STOCK PURCHASE AGREEMENT
BY AND AMONG
GAMETECH INTERNATIONAL, INC.,
BINGO TECHNOLOGIES CORPORATION
AND
THE STOCKHOLDERS AND INDEMNITORS NAMED HEREIN
DATED AS OF FEBRUARY 8, 1999
TABLE OF CONTENTS
PAGE
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RECITALS 1
ARTICLE I THE ACQUISITION.............................................................................................2
1.1 The Acquisition.....................................................................................2
1.2 Closing; Closing Date...............................................................................2
1.3 Consideration.......................................................................................2
1.4 Net Worth True-Up...................................................................................2
1.5 Certain Definitions.................................................................................4
1.6 Tax Consequences....................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE STOCKHOLDERS AND INDEMNITORS...........................5
2.1 Organization of the Company.........................................................................5
2.2 Subsidiaries........................................................................................6
2.3 Company Capital Structure...........................................................................6
2.4 Authority...........................................................................................6
2.5 No Conflict.........................................................................................7
2.6 Consents............................................................................................7
2.7 Company Financial Statements........................................................................8
2.8 No Undisclosed Liabilities..........................................................................8
2.9 No Changes..........................................................................................8
2.10 Tax Matters........................................................................................10
2.11 Restrictions on Business Activities................................................................12
2.12 Title to Properties; Absence of Liens and Encumbrances; Condition of Equipment.....................12
2.13 Intellectual Property..............................................................................13
2.14 Agreements, Contracts and Commitments..............................................................17
2.15 Interested Party Transactions......................................................................19
2.16 Governmental Authorization.........................................................................19
2.17 Litigation.........................................................................................19
2.18 Accounts Receivable; Inventory.....................................................................19
2.19 Minute Books.......................................................................................20
2.20 Environmental Matters..............................................................................20
2.21 Brokers' and Finders' Fees; Third Party Expenses.....................................................21
2.22 Employee Benefit Plans and Compensation............................................................21
2.23 Insurance..........................................................................................24
2.24 Compliance with Laws...............................................................................25
2.25 Warranties; Indemnities............................................................................25
2.26 Adequacy and Functionality of Company Products.....................................................25
2.27 Complete Copies of Materials.......................................................................25
2.28 Investment Representations.........................................................................25
2.29 Representations Complete...........................................................................26
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TABLE OF CONTENTS
(CONTINUED)
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT.................................................................27
3.1 Organization, Standing and Power...................................................................27
3.2 Authority..........................................................................................27
3.3 No Conflict........................................................................................27
3.4 Consents...........................................................................................28
3.5 Capital Structure..................................................................................28
3.6 SEC Filings........................................................................................28
3.7 Litigation.........................................................................................29
3.8 Compliance with Law and Charter Documents..........................................................29
3.9 Year 2000 Compliant................................................................................29
3.10 Full Disclosure....................................................................................29
ARTICLE IV CONDUCT PRIOR TO THE CLOSING..............................................................................30
4.1 Conduct of Business of the Company.................................................................30
4.2 Conduct of Business of Parent......................................................................32
4.3 No Solicitation....................................................................................32
ARTICLE V ADDITIONAL AGREEMENTS......................................................................................33
5.1 Parent Registration................................................................................33
5.2 Registration on Form S-3...........................................................................34
5.3 Expenses of Registration...........................................................................35
5.4 Registration Procedures............................................................................35
5.5 Indemnification....................................................................................36
5.6 Siblings' Indemnification of Parent................................................................36
5.7 Access to Information..............................................................................37
5.8 Confidentiality....................................................................................37
5.9 Expenses...........................................................................................37
5.10 Public Disclosure..................................................................................38
5.11 Consents...........................................................................................38
5.12 FIRPTA Compliance..................................................................................38
5.13 Reasonable Efforts.................................................................................38
5.14 Notification of Certain Matters....................................................................38
5.15 Additional Documents and Further Assurances........................................................39
5.16 Certain Post-Closing Matters.......................................................................39
5.17 Non-Competition Agreements.........................................................................39
5.18 Employment Agreements..............................................................................39
5.19 NASDAQ Listing.....................................................................................39
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5.20 Parent Right of First Refusal......................................................................39
5.21 Limitation on Aggregate Sales......................................................................40
5.22 Litigation between the Parties.....................................................................40
5.23 Company Employees..................................................................................40
ARTICLE VI CONDITIONS TO THE ACQUISITION.............................................................................41
6.1 Conditions to Obligations of Each Party to Effect the Acquisition..................................41
6.2 Conditions to Obligations of Company and the Stockholders..........................................41
6.3 Conditions to the Obligations of Parent............................................................42
ARTICLE VII SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION...................................43
7.1 Survival of Representations, Warranties and Covenants..............................................43
7.2 Indemnification....................................................................................44
7.3 Method of Asserting Claims.........................................................................45
7.4 Indemnification Liability Limitations..............................................................45
7.5 Securityholder Agent of the Stockholders; Power of Attorney........................................46
7.6 Third-Party Claims.................................................................................46
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.......................................................................47
8.1 Termination........................................................................................47
8.2 Effect of Termination..............................................................................48
8.3 Amendment..........................................................................................48
8.4 Extension; Waiver..................................................................................48
ARTICLE IX GENERAL PROVISIONS........................................................................................48
9.1 Notices............................................................................................48
9.2 Interpretation.....................................................................................50
9.3 Counterparts.......................................................................................50
9.4 Entire Agreement; Assignment.......................................................................50
9.5 Severability.......................................................................................51
9.6 Other Remedies.....................................................................................51
9.7 Governing Law......................................................................................51
9.8 Rules of Construction..............................................................................51
9.9 Attorneys Fees.....................................................................................51
9.10 Third Party Beneficiaries..........................................................................51
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of February 8, 1999 among GameTech International, Inc., a Delaware
corporation ("Parent"), Bingo Technologies Corporation, a Nevada corporation
(the "Company"), Xxxx X. Xxxxxx ("JL"), Siblings Partners, L.P., a Delaware
limited partnership ("Siblings"); (JL and Siblings collectively, the
"STOCKHOLDERS"), Xxxxxx X. Xxxxxxx ("GN") and Xxxxx X. Xxxxxxx ("KN").
RECITALS
A. The Board of Directors of Parent believes it is in the best interests
of Parent and its stockholders that Parent acquire the Company through the
purchase of all capital stock of the Company (the "Acquisition") and, in
furtherance thereof, have approved the Acquisition.
B. Pursuant to the Acquisition, among other things, all of the issued
and outstanding securities of the Company shall be purchased in exchange for
Parent Common Stock (as defined herein) and the promissory notes and cash
consideration as described in Section 1.3.
C. The Company and the Stockholders, on the one hand, and Parent, on the
other hand, desire to make certain representations, warranties, covenants and
other agreements in connection with the Acquisition. GN, KN and JL (the
"Indemnitors") desire to provide certain indemnities to Parent in connection
with the Acquisition.
D. Concurrent with the execution of this Agreement, as a material
inducement to Parent to enter into this Agreement, (i) GN, KN and JL are
entering into agreements not to compete with Parent (the "Noncompetition
Agreements") in the form of Exhibit B hereto, (ii) the Stockholders, the
Indemnitors, Parent and the Escrow Agent, as defined in Section 1.3(c) are
entering into an Escrow Agreement (the "Escrow Agreement") in the form of
Exhibit C hereto and (iii) GN, KN and JL and Parent are entering into
employment agreements in the forms of Xxxxxxxx X-0, X-0, and D-3 hereto (the
"Employment Agreements").
E. GN and KN are beneficial owners of Siblings.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
THE ACQUISITION
1.1 THE ACQUISITION. At the Closing (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the
Stockholders shall sell to Parent, and Parent shall purchase from
Stockholders 10,000 shares of the Company's Common Stock, constituting all of
the outstanding capital stock of the Company in consideration of the payments
described below. As a result of the Acquisition, the Company shall become a
wholly-owned subsidiary of Parent.
1.2 CLOSING; CLOSING DATE. Unless this Agreement is earlier terminated
pursuant to Section 8.1, the closing of the Acquisition (the "Closing") will
take place as promptly as practicable, but no later than five (5) business
days following satisfaction or waiver of the conditions set forth in Article
VI, at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx, unless another place
or time is agreed to in writing by Parent and the Company. The date upon
which the Closing actually occurs is herein referred to as the "Closing Date."
1.3 CONSIDERATION.
(a) SIBLINGS. In consideration of the purchase of 6,863 shares of
Company Common Stock from Siblings, at the Closing Parent shall deliver to
Siblings 1,866,938 shares of Parent Common Stock (the "Siblings Shares"), and
$5,912,529 (the "Siblings Closing Cash"). In further consideration of such
purchase, Parent shall deliver to Siblings a promissory note in the amount of
$943,065 (the "Siblings Deferred Cash") substantially in the form attached
hereto as Exhibit G-1.
(b) JL. In consideration of the purchase of 3,137 shares of Company
Common Stock from JL, at the Closing Parent shall deliver to JL $2,905,465
(the "JL Closing Cash"). In further consideration of such purchase, Parent
shall deliver to JL a promissory note in the amount of $3,681,268 (the "JL
Deferred Cash") substantially in the form attached hereto as Exhibit G-2.
Parent shall have certain offset rights with respect to a portion of the JL
Deferred Cash pursuant to Article VII hereof and the Escrow Agreement.
(c) ESCROW FUND. At the Closing, on behalf of the Stockholders and
the Indemnitors, pursuant to Article VII hereof, Parent shall deposit into an
escrow fund (the "Escrow Fund") 373,387 of the Siblings Shares (the "Siblings
Escrow Shares") issued in the name of an escrow agent (the "Escrow Agent"),
$1,371,118 of the Siblings Closing Cash (the "Siblings Escrow Cash"), and
$581,093 of the JL Closing Cash (the "JL Escrow Cash"; the Siblings Escrow
Shares, the Siblings Escrow Cash and JL Escrow Cash, collectively, the
"Escrow Fund").
1.4 NET WORTH TRUE-UP.
(a) Within forty-five (45) days following the Closing Date, the
Company's independent auditors ("Company's Accountants") shall furnish Parent
and the Stockholders with a
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report (the "Company Net Worth Report"), which shall set forth, in reasonable
detail, the Tangible Net Worth (as defined below) of the Company as of the
Closing Date. In making such determination, Company shall prepare a balance
sheet for the Company as of the Closing Date audited by Company's Accountants
and shall include such audited balance sheet, and their report thereon, as
part of the Company Net Worth Report. The Company Net Worth Report shall
indicate the procedures employed by Company's Accountants in preparing the
Company Net Worth Report and shall contain such other financial information
and methods of calculation as may be reasonably necessary for Parent to
evaluate the accuracy thereof. Parent shall have a period of ten (10) days
after receipt of the Company Net Worth Report to notify the Stockholders of
their election to accept or reject (and in the case of a rejection, there
shall be included in such notice the reasons for such rejection in reasonable
detail) the Company Net Worth Report. In the event no notice is received by
the Stockholders during such ten (10) day period, the Company Net Worth
Report and any required adjustments resulting therefrom shall be deemed
accepted by Parent. In the event Parent shall timely reject the Company Net
Worth Report, Parent's independent auditors ("Parent's Accountants") and
Company's accountants shall promptly (and in any event within thirty (30)
days following the date upon which Parent shall reject the Company Net Worth
Report) attempt to make a joint determination of the Tangible Net Worth of
the Company as of the Closing Date and such determination and any required
adjustments resulting therefrom shall be final and binding on the parties
hereto. In the event the Company's Accountants and Parent's Accountants are
unable to agree upon the required Tangible Net Worth determination as herein
provided, within 90 days from the Closing Date, such determination shall be
made by the Phoenix office of Ernst & Young at or prior to the expiration of
120 days from the Closing Date and such determination and any required
adjustments resulting therefrom shall be final and binding on all the parties
hereto. As used in this Section 1.4(a), "Tangible Net Worth" shall mean total
assets less total liabilities of the Company, determined in accordance with
GAAP.
(b) Within forty-five (45) days following the Closing Date,
Parent's independent auditors ("Parent's Accountants") shall
furnish Parent and the Stockholders with a report (the "Parent Net
Worth Report"), which shall set forth, in reasonable detail, the
Tangible Net Worth (as defined below) of the Parent as of the
Closing Date. In making such determination, Parent shall prepare a
balance sheet as of the Closing Date audited by Parent's
Accountants and shall include such audited balance sheet, and their
report thereon, as part of the Parent Net Worth Report. The Parent
Net Worth Report shall indicate the procedures employed by Parent's
Accountants in preparing the Parent Net Worth Report and shall
contain such other financial information and methods of calculation
as may be reasonably necessary for the Stockholders to evaluate the
accuracy thereof. The Stockholders shall have a period of ten (10)
days after receipt of the Parent Net Worth Report to notify Parent
of their election to accept or reject (and in the case of a
rejection, there shall be included in such notice the reasons for
such rejection in reasonable detail) the Parent Net Worth Report.
In the event no notice is received by Parent during such ten (10)
day period, the Parent Net Worth Report and any required
adjustments resulting therefrom shall be deemed accepted by the
Stockholders. In the event the Stockholders shall timely reject the
Parent Net Worth Report, the Company's independent auditors
("Company's Accountants") and Parent's accountants shall promptly
(and in any event within thirty (30) days following the date upon
which the Stockholders shall reject the Parent Net Worth Report)
attempt to make a joint determination of the Tangible Net
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Worth of the Parent as of the Closing Date and such determination and any
required adjustments resulting therefrom shall be final and binding on the
parties hereto. In the event Parent's Accountants and the Stockholder's
Accountants shall be unable to agree upon the required Tangible Net Worth
determination as herein provided, within 90 days from the Closing Date, such
determination shall be made by the Phoenix office of Ernst & Young at or
prior to the expiration of 120 days from the Closing Date and such
determination and any required adjustments resulting therefrom shall be final
and binding on all the parties hereto. As used in this Section 1.4(b),
"Tangible Net Worth" shall mean total assets less total liabilities of Parent
determined in accordance with GAAP.
(c) If the Company Net Worth Report shall reflect a Tangible Net
Worth of the Company as of the Closing Date that is less than $2,085,914 then
such deficit shall constitute Damages (as defined in Section 7.2 below) to
Parent hereunder and shall be immediately payable to Parent from the Escrow
Fund, provided, however that if the Parent Net Worth Report shall reflect a
Tangible Net Worth of Parent as of the Closing Date that is less than
$40,322,115 then the amount of such Damages shall be reduced by one dollar
for each dollar that the Tangible Net Worth of Parent is less than
$40,322,115, but such adjustment shall not reduce the amount of such Damages
to less than zero. For example, if the deficit in the Tangible Net Worth of
the Company is $200,000: (a) and if the there is no deficit in the Tangible
Net Worth of Parent, the amount of such Damages would be $200,000; (b) and if
the deficit in the Tangible Net Worth of Parent is $50,000, the amount of
such Damages would be $150,000; (c) and if the deficit in the Tangible Net
Worth of Parent is $200,000 or more, the amount of such Damages would be
zero. Promptly following the foregoing determination, Parent and the
Securityholder Agent, as defined in Section 7.3 below, shall prepare and
deliver to the Escrow Agent joint written instructions setting forth the
results of each such determination, including, specifically, the amount of
Escrow Fund to be delivered to Parent.
1.5 CERTAIN DEFINITIONS. For all purposes of this Agreement the
following terms shall have the following definitions:
"Company Capital Stock" shall mean shares of Company Common Stock
and shares of any other capital stock of the Company.
"Company Common Stock" shall mean shares of common stock of the
Company.
"Escrow Fund" shall have the meaning set forth in Section 1.3(c).
"Siblings Escrow Shares" shall have the meaning set forth in
Section 1.3(c).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Knowledge" with respect to a particular fact or circumstance,
shall mean actual knowledge of such particular fact or circumstance, or
knowledge of other facts or circumstances
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from which a reasonable person should have known of such particular fact or
circumstance, by the officers or directors of the Company, Parent, or by the
Stockholders, as the case may be.
"Litigation" shall mean that certain litigation involving Bingo
Card Minder Corporation and Parent, called Bingo Card Minder Corporation vs.
Gametech International, Inc., C96-997FMS WDB.
"Parent Common Stock" shall mean shares of the common stock, par
value $.001, of Parent.
1.6 TAX CONSEQUENCES. Each party acknowledges that such party has
consulted with such party's tax advisor with respect to the tax consequences
of this Agreement and the transactions contemplated hereby under the Internal
Revenue Code of 1986, as amended (the "Code") and other applicable law, and
that such party is relying solely on such advice.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE STOCKHOLDERS AND INDEMNITORS
Each of the Company, the Stockholders and the Indemnitors hereby,
jointly and severally, represents and warrants to Parent, subject to such
exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate Section and paragraph numbers of this Agreement)
supplied by the Company and the Stockholders to Parent and dated the date
hereof (the "Disclosure Schedule"), that on the date hereof and as of the
Closing as though made at the Closing as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada. Section 2.1 of the Disclosure Schedule sets forth a list of all
jurisdictions in which the Company is currently conducting business and a
list of all jurisdictions in which the Company is qualified to do business.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified could have a Company Material Adverse Effect.
For all purposes of this Agreement, the term "Company Material Adverse
Effect" means any change, event or effect that is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise), capitalization or results of operations or prospects of the
Company except for those changes, events and effects that (i) are directly
caused by conditions affecting the United States economy as a whole or
affecting the industry in which such entity competes as a whole, which
conditions do not affect such entity in a disproportionate manner, or (ii)
are related to or result from the announcement or pendency of the
Acquisition. The Company has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
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Section 2.1 of the Disclosure Schedule lists the directors and officers of
the Company. The operations now being conducted by the Company have not been
conducted under any other name.
2.2 SUBSIDIARIES. The Company does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any corporation, partnership, association, joint
venture or other business entity.
2.3 COMPANY CAPITAL STRUCTURE
(a) As of the date hereof, the authorized Company Capital Stock
consists of 10,000,000 shares of authorized Company Common Stock of which
10,000 shares are issued and outstanding as of the date hereof. All
outstanding Capital Stock of the Company is held by the Stockholders. All
outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound and
have been issued in compliance with federal and state securities laws. There
are no declared or accrued unpaid dividends with respect to any shares of the
Company's Capital Stock. The Company has no other capital stock authorized,
issued or outstanding.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party
or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the Capital Stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or other similar rights
with respect to the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting stock of the Company.
As a result of the Acquisition, Parent will be the sole record and beneficial
owner of all outstanding Company Capital Stock and all rights to acquire or
receive any Company Capital Stock, whether or not such Company Capital Stock
is outstanding.
2.4 AUTHORITY.
(a) The Company has all requisite power and authority to enter into
this Agreement and any Related Agreements (as hereinafter defined) to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related
Agreements to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, and no further action
is required on the part of the Company, Indemnitors or the Stockholders to
authorize the Agreement, any Related Agreements to which the Company is a
party and the transactions contemplated hereby and thereby. This Agreement
and the Acquisition have been unanimously approved by the Board of Directors
of the Company and the stockholders of the Company. This Agreement and any
Related Agreements to which the Company is a party have
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been duly executed and delivered by the Company, and, assuming the due
authorization, execution and delivery by the other parties hereto and
thereto, constitute the valid and binding obligation of the Company,
enforceable in accordance with their respective terms, subject to the laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and to rules of law governing specific performance, injunctive relief
or other equitable remedies. The "Related Agreements" shall mean all such
ancillary agreements required in this Agreement to be executed and delivered
in connection with the transactions contemplated hereby, including the
Noncompetition Agreements, Employment Agreements and the Escrow Agreement.
(b) Each of the Stockholders and the Indemnitors has all requisite
power and authority to enter into this Agreement and any Related Agreements
to which it is a party and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and any Related
Agreements to which each Stockholder or Indemnitor is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of such Stockholder or
Indemnitor, and no further action is required on the part of such Stockholder
or Indemnitor to authorize the Agreement, any Related Agreements to which it
is a party and the transactions contemplated hereby and thereby. This
Agreement and any Related Agreements to which such Stockholder or Indemnitor
is a party have been duly executed and delivered by the such Stockholder or
Indemnitor, and, assuming the due authorization, execution and delivery by
the other parties hereto and thereto, constitute the valid and binding
obligation of such Stockholder or Indemnitor, enforceable in accordance with
their respective terms, subject to the laws of general application relating
to bankruptcy, insolvency and the relief of debtors and to rules of law
governing specific performance, injunctive relief or other equitable remedies.
2.5 NO CONFLICT. The execution, delivery and performance of this
Agreement and each of the Related Agreements to which the Company,
Indemnitors or the Stockholders are a party by either the Company or the
Stockholders or the Indemnitors do not, and, the consummation of the
transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under
(any such event, a "Conflict") (i) any provision of the Articles of
Incorporation and Bylaws of the Company, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license to which the Company or the Stockholders or the Indemnitors or any of
their respective properties or assets (including intangible assets) are
subject or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or the Stockholders or the
Indemnitors or their respective properties or assets or (iv) any provision of
the agreement of limited partnership of Siblings, as amended to date.
2.6 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency
or commission or other federal, state, county, local, tribal or other foreign
governmental authority, instrumentality, agency or commission ("Governmental
Entity") or any third party, including a party to any agreement with the
Company (so as not to trigger any Conflict), is required by or with respect
to the Company or the Stockholders or the Indemnitors in connection with the
execution and delivery of this Agreement and any Related
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Agreements to which the Company or the Stockholders or the Indemnitors is a
party or the consummation of the transactions contemplated hereby and
thereby, except for such consents, waivers, approvals, orders or
authorizations as may be required with respect to the gaming licenses now
held by the Company in light of this Agreement and the transactions
contemplated hereby. There is no fact or circumstance relating to the
Company, Siblings, GN, KN, or JL which would prevent Parent and the Company
from obtaining any such required consent, waiver, approval, order, or
authorization following the Closing.
2.7 COMPANY FINANCIAL STATEMENTS. Section 2.7 of the Disclosure Schedule
sets forth the Company's audited consolidated balance sheet as of December
31, 1997 and the related audited consolidated statements of income and cash
flow for the twelve-month period ended December 31, 1997 (the "Year-End
Financials") and the Company's audited balance sheet as of September 30,
1998, and the related audited statements of income and cash flow for that
period (the "Interim Financials"). The Year-End Financials and the Interim
Financials are correct in all material respects and have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other. The Year-End Financials and the
Interim Financials present fairly the consolidated financial condition and
consolidated operating results of the Company and any consolidated
subsidiaries as of the dates and during the periods indicated therein. The
Company's audited Balance Sheet as of September 30, 1998 shall be hereinafter
referred to as the "Current Balance Sheet." The Company has also provided
internal unaudited financial statements for the months of October, November
and December, 1998 (the "Unaudited Financials"). The Unaudited Financials
have been prepared on a basis consistent with the audited financials and
present fairly the consolidated financial condition and consolidated
operating results of the Company as of the dates and for the periods
indicated therein, subject to normal year end audit adjustments and accruals.
2.8 NO UNDISCLOSED LIABILITIES. The Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement
of any type, whether accrued, absolute, contingent, matured, unmatured or
other (whether or not required to be reflected in financial statements in
accordance with GAAP), which (i) has not been reflected in the Current
Balance Sheet, or (ii) has not arisen in the ordinary course of business
consistent with past practices since September 30, 1998.
2.9 NO CHANGES. Since September 30, 1998, there has not been, occurred
or arisen any:
(a) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(b) capital expenditure or related commitment by the Company,
exceeding $20,000 individually or $50,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
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(d) claim of wrongful discharge or other unlawful labor practice or
action;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company or any direct
or indirect redemption, purchase or other acquisition by the Company of its
capital stock;
(h) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company of a bonus or other additional salary or
compensation to any such person except annualized increases not exceeding 7%
for any individual and 4% in the aggregate per annum;
(i) any agreement, contract, covenant, instrument, lease, license
or commitment to which the Company is a party or by which they or any of its
assets (including intangible assets) are bound or any termination, extension,
amendment or modification the terms of any agreement, contract, covenant,
instrument, lease, license or commitment to which the Company is a party or
by which it or any of its assets are bound except in the ordinary course of
business consistent with reasonable commercial practice;
(j) sale, lease, license or other disposition of any of the assets
or properties of the Company or any creation of any security interest in such
assets or properties other than the sale of inventory in the ordinary course
of business, consistent with past practices;
(k) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for reasonable advances to employees for
travel and business expenses in the ordinary course of business, consistent
with past practice;
(l) waiver or release of any right or claim of the Company
including any write-off or other compromise of any account receivable of the
Company;
(m) the commencement or notice or threat of any lawsuit or, to the
Company's or the Stockholders' Knowledge, proceeding or investigation against
the Company or its affairs;
(n) Knowledge of any claim or potential claim of ownership by any
person other than the Company of the Company Intellectual Property (as
defined in Section 2.13 below) or of infringement by the Company of any other
person's Intellectual Property excluding the Litigation;
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(o) issuance or sale, or contract to issue or sell, by the Company
of any shares of its capital stock or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to
purchase any of the foregoing;
(p) (i) sale or license of any Company Intellectual Property or
entering into of any agreement with respect to the Company Intellectual
Property with any person or entity or with respect to the Intellectual
Property of any person or entity or (ii) purchase or license of any
Intellectual Property or entering into of any agreement with respect to the
Intellectual Property of any person or entity or (iii) change in pricing or
royalties set or charged by the Company to its customers or licensees or in
pricing or royalties set or charged by persons who have licensed Intellectual
Property to the Company, except in the case of this clause (iii) in the
ordinary course of business consistent with reasonable commercial practice;
(q) any event or condition of any character that has had or is
reasonably likely to have a Company Material Adverse Effect;
(r) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with reasonable commercial
practices; or
(s) agreement by the Company or any officer or employee thereof to
do any of the things described in the preceding clauses (a) through (r)
(other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.10 TAX MATTERS.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes", means (i) any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts; (ii) any liability for the
payment of any amounts of the type described in clause (i) as a result of
being a member of an affiliated, consolidated, combined or unitary group for
any period; and (iii) any liability for the payment of any amounts of the
type described in clause (i) or (ii) as a result of any express or implied
obligation to indemnify any other person or as a result of any obligations
under any agreements or arrangements with any other person with respect to
such amounts and including any liability for taxes of a predecessor entity.
