AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AMERICAN BINGO & GAMING CORP.
AS THE "BUYER"
AND
DARLINGTON MUSIC ACQUISITION CORPORATION
AS THE "SUB"
AND
DARLINGTON MUSIC CO., INC.
AS THE "COMPANY"
AND
XXXXXX X. XXXXXXXX, XX.
XXXXXX X. XXXXXXXX
XXXXXXX X. XXXXXXXX
THE SHAREHOLDERS OF
DARLINGTON MUSIC CO., INC.
AS THE "SHAREHOLDERS"
DATED: NOVEMBER 12, 1997
SCHEDULES
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SCHEDULE
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1.4 Locations of Business
1.11 Contracts
1.16 Leases
1.21 Permits
1.23 Real Property
2.7 Allocation of Merger Consideration
4.5 Permits and Approvals
4.6 Consents
4.7 Financial Statements
4.8 List of Material Changes
4.9 Undisclosed Liabilities
4.10 List of Property
4.13 Litigation
4.14 Compliance with Law
4.17A Employee Benefit Plans
4.17B Employees
4.18 Insurance
4.20 Liens
4.22 Banks
4.23 Quarterly Reports of Gaming Operations
4.24 Real Property Restrictions
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5.1 Share Ownership
6.4A Litigation
6.4B Consents
7.1 Approved Payments
11.1 Exceptions to Non-compete
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EXHIBITS
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EXHIBIT
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1.6 Form of the Buyer's and Sub's Closing Certificate
1.10 Form of the Company's and the Shareholders' Closing Certificate
2.9 Form of Voting Agreement
8.3 Form of Employment Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
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THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 12th day of November, 1997, by and among American Bingo and Gaming Corp., a
corporation organized and existing under the laws of the State of Delaware (the
"Buyer"), Darlington Music Acquisition Corporation, a corporation organized and
existing under the laws of the State of South Carolina (the "Sub"), Darlington
Music Co., Inc., a corporation organized and existing under the laws of the
State of South Carolina (the "Company"), and Xxxxxx X. Xxxxxxxx, Xx., Xxxxxx X.
Xxxxxxxx and Xxxxxxx X. Xxxxxxxx, the shareholders of the Company (the
"Shareholders").
RECITALS
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WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Company (all of such issued and outstanding shares of
capital stock being referred to herein as the "Shares"); and
WHEREAS, the Boards of Directors of each of the Company, the Buyer and the
Sub have determined that a business combination between the parties is in the
best interests of their respective companies and stockholders and accordingly
have agreed to effect the Merger (hereinafter defined) upon the terms and
conditions set forth herein; and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto DO HEREBY AGREE as follows:
ARTICLE I
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DEFINITIONS
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When used in this Agreement, the following terms shall have the meanings
ascribed to them below:
1.1 ABG Common Stock. "ABG Common Stock" shall have the meaning
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ascribed to it in Section 2.7.
1.2 Agreement. "Agreement" shall mean this Agreement and Plan of
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Reorganization, together with the Exhibits and Schedules incorporated herein by
reference, as the same may be amended from time to time in accordance with the
terms hereof.
1.3 Assets. "Assets" shall mean all of the equipment, machinery, real
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property, fixtures, leasehold interests, inventory, and prepaid expenses, all of
the Company's rights under the Contracts and Leases, and all other tangible and
intangible assets of every kind which are currently owned by the Company for use
in the Business.
1.4 Business. "Business" shall mean the operations of the Company as
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of the date of Closing, which shall include the ownership and operation of video
poker games at various locations in South Carolina, which locations are
identified on Schedule 1.4 hereto.
1.5 Buyer. "Buyer" shall mean American Bingo & Gaming Corp., a
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corporation organized and existing under the laws of the State of Delaware.
1.6 Buyer's and Sub's Closing Certificate. "Buyer's and Sub's Closing
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Certificate" shall mean the certificate of Buyer and the Sub in the form of
Exhibit 1.6 hereto.
1.7 Closing. "Closing" shall mean the conference held at 10:00 am,
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local time, on the Closing Date, at Buyer's offices, or such other time and
place as the parties hereto may mutually agree. All transactions occurring at
the Closing shall be deemed to have occurred simultaneously, and no one
transaction shall be deemed to be complete until all transactions required to be
completed at the Closing are completed.
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1.8 Closing Date. "Closing Date" shall mean December 16, 1997, or such
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other date as the parties hereto may mutually agree, on which date the Articles
of Merger shall be filed with the South Carolina Secretary of State and become
effective.
1.9 Code. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
1.10 Company's and Shareholders' Closing Certificate. "Company's and
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Shareholders' Closing Certificate" shall mean the certificate of the Company and
the Shareholders in the form of Exhibit 1.10 hereto.
1.11 Contracts. "Contracts" shall mean all contracts, agreements,
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mortgages, trust deeds, indentures, notes, licenses, franchises, obligations or
other commitments, arrangements and understandings with a term of more than one
year or for an amount exceeding $1,000 to which the Company is a party or by
which it is bound, as described in Schedule 1.11 hereto.
1.12 Fixtures and Equipment. "Fixtures and Equipment" shall mean any
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and all of the furniture, fixtures, furnishings, leasehold improvements,
supplies, vehicles, parts, tools, machinery, equipment and other items of
tangible personal property which will be owned or leased by the Company as of
the Closing Date.
1.13 Indemnified Party. "Indemnified Party" shall have the meaning
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ascribed to it in Section 10.2 hereof.
1.14 Indemnifying Party. "Indemnifying Party" shall have the meaning
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ascribed to it in Section 10.2 hereof.
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1.15 Law. "Law" shall mean any federal, state, local or other law or
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governmental agency requirement of any kind, and the rules, regulations,
ordinances, permits, licenses and orders promulgated thereunder.
1.16 Leases. "Leases" shall mean all leases of real and personal
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property to which the Company is a party, as described in Schedule 1.16.
1.17 Lien. "Lien" shall mean any mortgage, pledge, lien, security
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interest, claim, encumbrance, charge, option, equity, right, proxy, voting or
other agreement which in any way limits or restricts any right of ownership of
the Assets.
1.18 Merger. "Merger" shall have the meaning ascribed to it in Section
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2.1 hereof.
1.19 Merger Consideration. "Merger Consideration" shall have the
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meaning ascribed to it in Section 2.7 hereof.
1.20 NASDAQ. "NASDAQ" shall mean the National Association of
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Securities Dealers Automated Quotation Stock Market.
1.21 Permits. "Permits" shall mean all licenses, permits and other
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governmental authorizations and pending applications therefore necessary for the
Company to conduct the Business, as described on Schedule 1.21 hereto.
1.22 Person. "Person" shall mean any government, natural person,
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corporation, partnership or other legal entity.
1.23 Real Property. "Real Property" shall mean all real property owned
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or leased by the Company as of the Closing Date, including all appurtenant
rights, claims and interests therein, as described on Schedule 1.23 hereto.
1.24 Registered Shares. "Registered Shares" shall have the meaning
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ascribed to it in Section 6.7 hereof.
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1.25 Registration Statement. "Registration Statement" shall have the
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meaning ascribed to it in Section 6.7 hereof.
1.26 SEC. "SEC" shall mean the United States Securities and Exchange
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Commission.
1.27 Shareholders. "Shareholders" shall mean Xxxxxx X. Xxxxxxxx, Xx.,
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Xxxxxx X. Xxxxxxxx, and Xxxxxxx X. Xxxxxxxx.
1.28 Shares. "Shares" shall have the meaning set forth in Section 4.2.
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1.29 Surviving Corporation. "Surviving Corporation" shall have the
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meaning ascribed to it in Section 2.1 hereof.
1.30. Unregistered Shares. "Unregistered Shares" shall have the
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meaning ascribed to it in Section 6.10 hereof.
ARTICLE II
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THE MERGER
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2.1 Merger of Sub into the Company. On the Closing Date, the Sub shall
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be merged with and into the Company in accordance with this Agreement and the
separate corporate existence of the Sub shall thereupon cease (the "Merger").
