ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement"), dated as of December 31,
2004, is entered into by and among Dolphin Direct Equity Partners, LP, a
Delaware limited partnership ("Dolphin"), Race Car Simulation Corp., a New York
corporation affiliated with Dolphin ("Buyer"), and Interactive Motorsports and
Entertainment Corporation, an Indiana corporation ("IMTS"), Perfect Line, Inc.,
an Indiana corporation wholly owned by IMTS ("PL") and Race Car Simulators,
Inc., an Indiana corporation wholly owned by IMTS ("RC" and together with IMTS
and PL, "Sellers").
On the terms and subject to the conditions set forth in this agreement,
Sellers desire to sell to Buyer and Buyer desires to purchase from Sellers, the
assets identified on Schedule A hereto (the "Assets").
Therefore, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
Article I
Purchase and Sale of the Assets
Subject to the terms set forth in this Agreement, Sellers hereby sell,
convey, transfer, assign and deliver to Buyer and Buyer hereby purchases and
acquires from Sellers, all of the Assets for the aggregate purchase price of
$1,536,600 (the "Purchase Price"), payable on the date hereof as follows: (i)
$600,000 by cancellation of that certain Secured Promissory Note, dated November
29, 2004, of IMTS in favor of Dolphin (the "Secured Note") and (ii) $936,600 in
immediately available funds to PL.
Article II
Representations and Warranties of Sellers
The Sellers, jointly and severally, represent and warrant to each of
Dolphin and Buyer that as of the date hereof:
Section 2.1 Corporate Organization. Each Seller is a corporation duly
organized and validly existing under the laws of the State of Indiana. Each
Seller is qualified or licensed to conduct its business, including as relates to
the Assets, and is in good standing where the nature of its activities,
including as relate to the Assets, or the character of the properties, including
the Assets, utilized in its business make such qualification or licensing
necessary.
Section 2.2 Power and Authority; Authorization; Enforceability; No
Conflicts; Etc.
(a) Each Seller has all requisite corporate power and authority to own its
assets and to carry on its business as it is now being conducted. Each Seller
has all requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, certificate and document contemplated hereby
(collectively, including without limitation this Agreement and the Warrant, the
Management Agreement, the Conditional License Agreement and the Escrow
Agreement, in each case as defined herein, the "Transaction Documents") to which
it is a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
(b) The execution, delivery and performance by each Seller of each
Transaction Document to which it is a party and the consummation by such Seller
of the transactions contemplated thereby has been duly authorized by all
requisite action of such Seller.
(c) Each Transaction Document to which a Seller is a party has been duly
and validly executed and delivered by such Seller and constitutes the legal,
valid and binding obligations of such Seller, enforceable against such Seller in
accordance with its terms.
(d) The execution and delivery by each Seller of each Transaction Document
to which it is a party, the performance by such Seller of its obligations
hereunder and thereunder and the consummation by such Seller of the transactions
contemplated hereby and thereby do not and will not:
(i) violate any provision of the Articles of Incorporation or the By-Laws
of such Seller;
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any written or oral material note, bond, mortgage,
indenture, guarantee, lease, contract, agreement or other instrument (each, a
"Contract") to which such Seller is a party or by which any of the Assets may be
bound or otherwise subject or result in a lien, claim or other encumbrance (a
"Lien") on any of the Assets; or
(iii) contravene or violate any order, writ, judgment, injunction, decree,
law, statute, rule or regulation (each, a "Law") applicable to such Seller or
any of the Assets.
(e) Except as may be required by the Securities Exchange Act of 1934, as
amended (including the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, the "Exchange Act"), no prior or subsequent
filing or registration with, notification to, or authorization, consent or
approval of (each of the foregoing, a "Consent"), any individual or entity (a
"Person"), including, without limitation, any foreign, provincial, United States
federal, state, county, municipal or other local jurisdiction, political entity,
body, organization, subdivision or branch, legislative or executive agency or
department or other regulatory service, authority or agency (a "Governmental
Entity") is required to be made or obtained by any Seller in connection with (A)
the execution, delivery and performance by such Seller of any of the Transaction
Documents to which such Seller is a party or the consummation by such Seller of
the transactions contemplated thereby, or (B) the ownership and operation of the
Assets as contemplated hereunder following the Closing.
Section 2.3 Title to Simulators. Each Seller has good, indefeasible and
merchantable title to and ownership of the racecar simulators included in the
Assets (the "Simulators") set forth opposite such Seller's name on Schedule A
hereto, free and clear of all Liens, except those of Dolphin (which are being
terminated concurrently herewith).
Section 2.4 Location of Simulators. On the date hereof, each Simulator is
located at the location set forth next to its serial number on Schedule A
hereto.
Section 2.5 Proprietary Software. Any and all software not owned by
Sellers, including without limitation software incorporating marks licensed from
NASCAR, NASCAR teams and/or NASCAR tracks (the "Third Party Software"), used in
connection with any of the Simulators is replaceable by the software subject of
the Conditional Software License Agreement attached hereto as Exhibit A (the
"Conditional License Agreement"), which software has been deposited into escrow
under the Software Escrow Agreement attached hereto as Exhibit B (the "Escrow
Agreement"), without any material adverse effect on the value of any of the
Simulators.