-10-
(b) TAX RETURNS AND AUDITS.
(i) As of the Closing, the Company will have prepared and
timely filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and
such Returns are true and correct and have been completed in accordance with
applicable law.
(ii) As of the Closing, the Company (A) will have paid all
Taxes it is required to pay and will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld, and (B) will have accrued all Taxes attributable to
the period between September 30, 1998 and the Closing and will not have
incurred any liability for Taxes for such period other than in the ordinary
course of business, consistent with past practice.
(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, assessed or proposed
against the Company, nor has the Company executed any waiver of any statute
of limitations on or extending the period for the assessment or collection of
any Tax.
(iv) No audit or other examination of any Return of the
Company has occurred in the past five taxable years of the Company or is
presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company has no liabilities for unpaid federal, state,
local, tribal and foreign Taxes which have not been accrued or reserved
against on the Current Balance Sheet, whether asserted or unasserted,
contingent or otherwise.
(vi) The Company has made available to Parent copies of all
foreign, federal and state income and all state sales and use Returns for the
Company filed for the last five taxable years of the Company.
(vii) There are (and immediately following the Closing there
will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or
attributable to Taxes other than Liens for Taxes not yet due and payable.
(viii) Neither the Company nor the Stockholders has Knowledge
of any reasonable basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any
Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-exempt
use property", within the meaning of Section 168(h) of the Code.
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(x) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions
of this Agreement, covering any employee or former employee of the Company
that, individually or collectively, could give rise to the payment of any
amount in consideration of the performance of services for the Company by
such employee or former employee that would not be deductible for income tax
purposes as an expense under applicable law.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(xii) The Company is not a party to any tax sharing,
indemnification or allocation agreement nor does the Company owe any amount
under any such agreement, other than this Agreement.
(xiii) The Company is not and has not been at any time, a
"United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiv) No adjustment relating to any Return filed by the
Company has been proposed formally or, to the Knowledge of the Company or the
Stockholders, informally by any tax authority to the Company or any
representative thereof.
(c) EXECUTIVE COMPENSATION TAX. There is no contract, agreement,
plan or arrangement to which the Company is a party as of the date of this
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Company, individually or
collectively, that could give rise to the payment of any amount that would
not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree
to which the Company is a party or otherwise binding upon the Company which
has or may have the effect of prohibiting, impairing or restricting any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which it is restricted from selling, licensing or otherwise distributing any
of its technology or products to or providing services to, customers or
potential customers or any class of customers, in any geographic area, during
any period of time or in any segment of the market.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) The Company owns no real property, nor has it ever owned any
real property. Section 2.12(a) of the Disclosure Schedule sets forth a list
of all real property currently leased by the Company, the name of the lessor,
the date of the lease and each amendment thereto and, with respect to any
current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are
valid and effective in accordance with their
-12-
respective terms, there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) and, to the Knowledge of the Company,
Indemnitors and the Stockholders, there is not, under any of such leases, an
existing default or event of default by a party thereto other than the
Company (or event which with notice or lapse of time, or both, would
constitute a default).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of their
respective tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any Liens, except as
reflected in the Current Balance Sheet and except for Liens for Taxes not yet
due and payable and such imperfections of title and encumbrances, if any,
which are not material in character, amount or extent, and which do not
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby.
(c) Section 2.12(c) of the Disclosure Schedule lists all material
items of equipment (the "Equipment") owned or leased by the Company and such
Equipment is, (i) adequate for the conduct of the business of the Company as
currently conducted and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
(d) The Company has sole and exclusive ownership, free and clear of
any Liens, of all customer files and other customer information relating to
customers of the Company's current and former customers (the "Customer
Information"). No person other than the Company possesses any claims or
rights with respect to use of the Customer Information.
2.13 INTELLECTUAL PROPERTY.
(a) For the purposes of this Agreement, the following terms have
the following definitions:
"Intellectual Property" shall mean any or all of the
following, in any form and embodied in any media, (i) works of authorship
including, without limitation, computer programs, source code and executable
code, whether embodied in software, firmware or otherwise, documentation,
designs, files, records, data and mask works, (ii) inventions (whether or not
patentable), improvements, and technology, (iii) proprietary and confidential
information, trade secrets and know how, (iv) databases, data compilations
and collections and technical data, (v) logos, trade names, trade dress,
trademarks and service marks, (vi) domain names, web addresses and sites, and
(vii) tools, methods and processes.
"Intellectual Property Rights" shall mean worldwide common law
and statutory rights associated with (i) patents and patent applications,
(ii) copyrights, copyrights registrations and copyrights applications and
"moral" rights, (iii) the protection of trade and industrial secrets and
confidential information, (iv) other proprietary rights relating to
intangible intellectual property, (v) trademarks, trade names and service
marks, (vi) analogous rights to those
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set forth above, and (vii) divisions, continuations, renewals, reissuances
and extensions of the foregoing (as applicable) now existing or hereafter
filed, issued or acquired.
"Company Intellectual Property" shall mean any Intellectual
Property and Intellectual Property Rights that are owned by or exclusively
licensed to the Company.
"Registered Intellectual Property Rights" shall mean
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected by recordation with any state, government or other public
legal authority.
(b) Section 2.13(b) of the Disclosure Schedule lists all Registered
Intellectual Property owned by, or filed in the name of, the Company (the
"Company Registered Intellectual Property") and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property. Section 2.13
(b) of the Disclosure Schedule also lists and identifies all computer
software that is owned by the Company (collectively, "Owned Software") and
all computer software (other than Owned Software) that is used by the Company
for any purpose whatsoever in its business as presently conducted
(collectively, the "Licensed Software"). The Owned Software and the Licensed
Software are collectively referred to as the "Software").
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in Section 2.13(b) of the
Disclosure Schedule and all Intellectual Property licensed to the Company, is
free and clear of any Liens or other encumbrances. The Company is the
exclusive owner of all Company Intellectual Property.
(d) To the extent that any Intellectual Property has been developed
or created independently or jointly by any person other than the Company for
which the Company has, directly or indirectly, paid, the Company has a
written agreement with such person with respect thereto, and the Company
thereby has obtained ownership of, and is the exclusive owner of, all such
Intellectual Property and associated Intellectual Property Rights by
operation of law or by valid assignment.
(e) The Company has not transferred ownership of or granted any
license of or right to use or authorized the retention of any rights to use
any Intellectual Property or Intellectual Property Rights that is or was
Company Intellectual Property, to any other person, except as provided in
Section 2.13(g) below.
(f) The Company Intellectual Property constitutes all the
Intellectual Property and Intellectual Property Rights used in and/or
necessary to the conduct of the business of the Company as it currently is
conducted, planned or is reasonably contemplated to be conducted, including,
without limitation, the design, development, manufacture, use, import and
sale of products, technology and services (including products, technology or
services currently under development). The Company has valid licenses to all
software owned by third parties that is used in and/or
-14-
necessary to the operation of the Company's products as they are currently
used, and the Company is not in default with respect to any such license.
(g) Other than "shrink-wrap" and similar widely available
third-party commercial end-user licenses, the contracts, licenses and
agreements listed in Section 2.13(g) of the Disclosure Schedule include all
contracts, licenses and agreements to which the Company is a party with
respect to any Intellectual Property and Intellectual Property Rights. No
person who has licensed Intellectual Property or Intellectual Property Rights
to the Company has ownership rights or license rights to improvements made by
the Company in such Intellectual Property which has been licensed to the
Company.
(h) Section 2.13(h) of the Disclosure Schedule lists all contracts,
licenses and agreements between the Company and any other person wherein or
whereby the Company has agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with
respect to the infringement or misappropriation by the Company or such other
person of the Intellectual Property Rights of any person other than the
Company.
(i) The operation of the business of the Company as it currently is
conducted or is reasonably contemplated to be conducted, including but not
limited to the design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company does not infringe or
misappropriate the Intellectual Property Rights of any person, violate the
rights of any person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under the laws of any
jurisdiction, and the Company has not received notice from any person
claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of
the Company infringes or misappropriates the Intellectual Property Rights of
any person or constitutes unfair competition or trade practices under the
laws of any jurisdiction (nor to the Knowledge of the Company, the
Indemnitors or the Stockholders is there any reasonable basis therefor).
-15-
(j) Each item of Company Registered Intellectual Property is valid
and subsisting, and all necessary registration, maintenance and renewal fees
in connection with such Company Registered Intellectual Property have been
paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining
such Registered Intellectual Property. There are no actions that must be
taken by the Company within sixty (60) days of the scheduled Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates for the purposes of
maintaining, perfecting or preserving or renewing any Registered Intellectual
Property. In each case in which the Company has acquired any Intellectual
Property rights from any person, the Company has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Intellectual Property and the associated Intellectual Property Rights
(including the right to seek past and future damages with respect thereto) to
the Company and, to the maximum extent provided for by, and in accordance
with, applicable laws and regulations, the Company has recorded each such
assignment with the relevant governmental authorities, including the PTO, the
U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be.
(k) There are no contracts, licenses or agreements between the
Company and any other person with respect to Company Intellectual Property
under which there is any dispute known to the Company, Indemnitors or the
Stockholders regarding the scope of such agreement, or performance under such
agreement including with respect to any payments to be made or received by
the Company thereunder.
(l) To the Knowledge of the Company, Indemnitors and the
Stockholders, no person is infringing or misappropriating any Company
Intellectual Property.
(m) The Company has taken all commercially reasonable steps in
order to protect the Company's rights in confidential information and trade
secrets of the Company or provided by any other person to the Company. All
current and former employees, consultants and contractors of the Company who
have or have had access to confidential, proprietary or trade secret
information of the Company ("Recipients") have entered proprietary
information, confidentiality and assignment of inventions agreements with the
Company. Section 2.13 of the Disclosure Schedule contains a list of all
Recipients indicating those who have signed the agreements and those who have
not entered such agreements and the form of each such agreement.
(n) No Company Intellectual Property, Intellectual Property Rights
or service of the Company is subject to any proceeding or outstanding decree,
order, judgment, agreement or stipulation that restricts in any manner the
use, transfer or licensing thereof by the Company or may affect the validity,
use or enforceability of such Company Intellectual Property.
-16-
(o) No (i) product, technology, service or publication of the
Company; (ii) material published or distributed by the Company or (iii)
conduct or statement of Company constitutes obscene material, a defamatory
statement or material, false advertising or otherwise violates any law or
regulation.
(p) All of the Company's products (including products currently
under development) will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999,
or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"). All of the Company's products (i) will
lose no functionality with respect to the introduction of records containing
dates falling on or after January 1, 2000 and (ii) will be interoperable with
other products used and distributed by the Company that may deliver records
to the Company's products or receive records from the Company's products, or
interact with the Company's products, including but not limited to back-up
and archived data. All of the Company's internal computer and technology
products and systems are Year 2000 Compliant.
2.14 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth in Sections 2.13(g), 2.13(h) or 2.14(a) of
the Disclosure Schedule, the Company is not a party to nor is it bound by:
(i) Any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization,
(ii) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan,
(iii) any fidelity or surety bond or completion bond,
(iv) any lease of personal property with annual payments
individually in excess of $10,000 or $25,000 in the aggregate,
(v) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(vi) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $20,000 individually
or $50,000 in the aggregate,
-17-
(vii) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of the Company's business,
(viii) any mortgages, indentures, loans or credit agreements,
security agreements, guarantees or other agreements or instruments relating
to the borrowing of money or extension of credit,
(ix) any purchase order or contract for the purchase of
materials involving in excess of $10,000 individually or $25,000 in the
aggregate, with the exception of standard inventory, part or product
purchases necessary to meet production schedules based on signed customer
orders or to meet short term production forecasts per commercially reasonable
procedures in which case any such purchase order or contract in excess of
$30,000 individually or $100,000 in the aggregate.
(x) any construction contracts,
(xi) any dealer, distribution, joint marketing, development or
other customer agreement with annualized value in excess of $20,000,
(xii) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software
vendor or other agreement for use or distribution of the Company's products,
technology or services,
(xiii) any partnership or joint venture agreement,
(xiv) any agreement between the Company and any Stockholder or
Indemnitor (or affiliates); or
(xv) any other agreement, contract or commitment that involves
$10,000 individually or $25,000 in the aggregate or more or is not cancelable
without penalty within thirty (30) days.
(b) The Company is in compliance with and has not breached,
violated or defaulted under, or received written notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract, covenant, instrument, lease, license or commitment described in the
Company Disclosure Schedule (collectively a "Contract"), nor do the Company,
Indemnitors or the Stockholders have Knowledge of any event that would
constitute such a breach, violation or default with the lapse of time, giving
of notice or both. Each Contract is in full force and effect and to the
Company's Knowledge, no party obligated to the Company pursuant thereto is
under default thereunder. The Company has obtained, or will obtain prior to
the Closing Date, all necessary consents, waivers and approvals ( which
consents, waivers, and approvals are set forth on Section 2.14(b) of the
Disclosure Schedule) of parties to any Contract as are required thereunder in
connection with the Acquisition or for such Contracts to remain in effect
without modification after the Closing. Following the Closing, the Company
will be permitted to exercise all of its rights under the Contracts without
the payment of any additional amounts or consideration other than ongoing
-18-
fees, royalties or payments which the Company would otherwise be required to
pay had the transactions contemplated by this Agreement not occurred.
2.15 INTERESTED PARTY TRANSACTIONS. No officer or director of the
Company or Stockholder (nor any ancestor, sibling, descendant or spouse of
any of such persons, or any trust, partnership or corporation in which any of
such persons has or within the last three (3) years has had an interest), has
or has had, directly or indirectly, (i) an interest in any entity which
furnished or sold, or furnishes or sells, services, products or technology
that the Company furnishes or sells, or proposes to furnish or sell, or (ii)
any interest in any entity that purchases from or sells or furnishes to the
Company any goods or services or (iii) a beneficial interest in any Contract
(iv) any amounts owed by or owed to the Company; provided, that ownership of
no more than one percent (1%) of the outstanding voting stock of a publicly
traded corporation shall not be deemed an "interest in any entity" for
purposes of this Section 2.15.
2.16 GOVERNMENTAL AUTHORIZATION. Section 2.16 of the Disclosure Schedule
accurately lists each consent, license, permit, grant or other authorization
issued to the Company by a Governmental Entity (i) pursuant to which the
Company currently operates or holds any interest in any of their properties
or (ii) which is required for the operation of its business or the holding of
any such interest (herein collectively called "Company Authorizations"). The
Company Authorizations are in full force and effect and constitute all
Company Authorizations required to permit the Company to operate or conduct
its business or hold any interest in its properties or assets.
2.17 LITIGATION. There is no action, suit, claim or proceeding of any
nature pending, or, to the Company's, Indemnitors' or the Stockholders'
Knowledge, threatened, (a) against the Company, its activities, properties
(tangible or intangible) or any of its officers, directors or employees of
the Company in connection with such officer's, director's or employee's
relationship with, or actions taken on behalf of, the Company, or (b) that
seeks to prevent, enjoin, alter or delay the transactions contemplated by
this Agreement, nor, to the Knowledge of the Company, Indemnitors or the
Stockholders, is there any reasonable basis therefor. To the Company's,
Indemnitors' or the Stockholders' Knowledge, there is no investigation
pending or threatened against the Company, its properties or any of its
officers or directors (nor, to the best Knowledge of the Company or the
Stockholders, is there any reasonable basis therefor) by or before any
Governmental Entity. No Governmental Entity has within the last five (5)
years challenged or questioned the legal right of the Company to conduct its
operations as presently or previously conducted. The Company is not a party
to or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. Except as set
forth on Section 2.17 of the Disclosure Schedule, the Company has not
initiated any action, suit, claim or proceeding of any nature.
2.18 ACCOUNTS RECEIVABLE; INVENTORY.
(a) The Company has made available to Parent a list of all accounts
receivable of the Company as of September 30, 1998 along with a range of days
elapsed since invoice.
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(b) All of the accounts receivable of the Company arose in the
ordinary course of business, are carried at values determined in accordance
with GAAP consistently applied and are collectible except to the extent of
reserves therefor set forth in the Current Balance Sheet. No person has any
Lien on any of such Accounts Receivable and no request or agreement for
deduction or discount has been made with respect to any of such Accounts
Receivable.
(c) All of the inventories of the Company were purchased, acquired
or produced in the ordinary and regular course of business and in a manner
consistent with the Company's regular inventory practices and are set forth
on the Company's books and records in accordance with the practices and
principles of the Company consistent with the method of treating said items
in prior periods. None of the inventory of the Company reflected on the
Current Balance Sheet or on the Company's books and records (in either case
net of the reserve therefor) is obsolete, defective or in excess of the needs
of the business of the Company reasonably anticipated for the normal
operation of the business consistent with past practices and outstanding
customer contracts. The presentation of inventory on the Current Balance
Sheet conforms to GAAP and such inventory is stated at the lower of cost
(determined using the first-in, first-out method) or net realizable value. No
person has any Lien on any Inventory.
2.19 MINUTE BOOKS. The minutes of the Company made available to counsel
for Parent are the only minutes of the Company and contain a reasonably
accurate summary of all meetings of the Board of Directors (or committees
thereof) of the Company and its shareholders or actions by written consent
since the time of incorporation of the Company.
2.20 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity
or by applicable federal, state or local law to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
or defined as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding
office and janitorial supplies properly and safely maintained. No Hazardous
Materials are present as a result of the deliberate actions of the Company
or, to the Company's, Indemnitors' or the Stockholders' Knowledge, as a
result of any actions of any other person or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing, nor has it disposed of, transported, sold, or
-20-
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
the Company's, Indemnitors' or the Stockholders' Knowledge, threatened
concerning any Environmental Permit, Hazardous Material or any Hazardous
Materials Activity of the Company. To the Knowledge of the Company,
Indemnitors and the Stockholders, there is no fact or circumstance which is
reasonably likely to involve the Company in any environmental litigation or
impose upon the Company any environmental liability.
2.21 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Except as set
forth in Section 2.21 of the Disclosure Schedule, neither the Company nor any
Stockholder has incurred, nor will they incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with the Agreement or any transaction
contemplated hereby. Section 2.21 of the Disclosure Schedule sets forth the
principal terms and conditions of any agreement, written or oral, with
respect to such fees.
2.22 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) The following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b),
(c), (m) or (o) of the Code and the regulations issued thereunder;
(ii) "Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or
otherwise, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, or with respect to
which the Company or any Affiliate has or may have any liability or
obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
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(v) "Employee" shall mean any current or former
employee, consultant or director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, or similar agreement,
contract or understanding between the Company or any Affiliate and any
Employee;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xi) "Pension Plan" shall mean each Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) SCHEDULE. Schedule 2.22(b) contains an accurate and complete
list of each Employee Plan and each Employee Agreement under each Employee
Plan or Employee Agreement. The Company has no plan or commitment to
establish any new Employee Plan or Employee Agreement, to modify any Employee
Plan or Employee Agreement (except to the extent required by law or to
conform any such Employee Plan or Employee Agreement to the requirements of
any applicable law, in each case as previously disclosed to Parent in
writing, or as required by this Agreement), or to enter into any Employee
Plan or Employee Agreement.
(c) DOCUMENTS. The Company has provided to Parent: (i) correct and
complete copies of all documents embodying each Employee Plan and each
Employee Agreement including (without limitation) all amendments thereto and
all related trust documents; (ii) the three (3) most recent annual reports
(Form Series 5500 and all schedules and financial statements attached
thereto), if any, required under ERISA or the Code in connection with each
Employee Plan; (iii) if the Employee Plan is funded, the most recent annual
and periodic accounting of Employee Plan assets; (iv) the most recent summary
plan description together with the summary(ies) of material modifications
thereto, if any, required under ERISA with respect to each Employee Plan; (v)
all material written agreements and contracts relating to each Employee Plan,
including, but not limited to, administrative service agreements and group
insurance contracts; (vi) all communications material to any Employee or
Employees relating to any Employee Plan and any proposed Employee Plans, in
each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any liability to the Company;
(vii) all correspondence to or from any governmental agency relating to any
Employee Plan; (viii) all COBRA forms and related notices; (ix) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Employee Plan; (x) all discrimination tests for each Employee Plan for the
most recent plan year; and (xi) all registration statements,
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annual reports (Form 11-K and all attachments thereto) and prospectuses
prepared in connection with each Employee Plan.
(d) EMPLOYEE PLAN COMPLIANCE. (i) The Company has performed all
obligations required to be performed by it under, is not in default or
violation of, and the Company, Indemnitors and Stockholders have no Knowledge
of any default or violation by any other party to each Employee Plan, and
each Employee Plan has been established and maintained in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Employee Plan; (iii) there are no
actions, suits or claims pending, or, to the Knowledge of the Company,
Indemnitors or the Stockholders, threatened nor, to the Knowledge of the
Company, Indemnitors or the Stockholders, is there any basis therefor (other
than routine claims for benefits) against any Employee Plan or against the
assets of any Employee Plan; (iv) each Employee Plan can be amended,
terminated or otherwise discontinued after the Closing in accordance with its
terms, without liability to Parent, the Company or any Affiliate (other than
ordinary administration expenses); (v) there are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company, Indemnitors or the
Stockholders or any Affiliates, threatened by the IRS or DOL with respect to
any Employee Plan; and (vi) neither the Company nor any Affiliate is subject
to any penalty or tax with respect to any Employee Plan under Section 502(i)
of ERISA or Sections 4975 through 4980 of the Code.
(e) NO PENSION PLANS. Neither the Company nor any Affiliate has
ever maintained, established, sponsored, participated in, or contributed to,
any Pension Plan subject to Title IV of ERISA.
(f) NO POST-EMPLOYMENT OBLIGATIONS. No Employee Plan provides, or
reflects or represents any liability to provide, retiree life insurance,
retiree health or other retiree employee welfare benefits to any person for
any reason, except as may be required by COBRA or other applicable statute,
and the Company has never represented, promised or contracted (whether in
oral or written form) to any Employee (either individually or to Employees as
a group) or any other person that such Employee(s) or other person would be
provided with retiree life insurance, retiree health or other retiree
employee welfare benefit, except to the extent required by statute.
(g) COBRA. Neither the Company nor any Affiliate has, prior to the
Closing, violated any of the health care continuation requirements of COBRA,
the requirements of FMLA or any similar provisions of state law applicable to
its Employees.
(h) EFFECT OF TRANSACTION. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee.
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(i) EMPLOYMENT MATTERS. The Company: (i) is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund governed by or maintained
by or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending or, to the
Knowledge of the Company. Indemnitors or the Stockholders, threatened or
reasonably anticipated claims or actions against the Company under any
worker's compensation policy or long-term disability policy, nor to the
Knowledge of the Company, Indemnitors or the Stockholders, is there any
reasonable basis therefor.
(j) LABOR. No work stoppage or labor strike against the Company is
pending, or to the Knowledge of the Company, Indemnitors or the Stockholders
threatened nor, to the Knowledge of the Company, Indemnitors or the
Stockholders, is there any reasonable basis therefor. The Company does not
Know of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the Knowledge of the Company, Indemnitors or the
Stockholders, threatened or reasonably anticipated relating to any labor,
safety or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints.
Within the last five (5) years, the Company has not engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. The
Company is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by the
Company.
(k) NO INTERFERENCE OR CONFLICT. To the Knowledge of the Company,
Indemnitors and the Stockholders, no shareholder, officer, employee or
consultant of the Company is obligated under any contract or agreement or is
subject to any judgment, decree or order of any court or administrative
agency that would interfere with such person's efforts to promote the
interests of the Company or that would interfere with the Company's business.
Neither the execution nor delivery of this Agreement, nor the carrying on of
the Company's business as presently conducted or presently proposed to be
conducted nor any activity of such officers, directors, employees or
consultants in connection with the carrying on of the Company's business as
presently conducted or currently proposed to be conducted, will, to the
Company's, Indemnitors' and the Stockholders' Knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract or agreement under which any of such officers,
directors, employees or consultants is now bound.
2.23 INSURANCE. Section 2.23 of the Disclosure Schedule lists all insurance
policies and fidelity bonds (collectively, "Insurance") covering the assets,
business, equipment, properties, operations, employees, officers and directors
of the Company. The Company has maintained
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Insurance levels for the two years prior to, and in effect at, the Closing
Date which represent generally reasonable, adequate coverage as appropriate.
There is no claim by the Company pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid, and the Company is otherwise in
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). Neither the
Company, Indemnitors nor the Stockholders has Knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.
2.24 COMPLIANCE WITH LAWS. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any material foreign, federal, state, tribal or local statute, law or
regulation.
2.25 WARRANTIES; INDEMNITIES. Except for the warranties and indemnities
contained in (i) those contracts and agreements set forth in Section 2.13(g)
of the Disclosure Schedule and (ii) the Company's standard product warranty
agreements substantially in the form set forth in Section 2.13(g) of the
Disclosure Schedule, the Company has not given any warranties or indemnities
relating to products or technology sold or licensed or services rendered by
the Company. Section 2.25 of the Disclosure Schedule contains a complete and
accurate summary of all warranty claims on the Company's products occurring
during the past five years. The Current Balance Sheet reflects a reasonable
warranty reserve determined in accordance with GAAP.
2.26 ADEQUACY AND FUNCTIONALITY OF COMPANY PRODUCTS. The assets of the
Company, including, without limitation, the source code and products of the
Company, are now and following the Closing will be sufficient for the conduct
of the business of the Company in the same manner as the business is now
conducted. The Owned Software now performs, and following the Closing will
perform, substantially in accordance with applicable user documentation
provided by the Company to the customers using such Owned Software, and does
not contain and is not subject to any operational defect or limitation which
is reasonably likely to substantially impair the capability or effectiveness
of the Owned Software to achieve its functions described in such user
documentation. The Owned Software contains all current revisions of such
software in the Company's possession, and includes all source code, object
code, forms of such software and all computer programs, materials processes,
tapes, and know-how related to such Owned Software. The Company has delivered
to the Parent complete and correct copies of the current version of all user
documentation in the Company's possession related to the Owned Software.