The Merger shall be based on the respective representations, warranties and
agreements of the parties hereto, and shall be subject to the terms and
conditions herein stated. The Merger is intended to be a "tax-free
reorganization" pursuant to Section 368(a)(2)(E) of the Code and the parties
hereto shall not report the transaction in a manner inconsistent therewith or
otherwise take any action that would prevent the Merger from qualifying as such;
provided, however, that the actual tax effect of the transactions contemplated
by this Agreement is not a condition precedent to the closing of the
transactions contemplated hereby and no party hereto makes or has made any
representation, warranty or covenant to any other party hereto as to such
qualification. The Company shall be the surviving corporation in the Merger (in
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such capacity, hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of South Carolina and the
separate corporate existence of Surviving Corporation with all its rights,
privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger, except as set forth herein. The Merger shall have the
effects specified in the South Carolina Business Corporation Act of 1988, as
amended.
2.2 Merger Certificates. If all conditions to the Merger set forth
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herein have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated pursuant to the terms hereof, the parties hereto
shall cause to be properly executed and filed with the South Carolina Secretary
of State on the Closing Date Articles of Merger meeting the requirements of the
South Carolina Business Corporation Act of 1988, as amended. The Merger shall
become effective on the Closing Date upon filing of the Articles of Merger with
the South Carolina Secretary of State.
2.3 Articles of Incorporation of Surviving Corporation. At the Closing
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Date, the Articles of Incorporation of the Company shall be the Articles of
Incorporation of the Surviving Corporation.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Sub on the
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Closing Date shall be the Bylaws of the Surviving Corporation, unless and until
duly amended in accordance with their terms.
2.5 Directors of the Surviving Corporation. The persons who are
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directors of the Sub immediately prior to the Closing Date shall, from and after
the Closing Date, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
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2.6 Officers of the Surviving Corporation. The persons who are
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officers of the Sub immediately prior to the Closing Date shall, from and after
the Closing Date, be the officers of the Surviving Corporation and shall hold
their same respective office(s) until their earlier death, resignation or
removal.
2.7 Conversion of the Shares. The manner of converting the Shares in
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the Merger shall be as follows:
(a) As a result of the Merger and without any action on the part of the
holder thereof, the Shares shall cease to be outstanding and shall be canceled
and retired and shall cease to exist, and the Shareholders shall thereafter
cease to have any rights with respect to the Shares, except the right to receive
one million (1,000,000) shares of Buyer's common stock (the "ABG Common Stock")
(the "Merger Consideration"), allocated among the Shareholders as identified on
Schedule 2.7.
(b) On the Closing Date, each share of the Sub's common stock issued
and outstanding as of the Closing Date shall be surrendered in exchange for a
share of validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.8 Exchange of Certificates Representing the Shares.
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(a) On the Closing Date, (i) the Shareholders, as the holders of all
outstanding certificates representing the Shares, shall, upon surrender of such
certificates, be entitled to receive the Merger Consideration and (ii) until the
certificates representing the Shares have been surrendered by the Shareholders
and replaced by certificates representing the Surviving Corporation common
stock, the certificates for the Shares shall, for all purposes, be deemed to
evidence ownership of the Surviving Corporation common stock.
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(b) The Shareholders shall deliver to the Sub on the Closing Date the
certificates representing the respective Shares owned by them, duly endorsed in
blank, or accompanied by blank stock powers, and with all necessary transfer tax
and other revenue stamps (if any), acquired at each Shareholder's expense. The
Shareholders agree to cure any deficiencies with respect to the endorsement of
the certificates or other documents of conveyance with respect to the Shares or
with respect to the stock powers accompanying the Shares. Simultaneous with
such delivery on the Closing Date, each Shareholder shall receive in exchange
therefor a certificate or certificates representing the ABG Common Stock
allocated to such Shareholder as his respective portion of the Merger
Consideration as noted on Schedule 2.7.
2.9 Voting Agreement. The ABG Common Stock owned by the Shareholders
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after Closing and the shares of common stock of Buyer held by Xxxx Xxxxxx,
President and Chief Executive Officer of Buyer, and Xxxxxxx Xxxx shall be
subject to the terms of the Voting Agreement, in the form of Exhibit 2.9 hereto,
by and between the Shareholders, Xxxx Xxxxxx and Xxxxxxx Xxxx.
2.10 Absence of Schedules. The parties hereto recognize and agree that
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the Schedules to this Agreement were not available as of the date of execution
of this Agreement. Accordingly, the parties hereto hereby waive any breach of
any representation, warranty, condition or provision of this Agreement which may
technically be deemed to exist due to the failure of any party hereto to
properly disclose any information which otherwise would have, or should have,
been disclosed on a Schedule attached to this Agreement on the date it is
signed. The parties hereto agree that all such Schedules shall be prepared only
as of the Closing Date and that accordingly any such representation, warranty,
condition or provision of this Agreement which is impacted by the absence of
such Schedule shall be deemed to speak, and shall be relevant, only as of the
Closing Date and thereafter.
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ARTICLE III
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FEASIBILITY PERIOD, ACCESS AND INDEMNITY
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3.1 Feasibility Period. From the date of execution of this Agreement
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by Buyer and the Shareholders until the earlier of the Closing or thirty (30)
days hereafter (the "Feasibility Period"), Buyer shall have the right of review,
investigation and inspection of the Company to determine whether or not Buyer
desires to proceed with the Closing. During the Feasibility Period the Buyer
may conduct inspections and economic and feasibility studies of the Company to
determine that the Company is suitable, in Buyer's sole opinion, for Buyer's
purposes and conduct all such inspections and studies as Buyer deems reasonable
of the Company. The Company and the Shareholders agree to cooperate fully with
Buyer's efforts and shall execute such forms and requests as may be required to
obtain the information deemed necessary by Buyer. No study, investigation or
inspection by Buyer or Buyer's representatives shall be deemed to have in any
way diminished or waived the representations, warranties or covenants of the
Company and the Shareholders set forth in this Agreement.
3.2 Access and Indemnity. Buyer and Buyer's agents shall have the right
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of access to the Company's facilities during the Feasibility Period for the
purpose of conducting such studies, investigations and inspections. Buyer shall
repair any damage or injury to the Company's property resulting from Buyer's
investigation and inspections. Buyer shall indemnify and hold harmless the
Company and the Shareholders on account of any claims, causes of action,
damages, costs and expenses (including attorney's fees) arising out of or
relating to the acts of Buyer, its agents and employees under the provisions of
this Article III. This indemnity shall survive the termination of this
Agreement.
3.3 Termination of Agreement. If Buyer determines, in Buyer's sole
--------------------------
judgment and discretion, that the Company is not suitable for Buyer's intended
purposes, Buyer shall give the Company and the Shareholders written notice of
such fact on or before the end of the Feasibility Period. Upon receipt of such
written notice, all parties shall be released from all further obligations under
this Agreement. If the Buyer does not timely provide such written notice to the
Company and the Shareholders, then it shall be conclusively deemed that the
Company is suitable for Buyer's intended purposes, and this Agreement may not be
terminated by the Buyer for the reasons set forth in this Article III.
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3.4 Confidentiality.
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(a) Each party to this Agreement acknowledges that from the date
of this Agreement until Closing he or it may receive confidential and
proprietary information from one or more other parties to this Agreement. Such
information, whether written or oral, includes, but is not limited to,
financial, technical, permitting, operating, marketing and other information, as
well as information pertaining to geographical areas and fields of business
interests, identities and information about employees, consultants, vendors,
suppliers, customers, and other business contacts, methods of doing business and
other trade secrets (the "Confidential Information"). Each party to this
Agreement agrees to keep all such Confidential Information secret and to
maintain the confidentiality of such information up to and through the date of
Closing hereunder, or indefinitely if the Closing does not occur; provided,
however, that the following shall be deemed not to be Confidential Information:
(1) information lawfully obtained by a party from a third party who is not
under an obligation of confidentiality with respect to such information; (2)
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information which is in the public domain; (3) information which a party can
prove was independently developed by him or it without the use of information
which would otherwise be Confidential Information; and (4) information which the
party is ordered to disclose by any court or governmental agency (provided that
he gives the other parties hereto written notice of any such judicial or
administrative proceeding as soon as practical after the party learns of such
proceeding).
