and
WHEREAS: the Company, Thompson and others, have entered into an
Agreement dated the ______ day of ________________, 19____, to which this
Agreement is Exhibit "B-1", and
WHEREAS: the Company and Thompson now desire to terminate said
employment contract and all related contracts and agreements pertaining thereto.
NOW THEREFORE:
In consideration of the mutual promises set forth herein, the parties
hereby agree as follows:
1. TERMINATION OF EMPLOYMENT AND EMPLOYMENT CONTRACT.
The Company and Thompson hereby mutually agree that the employment of
Thompson by Company is hereby terminated effective upon the date of closing of
the Agreement, and that the employment contract (Exhibit "B-1") dated the _____
day of ___________, 19____, is hereby mutually terminated on that date. This
termination shall be considered to be an irrevocable resignation by Thompson,
which has been accepted by Company.
2. FINAL COMPENSATION TO THOMPSON.
Thompson hereby acknowledges that he has received, pursuant to the
Agreement, all compensation and reimbursements due him from Company. The
following compensation and reimbursements shall be paid to Thompson on or before
the expiration of ten (10) days following the date of closing of the Agreement:
A. Three Hundred Fifty Thousand Dollars ($350,000) as provided for
therein.
B. _____________ ( ) Shares of common stock in Company.
C. Set-off or _____________ ($) Dollars, which was the principal amount
loaned to Thompson by employee, but not yet repaid, set forth as follows:
D. All pay for current payroll period, reimbursement of business
expenses, and any additional compensation due Thompson prior to the _______ day
of _________________, 1996.
E. Thompson hereby acknowledges and represents that he has returned to
Company all credit cards furnished for his use by Company. Thompson agrees not
to use said credit cards from and after the date of Closing, and further
represents and warrants that he has given to Company, all charge slips for which
billing statements have not yet been received by Company.
3. RESTRICTIVE COVENANTS SURVIVE TERMINATION.
Company and Thompson agree that the restrictive covenants contained in
paragraph ______ of the employment contract (Exhibit "B-1") shall survive this
termination. Thompson hereby covenants and agrees that those restrictive
covenants are amended and restated to read as follows:
Thompson will not, at any time after this date, directly or indirectly,
make known or divulge, to any person, firm, or corporation, the names or
addresses of existing, or potential, customers, suppliers, agents, sub-agents,
or third-party administrators, of Company.
Thompson will not, during the period of two (2) years after the date of
Closing, directly or indirectly, either for himself, for any other person, firm,
or corporation, call upon, solicit, divert, or take-away, or attempt to solicit,
divert, or take-away, any of the customers, suppliers, or potential customers of
the Company, as it would pertain to gaming or gaming related businesses, nor
compete with Company for said period, with respect to Company's gaming or gaming
related businesses.
Thompson will not at any time, in any fashion, form, or manner, either
directly, or indirectly, use, disclose, or communicate, to any person, or firm,
in any manner whatsoever, any information of any kind, nature, or description,
concerning any matters affecting, or relating to the business of the Company,
included, but not limited to the names and addresses of any of its customers,
suppliers, or potential customers, mailing lists, financial records, contracts,
or any other information concerning the business of the Company, its manner of
operation, its plans, or any
2
other data of any kind, nature, or description without regard to whether any, or
all, of the foregoing matters would be deemed confidential, proprietary,
material or important.
All books, records, files, forms, reports, memorandums, papers,
accounts, and documents relating, in any manner, to Company's business, or
customers, or suppliers, whether prepared, or paid for by Thompson, or any one
else, shall be the exclusive property of Company, and shall be turned
immediately to Company at the time of Closing. Thompson hereby acknowledges that
he has returned all such documents that Thompson knows of at this time, and
hereby agrees to return any that he should discover after date of Closing. In
the event Group fails to complete the Agreement of which this Exhibit is a part,
the parties agree to take steps necessary to reinstate the employment contract
of Thompson, referred to herein, at a position in the Company to be designated
at Thompson's option.
The parties hereby agree that each of the foregoing matters are
important material, and confidential to Company, and gravely affect the
effective and successful conduct of the business of the Company, and affect its
reputation and goodwill. That any violation of the terms of this paragraph is a
material violation, for which Company shall be entitled to injunctive relief and
damages. Thompson shall pay Company all costs and attorney fees incurred by
Company in any legal action or proceeding.