2.27 COMPLETE COPIES OF MATERIALS. The Company has delivered or made
available true and complete copies of each document (or summaries of same)
that has been requested by Parent or its counsel.
2.28 INVESTMENT REPRESENTATIONS
Siblings represents and warrants to the following:
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(a) EXPERIENCE. Siblings has substantial experience in evaluating
and investing in private placement transactions of securities in companies
similar to the Parent so that it is capable of evaluating the merits and
risks of investment in Parent and have the capacity to protect its own
interests.
(b) INVESTMENT. Siblings is acquiring the Siblings Shares for
investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof. Siblings
understands that the Siblings Shares to be acquired hereunder have been
issued pursuant to a specific exemption from the registration provisions of
the Securities Act, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of
Siblings' representations as expressed herein.
(c) RULE 144. Siblings acknowledges that the Siblings Shares must
be held indefinitely unless subsequently registered under the Securities Act
or unless an exemption from such registration is available, and that there is
no assurance that any exemption from such registration requirements will ever
become available. Siblings is aware of the provisions of Rule 144 promulgated
under the Securities Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions,
including, among other things, the existence of a public market for the
shares, the availability of certain current public information about Parent,
the resale occurring not less than one year after a party has purchased and
paid for the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" and the number
of shares being sold during any three-month period not exceeding specified
limitations. Siblings acknowledges that in the event the application
requirements of Rule 144 are not met, registration under the Securities Act
or an exemption from registration will be required for any disposition of its
stock. Siblings understands that although Rule 144 is not exclusive, the
Commission has expressed its opinion that persons proposing to sell
restricted securities received in a private offering other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for
such offers to sales and that such persons and the brokers who participate in
the transactions do so at their own risk.
(d) ACCESS TO DATA. Siblings has had an opportunity to discuss
Parent's business, management and financial affairs with its management.
Siblings has also had an opportunity to ask questions of officers of Parent,
which questions were answered to its satisfaction. Siblings understands that
such discussions, as well as any written information issued by Parent, were
intended to describe certain aspects of Parent's business and prospects but
were not a thorough or exhaustive description.
2.29 REPRESENTATIONS COMPLETE. None of the representations or warranties
made by the Company, Indemnitors or the Stockholders (as modified by the
Disclosure Schedule), nor any statement made in any Schedule or certificate
furnished by the Company, Indemnitors or the Stockholders pursuant to this
Agreement, taken together, contains or will contain at the Closing, any
untrue statement of a material fact, or omits or will omit at the Closing to
state any material fact
-26-
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, subject to such exceptions
as are specifically disclosed in the disclosure schedule supplied by Parent to
the Stockholders and dated the date hereof, that on the date hereof, and as of
the Closing as though made on the date hereof, as follows:
3.1 ORGANIZATION, STANDING AND POWER. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Parent has the corporate power to own its properties and to
carry on its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the failure to
be so qualified would have a Parent Material Adverse Effect. Parent has made
available a true and correct copy of its Certificate of Incorporation and
Bylaws, as amended to date, to counsel for the Company. For all purposes of
this Agreement, the term "Parent Material Adverse Effect" means any change,
event or effect that is materially adverse to the business, assets (including
intangible assets), financial condition, capitalization or results of
operations or prospects of Parent and its subsidiaries taken as a whole,
except for those changes, events and effects that (i) are directly caused by
conditions affecting the United States economy as a whole or affecting the
industry in which such entity competes as a whole, which conditions do not
affect such entity in a disproportionate manner, or (ii) are related to or
result from the announcement or pendency of the Acquisition.
3.2 AUTHORITY. Parent has all requisite corporate power and authority to
enter into this Agreement and any Related Agreements to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and any Related Agreements to which
it is a party and the consummation of the transactions contemplated hereby
and thereby have been, or will be prior to the Closing, duly authorized by
all necessary corporate action on the part of Parent. This Agreement and any
Related Agreements to which Parent is a party have been duly executed and
delivered by Parent and constitute the valid and binding obligations of
Parent, enforceable in accordance with their terms, except as such
enforceability may be limited by principles of public policy and subject to
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules of law governing specific performance, injunctive
relief or other equitable remedies.
3.3 NO CONFLICT. The execution, delivery and performance of this Agreement
and any Related Agreements to which it is a party do not, and the consummation
of the transactions contemplated hereby and thereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a Conflict under (i) any provision of the
Certificate of Incorporation, as amended, and Bylaws of Parent, (ii) any
mortgage, indenture,
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lease, contract or other agreement or instrument, permit, concession,
franchise or license to which Parent or any of its respective properties or
assets are subject and which has been filed as an Exhibit to Parent's filings
under the Securities Act or the Exchange Act or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Parent or
its properties or assets, except where such Conflict will not have a Parent
Material Adverse Effect.
3.4 CONSENTS. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity, or any
third party is required by or with respect to Parent in connection with the
execution and delivery of this Agreement and any Related Agreements to which
it is a party or the consummation of the transactions contemplated hereby and
thereby, except for such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable securities laws and such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings which, if not
obtained or made, would not have a Parent Material Adverse Effect. All such
filings will be made within the time prescribed by law.
3.5 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 40,000,000 shares of
Common Stock, $.001 par value, of which 9,367,576 shares were issued and
outstanding as of December 31, 1998, and 5,000,000 shares of undesignated
Preferred Stock, $0.001 par value. No shares of Preferred Stock are issued or
outstanding. All such shares have been duly authorized, and all such issued
and outstanding shares have been validly issued, are fully paid and
nonassessable and are free of any liens or encumbrances other than any liens
or encumbrances created by or imposed upon the holders thereof. Parent has
also reserved 2,000,000 shares of Common Stock for issuance pursuant to its
employee and director stock and option plans. There are no other options,
warrants, calls, rights, commitments or agreements of any character to which
Parent is a party or by which it is bound obligating Parent to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Parent or
obligating Parent to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
(b) The shares of Parent Common Stock to be issued pursuant to the
Acquisition will be duly authorized, validly issued, fully paid,
non-assessable, free of any liens or encumbrances and not subject to any
preemptive rights or rights of first refusal created by statute or the
Articles of Incorporation or Bylaws of Parent or any agreement to which
Parent is a party or is bound except as provided in this Agreement.
3.6 SEC FILINGS. Parent has filed in a timely manner all forms, reports and
documents required to be filed by Parent. All such required forms, reports and
documents (including those Parent may file subsequent to the date hereof) are
referred to herein as the "SEC Reports." As of their respective dates, the SEC
Reports (i) were prepared, in all material respects, in accordance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable to such SEC Reports and (ii) did not at the time they
were filed (or if amended or superseded by a filing prior to
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the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
Parent is not a party to any material contract, agreement or other
arrangement which was required to have been filed as an exhibit to the SEC
Reports that is not so filed.
3.7 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation ("Action") pending: (a) against Parent, its respective
activities, properties or assets or, to Parent's Knowledge, against any
officer, director or employee of Parent in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of,
Parent which Parent believes is reasonably likely to have a Parent Material
Adverse Effect, or (b) that seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement. Parent is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. No action by Parent is
currently pending nor does Parent intend to initiate any action which is
reasonably likely to have a Parent Material Adverse Effect.
3.8 COMPLIANCE WITH LAW AND CHARTER DOCUMENTS. Parent is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, as amended. Parent has complied and is in compliance with all
applicable statutes, laws, and regulations and executive orders of the United
States of America and all states, foreign countries and other governmental
bodies and agencies having jurisdictions over Parent's businesses or
properties, except for any violations that would not, either individually or
in the aggregate, have a Parent Material Adverse Effect.
3.9 Year 2000 Compliant. All of Parent's products (including products
currently under development) will record, store, process, calculate and
present calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will calculate any information dependent on
or relating to such dates in the same manner, and with the same
functionality, data integrity and performance, as the products record, store,
process, calculate and present calendar dates on or before December 31, 1999,
or calculate any information dependent on or relating to such dates
(collectively, "Year 2000 Compliant"). All of Parent's products (i) will lose
no functionality with respect to the introduction of records containing dates
falling on or after January 1, 2000 and (ii) will be interoperable with other
products used and distributed by Parent that may deliver records to Parent's
products or receive records from Parent's products, or interact with Parent's
products, including but not limited to back-up and archived data. All of
Parent's internal computer and technology products and systems are Year 2000
Compliant.
3.10 FULL DISCLOSURE. None of the representations or warranties made by
Parent, nor any statement made in any schedule or certificate furnished by
Parent pursuant to this Agreement and the Related Agreements, nor the SEC
Reports, taken together, contains or will contain at the Closing, any untrue
statement of a material fact, or omits or will omit at the Closing to state
any material fact necessary in order to make the statements contained herein
or therein, in the light of the circumstance under which they were made, not
misleading.
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ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, each of the Company and the Stockholders agree
(except to the extent that Parent shall otherwise consent in writing), to
carry on the Company's business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted, to pay the debts and
Taxes of the Company when due, to pay or perform other obligations when due,
and, to the extent consistent with such business, use their best efforts
consistent with past practice and policies to preserve intact the Company's
present business organizations, keep available the services of the Company's
present officers and key employees and preserve the Company's relationships
with regulators, customers, suppliers, distributors, licensors, licensees,
and others having business dealings with it, all with the goal of preserving
unimpaired the Company's goodwill and ongoing businesses at the Closing. The
Company shall promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of business of the Company and any material event
involving the Company. Except as expressly contemplated by this Agreement as
set forth in Section 4.1 of the Disclosure Schedule, the Company shall not,
without the prior written consent of Parent:
(a) Make any capital expenditure or commitment exceeding $20,000
individually or $50,000 in the aggregate;
(b) (i) Sell any Company Intellectual Property or enter into any
agreement with respect to the Company Intellectual Property with any person
or entity or with respect to the Intellectual Property of any person or
entity except as previously disclosed to Parent in writing, (ii) buy any
Intellectual Property or enter into any agreement with respect to the
Intellectual Property of any other person or entity, (iii) enter into any
agreement with respect to development of any Intellectual Property with a
third party except as previously disclosed to Parent in writing;
(c) Transfer to any person or entity any rights to the Company
Intellectual Property;
(d) Enter into or amend any Contract pursuant to which any other
party is granted marketing, distribution, development or similar rights of
any type or scope with respect to any products or technology except as
previously disclosed to Parent in writing;
(e) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts
set forth or described in the Disclosure Schedule;
(f) Commence or settle any litigation;
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(g) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of the capital stock of the Company (or options, warrants or other rights
exercisable therefor);
(h) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of the Company's capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating the Company to issue or purchase any
such shares or other convertible securities.
(i) Cause or permit any amendments to the Company's Articles (or
Certificate) of Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Company's business;
(k) Sell, lease, license or otherwise dispose of any of its
properties or assets, except as previously disclosed to Parent in writing;
(l) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others except as disclosed in the Disclosure Schedule;
(m) Grant any loans to others or purchase debt securities of others
or amend the terms of any outstanding loan agreement;
(n) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to
standard written agreements outstanding on the date hereof and disclosed in
the Disclosure Schedule;
(o) Adopt any employee benefit plan, or enter into any employment
contract, pay or agree to pay any special bonus or special remuneration to
any director or employee, or increase the salaries or wage rates of its
employees;
(p) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
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(q) Pay, discharge or satisfy, in an amount in excess of $10,000 in
any one case or $25,000 in the aggregate, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Current Balance
Sheet;
(r) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(s) Enter into any strategic alliance, joint marketing arrangement
or agreement, or joint venture;
(t) Other than as specifically requested in writing by Parent,
accelerate the vesting schedule of any of the outstanding Company Options or
Company Capital Stock;
(u) Hire any employee except in replacement of a terminated
employee or except as reasonably necessary consistent with the needs of the
business of the Company; not terminate the employment of any management level
or other key employee; or
(v) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (u) above, or any other action
that would prevent the Company from performing or cause the Company not to
perform its covenants hereunder.
4.2 CONDUCT OF BUSINESS OF PARENT. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Parent agrees that it shall, and shall cause it
subsidiaries to, conduct its business in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted. Without
limiting the foregoing, and except as expressly contemplated by this
Agreement, the Parent shall not, without the prior written consent of the
Company, (i) declare, set aside or pay any dividends on or make any other
distributions in respect of its capital stock, or split, combine or
reclassify any of its capital stock; (ii) amend its Articles of Incorporation
or (iii) enter into any transaction or series of transactions which would be
required to be reported on Form 8-K.
4.3 NO SOLICITATION. Until the earlier of the Closing or the date of
termination of this Agreement pursuant to the provisions of Section 8.1
hereof, neither the Company nor any of the Stockholders or Indemnitors (nor
will the Company nor any of the Stockholders or Indemnitors permit any of its
officers, directors, agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than
Parent and its designees: (a) solicit, encourage, initiate or participate in
any negotiations or discussions with respect to, any offer or proposal to
acquire all, substantially all or a significant portion of the Company's
business, properties or technologies or any portion of the Company's capital
stock (whether or not outstanding) whether by merger , purchase of assets,
tender offer or otherwise, or effect any such transaction, (b) disclose any
information not customarily disclosed to any person concerning the
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Company's business, technologies or properties or afford to any person or
entity access to its properties, technologies, books or records, (c) assist
or cooperate with any person to make any proposal to purchase all or any part
of the Company's capital stock or assets, (d) enter into any agreement with
any person providing for the acquisition of all or any significant portion of
the Company (whether by way of merger, purchase of assets, tender offer or
otherwise) or (e) solicit, initiate, participate or continue in any
negotiation or discussion with respect to any offer or proposal to acquire
all, substantially all or a significant portion of the business, properties
or technologies or any portion of capital stock of any other entity whether
by merger, purchase of assets, tender offer or otherwise, or effect any such
transaction. In addition to the foregoing, if the Company or any of the
Stockholders receives, prior to the Closing or the termination of this
Agreement, any offer, proposal, or request relating to any of the above, the
Company or the Stockholders, as applicable, shall immediately notify Parent
thereof, including information as to the identity of the offeror or the party
making any such offer or proposal and the terms thereof in reasonable detail,
and such other information related thereto as Parent may reasonably request.
The parties hereto agree that irreparable damage would occur in the event
that the provisions of this Section 4.3 were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed by
the parties that Parent shall be entitled to seek an injunction or
injunctions to prevent breaches of the provisions of this Section 4.3 and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which Parent may be entitled at law or in equity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PARENT REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time the
Parent shall determine to register any of its equity securities, either for
its own account or the account of a security holder or holders, other than
(i) a registration relating solely to employee benefit plans, (ii) a
registration relating solely to a Rule 145 transaction, or (iii) a
registration in which the only equity security being registered is Common
Stock issuable upon conversion of convertible debt securities which are also
being registered, the Parent will:
(i) Promptly give to Siblings written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within twenty (20) days after receipt of
such written notice from the Parent, by Siblings.
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(b) UNDERWRITING. If the registration of which the Parent gives
notice is for a registered public offering involving an underwriting, the
Parent shall so advise Siblings as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of Siblings to
registration pursuant to this Section 5.2 shall be conditioned upon Siblings'
participation in such underwriting, and the inclusion of the Siblings Shares
in the underwriting shall be limited to the extent provided herein.
Siblings shall (together with the Parent and the other holders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Parent. Notwithstanding any other
provision of this Section 5.1, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may exclude some or all of the
Siblings Shares from such registration. The Parent shall so advise Siblings
of the number of Siblings Shares that may be included in the registration and
underwriting.
If Siblings disapproves of the terms of any such underwriting, it
may elect to withdraw therefrom by written notice to the Parent and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
(c) RIGHT TO TERMINATE REGISTRATION. The Parent shall have the
right to terminate or withdraw any registration initiated by it under this
Section 5.1 prior to the effectiveness of such registration whether or not
Siblings has elected to include securities in such registration.
5.2 REGISTRATION ON FORM S-3.
(a) If Siblings requests that the Parent file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public
offering of Siblings Shares, the reasonably anticipated aggregate price to
the public of which, net of underwriting discounts and commissions, would
exceed $1,500,000, and the Parent is a registrant entitled to use Form S-3 to
register the Siblings Shares for such an offering, the Parent shall use its
best efforts to cause such Siblings Shares to be registered for the offering
on such form and to cause such Siblings Shares to be qualified in such
jurisdictions as Siblings may reasonably request; provided, however, that the
Parent shall not be required to effect more than one registration in the
aggregate on behalf of Siblings pursuant to this Section 5.2 per year. The
Parent shall inform other holders of Parent securities of the proposed
registration and offer them the opportunity to participate. In the event the
registration is proposed to be part of an underwritten public offering, the
substantive provisions of Section 5.1(b) shall be applicable to each such
registration initiated under this Section 5.2. The Parent may include other
shares of Common Stock in any of the registrations provided for in this
Section 5.2, provided that such inclusion will not interfere with the
marketing (including the price to the public) of the Siblings Shares to be
registered by Siblings.
(b) Notwithstanding the foregoing, the Parent shall not be
obligated to take any action pursuant to this Section 5.2:
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(i) in any particular jurisdiction in which the Parent would
be required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Parent is already
subject to service in such jurisdiction and except as may be required by the
Securities Act;
(ii) following the period starting with the date sixty (60)
days prior to the Parent's estimated date of filing of, and ending on the
date six (6) months immediately following, the effective date of any
registration statement pertaining to securities of the Parent (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Parent is actively employing in
good faith all reasonable efforts to cause such registration statement to
become effective; or
(iii) if the Parent shall furnish to Siblings a certificate
signed by the Chief Executive Officer of the Parent stating that in the good
faith judgment of the Chief Executive Officer it would be detrimental to the
Parent or its stockholders for registration statements to be filed in the
near future, then the Parent's obligation to use its best efforts to file a
registration statement shall be deferred for a period not to exceed ninety
(90) days from the receipt of the request to file such registration statement
by Siblings, provided that the Parent may not exercise this deferral right
more than once per twelve (12) month period.
5.3 EXPENSES OF REGISTRATION. All registration expenses, including
without limitation all Federal and "blue sky" registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements
of counsel for Parent, incurred in connection with the registration pursuant
to Sections 5.1 and 5.2 shall be borne by Parent. All Selling Expenses, as
defined below, shall be borne by the persons who sell the shares generating
said Selling Expenses. "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Siblings Shares
pursuant to this Agreement, together with the fees of any counsel to the
selling shareholders.
5.4 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Parent pursuant to this
Agreement, the Parent will keep Siblings advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. The Parent will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety
(90) days or until the distribution described in the registration statement
has been completed, whichever first occurs;
(b) Furnish to Siblings and to the underwriters of the securities
being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents
as such underwriters may reasonably request in order to facilitate the public
offering of such securities.
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5.5 INDEMNIFICATION.
(a) PARENT'S INDEMNIFICATION OF SIBLINGS. Parent will indemnify
Siblings with respect to which registration of the Siblings Shares has been
effected pursuant to this Agreement, and each underwriter thereof, if any,
and each person who controls such underwriter, against all claims, losses,
damages or liabilities (or actions in respect thereof) suffered or incurred
by any of them, to the extent such claims, losses, damages or liabilities
arise out of or are based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus or any related
Registration Statement incident to any such Registration, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by Parent of any rule or regulation promulgated under the
Securities Act applicable to Parent and relating to actions or inaction
required of Parent in connection with any such registration; and Parent will
reimburse Siblings, each such underwriter and each person who controls
Siblings or such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
in this Section 5.5 shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if settlement is effected without
the consent of the Parent (which consent shall not unreasonably be withheld);
and provided, further, that the Parent will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out
of or is based upon any untrue statement or omission based upon written
information furnished to Parent by Siblings, such underwriter, controlling
person or other indemnified person and stated to be for use in connection
with the offering of securities of Parent.
5.6 SIBLINGS' INDEMNIFICATION OF PARENT. Siblings will indemnify Parent,
each of its directors and officers, each person who controls the Parent
within the meaning of the Securities Act, and each other Stockholder, against
all claims, losses, damages and liabilities (or actions in respect thereof)
suffered or incurred by any of them and arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained
in such Registration Statement or related prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by Siblings of any rule or regulation promulgated under the
Securities Act applicable to Siblings and relating to action or inaction
required of Siblings in connection with the registration of the Siblings
Shares pursuant to such Registration Statement; and will reimburse Parent,
such other Stockholders, such directors, officers, partners, persons,
underwriters and controlling persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such Registration Statement or
prospectus in reliance upon and in conformity with written information
furnished to Parent by Siblings and stated to be specifically for use in
connection with the offering of securities of Parent.
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5.7 ACCESS TO INFORMATION. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Closing to (a) all of
the Company's properties, books, contracts, commitments and records, (b) all
other information concerning the business, properties and personnel (subject
to restrictions imposed by applicable law) of the Company as Parent may
reasonably request and (c) all key employees of the Company as identified by
Parent. The Company agrees to provide to Parent and its accountants, counsel
and other representatives copies of internal financial statements (including
by returns and supporting documentation) promptly upon request. No
information or knowledge obtained in any investigation pursuant to this
Section 5.7 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the Acquisition. Notwithstanding the foregoing, in accordance
with the terms of that certain Confidential Disclosure Agreement, dated
November 9, 1998, neither the Company nor Parent are required to furnish the
other with information regarding the Litigation.
5.8 CONFIDENTIALITY. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.7, or
pursuant to the negotiation and execution of this Agreement or the
effectuation of the transaction contemplated hereby shall be governed by the
terms of the Confidential Disclosure Agreements, dated February 12, 1998,
from Parent to the Company, and dated October 29, 1997, from the Company to
Parent and November 9, 1998.
5.9 EXPENSES.
(a) (i) All fees and expenses incurred by Parent in connection with
the Acquisition including, without limitation, all legal, accounting,
financial advisory, consulting and all other fees and expenses of third
parties in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, shall
be the obligation of Parent and (ii) all fees and expenses incurred by the
Company, Indemnitors and the Stockholders in connection with the Acquisition
including, without limitation, all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties other than the
Ladenburg Fee, as defined below ("Third Party Expenses") in connection with
the negotiation and effectuation of the terms and conditions of this
Agreement and the transactions contemplated hereby, prior to the execution of
this Agreement shall be the obligation of the Company and after the execution
of this Agreement shall be the obligation of the Stockholders provided,
however, that in the event the Acquisition is not consummated such Third
Party Expenses shall be the obligation of the Company.
(b) In the event that the Acquisition is consummated, Parent agrees
to pay the lesser of the investment banking fees incurred by the Company
and/or the Stockholders in connection with the Acquisition or $500,000 of the
Company's investment banking fees to Ladenburg (the "Ladenburg Fee"), and the
Company and the Stockholders agree that Parent shall have full recourse to
the Escrow Fund for payments to Ladenburg in excess of $500,000.
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5.10 PUBLIC DISCLOSURE. Upon execution of this Agreement, Parent shall
issue a press release reasonably acceptable to the Company. Unless otherwise
required by law, prior to the Closing, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made
by Parent, the Company or any Stockholders. Under no circumstances will the
Company (or any of its respective officers, directors, employees, affiliates
or agents), or any Stockholder discuss or disclose the existence or terms of
this Agreement, or the transaction contemplated hereby, with or to any third
party other than such legal, accounting and financial advisors of such party
who have a need to know such information solely for purposes of assisting
such party in connection with this Agreement or the transactions contemplated
hereby. Notwithstanding the foregoing, the Company and the Stockholders, but
only after consultation with Parent, may at any time make public disclosure
if it is advised by legal counsel that such disclosure is required under
applicable law or regulatory authority.
5.11 CONSENTS. The Company shall use its best efforts to obtain the
consents, waivers, assignments and approvals under any of the Contracts as
may be required in connection with the Acquisition (all of such consents,
waivers and approvals are set forth in the Disclosure Schedule) so as to
preserve all rights of, and benefits to, the Company thereunder.
5.12 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Parent a properly executed statement in a form reasonably acceptable to
Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.13 REASONABLE EFFORTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do
promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
5.14 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
notice to each other party of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate at or prior to the Closing and (ii) any failure of such
party, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.14 shall not limit or
otherwise affect any remedies available to the party receiving such notice.
No disclosure by the Company or the Stockholders pursuant to this Section
5.14, however, shall be deemed to amend or supplement the Disclosure Schedule
or prevent or cure any misrepresentations, breach of warranty or breach of
covenant.
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5.15 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at
the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or desirable for effecting completely the consummation of this Agreement and
the transactions contemplated hereby.
5.16 CERTAIN POST-CLOSING MATTERS.
(a) Parent agrees to cause the Company to repay to GN $3,709,879.67
plus interest accruing at the rate of 7.0% per annum between the Closing and
the date of payment with respect to GN's loans to the Company within 10 days
after the Closing. Upon such payment GN will confirm in writing that all of
GN's loans to the Company are satisfied in full and GN shall release all
security interests in the Company's assets.
(b) Parent agrees to use commercially reasonable efforts to obtain
the release of the personal guaranties of GN, KN and JL from obligations with
respect to [the Tokai equipment lease and the Company's credit cards.]
(c) Parent agrees within 10 days after the Closing either (i) to
repay the Company's loans with Nevada Banking Company and terminate the
agreement with Nevada Banking Company, or (ii) to obtain the release of all
Stockholders guaranties to Nevada Banking Company, including the release of
any collateral securing such guaranties.
5.17 NON-COMPETITION AGREEMENTS. Each of GN, KN and JL shall deliver to
Parent concurrently with the execution of this Agreement an executed
Non-Competition Agreement in the form attached hereto as Exhibit B. Each of
GN, KN and JL covenants that he shall comply with the Non-Competition
Agreement.
5.18 EMPLOYMENT AGREEMENTS. Each of GN, KN and JL shall deliver to
Parent concurrently with the execution of this Agreement an executed
Employment Agreement in the form attached hereto as Exhibits X-0, X-0 and
D-3, respectively.
5.19 NASDAQ LISTING. Parent agrees to authorize for listing on the
Nasdaq National Market the shares of Parent Common Stock issuable, in
connection with the Acquisition, upon official notice of issuance.