(b) The Confidential Information shall be used solely for the
purpose of evaluating the possible transactions contemplated by this Agreement
and shall not be used in any way directly or indirectly detrimental to any party
hereto. Such Confidential Information may be disclosed to advisers of the
parties hereto as necessary for the sole purpose of evaluating the proposed
transactions contemplated by this Agreement. All persons to whom such
Confidential Information is disclosed shall be informed of the confidential
nature of such information and shall likewise agree to be bound by the terms of
this confidentiality provision. Each party hereto agrees and recognizes that it
will be liable to the other parties hereto for any breach of this
confidentiality provision by it or any of its representatives.
(c) Upon written request of any party hereto, or upon the
termination of this Agreement, each party hereto shall promptly return to the
other parties any Confidential Information obtained and shall destroy all
originals and copies of any notes, analyses, compilations, studies,
interpretations or other materials prepared containing or reflecting any
Confidential Information.
(d) Until three years from the date of this Agreement, Buyer shall
not initiate or maintain contact with any officer, director, employee or agent
of the Company, except with the written consent of the Company. For a period of
three years from the date hereof, Buyer shall not hire any employee of the
Company with whom it has had contact or who became known to it during its
investigation.
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
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AND THE COMPANY
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The Shareholders and the Company make the following representations and
warranties to the Buyer. The Buyer has inspected the Assets and performed all
necessary due diligence and is acquiring the Company as a result of such
inspection and due diligence and not in reliance upon any representation or
warranty with respect thereto made by the Shareholders other than those
specifically set forth in this Agreement.
4.1 Organization of the Company. The Company is a corporation duly
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organized and validly existing and in good standing under the laws of the State
of South Carolina. The Company has the requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
Company has the requisite corporate power and authority to carry on the Business
and to own, operate and hold under lease or otherwise the Assets. The Company
has provided the Buyer with true, complete and correct copies of the Company's
Articles of Incorporation, Bylaws and all amendments thereto, as presently in
effect, all corporate minutes of board of directors and shareholder meetings and
actions by written consent by them since the incorporation of the Company, and
the stock ledger and minute book of the Company.
4.2 Capitalization; Ownership. The total authorized capital stock of
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the Company consists of 100,000 shares of common stock, no par value. As of the
date hereof, 16,200 shares of common stock are issued and outstanding (the
"Shares"), all of which shares are owned by the Shareholders. The Shares
constitute all the issued and outstanding shares of capital stock of the
Company. The Shareholders have good and marketable title to the Shares, free
and clear of all Liens. The Shares have been validly authorized and issued and
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are fully paid and non-assessable. Neither the Company nor any Shareholder has
received any notice of any adverse claim to the ownership of the Shares. There
is no security, option, warrant, right (preemptive or otherwise), call,
subscription, agreement, conversion or exchange, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly (a)
calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of the Company, or (b) obligates the Company to grant, offer or
enter into any of the foregoing or (c) relates to the voting or control of such
capital stock, securities or rights. Upon receipt by the Shareholders of the
Merger Consideration, the Buyer will own one hundred percent (100%) of the
issued and outstanding shares of the Company free and clear of all Liens.
4.3 Authorization; Enforceability. Each Shareholder and the Company
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have the requisite individual and corporate power and authority to execute,
deliver and perform this Agreement and each of the documents, instruments and
agreements contemplated hereby to which any of them is or will be a party, and
to perform their obligations hereunder or thereunder. The execution, delivery
and performance of this Agreement and each of the other documents, instruments
and agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Company, and no further approvals
on the part of the Company are required. This Agreement has been, and the other
documents and instruments required hereby to which the Company will be a party
will be, duly executed and delivered by the Company, and when duly executed and
delivered by the other parties hereto and thereto (assuming such documents and
instruments will be valid and binding obligations of such other parties), will
be the valid and binding obligations of the Company, and will be enforceable
against the Shareholders and the Company in accordance with their respective
terms, subject to the effect of bankruptcy, insolvency, moratorium, or other
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similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by general
principles of equity. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal is
required by the Shareholders and/or the Company for the execution, delivery
and/or performance of this Agreement, other than Articles of Merger which must
be filed with the South Carolina Secretary of State in connection with the
merger contemplated by this Agreement.
4.4 No Conflict or Violation. Neither the execution and delivery of
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this Agreement and each of the documents, instruments and agreements
contemplated hereby by the Company and the Shareholders nor the consummation of
the transactions contemplated hereby and thereby will result in (a) a violation
of, or a conflict with, any provision of the Articles of Incorporation or Bylaws
of the Company, (b) a violation by the Company of any judgment, order or decree
binding on the Company, (c) to the best of the Shareholders' and the Company's
knowledge, a violation by the Company of any Law or the occurrence of any event
which with notice, lapse of time, or both, would result in the violation of any
Law, judgment, order or decree binding on the Company, or (d) a breach of,
default under, or conflict with, any material term or provision of, or
permission to modify, terminate, or accelerate, any Contract, Lease or other
agreement or instrument, or obligation thereunder, applicable to the Company,
the Business or any of the Assets, or an event which with notice, lapse of time,
or both, would result in any such breach, default, or conflict.
4.5 Permits and Approvals. Except as set forth in Schedule 4.5 hereto,
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no Permit from or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority is necessary to enter into
this Agreement, any instrument, document or other agreement contemplated hereby,
and to carry out the transactions contemplated hereby and thereby; provided,
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however, neither the Company nor the Shareholders make any representation or
warranty as to any requirement of the Buyer with respect to any of the matters
discussed in this Section 4.5.
4.6 Consents. Except as set forth on Schedule 4.6, no consent of any
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party to any Contract, Lease, or other agreement or instrument applicable to the
Company, the Business or any of the Assets, is required for the execution,
delivery and/or performance of this Agreement.
4.7 Financial Condition. Schedule 4.7 shall consist of true and
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complete copies of (i) the compiled balance sheets of the Company as of August
31, 1997, and September 30, 1997, and the related compiled statement of income
and cash flows of the Company for the year ended August 31, 1997, and the month
ended September 30, 1997, accompanied by the compilation report thereon of the
accountants (collectively the "Financial Statements"). The Financial Statements
(i) were prepared in accordance with the books of account and other financial
records of the Company by accountants retained by the Company, (ii) present
fairly the financial condition, results of operations and cash flows of the
Company as of the dates thereof and for the periods covered thereby, (iii) have
been prepared in accordance with general accepted accounting principles ("GAAP")
applied on a basis consistent with the past practices of the Company, and (iv)
include all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the financial conditions of the Company,
and the results of operations and cash flows of the Company as of the dates
thereof or for the periods covered thereby.
4.8 Lack of Material Changes. Except as set forth in Schedule 4.8,
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since August 31, 1997:
(a) There has not been any change having a material adverse effect on the
Business operations, properties (including any intangible properties), condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of the Company.
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(b) The operations and business of the Company have been conducted in all
respects only in the ordinary course.
(c) The Shareholders and/or the Company have not mortgaged, pledged or
subjected to lien or other encumbrance any of the Assets.
(d) The Company has not suffered an extraordinary loss (whether or not
covered by insurance) or waived any right of substantial value.
(e) The Company has not sold or transferred any of its assets having a
book value in the aggregate of $5,000 or more or canceled any debts or claims,
except, in each case, in the ordinary course of business.
(f) The Company has not issued any common stock, preferred stock, capital
stock, bonds, warrants, options, rights or any other form of corporate
securities.