Section 2.6 Copies of Agreements. The Sellers have provided to Buyer or
Dolphin copies of each agreement relating to the present or proposed lease
and/or operation of each Simulator, as described on Schedule A.
Section 2.7 Good Condition. Each Simulator is revenue-producing and in
operation and use in the ordinary course of the applicable Seller's business and
is in good condition and repair and fully operational and is suitable for the
purposes for which it is currently used or proposed to be used. The Assets
include all assets, properties and interests in properties used or usable in the
current or proposed operation of the Assets, other than Sellers' rights under
Third Party Software.
Section 2.8 Operator Certifications. There exists no outstanding liability
of any Seller under, nor is any Seller in default under or in breach of, any
revenue sharing or lease arrangement ("Lease") relating to any Simulator.
Section 2.9 Financial Statements. Any and all (i) historical financial
information provided by any Seller to Buyer or Dolphin regarding any Seller or
any of the Assets fairly presents in all material respects the financial
condition, results of operations, and cash flows which they purport to present
as of the dates thereof and for the periods indicated thereon and (ii) all
financial projections provided by any Seller to Buyer or Dolphin regarding any
Seller or any of the Assets have been prepared in good faith by Sellers'
management and all material assumptions relating thereto are as disclosed
therein.
Section 2.10 Events Subsequent to December 31, 2003. Since December 31,
2003, each Seller has placed into operation, and maintained, the Assets in the
ordinary course of business and no Asset (including, without limitation, each
Lease) has suffered any material adverse change in its condition, operability or
value. Since that date:
(a) No Seller, or any other party thereto, has accelerated, terminated,
modified or canceled any agreement, contract, document, lease, or license (or
series of related agreements, contracts, Leases, and licenses) to which any
Seller is a party or by which it or any Assets is bound;
(b) No Seller has experienced any material damage, destruction, or loss
(whether or not covered by insurance) to any of the Assets;
(c) Except as disclosed in reports already filed by IMTS under the Exchange
Act, no Seller has incurred any debt, granted any Lien upon its assets,
including the Assets, or increased the amount payable by it, under any credit or
loan agreement to which it is a party, other than the $600,000 bridge financing
to IMTS dated as of November 29, 2004, including the $600,000 Secured Promissory
Note (the "Secured Note") delivered to Dolphin in connection therewith;
(d) No Seller has sold, leased, transferred, or assigned any of the Assets
other than (except with respect to the Assets) in the ordinary course of
business; and
(e) The Company has not committed to do any of the foregoing.
Section 2.11 Absence of Undisclosed Liabilities. No Seller has any
liabilities relating to or which may have any impact on the ownership or
operation of the Assets as contemplated by this Agreement.
Section 2.12 Creditors; Bankruptcy, Etc. No Seller is involved in any
proceeding by or against it as a debtor in any court under Title 11 of the
United States Bankruptcy Code or any other insolvency or debtors' relief act,
whether state or Federal, or for the appointment of a trustee, receiver,
liquidator, assignee, sequestrator or other similar official of any Seller.
Section 2.13 Legal Compliance. Except in each case as would not be
reasonably likely to result in a material adverse effect on any Seller or any
Asset, each Seller (i) has complied with and is in compliance with all
applicable Laws as apply to or may have any impact on the operation or ownership
of the Assets, and (ii) and no legal proceeding of any kind is pending or
threatened alleging any failure to so comply. All material permits under which
each Seller is operating or bound (a) constitute all the material permits used
or required in the conduct of its business, including the Assets, as presently
conducted, (b) are in full force and effect, and (c) are not subject to any
pending or threatened legal proceeding of any kind seeking their revocation or
limitation.
Section 2.14 Intellectual Property.
(a) Schedule 2.14 sets forth all licenses and other written agreements
relating to the Assets to which any Seller is a party or by which any Seller or
Asset is bound. There are no outstanding nor threatened disputes or
disagreements involving any Seller with respect to the licenses or other
agreements set forth on Schedule 2.14.
(b) No Seller is infringing, misappropriating or making any unlawful use
of, and no Seller has at any time infringed, misappropriated or made any
unlawful use of, or received any notice or other communication of any actual or
alleged infringement, misappropriation or unlawful use of, any intellectual
property owned or used by any other Person. No other Person is infringing,
misappropriating or making any unlawful use of, and no intellectual property
owned or used by any other infringes, any Asset.
(c) The Assets include all the intellectual property other than Third Party
Software and other than any NASCAR trademarks, including team and track
trademarks ("NASCAR Marks") used for the operation of the Assets as it is
currently conducted or contemplated. The Sellers are (i) the owners of all
right, title, and interest in and to each of the intellectual property subject
to the Conditional License Agreement or included in the Assets, free and clear
of all Liens, and have the right to use all such intellectual property as
currently used and as contemplated by the Transaction Documents, or (ii) with
respect to Third Party Software and NASCAR Marks, possess all necessary licenses
permitting such use.