5.20 PARENT RIGHT OF FIRST REFUSAL. At any time before the third
anniversary of the Closing a Stockholder, or any of such Stockholder's
"affiliates" or "associates" (as those terms are defined in Rule 405
promulgated under the Securities Act of 1933, as amended) ("Selling
Stockholder") proposes to sell, transfer the voting rights in, or otherwise
transfer for value in excess of 150,000 Siblings Shares in a transaction or
series of related transactions or in excess of 600,000 Siblings Shares in a
twelve month period (the "Offered Securities") to any person or group of
persons (the "Proposed Transferee") in one or more related transactions,
Selling Stockholder shall first offer to sell the Offered Securities to
Parent at the same price and on the same terms in a writing delivered to the
Parent (the "Parent Offer"), which Parent Offer shall remain open and
irrevocable for a period of five (5) days after delivery (the "Parent Offer
Period").
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(a) NOTICE OF PARENT ACCEPTANCE. Notice of Parent's election to
accept, in whole or in part, a Parent Offer shall be made by a writing signed
by an officer of Parent specifying the portion of the Offered Securities that
Parent elects to purchase, delivered to the Selling Stockholder prior to the
expiration of the Parent Offer Period (the "Parent Acceptance Notice").
(b) CLOSING. The closing of the purchase by Parent of some or all
of the Offered Securities upon the terms and conditions specified in the
Parent Offer shall occur within three (3) business days of receipt by the
Selling Stockholder of the Parent Acceptance Notice and shall be subject to
the preparation, execution and delivery of a purchase agreement reasonably
satisfactory to the Parent and the Selling Stockholder, as the case may be,
and their respective counsel; provided, however, that the Selling Shareholder
shall not be required to make any representations or warranties in such
purchase agreement except with respect to such Selling Shareholder's
authority to enter into such agreement and its ownership of the Offered
Shares.
(c) LEGEND. Each certificate representing Siblings Shares now owned
by the Stockholders shall be endorsed with the following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF AN AGREEMENT BY AND BETWEEN THE
STOCKHOLDER AND THE CORPORATION. COPIES OF THE APPLICABLE PORTIONS OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(d) LEGEND REMOVAL. The legend referred to in Section 5.20(c) shall
be removed upon termination of this Agreement in accordance with the
provisions of Article VIII.
5.21 LIMITATION ON AGGREGATE SALES. Siblings agrees that, for a period
of six months after the Closing, such stockholder will not sell more than
200,000 Siblings Shares without the prior written consent of Parent.
5.22 LITIGATION BETWEEN THE PARTIES. On the date of execution of this
Agreement, Ball shall dismiss with prejudice any lawsuit or other proceeding
against Golf.
5.23 COMPANY EMPLOYEES. Parent agrees, with respect to employees
employed by the Company immediately prior to the Closing who continue as
employees of Parent following the Closing, as follows: (a) such continuing
employees will be deemed to have begun their employment with Parent on the
date they began employment with the Company for the purposes of vacation
time, and severance and profit sharing eligibility with participation in
profit sharing to begin May 1, 1999, (b) such continuing employees will be
deemed to have begun their employment with Parent on the date they began
employment with the Company for the purposes of health insurance and 401(k)
plan participation to the extent permitted thereunder, (c) such continuing
employees will be integrated into Parent's compensation and bonus structure
consistent with their responsibilities and experience as determined by
Parent, and (d) such continuing employees will be eligible for participation
in
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Parent's stock option program consistent with their responsibilities and
experience as determined by Parent. The exact timing of implementation of the
foregoing will be determined by Parent.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE ACQUISITION.
The respective obligations of the Stockholders and Parent to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing
of the following conditions:
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the
Acquisition illegal or otherwise prohibiting consummation of the Acquisition.
(b) COMBINED BOARD. Parent shall have appointed three designees of
the Company to Parent's Board of Directors as follows: KN shall be appointed
as a Class I director, JL shall be appointed as a Class II director and GN
shall be appointed as a Class III director.
6.2 CONDITIONS TO OBLIGATIONS OF COMPANY AND THE STOCKHOLDERS. The
obligations of the Company and the Stockholders to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any of which may be waived, in writing, exclusively by the Stockholders:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of Parent in this Agreement shall be true and correct in all
material respects on and as of the Closing as though such representations and
warranties were made on and as of such time and each of Parent shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by
it as of the Closing.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Acquisition shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Acquisition, which makes the
consummation of the Acquisition illegal.
(c) CLAIMS. There shall not have occurred any claims (whether or
not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a Parent
Material Adverse Effect. There shall be no BONA FIDE action, suit, claim or
proceeding of any nature pending, or overtly threatened, against the Parent,
Sub
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or the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Acquisition or
the other transactions contemplated by the terms of this Agreement, that
would materially and adversely affect the consummation of the transactions
contemplated hereby or have a Company or Parent Material Adverse Effect.
(d) LEGAL OPINION. The Company and Stockholders shall have received
a legal opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, legal counsel to
Parent, substantially in the form of Exhibit F hereto.
(e) NO MATERIAL ADVERSE CHANGE. There shall not have occurred any
Parent Material Adverse Effect since the date of this Agreement.
(f) CERTIFICATE OF THE PARENT. Company shall have been provided
with a certificate executed on behalf of Parent by an authorized officer to
the effect that, as of the Closing:
(i) all representations and warranties made by Parent and Sub
in this Agreement are true and correct in all material respects on and as of
the Closing as though such representations and warranties were made on and as
of such time; and
(ii) all covenants and obligations of this Agreement to be
performed by Parent on or before such date have been so performed in all
material respects.
6.3 CONDITIONS TO THE OBLIGATIONS OF PARENT. The obligations of Parent
to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations
and warranties of the Company, the Stockholders and the Indemnitors in this
Agreement shall be true and correct in all material respects on and as of the
Closing as though such representations and warranties were made on and as of
the Closing and the Company, the Stockholders and the Indemnitors shall have
performed and complied in all material respects with all covenants and
obligations of this Agreement required to be performed and complied with by
them as of the Closing.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Acquisition shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Acquisition, which makes the
consummation of the Acquisition illegal.
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(c) CLAIMS. There shall not have occurred any claims (whether or
not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a Company
Material Adverse Effect. There shall be no BONA FIDE action, suit, claim or
proceeding of any nature pending, or overtly threatened, against the Parent,
Sub or the Company, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Acquisition or
the other transactions contemplated by the terms of this Agreement, that
would materially and adversely affect the consummation of the transactions
contemplated hereby or have a Company or Parent Material Adverse Effect.
(d) THIRD PARTY CONSENTS. Any and all consents, waivers,
assignments and approvals listed in Sections 2.5 and 2.6 of the Disclosure
Schedule shall have been obtained.
(e) LEGAL OPINION. Parent shall have received a legal opinion from
Xxxxxx, Xxxx & Xxxxxxxx LLP, legal counsel to the Company, substantially in
the form of Exhibit E hereto.
(f) NO MATERIAL ADVERSE CHANGES. There shall not have occurred any
Company Material Adverse Effect since the date of this Agreement.
(g) CERTIFICATE OF THE COMPANY AND STOCKHOLDERS. Parent shall have
been provided with a certificate executed by the Stockholders and executed on
behalf of the Company by an authorized officer to the effect that, as of the
Closing:
(i) all representations and warranties made by the Company and
the Stockholders in this Agreement are true and correct in all material
respects on and as of the Closing as though such representations and
warranties were made on and as of such time;
(ii) all covenants and obligations of this Agreement to be
performed by the Company on or before such date have been so performed in all
material respects; and
(iii) the provisions set forth in Sections 6.3 have been
satisfied.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Regardless of
any investigation by any party hereto, the Company's, Indemnitors', the
Stockholders' and Parent's representations, warranties and covenants in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate on the second anniversary of the Closing Date, except: (i) to the
extent a Claim Notice (as defined below) has been submitted prior to such
date; (ii) claims based on fraud; (iii) claims based on the representations
and warranties contained in Sections 2.3, 2.4 and 2.10; and (iv) claims based
on breach of any Related Agreement.
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7.2 INDEMNIFICATION.
(a) Subject to the terms and conditions of this Article VII, the
Indemnitors agree jointly and severally to indemnify and hold Parent and its
officers, directors, agents, affiliates and representatives (collectively,
the "Indemnitees"), from and in respect of, and hold the Indemnitees harmless
against, any and all damages, fines, penalties, losses, liabilities,
judgments, deficiencies, deficits in Tangible Net Worth as described in
Section 1.4 above, and expenses (including without limitation amounts paid in
settlement, interest, court costs, costs of investigators, reasonable fees
and expense of attorneys and accountants and other expenses of litigation),
offset or reduced by the amount of any insurance proceeds or tax benefits
actually received by Parent in respect of any of the foregoing, incurred or
suffered by any of the Indemnitees ("Damages") resulting from, relating to or
in connection with (i) any misrepresentation, breach of representation or
warranty or failure to perform any covenant or agreement of the Company or
the Stockholders or the Indemnitors contained in this Agreement or any
inaccuracy in any schedule or certificate delivered by the Company or the
Shareholders or the Indemnitors pursuant to this Agreement, (ii) any Damages
relating to a Tangible Net Worth shortfall as determined in accordance with
Section 1.4 of the Agreement, (iii) any Damages relating to a breach of the
Non-Competition Agreements (iv) payments to Ladenburg in excess of the
amounts specified in Section 5.9 and (v) any Damages relating to those
Special Matters agreed to in writing by Parent and the Company at the
closing. In the event that on or prior to the date that is one (1) year from
the Closing, any of the Key Employees (as defined below) shall have
voluntarily terminated their employment with Parent (or one of its
affiliates) without Good Reason, or if Parent shall terminate the employment
of any Key Employee for cause Parent shall be entitled to Damages in the
amount of $300,000 as liquidated damages and shall be entitled immediately to
receive such amount from the Escrow Fund. For purposes of this Section 7.2(a)
"Key Employees" shall mean those employees identified in writing by Parent
and the Company, and "Good Reason" shall mean a substantial reduction in such
Key Employee's responsibilities or compensation, or a relocation of such Key
Employee's primary place of work to a location other than the Xxxxxx
City-Stateline, Nevada area, or the Tempe, Arizona area. Notwithstanding the
first sentence of this Section 7.2(a), (i) each Indemnitor and each
Stockholder shall be severally and not jointly liable for claims based on
such party's representations and warranties contained in Section 2.4(b), and
(ii) each Indemnitor and each Stockholder shall be severally and not jointly
liable for claims based on breach of any Related Agreement by such party;
provided, that GN and KN shall be jointly and severally liable for claims
against Siblings described in clauses (i) and (ii).
(b) To secure the indemnification obligations of the Indemnitors to
the Indemnitees, the Escrow Fund will be deposited with the Escrow Agent in
accordance with Section 1.3 hereof and the Escrow Agreement. To further
secure the indemnification obligations of the Indemnitors to the Indemnities,
Parent shall have the right to offset indemnified claims against payment of
up to 20% of the JL Deferred Cash (the "JL Offset Amount")
(c) Each Indemnitor acknowledges that its indemnification
obligations hereunder are solely in his capacity as a former shareholder or
beneficial owner of shares of the Company, and, accordingly, the
indemnification obligations in this Article VII shall not entitle any current
or former
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officer, director or employee of the Company to any indemnification from the
Company pursuant to the Articles of Incorporation, or any agreement with the
Company (notwithstanding any insurance policy).
7.3 METHOD OF ASSERTING CLAIMS. Parent shall give prompt written notice
(the "Claim Notice") to the agent for the Indemnitors (the "Securityholder
Agent") as identified in Section 7.5 below, and the Escrow Agent of any claim
or event known to it which gives rise or may give rise to a claim for
indemnification hereunder (an "Indemnifiable Claim") as provided in the
Escrow Agreement.
7.4 INDEMNIFICATION LIABILITY LIMITATIONS.
(a) The maximum aggregate liability of the Indemnitors for Damages
shall be limited to the Maximum Liability Amount (as defined below), except
(i) for claims based on fraud, (ii) for breaches of the representations and
warranties contained in Sections 2.3 and 2.4 in which case the Indemnitors
shall be liable for the total amount of such Damages, and (iii) for breaches
of the representations and warranties contained in Section 2.10 in which case
the Indemnitors shall be liable for Damages as described in Section 7.4(e).
The "Maximum Liability Amount" shall initially equal the First Liability
Amount. The "First Liability Amount" shall mean an amount equal to the sum of
(i) the product of the number of Siblings Escrow Shares multiplied by the
Parent Share Deemed Value (as defined below), plus (ii) the Siblings Escrow
Cash, plus (iii) the JL Escrow Cash, plus (iv) 20% of the JL Deferred Cash.
The "Parent Share Deemed Value" shall mean the last reported sale price of
the Parent Common Stock at the most recent close of daily trading prior to
the Closing as reported by the Nasdaq Stock Market.
(b) Twelve months after the Closing Date the Maximum Liability
Amount will be reduced to an amount equal to the sum of (i) 50% of the First
Liability Amount and (ii) the estimated liability (as set forth on the
applicable Claim Notice) of all unresolved claims submitted prior to twelve
months after the Closing Date.
(c) Eighteen months after the Closing Date the Maximum Liability
Amount will be reduced to an amount equal to the sum of (i) 25% of the First
Liability Amount and (ii) the estimated liability (as set forth on the
applicable Claim Notice) of all unresolved claims submitted prior to eighteen
months after the Closing Date.
(d) The Stockholders shall not be liable under this Article VII unless
Indemnity Amounts (as determined pursuant to the Escrow Agreement) totaling in
excess of $250,000 (the "Basket Amount") have been determined in which case
Parent shall be entitled to recover all Indemnity Amounts; provided, however,
Indemnity Amounts with respect to (i) the adjustment for a shortfall in the
Tangible Net Worth of the Company in accordance with Section 1.4, (ii) payments
to Ladenburg in excess of $500,000, (iii) Damages payable with respect to the
termination of Key Employees pursuant to Section 7.2(a), (iv) claims based on
fraud, (v) breaches of the representations and warranties contained in Sections
2.3 and 2.4, and (vi) those Special Matters identified in
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Schedule 7.2 as excluded from the Basket Amount, shall be paid without regard
to the Basket Amount.
(e) The maximum liability of the Indemnitors for Damages based on
breach of the representations and warranties contained in Section 2.10 shall
be the First Liability Amount minus the Indemnity Amounts (as defined in the
Escrow Agreement) paid to Parent. Indemnity Amounts with respect to Section
2.10 ("Tax Indemnity Amounts") shall be subject to Section 7.4(d) and the
Basket Amount until the second anniversary of the Closing Date, and to a
special basket amount (the "Tax Basket") thereafter, as follows. The Tax
Basket shall equal $250,000 less the total amount of Tax Indemnity Amounts
which have not been paid at the second anniversary of the Closing Date due to
the operation of Section 7.4(d). After the second anniversary of the Closing
Date, the Stockholders shall not be liable under this Article VII for Damages
based on breach of the representations and warranties contained in Section
2.10 until additional Tax Indemnity Amounts total in excess of the Tax Basket
in which case Parent shall be entitled to recover all Tax Indemnity Amounts.
For example, if Tax Indemnity Amount A is determined to be $100,000 prior to
the second anniversary of the Closing Date and there are no other Indemnity
Amounts determined, then Parent will not be entitled to recover Tax Indemnity
Amount A, and the Tax Basket following the second anniversary of the Closing
Date will be $150,000. In the same case, if following the second anniversary
of the Closing Date, Tax Indemnity Amount B is determined to be $75,000,
Parent will not be entitled to recovery, but if Tax Amount C is then
determined to be $100,000, Parent will be entitle to recover the entire
amount of Tax Indemnity Amount A, Tax Indemnity Amount B, and Tax Indemnity
Amount C.
(f) Nothing in this Article VII shall limit, in any manner (whether
by time, amount, procedure or otherwise), any remedy at law or in equity to
which Parent may be entitled as a result of actual fraud or willful
misrepresentation or misconduct by the Company or Stockholders.
(g) The indemnification obligations of the Indemnitors hereunder
shall be the sole and exclusive obligations of the Indemnitors (as beneficial
owners of the Company) with respect to any Damages under this Agreement and
no former shareholder, optionholder, warrantholder, officer, director or
employee of the Company other than the Indemnitors shall have any other
personal liability to Parent or Sub in connection with this Agreement
following the Closing.
7.5 SECURITYHOLDER AGENT OF THE STOCKHOLDERS; POWER OF ATTORNEY. In the
event that the Acquisition is closed, GN shall be appointed as the
Securityholder Agent for each Stockholder of the Company and for each
Indemnitor.
7.6 THIRD-PARTY CLAIMS. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and
the Securityholder Agent and the Shareholders of the Company shall be
entitled, at their expense, to participate in any defense of such claim.
Parent shall have the right in its sole discretion to settle any such claim;
provided, however, that except with the consent of the Securityholder Agent,
no settlement of any such claim with third-party claimants shall be
determinative of the amount or validity of any claim against the Escrow Fund.
In the event that
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the Securityholder Agent has consented to any such settlement, the
Securityholder Agent shall have no power or authority to object under any
provision of this Article VII to the amount of any claim by Parent against
the Escrow Fund with respect to such settlement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. Except as provided in Section 8.2, this Agreement may be
terminated and the Acquisition abandoned at any time prior to the Closing:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Closing has not occurred
by March 31, 1999, provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in
the failure of the Acquisition to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement; (ii) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Acquisition; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Acquisition by any Governmental Entity that would make
consummation of the Acquisition illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable
to the Acquisition by any Governmental Entity, which would: (i) prohibit
Parent's ownership or operation of any portion of the business of the Company
or (ii) compel Parent or the Company to dispose of or hold separate all or a
portion of the business or assets of the Company or Parent as a result of the
Acquisition;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Company or the Stockholders and such breach has not been
cured within ten (10) calendar days after written notice to the Company;
provided, however, that, no cure period shall be required for a breach which
by its nature cannot be cured;
(e) by the Company if neither it nor any Stockholder is in material
breach of their respective obligations under this Agreement and there has
been a material breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Parent and such breach has not
been cured within ten (10) calendar days after written notice to Parent;
provided, however, that no cure period shall be required for a breach which
by its nature cannot be cured; or
(f) by Parent if an event having a Company Material Adverse Effect
shall have occurred after the date of this Agreement.
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(g) by the Company or the Stockholders if an event having a Parent
Material Adverse Effect shall have occurred after the date of this Agreement.
8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Parent, or the
Company, or their respective officers, directors or stockholders, provided
that each party shall remain liable for any breaches of this Agreement prior
to its termination; provided further that, the provisions of Sections 5.8,
5.9(a) and 5.10, Article IX and this Section 8.2 shall remain in full force
and effect and survive any termination of this Agreement.
8.3 AMENDMENT. This Agreement may be amended by the parties hereto at
any time by execution of an instrument in writing signed on behalf of Parent,
the Company and the Stockholders.
8.4 EXTENSION; WAIVER. At any time prior to the Closing, Parent and the
Stockholders may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice), provided,
however, that notices sent by mail will not be deemed given until received:
(a) if to Parent, to:
Gametech International, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to
Bingo Technologies Corporation
Post Office Box 5367
000 Xxxxxxx 00, Xxxxx 00
Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Stockholders or Indemnitors, to:
Siblings Partners, L.P.
Xxxx Xxxxxx Xxx 000
Xxxxxx Xxxx, XX 00000
Xxxxxx X. Xxxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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Xxxxx X. Xxxxxxx
000 Xxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Xxxx X. Xxxxxx
00000 000xx Xxxxxx XX
Xxxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(d) If to the Escrow Agent, to:
US Bank Trust, N.A.
Global Escrow Depository Services #SANF0527
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Exhibits hereto,
the Confidential Disclosure Agreements, dated February 12, 1998, October 29,
1997 and November 9, 1998, between the Company and Parent and the documents
and instruments and other agreements among the parties hereto referenced
herein: (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof; (b) are not intended to confer upon any other person
any rights or remedies hereunder; and (c) shall not be assigned (other than
by operation of law), except that Parent may assign its rights and delegate
its obligations hereunder to its affiliates, provided, however, that an
assignment to an affiliate shall not relieve Parent of its obligations
hereunder.
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9.5 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision that will achieve, to the extent possible,
the economic, business and other purposes of such void or unenforceable
provision.
9.6 OTHER REMEDIES. Any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Maricopa County, State of Arizona,
in connection with any matter based upon or arising out of this Agreement or
the matters contemplated herein, agrees that process may be served upon them
in any manner authorized by the laws of the State of Arizona for such persons
and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
9.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
9.9 ATTORNEYS FEES. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party
hereto, the prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any other relief to
which the prevailing party may be entitled).
9.10 THIRD PARTY BENEFICIARIES. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any person or entity other than the parties hereto.
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IN WITNESS WHEREOF, Parent, the Company, the Indemnitors, and the
Stockholders have caused this Agreement to be signed, all as of the date
first written above.
GAMETECH INTERNATIONAL, INC. BINGO TECHNOLOGIES
CORPORATION
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxxxxx
------------------------------- -------------------------------
Name: Xxxx X. Xxxxx Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer Title: Chairman
STOCKHOLDERS:
SIBLINGS PARTNERS, L.P.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Title: General Partner
----------------------------
/s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
INDEMNITORS
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
-----------------------------------
Xxxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
Exhibit A N/A
Exhibit B Form of Noncompetition Agreement
Exhibit C Form of Escrow Agreement
Exhibit D-1 Form of Employment Agreement: GN
Exhibit D-2 Form of Employment Agreement: KN
Exhibit D-3 Form of Employment Agreement: JL
Exhibit E N/A
Exhibit F N/A
Exhibit G-1 Form of Siblings Promissory Note
Exhibit G-2 Form of JL Promissory Note
EXHIBIT B
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is entered into on February
8, 1999, by and between Gametech International, Inc., a Delaware corporation
("Gametech"), Bingo Technologies Corporation, a Nevada corporation ("BingoTech")
and Xxxxxx Xxxxxxx, a stockholder of BingoTech ("Stockholder"). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Stock Purchase Agreement (the "Purchase Agreement") dated as of
February 8, 1999, among Gametech, BingoTech and the stockholders and indemnitors
named therein.
BACKGROUND
A. The Purchase Agreement provides for the acquisition by Gametech of all
of the outstanding capital stock of BingoTech (the "Acquisition").
B. Stockholder is receiving significant cash and stock of Gametech
pursuant to the terms of the Purchase Agreement and Stockholder acknowledges
that a portion of the consideration paid by Gametech in connection with the
Acquisition is based on Stockholder entering into and performing the obligations
of this Agreement.
C. As a condition to the Acquisition and to preserve the value and
goodwill of BingoTech after it is acquired by Gametech, the Purchase Agreement
contemplates, among other things, that Stockholder enter into this Agreement and
that this Agreement become effective upon the closing of the Acquisition.
D. BingoTech is currently engaged in the business of developing,
designing, manufacturing, marketing, distributing, selling, leasing and
licensing electronic gaming products, gaming software, software supporting
gaming businesses, and related services including: hand-held electronic bingo
daubing products, computerized bingo accounting products, point of sale bingo
system products, player tracking systems, casino accounting systems, pulltab
accounting systems, big screen electronic bingo daubing products, and networked
high-speed bingo products, (the "Business"). The Business also includes all
activities planned to be conducted by BingoTech and its subsidiaries as of the
Effective Date. Following the Acquisition, Gametech will continue conducting
the Business worldwide.
NOW, THEREFORE, in consideration of the mutual promises made herein,
Gametech and Stockholder (collectively referred to as the "Parties") hereby
agree as follows:
1. COVENANT NOT TO COMPETE OR SOLICIT.
(a) NON-COMPETITION. For five (5) years after the Effective Date of
the Acquisition (the "Noncompetition Period"), Stockholder shall not directly or
indirectly, without the prior written consent of Gametech, (i) engage, or
attempt to engage, anywhere in the world in (whether as an employee, agent,
consultant, advisor, independent contractor, proprietor, partner, officer,
director or otherwise) or have any ownership interest in (except for ownership
of one percent (1%) or less of any entity whose securities have been registered
under the Securities Act of 1933 or
Section 12 of the Securities Exchange Act of 1934 and except for ownership of
securities of Gametech) or participate in the financing, operation,
management or control of any firm, partnership, corporation, limited
liability company, entity or business that is competitive with the Business;
or (ii) induce or attempt to induce, directly or indirectly, any customer,
supplier or distributor of BingoTech or Gametech to terminate or reduce its
relationship with Gametech in order to enter into any relationship with
Stockholder or with any other person in a competing Business.
(b) NON-SOLICITATION. During the Noncompetition Period, Stockholder
shall not, directly or indirectly, without the prior written consent of
Gametech, solicit or take any other similar action which is intended to induce
any employee of Gametech or any subsidiary of Gametech or BingoTech to terminate
employment with Gametech or any subsidiary of Gametech or BingoTech.
(c) SEVERABLE COVENANTS. The covenants contained in the preceding
paragraphs shall be construed as a series of separate covenants, one for each
county, city, state and country of any geographic area of the world. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenants contained in the preceding paragraphs. If, in any
judicial proceeding, a court refuses to enforce any of such separate covenants
(or any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be,
permitted by applicable laws.
(d) EQUITABLE REMEDY. Stockholder agrees that it would be impossible
or inadequate to measure and calculate Gametech's or BingoTech's damages from
any breach of the covenants set forth in this Section 1. Accordingly,
Stockholder agrees that if he breaches any provision of this Section 1, Gametech
or BingoTech will have available, in addition to any other right or remedy
otherwise available, the right to obtain an injunction from a court of competent
jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement.
(e) REASONABLENESS OF RESTRICTIONS. Stockholder recognizes that the
consideration to be paid and all other obligations of Gametech to be performed
pursuant to the Purchase Agreement are intended to secure Stockholder's
agreement to the conditions of this Agreement, and Stockholder recognizes that
the scope of the restrictions and the foregoing territorial and time limitations
are reasonable and properly required for the adequate protection of the business
of Gametech and its subsidiaries and affiliates, including, following the
Effective Date, BingoTech, and that in the event the foregoing restrictions are
deemed to be unreasonable for any reason by any tribunal having jurisdiction,
Stockholder agrees to request, and to submit to, a narrowing of the scope of the
foregoing restrictions or the reduction of either said territorial or time
limitation to such an area or period as shall be deemed reasonable by such
tribunal.