(g) There is no compensation payable or to become payable by the Company
to any of its officers, employees or agents, or any known payment or arrangement
made to or with any of such persons, except as described in this Agreement and
except as noted on Schedule 7.1.
(h) The Company has not made any change in the method of accounting or
accounting practice or policy used by the Company, other than changes required
by GAAP.
(i) The Company has not made any material changes in the customary methods
of operations of the Business, including practice and policies relating to
purchasing, inventory, marketing, selling or pricing.
(j) The Company has not agreed, whether in writing or otherwise, to engage
in any of the acts specified in this Section 4.8, except for those contemplated
by this Agreement and except as noted on Schedule 7.1.
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(k) There is no fact known to the Company and/or any Shareholder which
will have a material adverse effect or in the future (as far as the Company or
any Shareholder can foresee) may have a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of the Company which has not been disclosed to Buyer in this
Agreement; provided, however, that the Company and the Shareholders express no
opinion as to political or economic matters of general applicability.
4.9 Absence of Undisclosed Liabilities. Except as set forth on Schedule
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4.9, the Company does not have liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) which individually or in the
aggregate, are material, including without limitation liabilities for federal,
state, local, or foreign taxes, liabilities to customers or suppliers, direct or
indirect, claims, losses, damages, deficiencies (including deferred income tax
and other net tax deficiencies), costs, expenses, obligations, guarantees, or
responsibilities, whether accrued, absolute, or contingent, known or unknown,
fixed or unfixed, liquidated or unliquidated, secured or unsecured, (hereinafter
collectively referred to as "Liabilities") other than the following:
(a) Liabilities for which full provision and disclosure have been made
on the balance sheet of the Company as of September 30, 1997, and/or
(b) Other liabilities arising since September 30, 1997, and prior to
the Closing Date which have been incurred in the ordinary course of business and
which are not inconsistent with the representations and warranties of the
Company and Shareholders contained in this Agreement or any other provisions of
this Agreement.
4.10 Title to Assets. The Company is the rightful owner of all the
-----------------
Assets, free and clear of any and all Liens. Schedule 4.10 shall consist of a
true and complete list of all legal and personal properties and material Assets
(including but not limited to machinery, equipment, inventories, and intangibles
17
owned, leased, used in the business and/or licensed by the Company), together
with a list of all personal property attached to, located on or used in
connection with the Business and which will not be owned by the Company as of
the date of Closing but which the Company will have the right to use under
lease, rental or other agreement, accompanied by true and current photocopies of
such agreements. The Assets constitute all of such properties and assets which
are necessary to conduct the Business.
4.11 Condition of Fixtures and Equipment. The Fixtures and Equipment
-------------------------------------
are in good operating condition and repair, normal wear and tear excepted, and
are adequate for the purposes for which they are being utilized, subject to the
continuing need for ordinary, routine maintenance and repairs.
4.12 Leases. Schedule 1.16 contains an accurate and complete list of
------
all Leases. The Leases constitute valid and legally binding obligations of the
Company and are enforceable in accordance with their terms, subject to the
effect of bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity, and none of
the Leases will be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. The Company is not in default, and
the Company has not received notice of any asserted default, under any Lease.
4.13 No Litigation. Except as set forth in Schedule 4.13, there is no
-------------
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending, proposed or threatened against the Company or any
Shareholder relating to this Agreement, the Assets, the Business or the
transactions contemplated herein, and there is no writ, injunction, decree,
order or judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or threatened, relating to the
ownership, use or maintenance of the Assets or the operation of the Business by
the Company.
18
4.14 Compliance with Law. To the best of the Shareholders' and the
---------------------
Company's knowledge, except as specified in Schedule 4.14, the Company's conduct
of the Business and ownership and/or use of the Assets do not materially violate
or conflict with any Law. The Permits described in Schedule 1.21 (i) constitute
all permits, licenses and governmental agency authorizations, registrations and
approvals required for the Company to own and/or use the Assets and/or to
conduct the Business, (ii) are in full force and effect, and (iii) are being
complied with in all material respects.
4.15 Taxes. The Company has filed all required tax returns and
-----
reports, including but not limited to state, local and federal income tax
returns, payroll tax reports and real and personal property tax reports, and
have paid all taxes shown thereby to be due and payable. Copies of all such
returns and reports for all open tax years have been delivered or made available
to the Buyer prior to the date of this Agreement. The Company has paid (or has
made adequate provision for and will timely pay) all taxes (including additions
to taxes, penalties and interest), withholdings and other governmental charges
the nonpayment of which could materially adversely affect any of the Assets, the
use of the Assets, or the conduct of the Business or could cause the Company to
incur a material liability. No taxing authority has asserted any claim for the
assessment of any such tax liability, withholding or other governmental charges,
nor is any governmental entity presently engaged in an audit of the Company's
tax returns, nor, to the best of the Shareholders' and the Company's knowledge,
about to engage in such an audit.
4.16 Contracts. Schedule 1.11 contains a list of all Contracts and a
---------
brief description of the subject matter of each such Contract. The Company is
not in material breach or violation of, or in default under, and there is no
19
valid basis for a claim of material breach or violation of, or default under,
any such Contract, and no event has occurred which constitutes or, with the
lapse of time or the giving of notice or both, would constitute such a material
breach or violation or default by the Company, or any other party thereto. No
party to any Contract has given notice of its intention to cancel or terminate
any such Contract. None of the rights of the Company under the Contracts will
be materially impaired by the delivery, execution and performance of this
Agreement.
4.17 ERISA Matters and Employees. Schedule 4.17A contains a list of
------------------------------
every pension, profit sharing, option, other incentive plan, or any other type
of employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974) which the Company has or contributes to, and any
obligation of the Company to, or customary arrangement by the Company with,
employees for bonuses, incentive compensation, or severance pay. Schedule 4.17B
hereto contains a list of the Company's employees with current salary (or rate
of pay) and other compensation now paid by the Company to each employee,
including a description of any increase scheduled to be effective after the date
of this Agreement.
4.18 Insurance. Schedule 4.18 hereto contains a complete and correct
---------
list of all insurance policies, of any kind, held by the Company. Each such
policy is valid and enforceable, and all premiums and other payments due from
the Company on account of any such policy have been paid and there is no act or
failure to act which has or might cause any such policy to be canceled or
terminated.
4.19 No Brokers' or Finders' Fees. Neither the Company nor any
--------------------------------
Shareholder is committed to any liability for any brokers' or finders' fees or
any similar fees in connection with the transactions contemplated by this
Agreement. Neither the Company nor any Shareholder has had any dealings,
negotiations or communications with any broker or other intermediary in
connection with the transactions contemplated by this Agreement.
20
4.20 Liens. Except as set forth on Schedule 4.20, at Closing the
-----
Company will have good and marketable title to all of the Assets and the Assets
will not be subject to any liens.
4.21 Questionable Payments. Neither the Company, any director,
----------------------
officer, agent, employee, nor other person associated with or acting on behalf
of such entities or individuals has, directly or indirectly: (i) used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful payment to foreign or domestic governmental officials or employees or
to foreign or domestic political parties or campaigns from corporate funds; (ii)
violated any provision of the Foreign Corrupt Practices Act of 1977; (iii)
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; (iv) made any false or fictitious entry on the books or records of
the Company; (v) made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment; (vi) given any favor or gift which is not deductible for
federal income tax purposes; and/or (viii) made any bribe, kickback, or other
payment of a similar or comparable nature, that is unlawful, to any person or
entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained.
4.22 Bank Accounts. Schedule 4.22 shall list the names and address of
--------------
every bank and other financial institution in which the Company maintains an
account (whether checking, savings or otherwise), lock box or safe deposit box,
and the account numbers and names of persons having signing authority or other
access thereof.
21
4.23 Quarterly Reports. Schedule 4.23 shall consist of copies of the
------------------
quarterly reports of the gaming operations of the Business for the most recent
six month period which have been filed with the South Carolina Department of
Revenue.