(d) Schedule 2.14 contains a complete and accurate list of all trademarks
and service marks used and owned by any Seller in connection with any Asset. The
Sellers are the owners of all right, title, and interest in and to each of such
marks, free and clear of Liens, or possesses a license therefor. No such xxxx is
being infringed, and no such xxxx has been challenged or threatened to be
challenged with regard to its validity or any Seller's right to use the same.
None of such marks infringes or has been alleged to infringe any trade name,
trademark or service xxxx of any third party.
(e) The Sellers have taken all reasonable precautions to protect the
secrecy, confidentiality and value of the intellectual property comprising the
Assets that constitutes trade secrets under applicable law. The Sellers have the
right to use such trade secrets. Such trade secrets have not been used,
divulged, or appropriated either for the benefit of any Person or to the
detriment of any Seller. No such trade secret is subject to any adverse claim or
has been challenged or threatened to be challenged as to its validity or the
right of any Seller to use the same.
Section 2.15 Contracts. Each agreement, lease, license, contract or
commitment disclosed on Schedule A is valid and enforceable against each Seller
as contemplated thereby and the other parties thereto. Each Seller has performed
all obligations required to be performed by it and is not in default under or in
breach of or in receipt of any claim of default or breach under any such
agreement, lease, license, contract or commitment disclosed on Schedule A; and
no event has occurred which with the passage of time or the giving of notice or
both would result in a default or breach under any such document. No other party
to any agreement, lease, license, contract, or commitment disclosed on Schedule
A is in default under or in breach of such document and no event has occurred
which with the passage of time or giving of notice or both would result in a
default or breach under any such document. The Sellers have supplied Buyer with
true, correct and complete copies of each of the documents listed on Schedule A,
together with all amendments, waivers or other changes thereto.
Section 2.16 Litigation. There are no legal or administrative proceedings
of any kind pending or threatened against any Seller.
Article III
Representations and Warranties of Dolphin and Buyer
Each of Dolphin and Buyer represents and warrants to Sellers that as the
date hereof:
Section 3.1 Organization. It is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization.
Section 3.2 Power and Authority; Authorization; Enforceability; No
Conflicts; Etc.
(a) It has all requisite power and authority to execute and deliver each
Transaction Document to which it is a party and to perform its obligations
thereunder and to consummate the transactions contemplated thereby.
(b) The execution, delivery and performance by it of each Transaction
Document to which it is a party and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action.
(c) Each Transaction Document to which it is a party has been duly and
validly executed and delivered by it and constitutes the legal, valid and
binding obligations of it, enforceable against it in accordance with its
respective terms.
(d) The execution and delivery by it of each Transaction Document to which
it is a party, the performance by it of its obligations thereunder and the
consummation by it of the transactions contemplated thereby do not and will not:
(i) violate any provision of its limited partnership agreement;
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any Contract to which it is a party or by which its
properties or assets may be bound or otherwise subject; or
(iii) contravene or violate any Law applicable to it.
(e) No prior or subsequent filing or registration with, notification to, or
authorization, consent or approval of, any Governmental Entity is required to be
made or obtained by it in connection with the execution, delivery and
performance of any Transaction Document to which it is a party or the
consummation by it of the transactions contemplated thereby.
Article IV
Additional Agreements
Section 4.1 No Assumption of Liabilities. Except only as relates to the
obligation to leave Simulators in place under Leases, neither Dolphin nor Buyer
shall assume or be bound by or be obligated or responsible for any duties,
responsibilities, commitments, expenses, obligations or liabilities of any
Seller or relating to any Assets (or which may be asserted against or imposed
upon Dolphin or Buyer as a successor or transferee of any Seller or as an
acquirer of the Assets or otherwise as a matter of law) of any kind or nature
(fixed or contingent, known or unknown, warranties, obligations or claims). For
the avoidance of doubt and without limiting the generality of the foregoing,
neither Dolphin nor Buyer shall have any liabilities or obligations of any kind
under Leases (except only as relates to the obligation to leave Simulators in
place) and other agreements included in the Assets; Sellers hereby specifically
agree to retain all such liabilities and obligations.
Section 4.2 Consent of Third Parties. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Assets if an attempted assignment thereof, without the consent of a
third Person, would constitute a breach or other contravention thereof or in any
way adversely affect the rights of Buyer thereunder. Each Seller will use its
reasonable best efforts to obtain the consent of any such Person for the
assignment to Buyer of any such Assets. If such consent is not obtained, or if
an attempted assignment thereof would be ineffective or would adversely affect
the rights of Sellers thereunder so that Buyer would not in fact receive all
such rights, Sellers and Buyer will cooperate in a mutually agreeable
arrangement under which Buyer would obtain all of the benefits thereunder from
and after the date hereof in accordance with this Agreement. Sellers will pay
promptly to Buyer when received all monies received by them after the date
hereof, to the extent earned or otherwise accrued from and after the date
hereof, with respect to any of the Assets.