2. MISCELLANEOUS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement
shall be governed by the laws of the State of Arizona without reference to rules
of conflicts of law. Stockholder hereby consents to the personal jurisdiction
of the state and federal courts located in
Arizona for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are
participants.
(b) NO ASSIGNMENT. Stockholder shall not assign this Agreement or
any rights or obligations under this Agreement without the prior written consent
of Gametech.
(c) NOTICE. Any notice or communication required or permitted under
this Agreement shall be made in writing and delivered personally to the other
party or sent by certified or registered mail, return receipt requested and
postage prepaid.
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by Gametech and Stockholder.
(e) WAIVER OF BREACH. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as or
be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(f) HEADINGS. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
GAMETECH INTERNATIONAL, INC. STOCKHOLDER
By:
------------------------ ----------------------------
Name:
Name:
------------------------
Title:
------------------------
BINGO TECHNOLOGIES CORPORATION
By:
------------------------
Name:
------------------------
Title:
------------------------
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is entered into on February
8, 1999, by and between Gametech International, Inc., a Delaware corporation
("Gametech"), Bingo Technologies Corporation, a Nevada corporation ("BingoTech")
and Xxxxx Xxxxxxx, a stockholder of BingoTech ("Stockholder"). Capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the Stock Purchase Agreement (the "Purchase Agreement") dated as of
February 8, 1999, among Gametech, BingoTech and the stockholders and indemnitors
named therein.
BACKGROUND
A. The Purchase Agreement provides for the acquisition by Gametech of all
of the outstanding capital stock of BingoTech (the "Acquisition").
B. Stockholder is receiving significant cash and stock of Gametech
pursuant to the terms of the Purchase Agreement and Stockholder acknowledges
that a portion of the consideration paid by Gametech in connection with the
Acquisition is based on Stockholder entering into and performing the obligations
of this Agreement.
C. As a condition to the Acquisition and to preserve the value and
goodwill of BingoTech after it is acquired by Gametech, the Purchase Agreement
contemplates, among other things, that Stockholder enter into this Agreement and
that this Agreement become effective upon the closing of the Acquisition.
D. BingoTech is currently engaged in the business of developing,
designing, manufacturing, marketing, distributing, selling, leasing and
licensing electronic gaming products, gaming software, software supporting
gaming businesses, and related services including: hand-held electronic bingo
daubing products, computerized bingo accounting products, point of sale bingo
system products, player tracking systems, casino accounting systems, pulltab
accounting systems, big screen electronic bingo daubing products, and networked
high-speed bingo products, (the "Business"). The Business also includes all
activities planned to be conducted by BingoTech and its subsidiaries as of the
Effective Date. Following the Acquisition, Gametech will continue conducting
the Business worldwide.
NOW, THEREFORE, in consideration of the mutual promises made herein,
Gametech and Stockholder (collectively referred to as the "Parties") hereby
agree as follows:
1. COVENANT NOT TO COMPETE OR SOLICIT.
(a) NON-COMPETITION. For five (5) years after the Effective Date of
the Acquisition (the "Noncompetition Period"), Stockholder shall not directly or
indirectly, without the prior written consent of Gametech, (i) engage, or
attempt to engage, anywhere in the world in (whether as an employee, agent,
consultant, advisor, independent contractor, proprietor, partner, officer,
director or otherwise) or have any ownership interest in (except for ownership
of one percent (1%) or less of any entity whose securities have been registered
under the Securities Act of 1933 or
Section 12 of the Securities Exchange Act of 1934 and except for ownership of
securities of Gametech) or participate in the financing, operation,
management or control of any firm, partnership, corporation, limited
liability company, entity or business that is competitive with the Business;
or (ii) induce or attempt to induce, directly or indirectly, any customer,
supplier or distributor of BingoTech or Gametech to terminate or reduce its
relationship with Gametech in order to enter into any relationship with
Stockholder or with any other person in a competing Business.
(b) NON-SOLICITATION. During the Noncompetition Period, Stockholder
shall not, directly or indirectly, without the prior written consent of
Gametech, solicit or take any other similar action which is intended to induce
any employee of Gametech or any subsidiary of Gametech or BingoTech to terminate
employment with Gametech or any subsidiary of Gametech or BingoTech.
(c) SEVERABLE COVENANTS. The covenants contained in the preceding
paragraphs shall be construed as a series of separate covenants, one for each
county, city, state and country of any geographic area of the world. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenants contained in the preceding paragraphs. If, in any
judicial proceeding, a court refuses to enforce any of such separate covenants
(or any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be,
permitted by applicable laws.
(d) EQUITABLE REMEDY. Stockholder agrees that it would be impossible
or inadequate to measure and calculate Gametech's or BingoTech's damages from
any breach of the covenants set forth in this Section 1. Accordingly,
Stockholder agrees that if he breaches any provision of this Section 1, Gametech
or BingoTech will have available, in addition to any other right or remedy
otherwise available, the right to obtain an injunction from a court of competent
jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement.
(e) REASONABLENESS OF RESTRICTIONS. Stockholder recognizes that the
consideration to be paid and all other obligations of Gametech to be performed
pursuant to the Purchase Agreement are intended to secure Stockholder's
agreement to the conditions of this Agreement, and Stockholder recognizes that
the scope of the restrictions and the foregoing territorial and time limitations
are reasonable and properly required for the adequate protection of the business
of Gametech and its subsidiaries and affiliates, including, following the
Effective Date, BingoTech, and that in the event the foregoing restrictions are
deemed to be unreasonable for any reason by any tribunal having jurisdiction,
Stockholder agrees to request, and to submit to, a narrowing of the scope of the
foregoing restrictions or the reduction of either said territorial or time
limitation to such an area or period as shall be deemed reasonable by such
tribunal.
2. MISCELLANEOUS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement
shall be governed by the laws of the State of Arizona without reference to rules
of conflicts of law. Stockholder hereby consents to the personal jurisdiction
of the state and federal courts located in
Arizona for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are
participants.
(b) NO ASSIGNMENT. Stockholder shall not assign this Agreement or
any rights or obligations under this Agreement without the prior written consent
of GameTech.
(c) NOTICE. Any notice or communication required or permitted under
this Agreement shall be made in writing and delivered personally to the other
party or sent by certified or registered mail, return receipt requested and
postage prepaid.
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by Gametech and Stockholder.
(e) WAIVER OF BREACH. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as or
be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(f) HEADINGS. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
GAMETECH INTERNATIONAL, INC. STOCKHOLDER
By:
------------------------ ----------------------------
Name:
Name:
------------------------
Title:
------------------------
BINGO TECHNOLOGIES CORPORATION
By:
------------------------
Name:
------------------------
Title:
------------------------
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement") is entered into on February
8, 1999, by and between Gametech International, Inc., a Delaware corporation
("Gametech"), Bingo Technologies Corporation, a Nevada corporation ("BingoTech")
and Xxxx Xxxxxx, a stockholder of BingoTech ("Stockholder"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Stock Purchase Agreement (the "Purchase Agreement") dated as of February
8, 1999, among Gametech, BingoTech and the stockholders and indemnitors named
therein.
BACKGROUND
A. The Purchase Agreement provides for the acquisition by Gametech of all
of the outstanding capital stock of BingoTech (the "Acquisition").
B. Stockholder is receiving significant cash and stock of Gametech
pursuant to the terms of the Purchase Agreement and Stockholder acknowledges
that a portion of the consideration paid by Gametech in connection with the
Acquisition is based on Stockholder entering into and performing the obligations
of this Agreement.
C. As a condition to the Acquisition and to preserve the value and
goodwill of BingoTech after it is acquired by Gametech, the Purchase Agreement
contemplates, among other things, that Stockholder enter into this Agreement and
that this Agreement become effective upon the closing of the Acquisition.
D. BingoTech is currently engaged in the business of developing,
designing, manufacturing, marketing, distributing, selling, leasing and
licensing electronic gaming products, gaming software, software supporting
gaming businesses, and related services including: hand-held electronic bingo
daubing products, computerized bingo accounting products, point of sale bingo
system products, player tracking systems, casino accounting systems, pulltab
accounting systems, big screen electronic bingo daubing products, and networked
high-speed bingo products, (the "Business"). The Business also includes all
activities planned to be conducted by BingoTech and its subsidiaries as of the
Effective Date. Following the Acquisition, Gametech will continue conducting
the Business worldwide.
NOW, THEREFORE, in consideration of the mutual promises made herein,
Gametech and Stockholder (collectively referred to as the "Parties") hereby
agree as follows:
1. COVENANT NOT TO COMPETE OR SOLICIT.
(a) NON-COMPETITION. For five (5) years after the Effective Date of
the Acquisition (the "Noncompetition Period"), Stockholder shall not directly or
indirectly, without the prior written consent of Gametech, (i) engage, or
attempt to engage, anywhere in the world in (whether as an employee, agent,
consultant, advisor, independent contractor, proprietor, partner, officer,
director or otherwise) or have any ownership interest in (except for ownership
of one percent (1%) or less of any entity whose securities have been registered
under the Securities Act of 1933 or Section 12 of the Securities Exchange Act of
1934 and except for ownership of securities of
Gametech) or participate in the financing, operation, management or control
of any firm, partnership, corporation, limited liability company, entity or
business that is competitive with the Business; or (ii) induce or attempt to
induce, directly or indirectly, any customer, supplier or distributor of
BingoTech or Gametech to terminate or reduce its relationship with Gametech
in order to enter into any relationship with Stockholder or with any other
person in a competing Business.
(b) NON-SOLICITATION. During the Noncompetition Period, Stockholder
shall not, directly or indirectly, without the prior written consent of
Gametech, solicit or take any other similar action which is intended to induce
any employee of Gametech or any subsidiary of Gametech or BingoTech to terminate
employment with Gametech or any subsidiary of Gametech or BingoTech.
(c) SEVERABLE COVENANTS. The covenants contained in the preceding
paragraphs shall be construed as a series of separate covenants, one for each
county, city, state and country of any geographic area of the world. Except for
geographic coverage, each such separate covenant shall be deemed identical in
terms to the covenants contained in the preceding paragraphs. If, in any
judicial proceeding, a court refuses to enforce any of such separate covenants
(or any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be,
permitted by applicable laws.
(d) EQUITABLE REMEDY. Stockholder agrees that it would be impossible
or inadequate to measure and calculate Gametech's or BingoTech's damages from
any breach of the covenants set forth in this Section 1. Accordingly,
Stockholder agrees that if he breaches any provision of this Section 1, Gametech
or BingoTech will have available, in addition to any other right or remedy
otherwise available, the right to obtain an injunction from a court of competent
jurisdiction restraining such breach or threatened breach and to specific
performance of any such provision of this Agreement.
(e) REASONABLENESS OF RESTRICTIONS. Stockholder recognizes that the
consideration to be paid and all other obligations of Gametech to be performed
pursuant to the Purchase Agreement are intended to secure Stockholder's
agreement to the conditions of this Agreement, and Stockholder recognizes that
the scope of the restrictions and the foregoing territorial and time limitations
are reasonable and properly required for the adequate protection of the business
of Gametech and its subsidiaries and affiliates, including, following the
Effective Date, BingoTech, and that in the event the foregoing restrictions are
deemed to be unreasonable for any reason by any tribunal having jurisdiction,
Stockholder agrees to request, and to submit to, a narrowing of the scope of the
foregoing restrictions or the reduction of either said territorial or time
limitation to such an area or period as shall be deemed reasonable by such
tribunal.
2. MISCELLANEOUS.
(a) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement
shall be governed by the laws of the State of Arizona without reference to rules
of conflicts of law. Stockholder hereby consents to the personal jurisdiction
of the state and federal courts located in
Arizona for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are
participants.
(b) NO ASSIGNMENT. Stockholder shall not assign this Agreement or
any rights or obligations under this Agreement without the prior written consent
of Gametech.
(c) NOTICE. Any notice or communication required or permitted under
this Agreement shall be made in writing and delivered personally to the other
party or sent by certified or registered mail, return receipt requested and
postage prepaid.
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by Gametech and Stockholder.
(e) WAIVER OF BREACH. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as or
be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(f) HEADINGS. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
GAMETECH INTERNATIONAL, INC. STOCKHOLDER
By:
------------------------ ----------------------------
Name:
Name:
------------------------
Title:
------------------------
BINGO TECHNOLOGIES CORPORATION
By:
------------------------
Name:
------------------------
Title:
------------------------
EXHIBIT C
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made and entered into as of
February 8, 1999 by and among Gametech International, Inc., a Delaware
corporation ("Parent"), Xxxxxx X. Xxxxxxx, as agent (the "Securityholders'
Agent") for the Stockholders of Bingo Technologies Corporation (the
"Company"), Xxxx X. Xxxxxx ("JL"), Siblings Partners, L.P., a Delaware
limited partnership ("Siblings"; JL and Siblings collectively, the
"Stockholders"), Xxxxxx X. Xxxxxxx ("GN"), and Xxxxx X. Xxxxxxx and US Bank
Trust, N.A., as the escrow agent (the "Escrow Agent").
RECITALS
A. Parent, Siblings, JL, GN and KN have entered into a Stock Purchase
Agreement, dated February 8, 1999 (together with the Exhibits and Schedules
thereto, the "Acquisition Agreement"), pursuant to which the Company became a
wholly-owned subsidiary of Parent. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Acquisition Agreement.
B. GN, KN and JL have agreed to provide certain indemnities to Parent
in connection with the Acquisition. GN and KN are beneficial owners of
Siblings.
C. Pursuant to the Acquisition Agreement, Parent shall deposit with
the Escrow Agent the Siblings Escrow Shares (consisting of 373,387 shares of
Parent Common Stock), the Siblings Escrow Cash (consisting of $1,371,118) and
the JL Escrow Cash (consisting of $581,093), collectively, the Escrow Fund,
and such Escrow Fund will be released pursuant to the terms and conditions of
the Acquisition Agreement and this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants set forth herein and in the Acquisition Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto and Escrow Agent agree as follows:
1. ESCROW AMOUNT. Parent has delivered directly to the Escrow Agent,
as provided by the Acquisition Agreement, (i) the Siblings Escrow Cash and JL
Escrow Cash for deposit into an interest bearing account, and (ii)
certificates, registered in the name of US Bank Trust, N.A. as escrow agent,
representing the Siblings Escrow Shares. The Siblings Escrow Cash and the JL
Escrow Cash shall be initially deposited in a money market account with US
Bank Trust, N.A., and thereafter shall be invested as Parent and the
Securityholders' Agent shall mutually agree. Siblings shall have voting
rights with respect to the Siblings Escrow Shares.
2. DISBURSEMENT FOR INDEMNIFICATION.
(a) NOTICES OF CLAIMS. Parent shall give prompt written notice
(the "Claim Notice") to the Securityholders' Agent and the Escrow Agent of
any claim or event known to it which gives rise or may give rise to a claim
for indemnification under Article VII of the Acquisition Agreement. The
Claim Notice shall specify the nature and estimated amount of Damages (the
"Claimed Amount"). The failure of Parent to give notice as provided in this
Section 2(a) shall not relieve any Stockholder of its obligations under
Article VII of the Acquisition Agreement, except to the extent that such
failure has adversely affected the rights of such Stockholder. In the case
of any claim for indemnification hereunder arising out of a claim, action,
suit or proceeding brought by any person who is not a party to this Agreement
(a "Third-Party Claim"), Parent also shall give the Securityholders' Agent
copies of any written claims, process or legal pleadings with respect to such
Third-Party Claim promptly after such documents are received by Parent.
(b) OBJECTIONS TO CLAIMS. Within 20 days after delivery of a
Claim Notice, the Securityholders' Agent shall provide written notice (the
"Certificate of Objection") to Parent and the Escrow Agent of his objections,
if any, to the Claim Notice.
(i) If the Securityholders' Agent fails to deliver the
Certificate of Objection to Parent and the Escrow Agent within such time
period, Parent shall be entitled to receive the Claimed Amount from the
Escrow Fund in accordance herewith.
(ii) If the Securityholders' Agent delivers a Certificate of
Objection to Parent and the Escrow Agent (it being understood that Escrow
Agent may rely on such Certificate of Objection for the purposes of refusing
to make any disbursement), the amounts shall not be released from the Escrow
Fund until such time as (A) joint written instructions (the "Joint
Instructions"), executed by the Securityholders' Agent and Parent, are
delivered to the Escrow Agent directing the Escrow Agent to the manner and
amount of any disbursement to be made, (B) a written order from an arbitrator
or arbitrators issued pursuant to 2(b)(iii) below or (C) a certified copy of
a final unappealable order or judgment of a court of competent jurisdiction
determining that an amount is due to Parent is delivered to the Escrow Agent.
As used in this Agreement, a Claim Notice for which no Certificate of
Objection from the Securityholders' Agent is received, Joint Instructions,
arbitrator's order or court judgment are referred to collectively as the
"Applicable Release Document." As used in this Agreement, the Claimed Amount
in a Claim Notice for which no Certificate of Objection from the
Securityholders' Agent is received, or the amount specified in such Joint
Instructions, arbitrator's order, or court judgment, as the case may be, is
the "Indemnity Amount" with respect to such claim.
(iii) RESOLUTION OF CONFLICTS; ARBITRATION.
(1) In case the Securityholders' Agent has delivered a
Certificate of Objection, the Securityholders' Agent and Parent shall attempt
in good faith to agree upon the rights of the respective parties with respect
to each of such claims. If the Securityholders' Agent and Parent should so
agree, Joint Written Instructions indicating such agreement shall be prepared
and signed by both parties and shall be furnished to the Escrow Agent.
(2) If no such agreement can be reached after good faith
negotiation, either Parent or the Securityholders' Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue
in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by one arbitrator mutually agreeable to
Parent and the Securityholders' Agent. In the event that within forty-five
(45) days after submission of any dispute to arbitration, Parent and the
Securityholders' Agent cannot mutually agree on one arbitrator, Parent and
the Securityholders' Agent shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgement of the
arbitrator or majority of the three arbitrators, as the case may be, to
discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the extent as a court of competent law or
equity, should the arbitrator or a majority of the three arbitrators, as the
case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator or a majority of
the three arbitrators, as the case may be, as to the validity and amount of
any claim in such Claim Notice shall be binding and conclusive upon the
parties to this Agreement, and the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth
the award, judgment, decree or order awarded by the arbitrator(s).
(3) Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. Any such
arbitration shall be held in Tempe, Arizona under the rules then in effect of
the American Arbitration Association. The arbitrator(s) shall determine how
all expenses relating to the arbitration shall be paid, including without
limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration Association.
(c) RELEASE OF ESCROW. Distributions to Parent with respect to
Indemnity Amounts shall be allocated to the Siblings Escrow Shares, the
Siblings Escrow Cash, the JL Escrow Cash and the JL Offset Amount as set
forth on Exhibit A hereto, except that in the event that an Indemnity Amount
is based on a matter described in the last sentence of Section 7.2(a) of the
Acquisition Agreement, such Indemnity Amount shall be specially allocated to
the responsible party or parties, and such special allocation shall be
contained in the Applicable Release Document. To the extent that a
distribution is allocated to the Siblings Escrow Shares, GN shall within 10
days pay to the Escrow Agent the amount of such allocation in cash, and the
Escrow Agent shall pay such cash to Parent and release to Siblings a number
of the Siblings Escrow Shares equal to such cash amount divided by the Parent
Share Deemed Value. If GN fails to pay such amount of cash, upon request of
Parent, the Escrow Agent shall deliver to Parent a number of Siblings Escrow
Shares equal to such amount of cash divided by the Parent Share Deemed Value
or the last reported sale price of Parent Common Stock at the most recent
close of daily trading prior to the date of the Applicable Release Document,
whichever is less. To the extent that a distribution is allocated to the JL
Escrow Cash and the JL Offset, it shall first be paid from the JL Escrow
Cash, and to the extent that JL Escrow Cash is insufficient to satisfy such
combined allocation, Parent shall offset such excess amount prorata over the
next 12 monthly installments of the JL Deferred Cash. Subject to the
foregoing, upon receipt by
the Escrow Agent of an Applicable Release Document, Escrow Agent shall
deliver to Parent an amount of cash equal to the Indemnity Amount.
(d) EXAMPLE. If, for example, the allocations of Exhibit A were
Siblings Escrow Shares 30%, Siblings Escrow Cash 35%, JL Escrow Cash 16% and
the JL Offset Amount 19%, and the Indemnity Amount were $2,000,000, GN would
pay the Escrow Agent (for payment to Parent) $600,000, $700,000 of the
Siblings Escrow Cash would be paid to Parent, all of the JL Escrow Cash
($581,093) would be paid to Parent, and Parent would offset $118,907 against
the JL Deferred Cash.
3. INTERIM DISTRIBUTIONS TO STOCKHOLDERS; TERMINATION OF ESCROW.
(a) INTERIM DISTRIBUTIONS TO STOCKHOLDERS. Twelve months after
the Closing Date Parent shall instruct the Escrow Agent to release to the
Stockholders that amount of the Escrow Fund in excess of the Maximum
Liability Amount then in effect. Similarly, 18 months after the Closing Date
Parent shall instruct the Escrow Agent to release to the Stockholders that
amount of the Escrow Fund in excess of the Maximum Liability Amount then in
effect. In each such instance, in determining the portion of the Escrow Fund
to be released to JL, the JL Escrow Cash and the JL Offset Amount shall be
released in the proportion that the JL Escrow Cash bears to the sum of the JL
Escrow Cash and the JL Offset Amount.
(b) DISBURSEMENT OF ESCROW FUND UPON TERMINATION. Subject to
Section 3(c) below, if, at the close of business on the twenty-four month
anniversary of the Closing Date (the "Final Release Date"), any amounts still
remain in the Escrow Fund, and no claims for Damages are then pending, then
any of the Escrow Fund, together with any interest thereon, remaining in the
Escrow Account shall be disbursed as follows. Escrow Agent shall distribute
the remaining Siblings Escrow Shares and Siblings Escrow Cash to Siblings,
and the remaining JL Escrow Cash to JL according to written instructions
provided to the Escrow Agent by the Securityholders' Agent.
(c) ESCROW RESERVE. In the event that, at the Final Release Date,
unresolved claims for indemnification shall have been made by Parent, (i)
Escrow Agent shall set aside and retain (to the extent available in the
then-remaining Escrow Account) as a reserve to cover such claim or claims
(such amount so set aside and reserved, as reduced from time to time pursuant
to the provisions of this Agreement, being herein called the "Escrow Account
Reserved Amount") such number of Siblings Escrow Shares (valued at the Parent
Share Deemed Value or the last reported sale price of Parent Common Stock at
the most recent close of daily trading prior to the date of release,
whichever is less), such amount of Sibling Escrow Cash and such amount of JL
Escrow Cash, all in the proportions set forth on Exhibit A, to satisfy the
Claimed Amount of all unresolved claims, and (ii) if such Siblings Escrow
Shares, Siblings Escrow Cash and JL Escrow Cash are insufficient to cover
unresolved claims, Parent shall be entitled to withhold such number of
installments of JL Deferred Cash (not in excess of the JL Offset Amount) as
necessary to cover any unresolved claims as part of the Escrow Account
Reserve Amount. Distributions of the Escrow Account Reserved Amount shall be
made by the Escrow Agent upon receipt of an Applicable Release Document.
After resolution of any pending claim, any Escrow Account Reserved Amount
remaining shall be distributed in accordance with the provision of Section
3(b) above.
4. PROTECTION OF ESCROW FUND. The Escrow Agent shall hold and safeguard
the Escrow Fund during the Escrow Period, shall treat such funds as a trust fund
in accordance with the terms of
this Agreement and shall hold and dispose of the Escrow Fund only in
accordance with the terms hereof.
5. ESCROW AGENT'S DUTIES.
(a) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein and may rely and shall be
protected in relying on any instrument reasonably believed to be genuine (or
to be a genuine copy or facsimile of such instrument) and to have been signed
or presented by the proper Party or Parties. The Escrow Agent shall not be
liable for any act done or omitted hereunder as Escrow Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of
such good faith.
(b) The Escrow Agent is hereby expressly authorized to comply with
and obey orders, judgments or decrees of any court. In case the Escrow Agent
obeys or complies with any such order, judgment or decree of any court, the
Escrow Agent shall not be liable to any of the Parties or to any other person
by reason of such compliance, notwithstanding any such order, judgment or
decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(c) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the Parties executing or delivering
or purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(d) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
(e) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent and
the Securityholders' Representative, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for any act done or omitted hereunder as
Escrow Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall
be conclusive evidence of such good faith.
(f) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow
Agent may hold all documents and the Escrow Amount and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, may be required of the
Escrow Agent. Furthermore, the Escrow Agent may at its option file an action
of interpleader requiring the Parties to answer and litigate any claims and
rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and the Escrow Amount. Upon initiating such
action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(g) Parent shall pay the Escrow Agent its fees. Except in the
case of gross negligence or willful misconduct on the part of the Escrow
Agent, the Parties and their respective successors and assigns agree jointly
and severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees and disbursements that may be imposed on
Escrow Agent or incurred by Escrow Agent in connection with the performance
of its duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter.
(h) The Escrow Agent may resign at any time upon giving at least
fifteen (15) days written notice to the Parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
Escrow Agent which shall be accomplished as follows: The Parties shall use
their best efforts to mutually agree on a successor Escrow Agent within
fifteen (15) days after receiving such notice. If the Parties fail to agree
upon a successor Escrow Agent within such time, the Escrow Agent shall have
the right to appoint a successor Escrow Agent which regularly serves as an
escrow agent in connection with commercial transactions of similar size to
that related to the Escrow Fund. The successor Escrow Agent shall execute and
deliver an instrument accepting such appointment and it shall, without
further acts, be vested with all the estates, properties, rights, powers, and
duties of the predecessor Escrow Agent as if originally named as Escrow
Agent. The Escrow Agent shall be discharged from any further duties and
liability under this Agreement.
(i) The Escrow Agent is not a party to, or is not bound by, any
provisions which may be evidenced by, or arise out of, any agreement other
than as therein set forth under the express provisions of this Escrow
Agreement.