4.24 Lack of Restrictions. Except as set forth on Schedule 4.24
----------------------
hereto, no real property owned, leased or used by the Company in connection with
the Business lies in an area which is, or to the knowledge of the Company or
Shareholders, will be, subject to zoning, use or building code restrictions
which would prohibit, and the Company and the Shareholders are not aware of any
facts relating to the acts of another person or entity or its ownership,
leasing, licensing or use of any real or personal property which would prevent,
the continued effective ownership, leasing and use of such real property in the
Business.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
The Shareholders, with respect to themselves and their obligations
hereunder, hereby represent and warrant to the Buyer:
5.1 Ownership of Shares; Title. Each Shareholder is the owner of
-----------------------------
record and beneficially of the Shares he is selling hereunder, as listed on
Schedule 5.1. Each Shareholder has good and marketable title to his respective
Shares, free and clear of all Liens. No Shareholder has received notice of any
adverse claim to the ownership of the Shares by the respective Shareholder.
There is no security, option, warrant, right, call, subscription, agreement,
conversion or exchange, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly affects the Shares.
5.2 Authorization; Enforceability. Each Shareholder has the power and
------------------------------
authority and has full legal capacity and is competent to execute, deliver and
22
perform his obligations under this Agreement and each of the other documents,
instruments and agreements contemplated hereby to which he is or will be a
party. This Agreement has been, and the other documents and instruments
required hereby to which each Shareholder will be a party will be, duly executed
and delivered by each Shareholder, and when duly executed and delivered by the
other parties hereto and thereto (assuming such documents and instruments will
be valid and binding obligations of such other parties) will be each
Shareholder's valid and binding obligations, enforceable against him in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable remedies
may be limited by general principles of equity.
5.3 No Conflict or Violation. With respect to each Shareholder,
---------------------------
neither the execution and delivery of this Agreement by him nor the consummation
of the transactions contemplated hereby will result in (a) a violation by him of
any Law, judgment, order or decree binding upon him or any event which with
notice, lapse of time, or both, would result in any such violation, (b) a breach
of, default under, or conflict with, any material term or provision of, or
permission to modify, terminate or accelerate, any Contract, Lease or other
agreement or instrument, or obligation thereunder, to which the Company is a
party and which is applicable to him or any of his assets, or an event which
with notice, lapse of time, or both, would result in any such breach or default,
or (c) the creation of any lien upon, or result in any person obtaining any
right to acquire any of his properties, assets or rights.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE SUB
-------------------------------------------------------
The Buyer and the Sub hereby represent and warrant to the Shareholders as
follows:
23
6.1 Organization of Buyer. The Buyer and the Sub are corporations duly
---------------------
organized and validly existing and in good standing under the laws of the State
of Delaware and the State of South Carolina, respectively, and have the
requisite corporate power and authority to enter into this Agreement and perform
their obligations hereunder.
6.2 Authorization; Enforceability. Each of the Buyer and the Sub have
------------------------------
the requisite corporate power and authority to execute, deliver and perform this
Agreement and each of the documents, instruments and agreements contemplated
hereby to which the Buyer and the Sub are or will be a party, and to perform
their obligations hereunder or thereunder. The execution, delivery and
performance of this Agreement and each of the other documents, instruments and
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Buyer and the Sub, and no further
approvals on the part of the Buyer and the Sub are required. This Agreement has
been, and the other documents and instruments required hereby to which the Buyer
and the Sub will be a party will be, duly executed and delivered by the Buyer
and the Sub, and when duly executed and delivered by the other parties hereto
and thereto (assuming such documents and instruments will be valid and binding
obligations of such other parties) will be the valid and binding obligations of
the Buyer and the Sub, enforceable against the Buyer and the Sub in accordance
with their respective terms, subject to the effect of bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity.
6.3 No Conflict or Violation. Neither the execution and delivery of
---------------------------
this Agreement and each of the documents, instruments and agreements
contemplated hereby by the Buyer or the Sub nor the consummation of the
transactions contemplated hereby and thereby will result in (a) a violation of,
24
or a conflict with, any provision of the Articles of Incorporation or Bylaws of
the Buyer or the Sub, (b) a violation by the Buyer or the Sub of any judgment,
order or decree binding on the Buyer or the Sub, (c) to the best of the Buyer's
and the Sub's knowledge, a violation by the Buyer or the Sub of any Law or the
occurrence of any event which with notice, lapse of time, or both, would result
in the violation of any Law, judgment, order or decree binding on the Buyer or
the Sub, or (d) a breach of, default under, or conflict with, any material term
or provision of, or permission to modify, terminate, or accelerate, any
contract, lease, mortgage, deed of trust, indenture, permit, license, franchise
or commitment or other agreement or instrument, or obligation thereunder,
applicable to the Buyer or the Sub, the business or any of their assets, or an
event which with notice, lapse of time, or both, would result in any such
breach, default, or conflict.
6.4 No Litigation or Consents. Except as set forth on Schedule 6.4A,
---------------------------
there is no litigation, arbitration proceeding, governmental investigation,
citation or action of any kind pending, proposed or threatened against the Buyer
or the Sub with respect to any transaction in the Buyer's securities, the
transactions contemplated by this Agreement, or the business or assets of the
Buyer or the Sub. Except as set forth on Schedule 6.4B, no consent of any other
Person and no consent, Permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required by the Buyer or the Sub in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and the transactions contemplated herein.
6.5 No Brokers' or Finders' Fees. Neither Buyer nor the Sub is
--------------------------------
committed to any liability for any brokers' or finders' fees or any similar fees
in connection with the transactions contemplated by this Agreement. The Buyer
and the Sub have not had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement.
25
6.6 ABG Common Stock. The issuance and delivery by the Buyer of shares
----------------
of the ABG Common Stock in connection with the transactions contemplated by this
Agreement will be, as of the Closing Date, duly authorized by all necessary
corporate action on the part of the Buyer. The shares of ABG Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
6.7 Registered Stock. One hundred fifty thousand (150,000) shares of
-----------------
the ABG Common Stock (the "Registered Shares") to be issued in connection with
the transactions contemplated by this Agreement have been registered with the
SEC on a registration statement on Form S-3 (the "Registration Statement"). The
Buyer is eligible to use Form S-3, Form S-3 is the proper registration statement
to be used for this transaction, and Form S-3 is being used properly in
connection with this transaction. The Registration Statement has been declared
effective under the Securities Act of 1933, as amended, and is not subject to a
stop order or threatened stop order. All necessary qualifications or exemptions
under applicable state securities laws related to the issuance of the Registered
Shares by Buyer to Shareholders in connection with the transactions contemplated
by this Agreement, have been obtained and are in full force and effect. The
Registered Shares to be issued pursuant to this Agreement will be freely
transferable under federal securities laws by the Shareholders.
6.8 Compliance with Securities Laws. The Buyer has filed in a timely
---------------------------------
manner all reports and other documents required to be filed by it with the SEC.
All of these reports and documents, as of their respective dates, complied in
all material respects with all applicable statutes, rules and regulations
enforced or promulgated by the SEC. As of their respective dates of filing,
none of the SEC reports, including, but not limited to, the Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1996, contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein not misleading.
26
6.9 Rule 144. The Buyer recognizes that some or all of the
---------
Shareholders may be deemed to be an "affiliate" of the Buyer, as that term is
defined in Rule 144 of the Securities Act of 1933, and that as an "affiliate" a
Shareholder would be subject to restrictions and limitations imposed by Rule 144
in the event the Shareholder decided to sell any of the ABG Common Stock.
Furthermore, even if none of the Shareholders are deemed to be an "affiliate" of
the Buyer under Rule 144, the Buyer recognizes that the Shareholders will be
subject to restrictions and limitations imposed by Rule 144 in the event any
Shareholder decides to sell any of the Unregistered Shares, and the Shareholders
may be subject to restrictions and limitations imposed by Rule 145 in the event
any Shareholder decides to sell any of the Registered Shares. Accordingly,
Buyer agrees to timely file all reports and other documents required to be filed
by it with the SEC and to take such other action as is required from time to
time to ensure that the Shareholders are able to sell the shares of ABG Common
Stock issued to them in compliance with the provisions of Rule 144 or Rule 145
(as in effect at the time of any proposed sale), if applicable.