Section 4.3. Allocation of Consideration. Buyer and Sellers
shall allocate the Purchase Price among the Simulators for all purposes in
accordance with Schedule A (the "Allocation"). Buyer and Sellers shall each
report the federal, state and local income and other tax consequences of the
transactions contemplated by this Agreement in a manner consistent with the
Allocation and cooperate in the preparation and filing of Form 8594 under
Section 1060 of the Code (or any successor form or successor provision of any
future tax law, or any comparable provisions of state, or local tax law), with
their respective federal, state and local income tax returns for the taxable
year that includes the date hereof.
Section 4.4 Taxes. Buyer and Sellers shall (a) each provide the other with
such assistance as may reasonably be requested by either of them in connection
with the preparation of any tax return, any audit or other examination by any
taxing governmental entity or any judicial or administrative proceeding with
respect to taxes, (b) each retain and provide the other with any records or
other information which may be relevant to such return, audit, examination or
proceeding, and (c) each provide the other with any final determination of any
such audit or examination, proceeding or determination that affects any amount
required to be shown on any tax return of the other for any period (which shall
be maintained confidentially). For the avoidance of doubt, Buyer shall obtain
the tax benefit of any and all depreciation of the Assets accruing hereafter,
notwithstanding that Sellers shall retain all liabilities relating to the Assets
in accordance with Section 4.1.
Section 4.5. Board Observer. IMTS shall, until such time as Sellers
exercise and fully satisfy their obligations under Section 4.11, allow Xxxxxx
Xxxxx (or any other person designated by Buyer in lieu of Xx. Xxxxx, the
"Observer") to attend and fully participate at all regular and special meetings
of its Board of Directors and all Committees thereof, whether in person or by
telephone, and shall provide notice thereof, all materials relating thereto and
reimbursement of all travel and other expenses incurred in connection therewith
on the same terms as if the Observer were a member of the Board or applicable
Committee; provided, however, that nothing herein shall (i) obligate the
Observer to so attend or participate, (ii) be deemed to create any duty of the
Observer to IMTS or (iii) result in any disclosure by IMTS relating to the
Observer (in his capacity as such) in any public announcement or filing under
the Exchange Act.
Section 4.6. Finder's Fees. Each party hereto represents and warrants to
each other party hereto that, except for Northeast Securities, whose fee equals
$84,000 in cash and warrants to purchase 150,000 shares of common stock of IMTS,
par value $0.0001 per share (the "Common Stock"), and which shall be the sole
responsibility of the Sellers, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transaction Documents or the transactions contemplated hereby or
thereby based upon any agreements, written or oral, made by or on behalf of such
party.
Section 4.7. Software; Marks. In the event and during such time, if any, as
Sellers or any operators under the Leases are prohibited from or unable to
utilize any Third Party Software utilized on the date hereof, on terms no less
favorable to IMTS or to the operators under the Leases than the license terms in
effect on the date hereof, for the operation of any or all of the Simulators,
Sellers shall obtain, and put or cause to be put into place (in each case at
their sole cost and expense, and without any payment of royalties by, or other
obligations of any kind on the part of, Buyer with respect thereto) substitute
software sufficient to operate each and every Simulator to the effect that there
shall be no lapse greater than six business days in the utilization of, no
difference in the end-user experience of (except for the absence of NASCAR
Marks), nor any other adverse effect on the value of, such Simulator or any
Lease or potential Lease thereof. In the event that Sellers fail to timely
comply with the provisions of this Section 4.7, the software that is subject of
the Conditional Licensing Agreement shall be released to Buyer from escrow and
Buyer may, at Sellers' sole cost and expense, and without any payment of
royalties by, or other obligations of any kind on the part of, Buyer with
respect thereto, put or cause to be put into place such software to operate each
and every Simulator.
Section 4.8. Dolphin Advisors. The Sellers hereby agree that Dolphin may
pay to Dolphin Advisors, LLC a closing fee of $40,000 and hereby offset such
amount against the amount payable hereunder to any or all Sellers.
Section 4.9. Maintenance of Policies. Until the Closing, Sellers agree to
maintain all existing insurance policies insofar as they cover the Assets.
Section 4.10. Warrant and Management Agreement. In addition to the
Conditional Licensing Agreement, the parties are executing and delivering that
certain Warrant (the "Warrant") and Management Agreement (the "Management
Agreement"), in each case of even date herewith, the latter of which are
attached hereto as Exhibits C and D, respectively.
Section 4.11. Repurchase Option. At any time prior to the seventh
anniversary of the date of this Agreement, Sellers may, by notice (the "Purchase
Notice") of its election to Dolphin and on the terms set forth below, acquire
all of the equity interests in Buyer. The aggregate purchase price payable by
Sellers for such interests shall be an amount equal to (i) 20% of the Purchase
Price, as Adjusted (as defined below), plus (ii) the Aggregate Investment Amount
(as defined below), plus (iii) the excess of the current assets (including
without limitation all revenue earned through the date of the consummation of
such acquisition) of Buyer over its current liabilities (other than indebtedness
to be cancelled as provided below), plus (iv) the aggregate amount of
unsatisfied claims that Dolphin or Buyer may have against Sellers for any breach
of any representation, warranty or covenant contained in any Transaction
Document, including as contemplated in Section 5.1 hereof, as reasonably
described by Dolphin in the Sale Notice (as defined below), and subject to
subsequent adjustment and reimbursement to the extent that any such claims are
determined by a court of competent jurisdiction or other mutually agreeable
dispute resolution procedure, in each case not subject to further appeal, to be
without merit. Any indebtedness owing by Buyer to Dolphin or any of its
affiliates shall be cancelled immediately prior to the consummation of the
acquisition contemplated by this Section 4.11. Dolphin may, by notice (the "Sale
Notice") to Sellers within 10 business days of receipt by Dolphin of the
Purchase Notice, elect to receive such purchase price in cash, shares of freely
tradable Common Stock valued at the Discounted Market Price (as defined below),
or any combination thereof in its sole discretion as described in the Purchase
Notice.