4. OTHER AGREEMENTS.
The following other agreements, a copy of which are attached hereto as
Exhibits B-___, B-___, and B-___, between Company and Thompson, are hereby
terminated.
5. COMPANY HOLD HARMLESS AGREEMENT AND RELEASE.
Company, on its own behalf, and on behalf of its successors, assigns,
agents, partners, members, managers, officers, directors, and shareholders, to
the extent permitted by law, hereby releases and forever discharges, Thompson,
and his spouse, heirs, successors, assigns, personal representatives, executors,
agents and companies, from and against any and all actions, causes of actions,
claims, suits, demands, debts, damages, obligations, and liabilities of any
kind, or character whatsoever, whether known or unknown, whether matured or
premature, whether at law or at equity, whether liquidated or unliquidated,
whether suspected or unsuspected, that are set forth in, arise out of, or relate
to the employment contract between Company and Thompson.
6. THOMPSON HOLD HARMLESS AGREEMENT AND RELEASE.
Thompson, on his own behalf, and on behalf of his spouse, heirs,
successors,
3
assigns, personal representatives, executors, agents and company, hereby
releases and forever discharges Company, its successors, assigns, agents,
partners, companies, officers, directors, and shareholders, from and against,
any and all actions, causes of actions, claims, suits, demands, debts, damages,
obligations, and liabilities of any kind, or character, whatsoever, whether
known or unknown, whether matured, or premature, whether at law, or at equity,
whether liquidated or unliquidated, whether suspected, or unsuspected, or set
forth in, arise out of, or relate to, the employment contract between Thompson
and Company.
7. INSURANCE.
As of this date, and hereafter, Company is not responsible for
providing medical or life insurance coverage for Thompson or his family.
Thompson acknowledges and agrees that it is solely Thompson's responsibility to
inquire into and obtain medical and life insurance coverage, included but not
limited to, conversion of any group insurance to an individual policy. Thompson
is also solely responsible for processing any and all claims on such policies.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and years first above written.
- ---------------------------- GROUP:
Stephan M. Thompson
-------------------------------
Kenneth Cahill
COMPANY:
-------------------------------
Timothy Morrissey
GALLERY RODEO INTERNATIONAL
-------------------------------
By: --------------------------- Ray Bouchard
President
-------------------------------
Darel Tiegs
-------------------------------
Jay Royce Renfrow
4
EXHIBIT "D" TO AGREEMENT
VOTING TRUST AGREEMENT
with Lockup Provisions
This Voting Trust Agreement is made and entered into as of the ___ day
of March, 1996, by and between Stephan M. Thompson ("Thompson"); Clipper
Industries, Inc. ("Clipper"), Gallery Rodeo International, a California
corporation ("Company"); KENNETH CAHILL, TIMOTHY MORRISSEY, RAY BOUCHARD, DAREL
TIEGS AND J. ROYCE RENFROW ("Group") and ______ ("Trustee") with reference to
the following facts:
RECITALS
1. Pursuant to an Agreement of even date, of which this Voting Trust
Agreement is Exhibit "D" ("Agreement") Thompson, at closing will be
relinquishing management control and responsibility of Company.
2. Group is composed of major shareholders and creditors of Company
which will be assuming management of Company upon shareholder approval.
3. Thompson or entities under his control will own 4,000,000 shares of
the common stock of Clipper, Thompson's, Gallery Rodeo International, a
California corporation ("Company") upon closing.
4. Group desires to protect its management and ownership position in
Company by controlling the votes of Thompson's, and Clipper's shares, and
Thompson and Clipper desire to protect their ownership position in Company
following Group's assumption of management of Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, agreements,
representations and warranties contained herein, the parties hereby as follows:
1. Grant. Thompson hereby creates the Trust described in this Voting
Trust Agreement and appoints ___________ as Trustee thereof. Upon execution of
this Agreement, Thompson is depositing with Trustee 4,000,000 shares of common
stock in Company (the "Shares") for the purpose of conveying to Trustee certain
voting rights.