(j) The Escrow Agent shall not be required to take notice of any
default or to take any action with respect to such default involving any
expense or liability, unless notice in writing of such default is formally
given to [title], of the Escrow Agent and unless it is indemnified, in a
manner satisfactory to it, against such expense or liability.
(k) The Escrow Agent may seek the advice of legal counsel in the
event of any question or dispute as to the construction of any of the
provisions hereof or its duties hereunder, and it shall incur no liability
and shall be fully protected in acting in accordance with the opinion and
instructions of such legal counsel.
(l) The Escrow Agent shall not be answerable for the default or
misconduct of any agent or legal counsel employed or appointed, at its
discretion, by it if such agent or legal counsel shall have been selected
with reasonable care.
6. SECURITYHOLDERS' AGENT; POWER OF ATTORNEY.
(a) GN shall be appointed as the Securityholders' Agent for each
Stockholder of the Company, for and on behalf of Stockholders, to give and
receive notices and communications, to authorize delivery to Parent of shares
of Parent Common Stock from the Escrow Fund in satisfaction of claims by
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders
of courts and awards of arbitrators with respect to such claims, and to take
all actions necessary or appropriate in the judgment of Securityholders'
Agent for the accomplishment of the foregoing. Such agency may be changed by
the Stockholders from time to time upon not less than thirty (30) days prior
written notice to Parent; provided that the Securityholders' Agent may not be
removed unless holders of a majority interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. No bond shall be
required of the Securityholders' Agent, and the Securityholders' Agent shall
not receive compensation for his or her services. Notices or communications
to or from the Securityholders' Agent shall constitute notice to or from each
of the Stockholders.
(b) The Securityholders' Agent shall not be liable for any act
done or omitted hereunder as Securityholders' Agent while acting in good
faith and in the exercise of reasonable judgment. The Stockholders on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall severally
indemnify the Securityholders' Agent and hold the Securityholders' Agent
harmless against any loss, liability or expense incurred without negligence
or bad faith on the part of the Securityholders' Agent and arising out of or
in connection with the acceptance or administration of the Securityholders'
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Securityholders' Agent.
(c) A decision, act, consent or instruction of the
Securityholders' Agent shall constitute a decision of all the Stockholders
for whom a portion of the Escrow Amount otherwise issuable to them are
deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such Stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Securityholders' Agent as
being the decision, act, consent or instruction of each and every such
Stockholder. The Escrow Agent and Parent are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Securityholders' Agent.
7. GENERAL PROVISIONS.
(a) NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail
(return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) if to Parent to:
Gametech International, Inc.
0000 Xxxx 0xx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Chief Executive Officer
Facsimile: 602/804-1403
Telephone: 602/000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(ii) if to Securityholders' Representative:
Xxxxxx X. Xxxxxxx
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
(iii) if to Escrow Agent:
US Bank Trust, N.A.
Global Escrow Depository Services #SANF0527
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxx, Vice President
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Any notice sent by mail shall be deemed given five (5) days after
deposited with the U.S. Postal Service; any notice sent by overnight delivery
service shall be deemed given the day after deposit; any notice given by
facsimile shall be deemed given one (1) hour after transmission, or if not a
business day, on the next business day.
(b) INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(c) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the Parties and the Escrow Agent and delivered to the other Party and
Escrow Agent, it being understood that all Parties and the Escrow Agent need
not sign the same counterpart.
(d) ENTIRE AGREEMENT. This Agreement among the Parties hereto and
the Escrow Agent, together with the Acquisition Agreement: (i) constitutes
the entire agreement among the Parties and the Escrow Agent with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the Parties and the Escrow Agent
with respect to the subject matter hereof; (ii) except as expressly provided
herein, is not intended to confer upon any other person any rights or
remedies hereunder; and (iii) shall not be assigned by operation of law or
otherwise, except as otherwise specifically provided in writing by the
Parties and the Escrow Agent hereto; provided that Purchaser may assign its
rights and obligations hereunder to any of its subsidiaries, parents, or
affiliates or any successor in interest to the business of such Purchaser.
(e) SEVERABILITY. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null,
void, or unenforceable, said provision shall survive to the extent it is not
so declared, and all of the other provisions of this Agreement shall remain
in full force and effect.
(f) AMENDMENT; WAIVERS. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties, or
conditions hereof may be waived, only by a written instrument executed by the
Parties and the Escrow Agent, or in the case of a waiver, by the Party or
Escrow Agent waiving compliance. Any waiver by any Party or Escrow Agent of
any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
(h) RULES OF CONSTRUCTION. The Parties hereto and the Escrow
Agent agree that they each have been represented by counsel during the
negotiation and execution of this Agreement and acknowledge that they each
understand all provisions of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against
the party drafting such agreement or document.
(i) AUTOMATIC SUCCESSION. Notwithstanding anything in this
Agreement to the contrary, any company into which the Escrow Agent may be
merged or with which it may be consolidated, or any company to whom the
Escrow Agent may transfer a substantial amount of its global escrow business,
shall be the successor to the Escrow Agent without the execution or filing of
any paper or any further act on the part of any of the Parties, provided,
however, the Escrow Agent shall at no time during the term of this Agreement
have a substantial financial relationship with either the Parent or Company.
IN WITNESS WHEREOF, Parent, Company, Securityholders' Agent, the
Stockholders, GN, KN, and the Escrow Agent have caused this Agreement to be
signed by them or their respective duly authorized officers, all as of the
date first written above.
GAMETECH INTERNATIONAL, INC.
By: ___________________________________
Name:
Title:
SECURITYHOLDERS' REPRESENTATIVE
_______________________________________
Xxxxxx X. Xxxxxxx
ESCROW AGENT
US BANK TRUST, N.A.
as Escrow Agent
By: ___________________________________
Name:
Title:
STOCKHOLDERS
SIBLINGS PARTNERS, L.P.
By: ___________________________________
XXXXXX X. XXXXXXX
Title: ________________________________
_______________________________________
XXXXX X. XXXXXXX XXXX X. XXXXXX
SIGNATURE PAGE TO ESCROW AGREEMENT
EXHIBIT A
Allocation of Payments to Parent
DOLLARS RATIO
------- -----
Siblings Escrow Shares 373,387 x $3.25*= $1,213,508 .0000
Xxxxxxxx Escrow Cash 1,371,118 .3514
JL Escrow Cash 581,093 .1489
JL Offset Amount 736,253 .1887
---------- ------
$3,901,972 1.0000
* Parent Share Deemed Value
EXHIBIT D-1
GAMETECH INTERNATIONAL, INC.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into at Tempe,
Arizona on this 8th day of February, 1999 by and between Gametech International,
Inc., a Delaware corporation ("Gametech"), and Xxxxxx X. Xxxxxxx ("Executive")
and shall be effective as of the Effective Date as defined in Paragraph 3 of
this Agreement.
WHEREAS
A. Bingo Technologies Corporation ("BingoTech") and the other parties
thereto have entered into a Stock Purchase Agreement dated as of February 8,
1999 (the "Acquisition Agreement"), pursuant to which BingoTech has become a
wholly-owned subsidiary of Gametech (the "Acquisition"), and which requires,
among other things, that Executive enter into this Agreement.
B. Executive has been employed as an employee of BingoTech.
C. Gametech intends to continue the business of BingoTech after the
Closing of the Acquisition Agreement. To preserve and protect the assets of
BingoTech, including BingoTech's goodwill and customers of which the Executive
has, and will have, knowledge in his role as an employee of Gametech, the
Executive has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the provisions hereinafter described,
Gametech and Executive agree as follows:
1. DUTIES OF EXECUTIVE
During the term of this Agreement, Executive shall be employed by Gametech
as Vice President of Strategic Business Development of Gametech, reporting to
the Chief Executive Officer of Gametech, and in that capacity shall perform all
functions and duties consistent with such position on behalf of Gametech in an
efficient, trustworthy and professional manner.
Executive agrees to devote such time as necessary for the performance of
his duties under this Agreement so long as his employment under this Agreement
is continued by Gametech. Notwithstanding the above, Executive shall be
entitled to reasonable absences for administrative meetings and to pursue other
outside activities. Executive also shall be permitted to serve as a member of
the Board of Directors of other organizations, subject to approval by the Board,
on a case by case basis. Such approval shall be granted if it can be reasonably
demonstrated that such service does not involve a competitor of Gametech or its
Enterprises and does not materially interfere with effective performance of
Executive's duties under this Agreement.
2. TERM OF AGREEMENT
Unless terminated sooner in accordance with the provisions of this
Agreement, Gametech shall employ Executive and Executive accepts such employment
under the conditions set forth herein for a two (2) year term (the "Term")
beginning on the Effective Date of this Agreement and ending upon the close of
business on the second anniversary of the Effective Date. Notwithstanding the
foregoing, if this Agreement is not terminated in accordance with the provisions
herein on or before the expiration of its Term, such Term shall continue, and
the Agreement shall continue in force for successive two (2) year periods
unless, at least ninety (90) days prior to the expiration of the Term of the
Agreement, or ninety (90) days prior to the expiration of any subsequent two (2)
year Term, either Executive or Gametech gives the other party written notice of
its intent to terminate the Agreement at the end of such Term.
3. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth in this Paragraph 3:
a. "ANNUAL BASE SALARY" OR "BASE SALARY" shall mean the annual base
salary rate in effect for Executive from time to time during the accordance with
the provisions of Paragraph 4.a. of this Agreement.
b. "ANNUAL BONUS" OR "BONUS" shall mean a cash payment available
annually (or as otherwise provided for in this document) to Executive in
addition to Base Salary as determined in accordance with Paragraph 4.b. of this
Agreement.
c. "CAUSE" shall mean (i) Executive's conviction for any felony
involving moral turpitude; (ii) any conduct by Executive which is materially
injurious to Gametech or its Enterprises, including any action or inaction by
Executive which may jeopardize any governmental registrations, licenses, permits
or other governmental permission, material to the business of Gametech in any
jurisdiction that Gametech does or seeks or may seek to do business or (iii) any
material breach of this Agreement by Executive. (Such cause for conduct shall
exist if Executive is guilty of dishonesty, gross neglect of duty hereunder, or
other similarly serious act or omission which materially impairs Gametech's
ability to conduct its ordinary business in its usual manner.). Cause shall be
determined by the Board of Directors.
d. "CHANGE OF CONTROL" shall mean any of the following events:
(i) Gametech consolidates with, or merges with or into, another entity or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of Gametech's assets to any entity, or any entity consolidates
with, or merges with or into, Gametech and Gametech is not the surviving
Corporation; (ii) the liquidation or dissolution of Gametech; (iii) during any
consecutive two year period, individuals who at the beginning of such period
constituted the Board (together with any new
directors whose election by such Board or whose nomination for election by
the stockholders of Gametech was approved by a vote of the majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination was previously so approved) cease
for any reason to constitute a majority of the Board then in office, or (iv)
any person or group (as such terms are defined in Section 13(d) and 14(d)
under the Securities Exchange Act of 1934 (the "Exchange Act")) is or becomes
the beneficial owner (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act, except that a person will be deemed to have beneficial
ownership of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time) directly or indirectly of more than 30% of the total voting power
entitled to vote in the election of the Board; PROVIDED, however, that such
person or group shall not include any person or group that is the beneficial
owner of more than 5% of the total voting power as of the date of this
Agreement.
e. "COMPENSATION COMMITTEE" means the Compensation Committee of the
Board of Directors.
f. "CONSTRUCTIVE TERMINATION" shall mean Executive's voluntary
Termination of Service within twelve (12) months following a Change of Control
or within ninety (90) days following the occurrence of one or more of the
following events, except if such event is approved in writing by Executive prior
to its occurrence:
(i) A failure by Gametech to abide by any part of this
Agreement that is not remedied within thirty (30) business days after
receiving written notification by Executive of such failure;
(ii) A material reduction in Executive's title or
responsibilities;
(iii) Relocation of Executive's primary place of work to
a location other than the Carson City, Nevada area.
g. "DISABILITY" shall be deemed to have occurred if Executive makes
application for or is otherwise eligible for disability benefits under any
Gametech-sponsored long-term disability program covering Executive, and
Executive qualifies for such benefits. In the absence of a Gametech-sponsored
long-term disability program covering Executive, Executive shall be presumed to
be totally and permanently disabled if so determined by Gametech's Board
following the Board's review of two independent medical opinions satisfactory to
the Board certifying that Executive will be permanently unable to perform his
normal duties as a result of a physical or mental condition.
h. "EFFECTIVE DATE" shall mean the date of this Agreement.
i. "ENTERPRISE" shall mean any joint venture, business pursuant to a
joint operating agreement, or other alliance or affiliated business of Gametech.
j. "EXECUTIVE'S SPOUSE" shall mean Executive's spouse upon the
execution of this Agreement, except as otherwise designated herein. (All
spousal pension benefits under this Agreement shall be non-transferable should
Executive remarry.)
k. "FISCAL YEAR" shall mean the twelve-month period beginning
November 1, unless Gametech, with the approval of the Internal Revenue Service,
shall establish a different fiscal year.
l. "SERVICE" shall mean Executive's employment with Gametech, or any
affiliated organization, including any leave of absence approved by the Board.
m. "TERMINATION OF SERVICE" shall mean Executive's termination of
Service for any reason whatsoever, including death.
4. EXECUTIVE'S RIGHTS WHILE EMPLOYED BY GAMETECH
a. BASE SALARY. Beginning on the Effective Date, during the Term
the minimum Annual Base Salary payable to Executive shall be $100,000. Such
Base Salary shall be paid in equal semi-monthly installments on Gametech's
normal payroll dates. Executive's Base Salary shall be reviewed annually by the
Compensation Committee if any, otherwise by the Board, and may be increased but
not decreased from time to time based on prevailing market conditions,
performance of the Executive and other considerations.
b. ANNUAL BONUS. All fiscal year bonus amounts will be determined
by and awarded in the sole discretion of the Compensation Committee if any,
otherwise by the Board commensurate with Executive's performance and the overall
performance of Gametech, or pursuant to a plan which may be adopted by Gametech
making payment of bonuses contingent upon achievement of goals and objectives
set by the Board for the fiscal period.
c. LONG-TERM INCENTIVES. Executive shall participate in any
Long-Term Incentive Plan that may be designed specifically for Executive or
provided to other executives of Gametech during the Term. Subject to the sole
discretion of the Board of Directors, grants to Executive under such Long-Term
Incentive Plan shall be generally comparable to Executive in amount and other
key design features, including vesting restrictions, with any other plans
provided to any other executive at Gametech.
d. FRINGE BENEFITS AND OTHER. Gametech shall provide Executive
with the following:
(i) Such benefits and perquisites, including but not
limited to medical insurance for Executive and his family (consistent with
Gametech's benefits plans), disability insurance, deferred compensation or any
form of savings or retirement plan, and an automobile allowance as may from time
to time be provided to other executives of Gametech, which automobile allowance
shall initially be $750 per month. Such benefits and perquisites shall exclude
fees paid for Board or Board Committee service, which are hereby included in
Executive's Base Salary. Benefits and perquisites shall be provided at the same
proportional cost to Executive as that paid by other executives of Gametech who
participate in such programs;
(ii) Reasonable vacation/sick leave each year during
the Term of thirty (30) days. Executive is allowed to accrue a maximum of
sixty (60) full days of unused vacation/sick leave time. Said vacation/sick
leave shall not reduce Executive's compensation under this Agreement;
(iii) Payment of premiums on professional liability
insurance for Executive;
(iv) Payment of dues for such professional societies
and associations of which Executive is a member that benefit Gametech;
(v) Nothing in this Agreement shall be construed as
limiting or restricting any benefit to Executive under any pension,
profit-sharing or similar retirement plan, or under any group life or group
health or accident or other plan of Gametech, for the benefit of its
employees generally or a group of them, now or hereafter in existence.
5. EXECUTIVE'S RIGHTS UPON TERMINATION OF SERVICE
a. FOR REASON OF VOLUNTARY RESIGNATION CONSTITUTING CONSTRUCTIVE
TERMINATION OR TERMINATION BY GAMETECH WITHOUT CAUSE. In the event of
Executive's Termination of Service for reason of (I) voluntary resignation by
Executive constituting Constructive Termination, (ii) Executive's Termination of
Service by Gametech without Cause or (iii) Executive's Termination of Service
for any reason except those specifically described in Paragraphs 5.b through 5.f
herein, Executive (or if Executive dies while benefits remain under this
Agreement, Executive's beneficiaries as designated in accordance with the
provisions of Paragraph 9 herein) shall be entitled to receive the following
upon such Termination of Service:
(i) Payment immediately upon Executive's Termination
of Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus
when all bonuses for that Fiscal Year are calculated and paid) through the
date of Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of a lump sum amount equal to two (2)
years of Executive's Base Salary; and
(iv) Medical, life and disability insurance for a
period of two years (consistent with Gametech's benefit plans).
In the event of a Change of Control, Executive shall be also be entitled to
the protections outlined in Paragraph 7 herein.
b. FOR REASON OF EXPIRATION OF THE TERM OF THIS AGREEMENT. In the
event of Executive's Termination of Service for reason of expiration of the Term
of this Agreement pursuant to Paragraph 2 hereof, Executive (or if, after
expiration of the Term, Executive dies while benefits remain due under this
Agreement, Executive's beneficiaries as designated in accordance with the
provisions of Paragraph 9 thereof) shall be entitled to receive the following
upon such Termination of Service:
(i) Payment immediately upon Executive's Termination
of Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans), by Gametech in accordance with
the terms and conditions of such benefits and this Agreement;
(iv) Payment of a lump sum amount equal to ONE (1) year
of Executive's Annual Base Salary.
c. FOR REASON OF DISABILITY. In the event of Executive's
Termination of Service for reason of Disability, Executive (or if Executive dies
while benefits remain due under this Agreement, Executive's beneficiaries as
designated in accordance with the provisions of Paragraph 9 hereof) shall be
entitled to receive the following upon such Termination of Service:
(i) Payment immediately upon Executive's Termination
of Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus
when all bonuses for that Fiscal Year are calculated and paid) through the
date of Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans), by Gametech and medical insurance
for (1) year after Termination of Service (consistent with Gametech's benefit
plans), each in accordance with the terms and conditions of such benefits
and this Agreement;
(iv) Payment of a lump sum amount equal to the
remaining Term of Executive's Base Salary.
d. FOR REASON OF DEATH. In the event of Executive's Termination of
Service for Reason of Death, Executive's beneficiaries as designated in
accordance with the provisions of Paragraph 9 hereof shall be entitled to
receive the following upon such Termination of Service;
(i) Payment immediately upon Executive's Termination
of service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any other benefits accrued and owed to
Executive as of the date of the expiration of the Term (consistent with
Gametech's benefit plans) provided by Gametech in accordance with the terms
and conditions of such benefits and this Agreement;
(iv) Payment of a lump sum amount equal to the
remaining Term of Executive's Base Salary. (Payment to be made to
Executive's Estate.)
e. FOR REASON OF VOLUNTARY RESIGNATION NOT CONSTITUTING CONSTRUCTIVE
TERMINATION. In the event of Executive's Termination of Service for reason of
voluntary resignation by Executive not constituting Constructive Termination,
Executive shall be entitled to receive the following upon such Termination of
Service;
(i) Payment immediately upon Executive's Termination
of Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus
when all bonuses for that Fiscal Year are calculated and paid) through the
date of Executive's Termination of Service;
(ii) Performance of Gametech obligations with respect
to Executive's exercise of any stock options or other rights previously
granted to Executive under any Gametech Long-Term Incentive Plan provided
such options or other rights have vested as of the date of the termination of
Executive's service in accordance with any agreement between Gametech and
Executive covering such options or other rights; and
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans) by Gametech in accordance with the
terms and conditions of such benefits and this Agreement.
f. FOR REASON OF CAUSE. In the event of Executive's Termination of
Service for reason of Cause, Gametech's obligations to Executive shall be
limited to:
(i) Payment immediately upon Executive's Termination
of Service of any previously unpaid Base Salary;
(ii) Performance of Gametech obligations with respect
to Executive's exercise of any stock options or other rights previously
granted to Executive under any Gametech Long-Term Incentive Plan provided
such options or other rights have vested as of the date of the termination of
executive's service in accordance with any agreement between Gametech and
Executive covering such options or other rights.
6. MITIGATION AND OFFSET REQUIREMENTS
Executive shall not be required to mitigate the amount of any benefit
provided for in this Agreement by actively seeking alternative employment during
the period in which such benefits are paid. In addition, except as provided for
in Paragraph 8 hereof, Executive shall not be required to offset any such
benefits provided for in this Agreement by amounts earned as a result of
Executive's employment or self-employment during the period in which Executive
is entitled to receive such benefits.
7. ADDITIONAL RIGHTS UPON A CHANGE OF CONTROL.
In addition to Executive's rights to effect a Constructive Termination
of Service within twelve (12) months upon a Change of Control, the Term of
this Agreement shall be automatically extended through the close of business
twenty-four (24) months following the effective date of any Change of Control.
8. BREACH OF CONFIDENTIALITY OR ENTERING INTO A DIRECT COMPETITION DURING
THE AGREEMENT PERIOD.
During the period in which this Agreement remains in force and while
Executive is entitled to receive any benefits under this Agreement, Executive
shall not, without prior written consent of the Board or pursuant to and
consistent with the order of any court, legislative body or regulatory agency,
(a) breach the terms of the Non-Competition Agreement between Executive and
Gametech, (b) disclose to any third party, either directly or indirectly, any
non-public information regarding Gametech's or its Enterprises' business,
customers, financial condition, strategies or operations the disclosure of which
could possibly harm Gametech or its Enterprises in any material way. This
Paragraph 8 shall not apply to any investment by Executive in the stock of a
publicly-traded corporation, provided such investment constitutes less than five
percent (5%) of such corporation's voting shares.
In the event that Executive violates this Paragraph 8, Executive's rights
to any benefits under this Agreement shall immediately terminate.
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by that
party; PROVIDED, HOWEVER, that this Agreement shall be binding upon and shall
inure to the benefit of any successor of Gametech, and any such successor shall
be deemed substituted for Gametech under the terms of this Agreement; PROVIDED
FURTHER that in the event of death of Executive, the distribution of benefits
remaining due under this Agreement shall be to beneficiaries designated by
Executive. The term successor as used herein shall include any person, firm,
corporation or other business entity which at any time, by merger, purchase or
otherwise, acquires substantially all of the assets or business of Gametech.
10. ATTORNEYS' FEES
a. SUBSEQUENT TO ANY CHANGE OF CONTROL. Subsequent to any Change of
Control, in any action at law or in equity brought by either party hereto to
enforce any of the provisions or rights under this Agreement, Gametech, in
addition to bearing its own expenses, shall pay to Executive all costs, expenses
and reasonable attorneys' fees incurred therein by Executive (including without
limitation such costs, expenses and fees on any appeals), and if Executive shall
recover judgment in any such action or proceeding, such costs, expenses and
attorneys' fees shall be included as part of such judgment
b. PRIOR TO ANY CHANGE OF CONTROL. Prior to any Change of Control,
in any arbitration or action at law or in equity brought by either party hereto
to enforce any of the provisions or rights under this Agreement, the
unsuccessful party to such proceeding, as determined by a court or arbitrator in
a final judgment or decision, shall pay the successful party or parties all
costs, expenses and reasonable attorneys' fees incurred therein by such party or
parties (including without limitation such costs, expenses and reasonable fees
relating to any appeals), and if such successful
party or parties shall recover judgment in any such arbitration, action or
proceeding, such costs, expenses and attorneys' fees shall be included as
part of such judgment.
Notwithstanding the foregoing provisions, in no event prior to a Change of
Control shall the successful party or parties be entitled to recover an amount
from the unsuccessful party or parties for costs, expenses and attorneys' fees
that exceeds the costs, expenses and attorneys' fees incurred by the
unsuccessful party in connection with the action or proceeding.
11. ARBITRATION
Gametech and Executive agree with each other that any claim arising out
of or relating to the interpretation of this Agreement or the breach of this
Agreement or Executive's employment by Gametech, including, without
limitation, any claim for compensation due, wrongful termination and any
claim alleging discrimination or harassment in any form shall be resolved by
binding arbitration, except for claims following a Change of Control and
claims in which injunctive relief is sought and obtained. The arbitration
shall be administered by the American Arbitration Association under its
Commercial Arbitration Rules at the American Arbitration Association Office
nearest Executive's place of employment. Notwithstanding anything contrary
in the Commercial Arbitration Rules, the arbitrator shall award costs,
expenses and reasonable attorney's fees to the prevailing party as provided
in Section 10.b hereof. The award entered by the arbitrator shall be final
and binding in all respects and judgment thereon may be entered in any court
having jurisdiction.
12. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains the
entire agreement between Gametech and Executive and supersedes all prior written
agreements, understandings and commitments between Gametech and Executive. No
amendments to this Agreement may be made except through a written document
signed by the Executive and approved in writing by Gametech's Board.
13. VALIDITY
In the event that any provision of this Agreement is held to be invalid,
void or unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Agreement.
14. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretations of
this Agreement.
15. NOTICE
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if mailed, FORTY-EIGHT (48) hours after having
been deposited in the United States mail, postage prepaid, and addressed, in the
case of Gametech, to the attention of the Board of Directors at Gametech's then
principal place of business, presently 0000 Xxxx 0xx Xxxxxx, Xxxxx, Xxxxxxx
00000 and, in the case of Executive, to 2118 The Xxxx Xxxx, Xxxxxxxxx, Xxxxxx
00000. Either party may change the address to which such notices are to be
addressed to it by giving the other party notice in the manner herein set forth.
16. RIGHT OF EMPLOYMENT
Nothing stated or implied by this Agreement shall prevent Gametech from
terminating the Service of Executive at any time nor prevent Executive from
voluntarily terminating Service at any time in accordance with the terms hereof.
17. WITHHOLDING TAXES AND OTHER DEDUCTIONS
To the extent required by law, Gametech shall withhold from any payments
due Executive under this Agreement any applicable federal, state or local taxes
and such other deductions as are prescribed by law or Gametech policy.
18. APPLICABLE LAW
This Agreement shall be interpreted and enforced under Arizona law.
19. PRIOR AGREEMENT.
Executive acknowledges and agrees that as of the Effective Time the
Employment Agreement between Executive and BingoTech dated as of January 1, 1997
is terminated and any and all rights of Executive to receive benefits or other
payments thereunder after the Effective Time are waived.