"Aggregate Investment Amount" means (X) the sum of (i) the Purchase Price,
as Adjusted, (ii) the Deposit (as defined below), without duplication,
regardless of whether Buyer has or has not exercised its option to purchase any
or all of the Additional Assets, (iii) the aggregate amount of all contributions
made pursuant to Section 2 of the Management Agreement, (iv) an annualized 13.5%
return on the amounts described in clauses (i), (ii) and (iii) above, accruing
on a daily basis and compounded monthly; provided, that for purposes of this
calculation the cancellation of the Secured Note shall be deemed to have
occurred, and thus $600,000 shall be deemed to have been paid to the Sellers, as
of November 29, 2004 and (v) $3,000 per month, accruing on a daily basis minus
(Y) 75% of the aggregate cash payments actually received by Buyer under the
Leases, net of all operating, administrative and other expenses of Buyer.
"Discounted Market Price" means (i) if the Common Stock is listed or quoted
on NYSE, NASDAQ, AMEX or any other national securities exchange, 80% of the
Average Market Price and (ii) otherwise, 65% of the Average Market Price.
"Average Market Price" means the average of the Market Price for each of
the 30 trading days immediately preceding delivery by Dolphin of a Sale Notice.
"Market Price" has the meaning given to such term in the Warrant, equitably
adjusted for stock splits, stock dividends, recapitalizations and similar
events.
"Adjusted" means adding an amount equal to (a) in the case of clause (i) of
Section 4.11 of this Agreement, (x) 20% of the aggregate cash consideration paid
(if any) by Buyer for the Additional Assets (as defined below) purchased by
Buyer minus (y) the amount, if any, of the Deposit applied to the purchase of
such Additional Assets and (b) in every other case, 100% of the aggregate cash
consideration paid (if any) by Buyer for the Additional Assets.
Section 4.12. Performance Guarantee. Each of the Sellers hereby absolutely
and unconditionally guarantees to Buyer, with respect to each Lease in effect on
the date hereof and the Nextel 6 Lease (as defined below), that Buyer shall
receive an amount at least equal to the minimum payments to Sellers provided for
therein as in effect on the date hereof (or, in the case, of the Nextel 6 Lease,
provided for in the Form of Simulation Lease Agreement attached hereto as
Exhibit E (the "Form Simulation Lease"), without offset, reduction or other
claim of any kind, no later than (x) the respective times provided for therein
as in effect on the date hereof (or, in the case, of the Nextel 6 Lease provided
for in the Form Simulation Lease) or (y) in the event such Lease has expired or
otherwise terminated, on the same payment schedule as in effect under such Lease
on the date hereof (or, in the case, of the Nextel 6 Lease as set forth in Form
Simulation Lease), until no earlier than the later of (i) the end of the term
provided for therein as in effect on the date hereof (or, in the case, of the
Nextel 6 Lease provided for in the Form Simulation Lease) or (ii) the third
anniversary of the date the Simulators relating to such Lease are purchased from
the Sellers by Buyer. The foregoing is a guarantee of payment and not of
collection, and each Seller shall make payment to Buyer as provided in this
Section from time to time within ten business days' notice from Buyer of its
failure to receive any amount contemplated in the first sentence of this 4.12.
Section 4.13. Payment in Kind. Without limiting Buyer's or Dolphin's
remedies under any Transaction Document, including Section 5.1 hereof, which
shall be all remedies as may be available in law or equity, each of Buyer and
Dolphin shall have the right to receive any and all amounts due to it as a
result of any breach of any representation, warranty or covenant contained in
any Transaction Document in cash or in shares of Common Stock with the same
registration rights that are described in the Warrant, or in any combination
thereof in its sole discretion. To the extent that Buyer or Dolphin elects to
receive such amounts in shares of Common Stock, such shares shall be valued at
the Discounted Market Price (substituting the date of either (i) delivery of
such election notice by Buyer or Dolphin or (ii) the trading day immediately
preceding the date of issuance of such shares, for the date of delivery by
Dolphin of a Sale Notice in the calculation set forth in the definition of
Average Market Price, depending on which date would result in a lower
calculation thereof and utilizing such date).