2. Voting Instruction. Trustee is directed by Thompson and Clipper to
vote the Shares in accordance with the instructions of Group as such vote may be
cast in respect to the election of Directors of the Company for a nine month
period following the closing of the Agreement among the parties. Clipper,
Thompson and Group direct Trustee to vote in favor of a slate of Directors to be
proposed by Group at a special meeting of shareholders of Company to be held
prior to or contemporaneous with the closing of the
Agreement which slate shall include Stephan M. Thompson, or nominee, as a
candidate for the Board of Directors of Company for a term of at least one year
from and after said meeting.
3. Dividends. All dividends or other rights accruing in respect of the
Shares shall be payable forthwith by Trustee to Thompson or Clipper.
4. Termination of Trust. This Voting Trust shall terminate on whichever
of the following conditions occurs first:
a. Two years and one day from the date of execution of this
Agreement; or
b. Agreement of the parties.
5. Rights and Duties of Trustee.
a. Trustee shall not sell, pledge, hypothecate or otherwise
dispose of any of the Shares. In the event that Trustee receives
additional shares of stock of the Company in connection with a stock
dividend, stock split or otherwise, the Trustee shall hold such
additional shares in the same manner as the Shares.
b. Trustee shall exercise its best judgment in connection with
the duties and responsibilities hereunder, but in no event shall
Trustee be liable for any loss or damage occasioned other than by its
own willful misconduct or gross negligence.
c. Trustee may employ and pay such agents, attorneys and
counsel as it deems necessary and proper in carrying out the terms of
this Agreement. Group hereby agrees to pay for any reasonable expenses
and charges incurred therefor.
6. Successor Trustee. The Trustee may be removed from his office at any
time by the mutual agreement of Thompson and Group. In the event of the death or
resignation of Trustee, a successor Trustee shall be appointed by mutual consent
of Group and Thompson. If Thompson and Group cannot agree within ten days of the
written request of Thompson for the appointment of a new Trustee, then Thompson
shall have the power to appoint as Trustee any national bank having assets
greater than $50 million located in the County of Los Angeles, State of
California.
7. Lock-Up Agreement. Thompson and Clipper, pursuant to the Agreement
entered into between the parties hereto, hereby agrees that prior to the
expiration of one hundred eighty days from the date hereof neither Thompson, nor
any entity controlled by him will sell, contract to sell or make any other
disposition of, or grant any purchase option for the sale of, any shares of
Common Stock, directly or indirectly, whether or not he disclaims beneficial
ownership of such shares of Common Stock, except for bona fide gifts to persons
who deliver a certificate substantially identical to this
certificate to the Group, without first obtaining the prior written consent of
the Group. Provided, however, Thompson and/or Clipper may sell up to 10%
(400,000 shares) of said stock during year one and not more than an additional
10% of the shares remaining subsequent to the Voting Trust (360,000 shares) in
year two.
8. Inspection of Agreement. Upon the execution of this Agreement and
the establishment of the Trust, the Trustee shall cause a duplicate of this
Agreement and any extension thereof to be filed with the Secretary of the
Company, which duplicate shall be open to inspection by any shareholder of the
Company on the same terms as the record of shareholders of the Company is open
to inspection and in any other manner provided for inspection under the laws of
the State of California.
9. Miscellaneous.
a. Any notice to be given to the Trustee shall be sufficiently
given if mailed, postage prepaid, at the following address, or such
other address as the Trustee may designate from time to time by written
notice:
------------
------------
------------
b. This agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to
contracts made and to be performed in Colorado.
IN WITNESS WHEREOF, the parties have executed this Voting Trust
Agreement with Lockup Provisions as of the day and year first above written.
"Thompson" "Group"
Stephan M. Thompson Kenneth Cahill, Timothy Morrissey,
Ray Bouchard, Darel Tiegs and
- ----------------------- J. Royce Renfrow
--------------------------
--------------------------
"Company" --------------------------
Gallery Rodeo International --------------------------
- ----------------------- --------------------------
By:
Its President
"Clipper"
Clipper Industries, Inc.
By:
-----------------------------
Its President
EXHIBIT "E" TO AGREEMENT
DATED this ______ day of March, 1996, by and between STEPHAN M.