IN WITNESS WHEREOF, Gametech has caused this Agreement to be executed by
its duly authorized representative(s) and Executive has affixed his signature
as of the date first written above.
XXXXXX X. XXXXXXX GAMETECH INTERNATIONAL, INC.
By:
----------------------- -----------------------------
Title:
---------------------------
EXHIBIT D-2
GAMETECH INTERNATIONAL, INC.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into at Tempe,
Arizona on this 8th day of February, 1999 by and between Gametech International,
Inc., a Delaware corporation ("Gametech"), and Xxxxx X. Xxxxxxx ("Executive")
and shall be effective as of the Effective Date as defined in Paragraph 3 of
this Agreement.
WHEREAS
A. Bingo Technologies Corporation ("BingoTech") and the other parties
thereto have entered into a Stock Purchase Agreement dated as of February 8,
1999 (the "Acquisition Agreement"), pursuant to which BingoTech has become a
wholly-owned subsidiary of Gametech (the "Acquisition"), and which requires,
among other things, that Executive enter into this Agreement.
B. Executive has been employed as an employee of BingoTech.
C. Gametech intends to continue the business of BingoTech after the
Closing of the Acquisition Agreement. To preserve and protect the assets of
BingoTech, including BingoTech's goodwill and customers of which the Executive
has, and will have, knowledge in his role as an employee of Gametech, the
Executive has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the provisions hereinafter described,
Gametech and Executive agree as follows:
1. DUTIES OF EXECUTIVE
During the term of this Agreement, Executive shall be employed by Gametech
as a senior executive of Gametech, reporting to the Chief Executive Officer of
Gametech, and in that capacity shall perform all functions and duties consistent
with such position on behalf of Gametech in an efficient, trustworthy and
professional manner. Executives specific duties will be determined after joint
discussions between the Executive, CEO and Board of Directors of Gametech (the
"Board").
Executive agrees to devote substantially all of his working time and energy
to the performance of his duties under this Agreement so long as his employment
under this Agreement is continued by Gametech. Notwithstanding the above,
Executive shall be entitled to reasonable absences for administrative meetings
and to pursue other outside activities. Executive also shall be permitted to
serve as a member of the Board of Directors of other organizations, subject to
approval by the Board, on a case by case basis. Such approval shall be granted
if it can be reasonably demonstrated that such
service does not involve a competitor of Gametech or its Enterprises and does
not materially interfere with effective performance of Executive's duties
under this Agreement.
2. TERM OF AGREEMENT
Unless terminated sooner in accordance with the provisions of this
Agreement, Gametech shall employ Executive and Executive accepts such employment
under the conditions set forth herein for a one (1) year term (the "Term")
beginning on the Effective Date of this Agreement and ending upon the close of
business on the first anniversary of the Effective Date. Notwithstanding the
foregoing, if this Agreement is not terminated in accordance with the provisions
herein on or before the expiration of its Term, such Term shall continue, and
the Agreement shall continue in force for successive one (1) year periods
unless, at least ninety (90) days prior to the expiration of the Term of the
Agreement, or ninety (90) days prior to the expiration of any subsequent one (1)
year Term, either Executive or Gametech gives the other party written notice of
its intent to terminate the Agreement at the end of such Term.
3. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
set forth in this Paragraph 3:
a. "ANNUAL BASE SALARY" OR "BASE SALARY" shall mean the annual base
salary rate in effect for Executive from time to time during the accordance with
the provisions of Paragraph 4.a. of this Agreement.
b. "ANNUAL BONUS" OR "BONUS" shall mean a cash payment available
annually (or as otherwise provided for in this document) to Executive in
addition to Base Salary as determined in accordance with Paragraph 4.b. of this
Agreement.
c. "CAUSE" shall mean (i) Executive's conviction for any felony
involving moral turpitude; (ii) any conduct by Executive which is materially
injurious to Gametech or its Enterprises, including any action or inaction by
Executive which may jeopardize any governmental registrations, licenses, permits
or other governmental permission, material to the business of Gametech in any
jurisdiction that Gametech does or seeks or may seek to do business or (iii) any
material breach of this Agreement by Executive. (Such cause for conduct shall
exist if Executive is guilty of dishonesty, gross neglect of duty hereunder, or
other similarly serious act or omission which materially impairs Gametech's
ability to conduct its ordinary business in its usual manner.). Cause shall be
determined by the Board of Directors.
d. "CHANGE OF CONTROL" shall mean any of the following events:
(i) Gametech consolidates with, or merges with or into, another entity or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of Gametech's assets to any entity, or any entity consolidates
with, or merges with or into, Gametech and Gametech is not the surviving
Corporation; (ii) the liquidation or dissolution of Gametech; (iii) during any
consecutive two year period,
individuals who at the beginning of such period constituted the Board
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of Gametech was approved by a
vote of the majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination was
previously so approved) cease for any reason to constitute a majority of the
Board then in office, or (iv) any person or group (as such terms are defined
in Section 13(d) and 14(d) under the Securities Exchange Act of 1934 (the
"Exchange Act")) is or becomes the beneficial owner (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act, except that a person will be
deemed to have beneficial ownership of all securities that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time) directly or indirectly of more than 30% of the
total voting power entitled to vote in the election of the Board; PROVIDED,
however, that such person or group shall not include any person or group that
is the beneficial owner of more than 5% of the total voting power as of the
date of this Agreement.
e. "COMPENSATION COMMITTEE" means the Compensation Committee of the
Board of Directors.
f. "CONSTRUCTIVE TERMINATION" shall mean Executive's voluntary
Termination of Service within twelve (12) months following a Change of Control
or within ninety (90) days following the occurrence of one or more of the
following events, except if such event is approved in writing by Executive prior
to its occurrence:
(i) A failure by Gametech to abide by any part of this
Agreement that is not remedied within thirty (30) business days after receiving
written notification by Executive of such failure;
(ii) A material reduction in Executive's title or
responsibilities;
(iii) Relocation of Executive's primary place of work to
a location other than the Carson City, Nevada area.
g. "DISABILITY" shall be deemed to have occurred if Executive makes
application for or is otherwise eligible for disability benefits under any
Gametech-sponsored long-term disability program covering Executive, and
Executive qualifies for such benefits. In the absence of a Gametech-sponsored
long-term disability program covering Executive, Executive shall be presumed to
be totally and permanently disabled if so determined by Gametech's Board
following the Board's review of two independent medical opinions satisfactory to
the Board certifying that Executive will be permanently unable to perform his
normal duties as a result of a physical or mental condition.
h. "EFFECTIVE DATE" shall mean the date of this Agreement.
i. "ENTERPRISE" shall mean any joint venture, business pursuant to a
joint operating agreement, or other alliance or affiliated business of Gametech.
j. "EXECUTIVE'S SPOUSE" shall mean Executive's spouse upon the
execution of this Agreement, except as otherwise designated herein. (All
spousal pension benefits under this Agreement shall be non-transferable should
Executive remarry.)
k. "FISCAL YEAR" shall mean the twelve-month period beginning
November 1, unless Gametech, with the approval of the Internal Revenue Service,
shall establish a different fiscal year.
l. "SERVICE" shall mean Executive's full-time or substantially
full-time employment with Gametech, or any affiliated organization, including
any leave of absence approved by the Board.
m. "TERMINATION OF SERVICE" shall mean Executive's termination of
Service for any reason whatsoever, including death.
4. EXECUTIVE'S RIGHTS WHILE EMPLOYED BY GAMETECH
a. BASE SALARY. Beginning on the Effective Date, during the Term
the minimum Annual Base Salary payable to Executive shall be $150,000. Such
Base Salary shall be paid in equal semi-monthly installments on Gametech's
normal payroll dates. Executive's Base Salary shall be reviewed annually by the
Compensation Committee if any, otherwise by the Board, and may be increased but
not decreased from time to time based on prevailing market conditions,
performance of the Executive and other considerations.
b. ANNUAL BONUS. Executive shall be entitled to participate in
bonus plans available to other senior Executives of Gametech with similar levels
of responsibility. All fiscal year bonus amounts will be determined by and
awarded in the sole discretion of the Compensation Committee if any, otherwise
by the Board commensurate with Executive's performance and the overall
performance of Gametech, or pursuant to a plan which may be adopted by Gametech
making payment of bonuses contingent upon achievement of goals and objectives
set by the Board for the fiscal period.
c. LONG-TERM INCENTIVES. Executive shall participate in any
Long-Term Incentive Plan that may be designed specifically for Executive or
provided to other executives of Gametech during the Term. Subject to the sole
discretion of the Board of Directors, grants to Executive under such Long-Term
Incentive Plan shall be generally comparable to Executive in amount and other
key design features, including vesting restrictions, with any other plans
provided to any other executive at Gametech.
d. FRINGE BENEFITS AND OTHER. Gametech shall provide Executive with
the following:
(i) Such benefits and perquisites, including but not
limited to medical insurance for Executive and his family (consistent with
Gametech's benefit plans), disability insurance, deferred compensation or any
form of savings or retirement plan, and an automobile allowance as may from time
to time be provided to other executives of Gametech, which automobile allowance
shall initially be $750 per month. Such benefits and perquisites shall exclude
fees paid for Board or Board Committee service, which are hereby included in
Executive's Base Salary. Benefits and perquisites shall be provided at the same
proportional cost to Executive as that paid by other executives of Gametech who
participate in such programs;
(ii) Reasonable vacation/sick leave each year during the
Term of thirty (30) days. Executive is allowed to accrue a maximum of sixty
(60) full days of unused vacation/sick leave time. Said vacation/sick leave
shall not reduce Executive's compensation under this Agreement;
(iii) Payment of premiums on professional liability
insurance for Executive;
(iv) Payment of dues for such professional societies and
associations of which Executive is a member that benefit Gametech; and
(v) Nothing in this Agreement shall be construed as
limiting or restricting any benefit to Executive under any pension,
profit-sharing or similar retirement plan, or under any group life or group
health or accident or other plan of Gametech, for the benefit of its employees
generally or a group of them, now or hereafter in existence.
5. EXECUTIVE'S RIGHTS UPON TERMINATION OF SERVICE
a. FOR REASON OF VOLUNTARY RESIGNATION CONSTITUTING CONSTRUCTIVE
TERMINATION OR TERMINATION BY GAMETECH WITHOUT CAUSE. In the event of
Executive's Termination of Service for reason of (I) voluntary resignation by
Executive constituting Constructive Termination, (ii) Executive's Termination of
Service by Gametech without Cause or (iii) Executive's Termination of Service
for any reason except those specifically described in Paragraphs 5.b through 5.f
herein, Executive (or if Executive dies while benefits remain under this
Agreement, Executive's beneficiaries as designated in accordance with the
provisions of Paragraph 9 herein) shall be entitled to receive the following
upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all bonuses
for that Fiscal Year are calculated and paid) through the date of Executive's
Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of a lump sum amount equal to one (1) year
of Executive's Base Salary; and
(iv) Medical, life and disability insurance for a
period of one (1) year (consistent with Gametech's benefit plans).
In the event of a Change of Control, Executive shall be also be entitled to
the protections outlined in Paragraph 7 herein.
b. FOR REASON OF EXPIRATION OF THE TERM OF THIS AGREEMENT. In the
event of Executive's Termination of Service for reason of expiration of the Term
of this Agreement pursuant to Paragraph 2 hereof, Executive (or, after
expiration of the Term, if Executive dies while benefits remain due under this
Agreement, Executive's beneficiaries as designated in accordance with the
provisions of Paragraph 9 thereof) shall be entitled to receive the following
upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all bonuses
for that Fiscal Year are calculated and paid) through the date of Executive's
Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term, by
Gametech in accordance with the terms and conditions of such benefits and this
Agreement;
(iv) Payment of a lump sum amount equal to ONE (1) year of
Executive's Annual Base Salary.
c. FOR REASON OF DISABILITY. In the event of Executive's
Termination of Service for reason of Disability, Executive (or if Executive dies
while benefits remain due under this Agreement, Executive's beneficiaries as
designated in accordance with the provisions of Paragraph 9 hereof) shall be
entitled to receive the following upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus
when all bonuses for that Fiscal Year are calculated and paid) through the
date of Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term,
(consistent with Gametech's benefit plans), by Gametech and medical insurance
for one (1) year after Termination of Service (consistent with Gametech's
benefit plans), each in accordance with the terms and conditions of such
benefits and this Agreement;
(iv) Payment of a lump sum amount equal to the remaining
Term of Executive's Base Salary.
d. FOR REASON OF DEATH. In the event of Executive's Termination of
Service for Reason of Death, Executive's beneficiaries as designated in
accordance with the provisions of Paragraph 9 hereof shall be entitled to
receive the following upon such Termination of Service;
(i) Payment immediately upon Executive's Termination
of service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all bonuses
for that Fiscal Year are calculated and paid) through the date of Executive's
Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any other benefits accrued and owed to
Executive as of the date of the expiration of the Term (consistent with
Gametech's benefit plans), provided by Gametech in accordance with the terms and
conditions of such benefits and this Agreement;
(iv) Payment of a lump sum amount equal to the remaining
Term of Executive's Base Salary. (Payment to be made to Executive's Estate.)
e. FOR REASON OF VOLUNTARY RESIGNATION NOT CONSTITUTING CONSTRUCTIVE
TERMINATION. In the event of Executive's Termination of Service for reason of
voluntary resignation by Executive not constituting Constructive Termination,
Executive shall be entitled to receive the following upon such Termination of
Service;
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus
when all bonuses for that Fiscal Year are calculated and paid) through the
date of Executive's Termination of Service;
(ii) Performance of Gametech obligations with respect to
Executive's exercise of any stock options or other rights previously granted to
Executive under any Gametech Long-Term Incentive Plan provided such options or
other rights have vested as of the date of the termination of Executive's
service in accordance with any agreement between Gametech and Executive covering
such options or other rights; and
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans), by Gametech in accordance with the
terms and conditions of such benefits and this Agreement.
f. FOR REASON OF CAUSE. In the event of Executive's Termination of
Service for reason of Cause, Gametech's obligations to Executive shall be
limited to:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary;
(ii) Performance of Gametech obligations with respect to
Executive's exercise of any stock options or other rights previously granted to
Executive under any Gametech Long-Term Incentive Plan provided such options or
other rights have vested as of the date of the termination of executive's
service in accordance with any agreement between Gametech and Executive covering
such options or other rights.
6. MITIGATION AND OFFSET REQUIREMENTS
Executive shall not be required to mitigate the amount of any benefit
provided for in this Agreement by actively seeking alternative employment during
the period in which such benefits are paid. In addition, except as provided for
in Paragraph 8 hereof, Executive shall not be required to offset any such
benefits provided for in this Agreement by amounts earned as a result of
Executive's employment or self-employment during the period in which Executive
is entitled to receive such benefits.
7. ADDITIONAL RIGHTS UPON A CHANGE OF CONTROL.
In addition to Executive's rights to effect a Constructive Termination of
Service within twelve (12) months upon a Change of Control, the Term of this
Agreement shall be automatically extended through the close of business
twenty-four (24) months following the effective date of any Change of Control.
8. BREACH OF CONFIDENTIALITY OR ENTERING INTO A DIRECT COMPETITION DURING
THE AGREEMENT PERIOD.
During the period in which this Agreement remains in force and while
Executive is entitled to receive any benefits under this Agreement, Executive
shall not, without prior written consent of the Board or pursuant to and
consistent with the order of any court, legislative body or regulatory agency,
(a) breach the terms of the Non-Competition Agreement between Executive and
Gametech, (b) disclose to any third party, either directly or indirectly, any
non-public information regarding Gametech's or its Enterprises' business,
customers, financial condition, strategies or operations the disclosure of which
could possibly harm Gametech or its Enterprises in any material way. This
Paragraph 8 shall not apply to any investment by Executive in the stock of a
publicly-traded corporation, provided such investment constitutes less than five
percent (5%) of such corporation's voting shares.
In the event that Executive violates this Paragraph 8, Executive's rights
to any benefits under this Agreement shall immediately terminate.
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by that
party; PROVIDED, HOWEVER, that this Agreement shall be binding upon and shall
inure to the benefit of any successor of Gametech, and any such successor shall
be deemed substituted for Gametech under the terms of this Agreement; PROVIDED
FURTHER that in the event of death of Executive, the distribution of benefits
remaining due under this Agreement shall be to beneficiaries designated by
Executive. The term successor as used herein shall include any person, firm,
corporation or other business entity which at any time, by merger, purchase or
otherwise, acquires substantially all of the assets or business of Gametech.
10. ATTORNEYS' FEES
a. SUBSEQUENT TO ANY CHANGE OF CONTROL. Subsequent to any Change of
Control, in any action at law or in equity brought by either party hereto to
enforce any of the provisions or rights under this Agreement, Gametech, in
addition to bearing its own expenses, shall pay to Executive all costs, expenses
and reasonable attorneys' fees incurred therein by Executive (including without
limitation such costs, expenses and fees on any appeals), and if Executive shall
recover judgment in any such action or proceeding, such costs, expenses and
attorneys' fees shall be included as part of such judgment.
b. PRIOR TO ANY CHANGE OF CONTROL. Prior to any Change of Control,
in any arbitration or action at law or in equity brought by either party hereto
to enforce any of the provisions or rights under this Agreement, the
unsuccessful party to such proceeding, as determined by a court or arbitrator in
a final judgment or decision, shall pay the successful party or parties all
costs, expenses and reasonable attorneys' fees incurred therein by such party or
parties (including without limitation such costs, expenses and reasonable fees
relating to any appeals), and if such successful
party or parties shall recover judgment in any such arbitration, action or
proceeding, such costs, expenses and attorneys' fees shall be included as
part of such judgment.
Notwithstanding the foregoing provisions, in no event prior to a Change of
Control shall the successful party or parties be entitled to recover an amount
from the unsuccessful party or parties for costs, expenses and attorneys' fees
that exceeds the costs, expenses and attorneys' fees incurred by the
unsuccessful party in connection with the action or proceeding.
11. ARBITRATION
Gametech and Executive agree with each other that any claim arising out of
or relating to the interpretation of this Agreement or the breach of this
Agreement or Executive's employment by Gametech, including, without limitation,
any claim for compensation due, wrongful termination and any claim alleging
discrimination or harassment in any form shall be resolved by binding
arbitration, except for claims following a Change of Control and claims in which
injunctive relief is sought and obtained. The arbitration shall be administered
by the American Arbitration Association under its Commercial Arbitration Rules
at the American Arbitration Association Office nearest Executive's place of
employment. Notwithstanding anything contrary in the Commercial Arbitration
Rules, the arbitrator shall award costs, expenses and reasonable attorney's fees
to the prevailing party as provided in Section 10.b hereof. The award entered
by the arbitrator shall be final and binding in all respects and judgment
thereon may be entered in any court having jurisdiction.
12. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains the
entire agreement between Gametech and Executive and supersedes all prior written
agreements, understandings and commitments between Gametech and Executive. No
amendments to this Agreement may be made except through a written document
signed by the Executive and approved in writing by Gametech's Board.
13. VALIDITY
In the event that any provision of this Agreement is held to be invalid,
void or unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Agreement.
14. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretations of
this Agreement.
15. NOTICE
Any notice or demand required or permitted to be given under this Agreement
shall be made in writing and shall be deemed effective upon the personal
delivery thereof if delivered or, if mailed, FORTY-EIGHT (48) hours after having
been deposited in the United States mail, postage prepaid, and addressed, in the
case of Gametech, to the attention of the Board of Directors at Gametech's then
principal place of business, presently 0000 Xxxx 0xx Xxxxxx, Xxxxx, Xxxxxxx
00000 and, in the case of Executive, to 000 Xxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxx
00000. Either party may change the address to which such notices are to be
addressed to it by giving the other party notice in the manner herein set forth.
16. RIGHT OF EMPLOYMENT
Nothing stated or implied by this Agreement shall prevent Gametech from
terminating the Service of Executive at any time nor prevent Executive from
voluntarily terminating Service at any time in accordance with the terms hereof.
17. WITHHOLDING TAXES AND OTHER DEDUCTIONS
To the extent required by law, Gametech shall withhold from any payments
due Executive under this Agreement any applicable federal, state or local taxes
and such other deductions as are prescribed by law or Gametech policy.
18. APPLICABLE LAW
This Agreement shall be interpreted and enforced under Arizona law.
19. PRIOR AGREEMENT.
Executive acknowledges and agrees that as of the Effective Time the
Employment Agreement between Executive and BingoTech dated as of January 1, 1997
is terminated and any and all rights of Executive to receive benefits or other
payments thereunder after the Effective Time are waived.
IN WITNESS WHEREOF, Gametech has caused this Agreement to be executed by
its duly authorized representative(s) and Executive has affixed his signature as
of the date first written above.
XXXXX X. XXXXXXX GAMETECH INTERNATIONAL, INC.
By:
---------------------------- ----------------------------
Title:
----------------------------
EXHIBIT D-3
GAMETECH INTERNATIONAL, INC.
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement") is made and entered into at
Tempe, Arizona on this 8th day of February, 1999 by and between Gametech
International, Inc., a Delaware corporation ("Gametech"), and Xxxx X. Xxxxxx
("Executive") and shall be effective as of the Effective Date as defined in
Paragraph 3 of this Agreement.
WHEREAS
A. Bingo Technologies Corporation ("BingoTech") and the other parties
thereto have entered into a Stock Purchase Agreement dated as of February 8,
1999 (the "Acquisition Agreement"), pursuant to which BingoTech has become a
wholly-owned subsidiary of Gametech (the "Acquisition"), and which requires,
among other things, that Executive enter into this Agreement.
B. Executive has been employed as an employee of BingoTech.
C. Gametech intends to continue the business of BingoTech after the
Closing of the Acquisition Agreement. To preserve and protect the assets of
BingoTech, including BingoTech's goodwill and customers of which the
Executive has, and will have, knowledge in his role as an employee of
Gametech, the Executive has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the provisions hereinafter
described, Gametech and Executive agree as follows:
1. DUTIES OF EXECUTIVE
During the term of this Agreement, Executive shall be employed by
Gametech as a senior executive of Gametech, reporting to the Chief Executive
Officer of Gametech, and in that capacity shall perform all functions and
duties consistent with such position on behalf of Gametech in an efficient,
trustworthy and professional manner. Executives specific duties will be
determined after joint discussions between the Executive, CEO and Board of
Directors of Gametech (the "Board").
Executive agrees to devote substantially all of his working time and
energy to the performance of his duties under this Agreement so long as his
employment under this Agreement is continued by Gametech. Notwithstanding
the above, Executive shall be entitled to reasonable absences for
administrative meetings and to pursue other outside activities. Executive
also shall be permitted to serve as a member of the Board of Directors of
other organizations, subject to approval by the Board, on a case by case
basis. Such approval shall be granted if it can be reasonably demonstrated
that such
service does not involve a competitor of Gametech or its Enterprises and does
not materially interfere with effective performance of Executive's duties
under this Agreement.
2. TERM OF AGREEMENT
Unless terminated sooner in accordance with the provisions of this
Agreement, Gametech shall employ Executive and Executive accepts such
employment under the conditions set forth herein for a one (1) year term (the
"Term") beginning on the Effective Date of this Agreement and ending upon the
close of business on the first anniversary of the Effective Date.
Notwithstanding the foregoing, if this Agreement is not terminated in
accordance with the provisions herein on or before the expiration of its
initial Term, such Term shall continue, and the Agreement shall continue in
force for successive one (1) year periods unless, at least ninety (90) days
prior to the expiration of the Term of the Agreement, or ninety (90) days
prior to the expiration of any subsequent one (1) year Term, either Executive
or Gametech gives the other party written notice of its intent to terminate
the Agreement at the end of such Term.
3. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Paragraph 3:
a. "ANNUAL BASE SALARY" OR "BASE SALARY" shall mean the annual
base salary rate in effect for Executive from time to time during the
accordance with the provisions of Paragraph 4.a. of this Agreement.
b. "ANNUAL BONUS" OR "BONUS" shall mean a cash payment available
annually (or as otherwise provided for in this document) to Executive in
addition to Base Salary as determined in accordance with Paragraph 4.b. of
this Agreement.
c. "CAUSE" shall mean (i) Executive's conviction for any felony
involving moral turpitude; (ii) any conduct by Executive which is materially
injurious to Gametech or its Enterprises, including any action or inaction by
Executive which may jeopardize any governmental registrations, licenses,
permits or other governmental permission, material to the business of
Gametech in any jurisdiction that Gametech does or seeks or may seek to do
business or (iii) any material breach of this Agreement by Executive. (Such
cause for conduct shall exist if Executive is guilty of dishonesty, gross
neglect of duty hereunder, or other similarly serious act or omission which
materially impairs Gametech's ability to conduct its ordinary business in its
usual manner.). Cause shall be determined by the Board of Directors.
d. "CHANGE OF CONTROL" shall mean any of the following events:
(i) Gametech consolidates with, or merges with or into, another entity or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of Gametech's assets to any entity, or any entity
consolidates with, or merges with or into, Gametech and Gametech is not the
surviving Corporation; (ii) the liquidation or dissolution of Gametech; (iii)
during any consecutive two year period,
individuals who at the beginning of such period constituted the Board
(together with any new directors whose election by such Board or whose
nomination for election by the stockholders of Gametech was approved by a
vote of the majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination was
previously so approved) cease for any reason to constitute a majority of the
Board then in office, or (iv) any person or group (as such terms are defined
in Section 13(d) and 14(d) under the Securities Exchange Act of 1934 (the
"Exchange Act")) is or becomes the beneficial owner (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act, except that a person will be
deemed to have beneficial ownership of all securities that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time) directly or indirectly of more than 30% of the
total voting power entitled to vote in the election of the Board; PROVIDED,
however, that such person or group shall not include any person or group that
is the beneficial owner of more than 5% of the total voting power as of the
date of this Agreement.
e. "COMPENSATION COMMITTEE" means the Compensation Committee of
the Board of Directors.
f. "CONSTRUCTIVE TERMINATION" shall mean Executive's voluntary
Termination of Service within twelve (12) months following a Change of
Control or within ninety (90) days following the occurrence of one or more of
the following events, except if such event is approved in writing by
Executive prior to its occurrence:
(i) A failure by Gametech to abide by any part of this
Agreement that is not remedied within thirty (30) business days after
receiving written notification by Executive of such failure;
(ii) A material reduction in Executive's title or
responsibilities;
(iii) Relocation of Executive's primary place of work
to a location other than the Carson City, Nevada area or Tempe, Arizona.
g. "DISABILITY" shall be deemed to have occurred if Executive
makes application for or is otherwise eligible for disability benefits under
any Gametech-sponsored long-term disability program covering Executive, and
Executive qualifies for such benefits. In the absence of a
Gametech-sponsored long-term disability program covering Executive, Executive
shall be presumed to be totally and permanently disabled if so determined by
Gametech's Board following the Board's review of two independent medical
opinions satisfactory to the Board certifying that Executive will be
permanently unable to perform his normal duties as a result of a physical or
mental condition.
h. "EFFECTIVE DATE" shall mean the date of this Agreement.
i. "ENTERPRISE" shall mean any joint venture, business pursuant
to a joint operating agreement, or other alliance or affiliated business of
Gametech.
j. "EXECUTIVE'S SPOUSE" shall mean Executive's spouse upon the
execution of this Agreement, except as otherwise designated herein. (All
spousal pension benefits under this Agreement shall be non-transferable
should Executive remarry.)
k. "FISCAL YEAR" shall mean the twelve-month period beginning
November 1, unless Gametech, with the approval of the Internal Revenue
Service, shall establish a different fiscal year.
l. "SERVICE" shall mean Executive's full-time or substantially
full-time employment with Gametech, or any affiliated organization, including
any leave of absence approved by the Board.
m. "TERMINATION OF SERVICE" shall mean Executive's termination of
Service for any reason whatsoever, including death.