Section 4.14 Additional Closing. At Buyer's sole and absolute discretion,
exercisable for a period of 30 days immediately subsequent to its receipt from
Sellers of an Additional Closing Notice (as defined below), Buyer may purchase
any or all of the Simulators listed on Schedule 4.14 together with all Leases
and other assets relating thereto, including without limitation the Leases
listed on Schedule 4.14 (the "Additional Assets"), and identified in such
Additional Closing Notice for the cash purchase price indicated on such Schedule
for such Simulators. On the date of this Agreement Buyer shall pay a $528,000
non-refundable deposit (the "Deposit") toward the cash purchase price of the
Additional Assets in immediately available funds to PL. The Deposit shall be
applied toward the cash purchase price of any or all of the Additional Assets
which Buyer elects to purchase and Buyer shall pay the balance, if any, of the
cash purchase price for such Additional Assets upon delivery by Sellers of such
Additional Assets. Buyer acknowledges and agrees that it shall forfeit any
portion of the Deposit that is not so applied towards the purchase of the
Additional Assets. Upon the consummation of any such purchase, IMTS shall issue
an additional warrant to Buyer, in the same form as the Warrant, exercisable for
a number of shares of Common Stock equal to (i) the sum of the (x) the aggregate
cash purchase price for the Additional Assets purchased minus (y) the amount, if
any, of the Deposit applied to the purchase of such Additional Assets times (ii)
2.5. Sellers shall deliver an Additional Closing Notice with respect to each
Simulator listed on Schedule 4.14 no later than 10 days prior the installation
of such Simulator and, in any event, no later than May 31, 2005, and Sellers
acknowledge that any failure to do so would result in a loss to Buyer subject to
indemnification under Section 4 in an amount equal to Buyer's reasonable
anticipated profits from the Additional Assets. To the extent that Buyer elects
not to purchase any Additional Assets, and Sellers enter into more favorable
Leases (by amendment or otherwise) with respect thereto prior to the stated
termination of the Leases described in any Additional Closing Notice or Notices,
Sellers shall promptly pay to Buyer an amount equal to the present value of any
such favorable difference in economic terms.
"Additional Closing Notice" shall mean a notice, certified by the Chief
Executive Officer of IMTS, (i) attaching true and correct copies of all Leases
included in the Additional Assets identified in such notice, (ii) containing a
representation and warranty to the effect that all representations and
warranties contained herein with respect to the Sellers and the Assets are true
and correct with respect to the Sellers and the Additional Assets identified in
such notice as of the date of such notice (and will so be as of the date of the
consummation of any purchase contemplated by such notice and this Section 4.14),
except in each case as disclosed therein, (iii) containing a representation and
warranty to the effect that the Simulator or Simulators identified in such
notice are newly constructed and have not been previously put into service and
(iv) containing an agreement to deem such notice a Transaction Document, deem
all Additional Assets identified in such notice that Buyer elects to purchase as
"Assets" for all purposes under Articles 4, 5 and 6 hereof, and in all other
respects deem this Agreement to apply to the purchase of such Additional Assets
mutatis mutandis.
Section 4.15 Nextel 6 Lease. PL shall, and Sellers shall cause National
Tour, Inc., a California corporation, or another third party reasonably
satisfactory to Buyer to, execute and deliver to Buyer a Lease (the "Nextel 6
Lease") either (x) in substantially the same form as the Form Simulation Lease
or (y) in form and substance reasonably satisfactory to Buyer no later than
January 15, 2005.
Article V
Additional Agreements
Section 5.1 Indemnification.
(a) The Sellers shall jointly and severally indemnify, defend and hold
harmless Dolphin, Buyer and their respective officers, directors, employees, and
agents (collectively, the "Buying Indemnitees" and individually each a "Buying
Indemnitee") from and against, and shall reimburse each of the Buying
Indemnitees for, any adverse consequences which are suffered or incurred by any
of the Buying Indemnitees (regardless of whether or not such adverse
consequences relate to any third party claim) and which are the direct and
proximate result of:
(i) any breach of any representation or warranty made by any Seller in this
Agreement or other Transaction Agreement; and
(ii) any breach of any covenant or obligation of any Seller in this
Agreement or other Transaction Agreement.
(b) Buyer shall indemnify, defend and hold harmless each Seller and each of
their respective officers, directors, employees, and agents (collectively, the
"Selling Indemnitees" and individually each an "Selling Indemnitee") from and
against, and shall reimburse each of the Selling Indemnitees for, any adverse
consequences which are suffered or incurred by any of the Selling Indemnitees
(regardless of whether or not such adverse consequences relate to any third
party claim) and which are the direct and proximate result of:
(i) any breach of any representation or warranty made by Buyer in this
Agreement or other Transaction Agreement; and
(ii) any breach of any covenant or obligation of Buyer in this Agreement or
other Transaction Agreement.
Section 5.2 Indemnification Procedures.
(a) As used herein, "Indemnified Party" shall mean (i) each Selling
Indemnitee when being indemnified by Buyer pursuant to Section 5.1(b), and (ii)
each Buying Indemnitee when being indemnified by Sellers pursuant to Section
5.1(a), and "Indemnifying Party" shall mean (x) Sellers when indemnifying any
Buying Indemnitee pursuant to Section 8.1(a), and (y) Buyer when indemnifying
any Selling Indemnitee pursuant to Section 8.1(b).