THOMPSON, CLIPPER INDUSTRIES, INC., GALLERY RODEO INTERNATIONAL, KENNETH CAHILL,
TIMOTHY MORRISSEY, RAY BOUCHARD, DAREL TIEGS and J.
ROYCE RENFROW (the "Agreement").
LETTER OF INTENT
GALLERY INTERNATIONAL INCORPORATED
421 North Rodeo Drive
Beverly Hills, CA 90210
Re: Letter of Intent for Management and Consulting Regarding Hotel and Gaming
Properties
Gentlemen:
The following will summarize the principal terms of a management and/or
consulting agreement ("Agreement"), to be entered into between Kenneth Cahill
and/or Arcadia International Incorporated ("Arcadia"), and Gallery Rodeo
International ("GRI") as follows:
1. Following the consummation and closing of the Agreement of which
this Letter of Intent is Exhibit "F", Arcadia and GRI shall enter into Contract
under which Arcadia shall manage anticipated hotel, entertainment and gaming
operations owned by GRI which the parties shall mutually determine.
2. The specific terms of said Contract shall be determined by the
parties and shall be executed within a period of thirty (30) days following the
date of closing of the Agreement to which this letter of intent is Exhibit "F."
Terms of the proposed Contract will be further negotiated and memorialized in
said agreement which will contain the usual warranties, representations, and
specific obligations of the parties including, but not limited to the following:
A. Terms.
B. Licensing.
C. Management/Consulting Fees.
D. An agreement with respect to all related expenses, including
operating
costs and property maintenance.
E. An agreement with respect to construction, if appropriate, and
expenses of furnishing and equipment any anticipated hotel and gaming project
and the financing thereof.
F. A provision for review by independent public accountants of the
books and accounts of Arcadia under standard terms in the event of the operation
of any hotel and gaming properties by Arcadia.
G. Provisions for the indemnification of GRI for liabilities arising
from the operation of any hotel/gaming property during the term of said
management/consulting agreement.
H. A provision specifying terms granting to Arcadia an exclusive right
to acquire hotel and/or gaming properties covered by the Contract, specifying
the term thereof and the purchase price and terms during the option period.
This Letter of Intent is accepted by the parties merely as a statement
of mutual intention at this time to conduct further negotiations along the lines
indicated above. It is understood that the proposed Contract is subject to the
closing of the Agreement to which this Letter of Intent is a part, and review
and approval thereof by the respective counsel and boards of directors of the
parties. It is understood that neither Arcadia nor Gallery shall be bound to the
other by this Letter of Intent for damages, expenses, failure to finally agree
upon a formal and final management and/or consulting agreement, or any other
way.
If the foregoing correctly as set forth are general intentions, kindly
so indicate by signing and returning the enclosed copy of this Letter of Intent.
Very truly yours,
Kenneth Cahill and
ARCADIA INTERNATIONAL INCORPORATED
By:
--------------------------------
Its President
AGREED AND ACCEPTED AS OF 04/01/96
GALLERY RODEO INTERNATIONAL, INC.
By:
--------------------------------
Its President
EXHIBIT "F" TO AGREEMENT
SHARE OPTION AGREEMENT
THIS AGREEMENT dated ______ day of ____________, 199__, by and between
STEPHAN M. THOMPSON ("THOMPSON"), CLIPPER INDUSTRIES, INC. ("CLIPPER"), GALLERY
RODEO INTERNATIONAL (THE "COMPANY") and KENNETH CAHILL, TIMOTHY MORRISSEY, RAY
BOUCHARD, DAREL TIEGS, and J. ROYCE RENFROW, and RICHARD CARTHEW ("CARTHEW"),
witnesseth:
WHEREAS: the above parties, with the exception of Richard Carthew,
("Carthew"), have entered into an Agreement (the "Agreement"), dated the ____
day of March, 1996, of which this Agreement is Exhibit "F", and
WHEREAS: Carthew is a record owner of shares of Company, and
WHEREAS: the parties desire to cause Company to grant an option to
Thompson, Clipper, and Carthew, to purchase additional shares in Company in the
event of certain transactions.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. CONDITIONS. Upon closing of the Agreement and the shift of
management of control of Company to Group, as provided for therein, Company and
Group agree to grant Thompson, Clipper, and Carthew, an option to purchase
certain of its shares of common stock for the price and under the terms and
conditions set forth hereinbelow in the event Company, during a two (2) year
period from and after closing of the Agreement, exchanges shares of common stock
in Company as whole or partial consideration for the purchase of assets by
Company.