4. EXECUTIVE'S RIGHTS WHILE EMPLOYED BY GAMETECH
a. BASE SALARY. Beginning on the Effective Date, during the Term
the minimum Annual Base Salary payable to Executive shall be zero, and during
any subsequent 12 month period if the Term is extended, Annual Base Salary
payable to Executive shall be $150,000. Notwithstanding the above, for
purposes of severance and related benefits payable upon termination of
employment, Executive will be deemed to have been paid a Base Salary of
$150,000 during the initial 12 months of the Term. Such Base Salary, if any,
shall be paid in equal semi-monthly installments on Gametech's normal payroll
dates. Executive's Base Salary shall be reviewed annually by the
Compensation Committee if any, otherwise by the Board, and may be increased
but not decreased from time to time based on prevailing market conditions,
performance of the Executive and other considerations.
b. ANNUAL BONUS. Executive shall be entitled to participate in
bonus plans available to other senior Executives of Gametech with similar
levels of responsibility. All fiscal year bonus amounts will be determined
by and awarded in the sole discretion of the Compensation Committee if any,
otherwise by the Board commensurate with Executive's performance and the
overall performance of Gametech, or pursuant to a plan which may be adopted
by Gametech making payment of bonuses contingent upon achievement of goals
and objectives set by the Board for the fiscal period.
c. LONG-TERM INCENTIVES. Executive shall participate in any
Long-Term Incentive Plan that may be designed specifically for Executive or
provided to other executives of Gametech during the Term. Subject to the
sole discretion of the Board of Directors, grants to Executive under such
Long-Term Incentive Plan shall be generally comparable to Executive in amount
and other key design features, including vesting restrictions, with any other
plans provided to any other executive at Gametech. Notwithstanding the
above, Executive shall be granted an option to purchase 150,000 shares of
Gametech's Common Stock at the closing price on the Effective Date, which
option shall vest as follows: 50,000 shares on the Effective Date, 33,333 on
the first and second anniversaries of the Effective Date and 33,334 of the
third anniversary of the Effective Date.
d. FRINGE BENEFITS AND OTHER. Gametech shall provide Executive
with the following:
(i) Such benefits and perquisites, including but not
limited to medical insurance for Executive and his family (consistent with
Gametech's benefit plans), disability insurance, deferred compensation or any
form of savings or retirement plan, and an automobile allowance as may from
time to time be provided to other executives of Gametech, which automobile
allowance shall initially be $750 per month. Such benefits and perquisites
shall exclude fees paid for Board or Board Committee service, which are
hereby included in Executive's Base Salary. Benefits and perquisites shall
be provided at the same proportional cost to Executive as that paid by other
executives of Gametech who participate in such programs;
(ii) Reasonable vacation/sick leave each year during the
Term of thirty (30) days. Executive is allowed to accrue a maximum of sixty
(60) full days of unused vacation/sick leave time. Said vacation/sick leave
shall not reduce Executive's compensation under this Agreement;
(iii) Payment of premiums on professional liability
insurance for Executive;
(iv) Payment of dues for such professional societies and
associations of which Executive is a member that benefit Gametech;
(v) Nothing in this Agreement shall be construed as
limiting or restricting any benefit to Executive under any pension,
profit-sharing or similar retirement plan, or under any group life or group
health or accident or other plan of Gametech, for the benefit of its
employees generally or a group of them, now or hereafter in existence; and
(vi) If required, reasonable relocation expenses not to
exceed $15,000 in the aggregate, including but not limited to temporary
housing expenses, moving expenses and travel expenses in connection with a
relocation of Executive from Carson City, Nevada to Tempe Arizona.
5. EXECUTIVE'S RIGHTS UPON TERMINATION OF SERVICE
a. FOR REASON OF VOLUNTARY RESIGNATION CONSTITUTING CONSTRUCTIVE
TERMINATION OR TERMINATION BY GAMETECH WITHOUT CAUSE. In the event of
Executive's Termination of Service for reason of (I) voluntary resignation by
Executive constituting Constructive Termination, (ii) Executive's Termination
of Service by Gametech without Cause or (iii) Executive's Termination of
Service for any reason except those specifically described in Paragraphs 5.b
through 5.f herein, Executive (or if Executive dies while benefits remain
under this Agreement, Executive's beneficiaries as designated in accordance
with the provisions of Paragraph 9 herein) shall be entitled to receive the
following upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of a lump sum amount equal to one (1) year
of Executive's Base Salary; and
(iv) Medical, life and disability insurance for a period
of one (1) year (consistent with Gametech's benefit plans).
In the event of a Change of Control, Executive shall be also be entitled
to the protections outlined in Paragraph 7 herein.
b. FOR REASON OF EXPIRATION OF THE TERM OF THIS AGREEMENT. In
the event of Executive's Termination of Service for reason of expiration of
the Term of this Agreement pursuant to Paragraph 2 hereof, Executive (or,
after expiration of the Term, if Executive dies while benefits remain due
under this Agreement, Executive's beneficiaries as designated in accordance
with the provisions of Paragraph 9 thereof) shall be entitled to receive the
following upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans) by Gametech in accordance with the
terms and conditions of such benefits and this Agreement;
(iv) Payment of a lump sum amount equal to ONE (1) year
of Executive's Annual Base Salary.
c. FOR REASON OF DISABILITY. In the event of Executive's
Termination of Service for reason of Disability, Executive (or if Executive
dies while benefits remain due under this
Agreement, Executive's beneficiaries as designated in accordance with the
provisions of Paragraph 9 hereof) shall be entitled to receive the following
upon such Termination of Service:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans), by Gametech and medical insurance
for one (1) year after Termination of Service (consistent with Gametech's
benefit plans), each in accordance with the terms and conditions of such
benefits and this Agreement;
(iv) Payment of a lump sum amount equal to the remaining
Term of Executive's Base Salary.
d. FOR REASON OF DEATH. In the event of Executive's Termination
of Service for Reason of Death, Executive's beneficiaries as designated in
accordance with the provisions of Paragraph 9 hereof shall be entitled to
receive the following upon such Termination of Service;
(i) Payment immediately upon Executive's Termination of
service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Immediate vesting of any stock options or other
rights previously provided to Executive under any Gametech Long-Term
Incentive Plan;
(iii) Payment of any other benefits accrued and owed to
Executive as of the date of the expiration of the Term (consistent with
Gametech's benefit plans) provided by Gametech in accordance with the terms
and conditions of such benefits and this Agreement;
(iv) Payment of a lump sum amount equal to the remaining
Term of Executive's Base Salary. (Payment to be made to Executive's Estate.)
e. FOR REASON OF VOLUNTARY RESIGNATION NOT CONSTITUTING
CONSTRUCTIVE TERMINATION. In the event of Executive's Termination of Service
for reason of voluntary resignation
by Executive not constituting Constructive Termination, Executive shall be
entitled to receive the following upon such Termination of Service;
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary and any Bonus granted and
previously unpaid or the pro-rata portion of any Bonus earned by Executive
pursuant to any plan (if necessary, Gametech may pay such Bonus when all
bonuses for that Fiscal Year are calculated and paid) through the date of
Executive's Termination of Service;
(ii) Performance of Gametech obligations with respect to
Executive's exercise of any stock options or other rights previously granted
to Executive under any Gametech Long-Term Incentive Plan provided such
options or other rights have vested as of the date of the termination of
Executive's service in accordance with any agreement between Gametech and
Executive covering such options or other rights; and
(iii) Payment of any Disability or other benefits,
accrued and owed to Executive as of the date of the expiration of the Term
(consistent with Gametech's benefit plans) by Gametech in accordance with the
terms and conditions of such benefits and this Agreement.
f. FOR REASON OF CAUSE. In the event of Executive's Termination
of Service for reason of Cause, Gametech's obligations to Executive shall be
limited to:
(i) Payment immediately upon Executive's Termination of
Service of any previously unpaid Base Salary;
(ii) Performance of Gametech obligations with respect to
Executive's exercise of any stock options or other rights previously granted
to Executive under any Gametech Long-Term Incentive Plan provided such
options or other rights have vested as of the date of the termination of
executive's service in accordance with any agreement between Gametech and
Executive covering such options or other rights.
6. MITIGATION AND OFFSET REQUIREMENTS
Executive shall not be required to mitigate the amount of any benefit
provided for in this Agreement by actively seeking alternative employment
during the period in which such benefits are paid. In addition, except as
provided for in Paragraph 8 hereof, Executive shall not be required to offset
any such benefits provided for in this Agreement by amounts earned as a
result of Executive's employment or self-employment during the period in
which Executive is entitled to receive such benefits.
7. ADDITIONAL RIGHTS UPON A CHANGE OF CONTROL.
In addition to Executive's rights to effect a Constructive Termination
of Service within twelve (12) months upon a Change of Control, the Term of
this Agreement shall be automatically extended
through the close of business twenty-four (24) months following the effective
date of any Change of Control.
8. BREACH OF CONFIDENTIALITY OR ENTERING INTO A DIRECT COMPETITION
DURING THE AGREEMENT PERIOD.
During the period in which this Agreement remains in force and while
Executive is entitled to receive any benefits under this Agreement, Executive
shall not, without prior written consent of the Board or pursuant to and
consistent with the order of any court, legislative body or regulatory
agency, (a) breach the terms of the Non-Competition Agreement between
Executive and Gametech, (b) disclose to any third party, either directly or
indirectly, any non-public information regarding Gametech's or its
Enterprises' business, customers, financial condition, strategies or
operations the disclosure of which could possibly harm Gametech or its
Enterprises in any material way. This Paragraph 8 shall not apply to any
investment by Executive in the stock of a publicly-traded corporation,
provided such investment constitutes less than five percent (5%) of such
corporation's voting shares.
In the event that Executive violates this Paragraph 8, Executive's
rights to any benefits under this Agreement shall immediately terminate.
9. SUCCESSORS
The rights and duties of a party hereunder shall not be assignable by
that party; PROVIDED, HOWEVER, that this Agreement shall be binding upon and
shall inure to the benefit of any successor of Gametech, and any such
successor shall be deemed substituted for Gametech under the terms of this
Agreement; PROVIDED FURTHER that in the event of death of Executive, the
distribution of benefits remaining due under this Agreement shall be to
beneficiaries designated by Executive. The term successor as used herein
shall include any person, firm, corporation or other business entity which at
any time, by merger, purchase or otherwise, acquires substantially all of the
assets or business of Gametech.
10. ATTORNEYS' FEES
a. SUBSEQUENT TO ANY CHANGE OF CONTROL. Subsequent to any Change
of Control, in any action at law or in equity brought by either party hereto
to enforce any of the provisions or rights under this Agreement, Gametech, in
addition to bearing its own expenses, shall pay to Executive all costs,
expenses and reasonable attorneys' fees incurred therein by Executive
(including without limitation such costs, expenses and fees on any appeals),
and if Executive shall recover judgment in any such action or proceeding,
such costs, expenses and attorneys' fees shall be included as part of such
judgment.
b. PRIOR TO ANY CHANGE OF CONTROL. Prior to any Change of
Control, in any arbitration or action at law or in equity brought by either
party hereto to enforce any of the provisions or rights under this Agreement,
the unsuccessful party to such proceeding, as determined by a court
or arbitrator in a final judgment or decision, shall pay the successful party
or parties all costs, expenses and reasonable attorneys' fees incurred
therein by such party or parties (including without limitation such costs,
expenses and reasonable fees relating to any appeals), and if such successful
party or parties shall recover judgment in any such arbitration, action or
proceeding, such costs, expenses and attorneys' fees shall be included as
part of such judgment.
Notwithstanding the foregoing provisions, in no event prior to a Change
of Control shall the successful party or parties be entitled to recover an
amount from the unsuccessful party or parties for costs, expenses and
attorneys' fees that exceeds the costs, expenses and attorneys' fees incurred
by the unsuccessful party in connection with the action or proceeding.
11. ARBITRATION
Gametech and Executive agree with each other that any claim arising out
of or relating to the interpretation of this Agreement or the breach of this
Agreement or Executive's employment by Gametech, including, without
limitation, any claim for compensation due, wrongful termination and any
claim alleging discrimination or harassment in any form shall be resolved by
binding arbitration, except for claims following a Change of Control and
claims in which injunctive relief is sought and obtained. The arbitration
shall be administered by the American Arbitration Association under its
Commercial Arbitration Rules at the American Arbitration Association Office
nearest Executive's place of employment. Notwithstanding anything contrary
in the Commercial Arbitration Rules, the arbitrator shall award costs,
expenses and reasonable attorney's fees to the prevailing party as provided
in Section 10.b hereof. The award entered by the arbitrator shall be final
and binding in all respects and judgment thereon may be entered in any court
having jurisdiction.
12. ENTIRE AGREEMENT
With respect to the matters specified herein, this Agreement contains
the entire agreement between Gametech and Executive and supersedes all prior
written agreements, understandings and commitments between Gametech and
Executive. No amendments to this Agreement may be made except through a
written document signed by the Executive and approved in writing by
Gametech's Board.
13. VALIDITY
In the event that any provision of this Agreement is held to be invalid,
void or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Agreement.
14. PARAGRAPHS AND OTHER HEADINGS
Paragraphs and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement.
15. NOTICE
Any notice or demand required or permitted to be given under this
Agreement shall be made in writing and shall be deemed effective upon the
personal delivery thereof if delivered or, if mailed, FORTY-EIGHT (48) hours
after having been deposited in the United States mail, postage prepaid, and
addressed, in the case of Gametech, to the attention of the Board of
Directors at Gametech's then principal place of business, presently 0000 Xxxx
0xx Xxxxxx, Xxxxx, Xxxxxxx 00000 and, in the case of Executive, to 00000
000xx Xxxxxx XX, Xxxxxxxxxxx, Xxxxxxxxxx 00000. Either party may change the
address to which such notices are to be addressed to it by giving the other
party notice in the manner herein set forth.
16. RIGHT OF EMPLOYMENT
Nothing stated or implied by this Agreement shall prevent Gametech from
terminating the Service of Executive at any time nor prevent Executive from
voluntarily terminating Service at any time in accordance with the terms
hereof.
17. WITHHOLDING TAXES AND OTHER DEDUCTIONS
To the extent required by law, Gametech shall withhold from any payments
due Executive under this Agreement any applicable federal, state or local
taxes and such other deductions as are prescribed by law or Gametech policy.
18. APPLICABLE LAW
This Agreement shall be interpreted and enforced under Arizona law.
19. PRIOR AGREEMENT.
Executive acknowledges and agrees that as of the Effective Time the
Employment Agreement between Executive and BingoTech dated as of January 1,
1997 is terminated and any and all rights of Executive to receive benefits or
other payments thereunder after the Effective Time are waived.
IN WITNESS WHEREOF, Gametech has caused this Agreement to be executed by
its duly authorized representative(s) and Executive has affixed his signature
as of the date first written above.
XXXX X. XXXXXX GAMETECH INTERNATIONAL, INC.
_________________________________ By: _________________________________
Title: _____________________________
EXHIBIT G-1
February 8, 0000
Xxxxx, Xxxxxxx
GAMETECH INTERNATIONAL, INC.
PROMISSORY NOTE
Gametech International, Inc., a Delaware corporation ("PARENT"), for value
received, promises to pay to Siblings Partners, L.P. (the "HOLDER") the
principal sum of Nine Hundred Forty-Three Thousand Sixty-Five Dollars
($943,065). This Promissory Note shall not accrue interest. All principal
shall be payable in sixty (60) equal installments payable monthly commencing on
the first monthly anniversary of the date hereof with each such monthly
installment date being referred to as a "Due Date."
Payment of principal shall be made in lawful money of the United
States to the holder of this Note at Parent's principal offices or, at the
option of Holder, at such other place in the United States as such Holder shall
have designated to Parent in writing.
This Note is one of a duly authorized issue of Notes (the "NOTES") of
Parent issued by Parent on or about February 8, 1999 pursuant to the Stock
Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of February 8, 1999, by
and among Parent, Bingo Technologies Corporation and the stockholders and
indemnitors named therein.
The following is a statement of the other terms and conditions to
which this Note is subject and to which the Holder, by the acceptance of this
Note, agrees:
1. PREPAYMENT. Parent shall have the right to prepay without penalty, in
whole or in part, the unpaid principal due on this Note as of the date of such
prepayment.
2. EVENTS OF DEFAULT. Upon occurrence of any of the following events the
Holder may declare an event of default ("EVENTS OF DEFAULT"):
(a) Parent shall fail to pay within 15 days following a Due Date
thereof any scheduled payment of principal on this Note;
(b) there should occur any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, dissolution, liquidation, or other
winding up or similar proceeding of Parent (whether or not involving insolvency
or bankruptcy proceedings); or
(c) Parent makes a general assignment for the benefit of its
creditors or a receiver is appointed for substantially all the property of
Company.
3. REMEDIES UPON EVENTS OF DEFAULT.
(a) In the event the Holder declares an Event of Default, the
Holder may institute such actions or proceedings in law or equity as it shall
deem expedient for the protection of its rights, and in connection with any such
action or proceeding shall be entitled to receive from Parent payment of the
amounts then due under this Note plus reasonable expenses of collection,
including, without limitation, reasonable attorneys' fees and expenses.
(b) If the Holder has declared an Event of Default, the Holder
may also declare the principal amount then outstanding to be immediately due and
payable if (i) Parent shall have failed to pay installments for three
consecutive Due Dates and such default has not been cured by Parent within five
business days of Holder's notice and demand for payment, or (ii) Holder has
declared an Event of Default pursuant to Section 2(b) or 2(c).
(c) Upon the declaration of an Event of Default, Parent waives
presentment for payment, demand, protest, or other formalities of any kind,
except only for those notice and demands provided herein.
(d) Upon declaration of an Event of Default, thiS Note shall
bear interest at a rate of 8% per annum on any amount not paid when due.
4. AMENDMENT. Any provision of this Note may be amended or modified by
written agreement of Parent and Holder. Any amendment shall be endorsed on this
Note, and all future permitted Holders shall be bound thereby.
5. PROHIBITION ON ASSIGNMENT OR PLEDGE. The Holder of this Note shall
not be entitled to sell, transfer, gift, encumber or pledge this Note or any of
the rights of the Holder hereunder, without the prior written consent of Parent.
6. REPLACEMENT OF NOTE. Upon receipt by Parent or evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note, and of
indemnity satisfactory to it, and upon reimbursement of Parent for all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note, if mutilated, Parent will make and deliver a new Note identical in
form and substance to this Note (with a notation thereon of the date to which
principal has been paid) and any such lost, stolen, destroyed or mutilated Note
shall thereupon become void.
7. HOLIDAYS. If any payment of principal on this Note shall become due
on a Saturday, Sunday or on a public holiday under the laws of the State of
Arizona, such payment shall be made on the next succeeding business day.
8. GOVERNING LAW. This Note is being delivered in and shall be governed
and constructed in accordance with the laws of the State of Arizona, without
regard to principles of conflicts of law.
9. NOTICES. Any notice or other communication (except payment) required
or permitted hereunder shall be in writing and shall be given in accordance with
the provisions of Section 9.1 of the Purchase Agreement.
10. HEADINGS. All headings and caption in this Note are for convenience
only and shall be disregarded for the purpose of construing or interpreting the
provisions of this Note.
IN WITNESS WHEREOF, Parent has caused this Note to be signed in its name
this 8th day of February, 1999.
GAMETECH INTERNATIONAL, INC.
By: ____________________________
Name: XXXX XXXXX
___________________________
Title: CHIEF EXECUTIVE OFFICER
___________________________
EXHIBIT G-2
February 8, 0000
Xxxxx, Xxxxxxx
GAMETECH INTERNATIONAL, INC.
PROMISSORY NOTE
Gametech International, Inc., a Delaware corporation ("PARENT"), for value
received, promises to pay to Xxxx Xxxxxx (the "HOLDER") the principal sum of
Three Million Six Hundred Eighty-One Thousand Two Hundred Sixty-Eight
($3,681,268). This Promissory Note shall not accrue interest. All principal
shall be payable in sixty (60) equal installments payable monthly commencing on
the first monthly anniversary of the date hereof with each such monthly
installment date being referred to as a "Due Date."
Payment of principal shall be made in lawful money of the United
States to the holder of this Note at Parent's principal offices or, at the
option of Holder, at such other place in the United States as such Holder shall
have designated to Parent in writing.
This Note is one of a duly authorized issue of Notes (the "NOTES") of
Parent issued by Parent on or about February 8, 1999 pursuant to the Stock
Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of February 8, 1999, by
and among Parent, Bingo Technologies Corporation and the stockholders and
indemnitors named therein. This Note is subject to the terms and conditions of
the Purchase Agreement, including without limitation, the indemnification
obligations of Holder set forth in Article VII of the Purchase Agreement.
The following is a statement of the other terms and conditions to
which this Note is subject and to which the Holder, by the acceptance of this
Note, agrees:
1. PREPAYMENT. Parent shall have the right to prepay without penalty, in
whole or in part, the unpaid principal due on this Note as of the date of such
prepayment.
2. EVENTS OF DEFAULT. Upon occurrence of any of the following events the
Holder may declare an event of default ("EVENTS OF DEFAULT"):
(a) Parent shall fail to pay within 15 days following a Due Date
thereof any scheduled payment of principal on this Note except in the event of a
proper withholding or reduction of obligations pursuant to Article VII of the
Purchase Agreement;
(b) there should occur any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, dissolution, liquidation, or other
winding up or similar proceeding of Parent (whether or not involving insolvency
or bankruptcy proceedings); or
(c) Parent makes a general assignment for the benefit of its
creditors or a receiver is appointed for substantially all the property of
Company.
3. REMEDIES UPON EVENTS OF DEFAULT.
(a) In the event the Holder declares an Event of Default, the
Holder may institute such actions or proceedings in law or equity as it shall
deem expedient for the protection of its rights, and in connection with any such
action or proceeding shall be entitled to receive from Parent payment of the
amounts then due under this Note plus reasonable expenses of collection,
including, without limitation, reasonable attorneys' fees and expenses.
(b) If the Holder has declared an Event of Default, the Holder
may also declare the principal amount then outstanding to be immediately due and
payable if (i) Parent shall have failed to pay installments for three
consecutive Due Dates and such default has not been cured by Parent within five
business days of Holder's notice and demand for payment, or (ii) Holder has
declared an Event of Default pursuant to Section 2(b) or 2(c).
(c) Upon the declaration of an Event of Default, Parent waives
presentment for payment, demand, protest, or other formalities of any kind,
except only for those notice and demands provided herein.
(d) Upon declaration of an Event of Default, this Note shall
bear interest at a rate of 8% per annum on any amount not paid when due.
(e) Nothing contained herein shall prejudice Holder's right to
assert an Event of Default in the event payments are withheld.
4. AMENDMENT. Any provision of this Note may be amended or modified by
written agreement of Parent and Holder. Any amendment shall be endorsed on this
Note, and all future permitted Holders shall be bound thereby.
5. PROHIBITION ON ASSIGNMENT OR PLEDGE. The Holder of this Note shall
not be entitled to sell, transfer, gift, encumber or pledge this Note or any of
the rights of the Holder hereunder, without the prior written consent of Parent.
6. REPLACEMENT OF NOTE. Upon receipt by Parent or evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Note, and of
indemnity satisfactory to it, and upon reimbursement of Parent for all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note, if mutilated, Parent will make and deliver a new Note identical in
form and
substance to this Note (with a notation thereon of the date to which
principal has been paid) and any such lost, stolen, destroyed or mutilated
Note shall thereupon become void.
7. HOLIDAYS. If any payment of principal on this Note shall become due
on a Saturday, Sunday or on a public holiday under the laws of the State of
Arizona, such payment shall be made on the next succeeding business day.
8. GOVERNING LAW. This Note is being delivered in and shall be governed
and constructed in accordance with the laws of the State of Arizona, without
regard to principles of conflicts of law.
9. NOTICES. Any notice or other communication (except payment) required
or permitted hereunder shall be in writing and shall be given in accordance with
the provisions of Section 9.1 of the Purchase Agreement.
10. HEADINGS. All headings and caption in this Note are for convenience
only and shall be disregarded for the purpose of construing or interpreting the
provisions of this Note.
IN WITNESS WHEREOF, Parent has caused this Note to be signed in its name
this 8th day of February, 1999.
GAMETECH INTERNATIONAL, INC.
By: ____________________________
Name: XXXX XXXXX
____________________________
Title: CHIEF EXECUTIVE OFFICER
____________________________