6.10 Restrictions on Disposition of Shares. Eight hundred fifty
-----------------------------------------
thousand (850,000) shares of the ABG Common Stock (the "Unregistered Shares") to
be issued to the Shareholders in connection with the transactions contemplated
by this Agreement, will not have been registered under the Securities Act of
1933, and may be resold by the Shareholders only after registration under the
Securities Act of 1933, or under an available exemption, or pursuant to Rule
144. The Shareholders agree that the Unregistered Shares will not be disposed
of except (i) pursuant to an effective registration statement under the
Securities Act of 1933, or (ii) in any other transaction which is exempt from
27
registration under the Securities Act of 1933 or the rules and regulations of
the SEC promulgated thereunder. Each Shareholder further agrees (i) that no
such sale, conveyance or disposition of his allocated portion of the
Unregistered Shares shall occur for a period of twelve (12) months after
Closing, (ii) that no more than one-third (1/3) of his allocated portion of the
Unregistered Shares shall be sold during the period between the first
anniversary and the second anniversary of Closing, (iii) that no more than
one-third (1/3) of his allocated portion of the Unregistered Shares shall be
sold during the period between the second anniversary and the third anniversary
of Closing, and (iv) that no more than one-third (1/3) of his allocated portion
of the Unregistered Shares shall be sold during the period between the third
anniversary and the fourth anniversary of Closing; provided, however, this
annual limitation on sales of the Unregistered Shares shall not apply in the
event (i) the Buyer is the subject of an acquisition pursuant to any merger,
stock exchange, stock purchase, consolidation, tender offer or other type of
similar transaction, or (ii) the Buyer extends an offer to its shareholders to
repurchase shares of its common stock. In order to effectuate the covenants of
this subsection, an appropriate legend will be placed upon each of the
certificates of stock at the time of distribution of such Unregistered Shares
pursuant to this Agreement, and stop transfer instructions shall be placed with
the transfer agent for such shares. Such legend shall be removed from the
respective certificates as appropriate upon reaching the respective anniversary
date that terminates the restriction.
6.11 Evidence of Compliance with Private Offering Exception. The
------------------------------------------------------------
Shareholders will agree to provide such reasonable evidence as counsel for Buyer
may request in order to evidence the private offering nature of the distribution
of the Unregistered Shares received pursuant to this Agreement.
28
ARTICLE VII
-----------
CERTAIN MATTERS PENDING THE CLOSING
-----------------------------------
The Shareholders, the Company, the Buyer and the Sub each covenants with
the others as follows for the period from the date hereof through the Closing
Date:
7.1 Maintenance of the Company and the Business Prior to Closing. The
-------------------------------------------------------------
Shareholders shall use their best efforts to continue to carry on the Business
in the ordinary course and in accordance with past practice, and will not take
any action inconsistent therewith or with the consummation of Closing. Without
limiting the generality of the foregoing, the Shareholders shall, absent the
written consent of the Buyer, which consent shall not be unreasonably withheld,
(a) maintain the Assets in substantially their current state of repair,
excepting normal wear and tear; (b) use all reasonable efforts to preserve
intact the relationships with all Persons having business dealings with the
Company; (c) not enter into or agree to enter into any material purchase
commitment for Fixtures and Equipment or supplies, except in the ordinary course
of business; (d) not authorize, declare, pay or effect any dividend in respect
of the Company's capital stock, except as noted on Schedule 7.1; (e) not enter
into or agree to enter into any material contract without amending Schedule 1.11
and providing the Buyer with a copy of the revised Schedule 1.11 within seven
days after entering into such a contract; (f) not amend or agree to amend the
Company's Articles of Incorporation or Bylaws or merge with or consolidate into
any other entity; (g) not sell, pledge or acquire or agree to sell, pledge or
acquire any shares of capital stock or other securities of the Company; (h) not
grant or enter into any options, warrants, calls or commitments of any kind with
respect to the Company's capital stock; (i) not make or agree to make any single
capital expenditure or commitment in excess of $20,000 nor aggregate capital
expenditure or commitment in excess of $50,000; and (j) not borrow or agree to
borrow any funds or incur or agree to incur, whether directly or by way of
guarantee or otherwise, any indebtedness, obligation or liability or enter into
any other material transaction except in the ordinary course of business.
29
7.2 Cooperation. The Company, the Shareholders, the Buyer and the Sub
-----------
shall use their best efforts to cause the transactions contemplated by this
Agreement to be consummated. The Company and the Shareholders shall use their
best efforts to obtain all consents and authorizations of third parties and to
make all filings with and give all notices to third parties which may be
necessary or reasonably required in order to effect the transactions
contemplated hereby.
7.3 Compliance with Law. The Company and the Shareholders shall
---------------------
continue to conduct the Business and to use the Assets in compliance with all
applicable Laws, and all orders of any court or of any federal, state, municipal
or other governmental department, noncompliance with which could cause a
material adverse change in the Assets or the Business.
7.4 Registration Statement. The Buyer shall take all other required
-----------------------
action to ensure that on the Closing Date the Registered Shares issued in
connection with the transactions contemplated by this Agreement will be freely
transferable by the Shareholders.
7.5 Listing Application. The Buyer shall prepare and submit to NASDAQ
--------------------
a listing application covering the ABG Common Stock and shall use its best
efforts to obtain approval for the listing of the ABG Common Stock upon official
notice of issuance.
7.6 Articles of Merger and Plan of Merger. Prior to the Closing Date,
--------------------------------------
the Shareholders and the Buyer shall prepare Articles of Merger and Plan of
Merger reflecting the terms of the Merger, which Articles of Merger will be
filed with the Secretary of State of South Carolina on the Closing Date to
effectuate the Merger.
30
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND THE SUB
----------------------------------------------------------------
Each and every obligation of the Buyer and the Sub to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following express conditions precedent:
8.1 Compliance with Agreement. The Company and the Shareholders shall
--------------------------
have performed and complied in all material respects with all of their
respective obligations under this Agreement that are to be performed or complied
with by them prior to or on the Closing Date.
8.2 Proceedings and Instruments Satisfactory. All proceedings,
-------------------------------------------
corporate or other, to be taken by the Company and the Shareholders in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Buyer, the Sub and their counsel, and the Company and the
Shareholders shall have made available to the Buyer for examination the
originals or true and correct copies of all documents that the Buyer may
reasonably request in connection with the transactions contemplated by this
Agreement.
8.3 Employment Agreement. The Buyer shall have received from each
---------------------
Shareholder an executed employment agreement in substantially the form set forth
in Exhibit 8.3.
8.4 No Adverse Change. There shall have been no material adverse
-------------------
change in the Business, Assets, operations or condition (financial or otherwise)
of the Company between the date hereof and the Closing Date.
8.5 No Litigation. No investigation, suit, charge, action or other
--------------
proceeding shall be threatened or pending before any court or governmental
agency that seeks restraint, prohibition, damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby,
31
or which seeks to obtain, establish or impose any interest in or lien or
encumbrance upon any of the Assets, or which, if successful, would materially
impair operation of the Business or the financial condition of the Company.
8.6 Representations and Warranties. All Schedules referred to in this
-------------------------------
Agreement which contain or should contain information concerning the
Shareholders or the Company shall have been fully and accurately completed and
provided to the Buyer for attachment to this Agreement; and the representations
and warranties made by the Company and the Shareholders in this Agreement and
the Schedules attached hereto shall be true and correct in all material respects
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
8.7 Consents. Except as set forth in Schedule 4.6, all consents,
--------
approvals and waivers from third parties and governmental authorities and other
parties necessary (a) to permit the Shareholders to transfer the Shares to the
Buyer, free and clear of all Liens; (b) to consummate the transactions
contemplated hereby; and (c) to allow the Company to operate the Business after
the Closing Date shall have been obtained by the Buyer.