3. PRICE. The base price to be paid by Thompson, Clipper, and Carthew,
in the event the option becomes outstanding and exercisable, and is exercised,
will be the price assigned in any exchange contract (the "Transaction") to
shares of common stock in Company, which are exchanged for assets purchased by
Company, with a third party vendor known as the "strike" price.
4. OTHER TERMS. The number of shares subject to this option shall be
such number necessary and sufficient to enable Thompson, Clipper, and Carthew,
should they so desire to retain the same percentage of ownership of common stock
in Company as they own following the closing of the Agreement of which this
Share Option Agreement is Exhibit "E", so as to prevent the dilution of their
ownership interest in Company which might otherwise result from the Transaction
referred to above.
5. METHOD OF EXERCISE OF OPTION. Upon closing said Transaction, for the
exchange of its common stock for assets, Company shall notify Thompson, Clipper,
and Carthew in writing at the address specified hereinbelow, that a specific
option is exercisable in the amount and terms thereof, at which time Thompson,
Clipper, and Carthew shall exercise said option, if desired, by giving Company
written notice of their individual election to do so. Simultaneously therewith,
any party exercising the option shall deposit in escrow with an agent mutually
agreed upon with Company the option exercise price, pending the actual closing
of the stock purchase pursuant to the option. Said notice of exercise of option
shall be delivered to Company at the address set forth hereinbelow within
fifteen (15) days of notice to Thompson, Clipper, and Carthew, of the
Transaction giving rise to the option as specified herein.
6. TERM OF OPTION. The obligation hereunder to grant any option shall
expire two (2) years from and after the date of closing of the Agreement to
which this Share Option Agreement is a part.
7. CLOSING. Closing of the option shall be as soon as possible
following the exercise of the option, and in any event, shall be within thirty
(30) days of said date of notice of exercise by Thompson, Clipper, or Carthew.
8. ASSIGNMENT. This Agreement shall run only to Thompson, Clipper, and
Carthew, and shall not be assignable by Thompson, Clipper, and/or Carthew, to
any third party without prior written consent of Company.
9. NOTICES. Notices under this Agreement shall be as follows:
Stephan M. Thompson, 6399 Wilshire Boulevard, Suite 504, Los Angeles, CA 90048,
with a copy to Karen Krasney, Esq., 135 S. Thornton, Los Angeles, CA 90049;
Gallery Rodeo International, 421 North Rodeo Drive, Beverly Hills, CA 90210,
with a copy to Karen Krasney, Esq., 135 S. Thornton, Los Angeles, CA 90049;
J. Royce Renfrow, P.C., 320 E. Costilla, Colorado Springs, CO 80903; Kenneth
Cahill, Arcadia International, Inc., 2333 Blairs Ferry Road, N.E., Cedar Rapids,
IA 52402; Ray Bouchard, 4014 Gunn Highway, Suite 275, Tampa, FL 33624; Darel
Tiegs, 4326 N. Nevada Ave., Colorado Springs, CO 80907; Timothy Morrissey,
310 Fourth Avenue South, Mount Vernon, IA 52314.
Changes of address may be sent to other parties to the address specified
hereinabove.
10. APPLICABLE LAW; ATTORNEYS FEES. This Agreement is governed by and
construed under the laws of the state of California. Any action brought by
either party against the other party to enforce or interpret this Agreement
shall be brought in an appropriate court of such state. In the event of any such
action, the prevailing party shall recover all costs and expenses thereof,
including reasonable attorney fees from the losing party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the duly authorized officers, or as individuals, as of the date
first above written.
- ---------------------------------- GROUP:
STEPHAN M. THOMPSON
---------------------------------
KENNETH CAHILL
COMPANY:
---------------------------------
TIMOTHY MORRISSEY
GALLERY RODEO INTERNATIONAL
---------------------------------
By: RAY BOUCHARD
---------------------------------
President
---------------------------------
DAREL TIEGS
---------------------------------
JAY ROYCE RENFROW