(b) The obligations of an Indemnifying Party under this Article V with
respect to adverse consequences arising from claims or demands of any third
party which are subject to the indemnification provided for under Section 5.1
("Third Party Claims") shall be governed by and contingent upon the following
terms and conditions: if an Indemnified Party shall receive written or other
definitive notice of any Third Party Claim, the Indemnified Party shall notify
each Indemnifying Party promptly of such Third Party Claim, stating the amount
of the adverse consequences, if known, and method of computation thereof, a
brief description of the facts upon which such Third Party Claim is based and
containing a reference to the provisions of this Agreement in respect of which
the Indemnified Party's right of indemnification is claimed or arises; provided,
however, that the delay or failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article V unless (and
then solely to the extent) the Indemnifying Party is prejudiced by the delay or
failure. Any Indemnifying Party will have the right to assume sole control over
the defense and settlement of the Third Party Claim with counsel selected by the
Indemnified Party, which may, at its own expense, participate in the defense of
such claim. Notwithstanding the foregoing, if, within ten (10) days after its
receipt of the aforesaid notice from the Indemnified Party, the Indemnifying
Party does not assume the defense of such matter, the Indemnified Party may
defend against the matter in any manner that it reasonably may deem appropriate
and the Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against such claim (including reasonable
attorneys' fees and expenses). In the event the Indemnifying Party assumes the
defense of any Third Party Claim as provided above, the Indemnified Party shall
cooperate with the Indemnifying Party in such defense and make available to the
Indemnifying Party on a timely basis, at the Indemnifying Party's expense, all
witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto as
is reasonably requested by the Indemnifying Party. Similarly, in the event the
Indemnifying Party does not assume the defense of such Third Party Claim and the
Indemnified Party is defending against such matter as provided above, the
Indemnifying Party shall cooperate with the Indemnified Party in such defense
and make available to the Indemnified Party on a timely basis, at the
Indemnifying Party's expense, all such witnesses, records, materials and
information in the Indemnifying Party's possession or under the Indemnifying
Party's control relating thereto as is reasonably requested by the Indemnified
Party.
(c) An Indemnified Party shall give each Indemnifying Party notice of any
matter (other than a Third Party Claim) which an Indemnified Party has
determined has given rise to a right of indemnification under Section 5.1,
stating the amount of the adverse consequences, if known, and method of
computation thereof, a brief description of the facts upon which such claim is
based and containing a reference to the provisions of this Agreement or other
Transaction Agreement in respect of which such right of indemnification is
claimed or arises; provided, however, that the delay or failure to provide such
notice shall not release the Indemnifying Party from any of its obligations
under this Article V unless the Indemnifying Party is prejudiced by the delay or
failure.
Section 5.3 Non-Competition; Non-Solicitation.
(a) For so long as and at all times until IMTS shall have exercised in full
its repurchase option as contemplated by Section 4.11 hereof, Sellers shall not
and shall cause their respective affiliates not to, without the prior written
consent of Buyer, directly or indirectly, own, manage, control, participate in,
consult with, render services for, or in any manner engage in or represent any
business involving, directly or indirectly, racecar simulators; provided that
actions or inactions prohibited by the foregoing shall not constitute a
violation of this Section 5.3(a) so long as such actions or inactions do not
favor or result in more favorable treatment to the operation and maintenance of
other racecar simulators and related assets over the operation and maintenance
of the Assets.
(b) To the extent that any court concludes that any provision of this
Section 5.3 is void or voidable, the court shall reform such provision(s) to
render the provision(s) enforceable, but only to the extent necessary to render
the provision(s) enforceable and only in view of the parties' express desire
that Buyer be protected to the greatest extent possible under applicable law
from improper competition and/or the misuse or disclosure of trade secrets
and/or confidential information in light of the initiation of Buyer to purchase
the business comprising the Assets.
Article VI
Miscellaneous
Section 6.1 Publicity. No party hereto will issue any press release or make
any other public announcement relating to the transactions contemplated hereby
without the prior written consent of the other parties hereto, except that any
party hereto may make any disclosure required to be made by it under applicable
law or stock exchange or national automated quotation system rules if it
determines in good faith that it is necessary to do so, provides a copy to the
other parties hereto of the proposed press release or public announcement,
giving such other parties an opportunity to review and comment thereon prior to
the release thereof, and makes such changes thereto as such parties shall
reasonably request to the extent that such proposed press release or public
announcement mentions such parties.
Section 6.2 Fees and Expenses. Except as contemplated by Section 4.8, each
party hereto shall pay the direct and indirect expenses (including, without
limitation, the fees and expenses of their legal, tax and accounting counsel and
advisors) incurred by it in connection with the negotiation and preparation of
the Transaction Documents and the consummation of the transactions contemplated
thereby.