8.8 Deliveries at Closing. The Company and the Shareholders shall have
---------------------
delivered, or cause to be delivered, to the Buyer the following documents, each
properly executed and dated as of the Closing Date: (a) the Company's and the
Shareholders' Closing Certificate; (b) certificates evidencing the Shares, duly
endorsed in blank for transfer or accompanied by duly executed stock powers; and
(c) such other documents as the Buyer may reasonably request.
8.9 No Termination Under Article III. Buyer shall not have given
------------------------------------
timely notice of termination of this Agreement pursuant to Article III hereof.
32
ARTICLE IX
----------
CONDITIONS PRECEDENT TO THE OBLIGATIONS
---------------------------------------
OF THE SHAREHOLDERS AND THE COMPANY
-----------------------------------
Each and every obligation of the Shareholders and the Company to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following express conditions precedent:
9.1 Compliance with Agreement. The Buyer and the Sub shall have
---------------------------
performed and complied in all material respects with all of their obligations
under this Agreement that are to be performed or complied with by them prior to
or on the Closing Date.
9.2 Proceedings and Instruments Satisfactory. All proceedings,
-------------------------------------------
corporate or other, to be taken by the Buyer and the Sub in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the Shareholders, the
Company and their counsel and the Buyer shall have made available to the
Shareholders for examination the originals or true and correct copies of all
documents that any Shareholder may reasonably request in connection with the
transactions contemplated by this Agreement.
9.3 Employment Agreement. The Buyer shall have executed an employment
---------------------
agreement for each Shareholder in substantially the form set forth in Exhibit
8.3.
9.4 No Adverse Change. There shall have been no material adverse
-------------------
change in the operation or condition (financial or otherwise) of the Buyer or in
the value of the ABG Common Stock between the date hereof and the Closing Date.
9.5 No Litigation. No investigation, suit, action or other proceeding
--------------
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
33
9.6 Representations and Warranties. All Schedules referred to in this
-------------------------------
Agreement which contain or should contain information concerning the Buyer or
the Sub shall have been fully and accurately completed and provided to the
Shareholders and the Company for attachment to this Agreement; and the
representations and warranties made by the Buyer and the Sub in this Agreement
and the Schedules attached hereto shall be true and correct in all material
respects as of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
9.7 Consents. All consents, approvals and waivers from governmental
--------
authorities and other parties necessary to permit the Shareholders to transfer
the Shares to the Buyer as contemplated hereby shall have been obtained by the
Buyer.
9.8 Registration Statement. The Registration Statement for the
-----------------------
Registered Shares shall be effective and not subject to a stop order or
threatened stop order. All necessary qualifications or exemptions under
applicable state securities laws shall have been obtained and be in full force
and effect.
9.9 Approval for Listing. Buyer shall have filed the necessary
----------------------
documentation to list the ABG Common Stock to be issued pursuant to this
Agreement on NASDAQ.
9.10 Deliveries at Closing. The Buyer shall have delivered to the
-----------------------
Shareholders the following documents, each properly executed and dated as of the
Closing Date: (a) the Merger Consideration in the form of ABG Common Stock; (b)
the Buyer's and Sub's Closing Certificate; (c) certified corporate resolutions
of the board of directors of the Buyer and the Sub approving the transactions
34
contemplated by this Agreement; and (d) such other documents as the Shareholders
may reasonably request.
ARTICLE X
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
10.1 Survival of Representations and Warranties. All of the
----------------------------------------------
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement.
10.2 Indemnification.
---------------
(a) The Shareholders hereby agree to indemnify, defend and hold
harmless the Buyer and the Sub from and against any and all damages, losses,
expenses, claims or other liabilities, including without limitation reasonable
attorneys' fees, incurred by the Buyer or the Sub as a result, directly or
indirectly, of any breach, violation or nonfulfillment of any covenant,
representation, warranty or other provision of this Agreement, or any agreement
executed in connection with the transactions contemplated by this Agreement, or
any misrepresentation or omission with respect to any covenant, representation,
warranty or other provision of this Agreement, on the part of the Shareholders.
The Buyer and the Sub hereby agree to indemnify, defend and hold harmless the
Shareholders from and against any and all damages, losses, expenses, claims, or
other liabilities, including without limitation reasonable attorneys' fees,
incurred by any Shareholder as a result, directly or indirectly, of any breach,
violation or nonfulfillment of any covenant, representation, warranty or other
provision of this Agreement, or any agreement executed in connection with the
transactions contemplated by this Agreement, or any misrepresentation or
omission with respect to any covenant, representation, warranty or other
provision of this Agreement, on the part of the Buyer or the Sub.
35
(b) Should any claim be made by a person not a party to this Agreement,
with respect to any matter to which the foregoing indemnity relates, the party
against whom such claim is asserted (the "Indemnified Party"), within a
reasonable period of time, shall give written notice to the other party (the
"Indemnifying Party") of any such claim, and the Indemnifying Party shall
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its own selection. In such defense or settlement of
any claims, the Indemnified Party shall cooperate with the Indemnifying Party to
the maximum extent reasonably possible. Any payment resulting from such defense
or settlement, together with the total expense thereof, shall be binding on the
Buyer, the Company and the Shareholders.
(c) Notwithstanding the foregoing provisions of this Section 10.2, no
party shall be liable to indemnify the other until the total of all
indemnifiable losses, liabilities, damages, costs, or expenses for which
indemnification would otherwise be required, equals or exceeds $25,000. At such
time as the aggregate indemnifiable losses, liabilities, damages, costs and
expenses have exceeded this threshold amount, the Indemnifying Party shall pay
all such excess amounts as provided herein.
ARTICLE XI
NON-COMPETITION AGREEMENT
-------------------------
11.1 Shareholders' Covenants. Except as set forth on Schedule 11.1, each
-----------------------
Shareholder covenants and agrees that:
(a) Such Shareholder shall not, directly or indirectly,
within the Territory during the Restricted Period, promote, operate, manage or
conduct any bingo game or related gaming business permitted under the terms and
conditions of any bingo license issued by the State of South Carolina or under
any other state or federal law or authority, or operate any video game machine
or other gaming machine or device (such games and game machines being referred
to herein as "Games").
36
(b) Further, such Shareholder shall not, directly or
indirectly, within the Territory during the Restricted Period, solicit or sell
for, own, or acquire any interest in, either directly or indirectly, any
corporation, partnership, limited partnership, or other entity, or become
engaged by, act as landlord to, or as agent or consultant for, do business with,
manage, operate, control, be employed by, participate in, or be connected, in
any manner with, or in any manner assist, any other person, corporation,
partnership or other entity engaged in the business of promoting, operating,
managing or conducting Games.
11.2 Restricted Period. For the purpose of this Agreement, the
------------------
"Restricted Period" means the period commencing with the date hereof and
continuing until three years thereafter.
11.3 Territory. For purposes of this Agreement the "Territory" shall
---------
mean: (i) with regard to any activities described in Section 11.1 above which
are conducted under a Class B or Class C bingo license (or equivalent thereof
under any future law) issued by the State of South Carolina or under any other
state or federal law or authority, the area within a fifty (50) mile radius of
any bingo facility then owned by Company, Buyer or any subsidiary of Buyer, and
(ii) with regard to any activities described in Section 11.1 above which are
conducted under any Class A license (or equivalent thereof under any future law)
issued by the State of South Carolina or under any other state or federal law or
authority, the area within a one hundred (100) mile radius of any bingo game
facility then owned by Company, Buyer, or any subsidiary of Buyer; and (iii)
with regard to video game facilities, the area within a twenty-five (25) mile
radius of any bingo, video poker or video game facility then owned by the
Company, Buyer, or any subsidiary of Buyer.
37
11.4 Enforcement. In the event of a breach by either party of the
-----------
provisions of this Agreement, the non-breaching party, in addition to any other
remedies it may have at law or under this Agreement, shall be entitled to an
injunction restraining the breaching party from violating or continuing a
violation of the terms of this Article XI.