Section 6.3 Notices. All notices, consents, demands, instructions, requests
and other communications required or permitted hereunder must be in writing and
shall be deemed to have been duly given only if delivered personally, by
facsimile transmission, by first-class mail (postage prepaid, return receipt
requested), or by delivery by a recognized overnight courier service (all costs
prepaid) to the parties at the following addresses or facsimile numbers:
If to any Seller, to:
Interactive Motorsports and Entertainment Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Telecopier No.: (000) 000-0000
and a copy to:
Bose XxXxxxxx & Xxxxx LLP
0000 Xxxxx Xxxxxxx Xxxxx
000 X. Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier. No.: (000) 000-0000
If to Dolphin or Buyer, to:
Dolphin Advisors, LLC
c/o Dolphin Asset Management Corp.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
Telecopier No.: (000) 000-0000
and a copy to:
Xxxxxx Xxxxxxx & Xxxx LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx
Telecopier No.: (000) 000-0000
All such notices, requests and other communications will be deemed
delivered upon receipt thereof. Any party may from time to time change its
address, facsimile number or other information for purposes of notices to that
party by giving like notice specifying such change to the other parties hereto.
Section 6.4. Survival. All of the representations, warranties, covenants
and agreements of the parties contained in any Transaction Document shall
survive (and not be affected in any respect by) the purchase and sale hereunder
or any investigation conducted by any party hereto and any information which any
party may receive.
Section 6.5. Bulk Transfer. The parties hereto hereby waive compliance with
the provisions of any applicable bulk sales Law of any jurisdiction in
connection with the transactions contemplated hereby and no representation,
warranty or covenant contained in this Agreement shall be deemed to have been
breached as a result of such non-compliance.
Section 6.6 Further Assurances. The parties hereto will, without further
consideration, execute and deliver such further documents and instruments and
take such other actions as may be necessary or desirable to perfect the
transactions contemplated hereby.
Section 6.7 No Waiver. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.
Section 6.8 Entire Agreement. The Transaction Documents supersede all prior
and/or contemporaneous negotiations, understandings, discussions and agreements
(written or oral) between the parties with respect to the subject matter hereof
(all of which are merged herein and therein) and contain the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
Section 6.9 Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with, and shall be governed by, the laws of the state
of New York applicable to contracts made and to be performed wholly therein.
Section 6.10 Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York in connection with any dispute
arising out of or relating to this agreement or the transactions contemplated
hereby, waives any objection to venue in such District (unless such court lacks
jurisdiction with respect to such dispute, in which case, each of the parties
hereto irrevocably consents to the jurisdiction of the courts of the State of
New York located in New York County in connection with such dispute and waives
any objection to venue in the County of New York), and agrees that service of
any summons, complaint, notice or other process relating to such dispute may be
effected in the manner provided by Section 5.3.
Section 6.11 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING RELATING TO ANY AND ALL
TRANSACTION DOCUMENTS AND ANY AND ALL TRANSACTION CONTEMPLATED THEREBY.
Section 6.12 Assignment. Neither IMTS, PL nor RC may assign any Transaction
Document or any of its rights, interests or obligations thereunder without the
prior written consent of Dolphin. So long as (i) no Seller is in violation of
any Transaction Document and (ii) Buyer is timely receiving all minimum payments
under the Leases, neither Buyer nor Dolphin may assign any Transaction Document
or any of its rights, interests or obligations thereunder to any person other
than an affiliate of Dolphin without the prior written consent of Sellers.
Section 6.13 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 6.14 No Third Party Beneficiaries. Nothing contained in this
Agreement, whether express or implied, is intended, or shall be deemed, to
create or confer any right, interest or remedy for the benefit of any Person not
a party hereto.
Section 6.15 Amendment and Waiver. Any term of this Agreement may be
amended only by the written consent of all parties hereto. The observance of any
term of this Agreement may be waived (either generally or in a particular
instance, either retroactively or prospectively, and either for a specified
period of time or indefinitely), only by a writing signed by the party for whose
benefit such term is to be performed. Any agreement on the part of a party to
any extension or waiver shall only be valid if set forth in an instrument in
writing signed on behalf of such party. Any such waiver or extension shall not
operate as waiver or extension of any other subsequent condition or obligation.
Section 6.16 Severability. If any provision of this Agreement is found to
be void or unenforceable by a court of competent jurisdiction, the remaining
provisions of this Agreement shall nevertheless be binding upon the parties with
the same force and effect as though the unenforceable part had been severed and
deleted.
Section 6.17 Conventions.
(a) Whenever the context so requires, each pronoun or verb used herein will
be construed in the singular or the plural sense and each capitalized term
defined herein and each pronoun used herein will be construed in the masculine,
feminine or neuter sense. The terms "herein," "hereto," "hereof," "hereby," and
"hereunder," and other terms of similar import, refer to this agreement as a
whole, and not to any section or other part hereof.
(b) The term "include" and its forms shall be construed as if followed by
the phrase "without limitation.
Section 6.18 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
[The next page is the signature page]
The parties have executed this Asset Purchase Agreement as of the date
first written above.
INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
PERFECT LINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
RACE CAR SIMULATORS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: chief Executive Officer
DOLPHIN DIRECT EQUITY PARTNERS, LP
By: Dolphin Advisors, LLC, its managing general
partner
By: /s/ Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: President, Dolphin Management, Inc.,
Managing Member
RACE CAR SIMULATION CORP.
By: /s/ Xxxxx X. Xxxxx
--------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
Acknowledged:
DOLPHIN ADVISORS, LLC
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: President, Dolphin Management,Inc.,
Managing Partner