ARTICLE XII
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REGISTRATION RIGHTS
-------------------
12.1 Piggyback Registration. If at any time after December 31, 1998,
-----------------------
or from time to time thereafter, the Buyer shall determine to register any of
its securities under the Securities Act of 1933, either for its own account or
the account of a shareholder, pursuant to an underwritten public offering, the
Buyer shall (a) promptly give to each Shareholder written notice thereof, and
(b) include in such registration and in any underwriting involved therein, up to
one-sixth (1/6) of each Shareholder's Unregistered Shares as specified in a
written request or requests of a Shareholder made within thirty days after
receipt by the Shareholder of such written notice from the Buyer.
12.2 Limitations on Registration. If the underwriter determines that
-----------------------------
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Unregistered Shares to be
included in the registration and underwriting; provided, however, that the
underwriter may not limit the amount of Unregistered Shares included in such
registration and underwriting to less than an amount equal to five percent (5%)
of the amount of all of the Buyer's securities included within such registration
and underwriting. If any Shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the Buyer
and the underwriter.
12.3 Delay or Cancellation of Registration. If, at any time after
---------------------------------------
giving the Shareholders written notice of the Buyer's intention to register any
of its securities, and prior to the effective date of the registration statement
38
filed in connection with such registration, the Buyer shall determine for any
reason not to register or to delay the registration, at its sole election, the
Buyer may give written notice of such determination to the Shareholders and
thereupon shall be relieved of its obligation to register the Unregistered
Shares in connection with such registration (but not from its obligation to pay
registration expenses in connection therewith or to register the Unregistered
Shares in a subsequent registration).
12.4 Expenses. All expenses incurred in connection with any
--------
registration, qualification or compliance pursuant to this Article XII,
including without limitation, all registration, filing, and qualification fees,
printing expenses, fees and disbursements of counsel for the Buyer, and expenses
of any special audits incidental to or required by such registration, shall be
borne by the Buyer; provided, however, the Buyer shall not be required to pay
underwriters' fees, discounts, or commissions relating to the Unregistered
Shares.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Books and Records. Each party agrees that it will cooperate with
------------------
and make available to the other parties, during normal business hours, all
books, records and information retained and remaining in existence after the
Closing Date which are necessary or useful in connection with any tax filing,
inquiry, audit, investigation or dispute, any litigation or investigation or any
other matter requiring any such books, records or information. The party
requesting any such books, records or information shall bear all of the other
parties' out-of-pocket costs and expenses reasonably incurred in connection with
providing such books, records and information.
13.2 Further Assurances. Both before and after the Closing Date, each
-------------------
party will cooperate in good faith with the other parties and, from time to time
39
as requested by the other party or parties, will take all appropriate action and
execute all documents which may be necessary to carry out any of the
transactions contemplated hereunder more effectively, all at the expense of the
requesting party unless arising out of a default of the cooperating party.
13.3 Entire Agreement; Amendment. This Agreement constitutes the
-----------------------------
entire agreement among the parties pertaining to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements among the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
13.4 Expenses. Each party hereto shall bear its own fees and expenses
--------
of its counsel, accountants and other experts incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby. To the extent such fees and expenses are incurred by the Company prior
to Closing, such fees and expenses shall be paid by the Company at Closing.
13.5 Termination. If any condition precedent to the Shareholders'
-----------
obligations hereunder is not satisfied and such condition is not waived by the
Shareholders at or prior to the Closing Date, or if any condition precedent to
the Buyer's obligations hereunder is not satisfied and such condition is not
waived by the Buyer at or prior to the Closing Date, any Shareholder or the
Buyer, as the case may be, may terminate this Agreement at their option by
40
notice to the other party or parties, as the case may be. In the event of the
termination of this Agreement by any party as above provided, no party shall
have any liability hereunder of any nature whatsoever to the other party, other
than the liability of each party for its own expenses and liability resulting,
arising or accruing from the breach of this Agreement; provided, however, that a
party shall not be so relieved of liability to the other party if the failure to
satisfy a condition precedent results from the failure of a party to make good
faith efforts to satisfy such condition. In the event that a condition
precedent to a party's obligations is not satisfied, nothing contained herein
shall be deemed to require any party to terminate this Agreement, rather than to
waive such condition precedent and proceed with the Closing.
13.6 Governing Law. This Agreement shall be governed by, construed and
-------------
interpreted in accordance with the laws of the State of South Carolina, without
reference to the conflicts of laws principles thereof.
13.7 Successors and Assigns. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns or heirs and personal representatives.
13.8 Assignment. This Agreement and each party's respective rights
----------
hereunder may not be assigned by any party without the prior written consent of
the other parties.
13.9 No Reliance. No third party is entitled to rely on any of the
------------
representations, warranties and agreements contained in this Agreement.
13.10 Notices. All communications, notices and disclosures required or
-------
permitted by this Agreement shall be in writing, and delivered personally, sent
by overnight messenger service, or sent by United States mail, certified or
registered, postage prepaid, and addressed as follows, unless and until a party
notifies the others in accordance with this Section of a change of address:
41
If to the Company Pre-Closing: 000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Xx.
With a copy to: Xxxxxx Xxxxxxx Xxxxx & Scarborough, L.L.P.
Third Floor, Xxxxxx Building
0000 Xxxx Xxxxxx
X. X. Xxx 00000 (29211)
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
If to the Company Post-Closing: 000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxx
If to the Shareholders: Xx. Xxxxxx X. Xxxxxxxx, Xx.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Xx. Xxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Xx. Xxxxxxx X. Xxxxxxxx
Xxxx Xxxxxx Xxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
With a copy to: Xxxxxx Xxxxxxx Xxxxx & Xxxxxxxxxxx, L.L.P.
Third Floor, Xxxxxx Building
0000 Xxxx Xxxxxx
X. X. Xxx 00000 (29211)
Xxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
If to the Buyer or to Sub: American Bingo & Gaming Corp.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxx
With a copy to: Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx Xxxxxx
42
13.11 Counterparts; Headings. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall be deemed an original but all of which
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13.12 Interpretation. Unless the context requires otherwise, all words
--------------
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular
and all words in any gender shall extend to and include all genders.
13.13 Severability. If any provision, clause or part of this
------------
Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the application of such provision,
clause or part under other circumstances, shall not be affected thereby.
13.14 Confidentiality. The parties hereto agree to keep this Agreement
---------------
confidential, as well as any information or document obtained by either party in
connection with this transaction, except to the extent disclosure is required to
or by any government agency or regulatory or quasi-regulatory body.
13.15 Joint Draftsmanship. The preparation of this Agreement has been
--------------------
a joint effort of the parties and this Agreement shall not, solely as a matter
of judicial construction, be construed more severely against one of the parties
than the other.
43
IN WITNESS WHEREOF, each corporate party has caused this Agreement to be duly
executed in its name by its duly authorized officer and each individual party
hereto has duly executed this Agreement, all as of the day and year first above
written, unless otherwise noted below.
AMERICAN BINGO & GAMING CORP.
By: /s/ Xxxx Xxxxxx
-------------------------------
L. Xxxxxxx Xxxxxx, President
DARLINGTON MUSIC CO., INC.
By: /s/ Xxxxxx X. Xxxxxxxx, Xx.
--------------------------------------
Xxxxxx X. Xxxxxxxx, Xx., President
DARLINGTON MUSIC ACQUISITION
CORPORATION
By: /s/ Xxxx Xxxxxx
-------------------------------
L. Xxxxxxx Xxxxxx, President
SHAREHOLDERS:
/s/ Xxxxxx X. Xxxxxxxx, Xx.
--------------------------
Xxxxxx X. Xxxxxxxx, Xx.
/s/ Xxxxxx X. Xxxxxxxx
-------------------------
Xxxxxx X. Xxxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
--------------------------
Xxxxxxx X. Xxxxxxxx
44
