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EXHIBIT 2.2
SHAREHOLDER PURCHASE AGREEMENT
BY AND AMONG
AMERICAN GAMING & ELECTRONICS, INC.,
A NEVADA CORPORATION,
AND
XXX XXXXXXXX AND XXXXX XXXXX AND XXXX XXXXX AND
XXXXX X'XXXXXXXXX
DATED AS OF JANUARY 12, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF ASSETS..............................................................................1
1.1 Assets........................................................................1
1.2 Excluded Assets...............................................................2
1.3 Cooperation Following the Closing Date........................................2
1.4 Regulatory Matters............................................................2
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT......................................................................2
2.1 Purchase Price................................................................2
2.2 Contingent Payments...........................................................2
2.2.1 Definitions...........................................................2
2.2.2 Current Operations Contingent Payment.................................4
2.2.3 Proposed Operations Contingent Payment................................5
2.2.4 Calculation of Contingent Payments....................................6
2.2.5 Payment of Contingent Payments........................................6
2.3 Assumed Liabilities...........................................................8
2.4 No Expansion of Third Party Rights............................................8
2.5 Excluded Liabilities..........................................................8
2.6 Allocation of Purchase Price..................................................8
2.7 Transferee Liability..........................................................9
2.8 Waiver of Resolutory Conditions...............................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES...........................................................................9
3.1 Representations and Warranties of Sellers.....................................9
3.1.1 Authority.....................................................................9
3.1.2 Assets................................................................9
3.1.3 No Consents..........................................................10
3.1.4 Absence of Undisclosed Liabilities...................................10
3.1.5 Taxes................................................................10
3.1.6 Contracts............................................................10
3.1.7 Real Property........................................................11
3.1.8 Litigation...........................................................11
3.1.9 Compliance with Laws.................................................11
3.1.10 Intellectual Property................................................11
3.1.11 Transactions Not a Breach............................................12
3.1.12 Conduct of the Business..............................................12
3.1.13 Insurance Policies...................................................12
3.1.14 Licenses.............................................................12
3.1.15 Employees............................................................13
3.1.16 Interest of Sellers in Customers, Etc................................13
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3.1.17 Affiliate Transactions...............................................13
3.1.18 Books and Records....................................................13
3.1.19 Brokers..............................................................13
3.1.20 No Misrepresentation.................................................13
3.2 Representations and Warranties of Buyer......................................13
3.2.1 Organization.........................................................13
3.2.2 Authority............................................................14
3.2.3 Transactions Not a Breach............................................14
3.2.4 Brokers..............................................................14
3.2.5 No Misrepresentation.................................................14
ARTICLE IV
CLOSING.................................................................................................14
4.1 Time and Place...............................................................14
4.2 Sellers Deliveries...........................................................15
4.2.1 AGE Purchase Agreement...............................................15
4.2.2 Xxxx of Sale and Assignment Agreement................................15
4.2.3 Consents.............................................................15
4.2.4 Tax Clearance........................................................15
4.2.5 Lien Searches........................................................15
4.2.6 Employment Agreements................................................15
4.2.7 Other Documents......................................................15
4.3 Buyer Deliveries.............................................................15
4.3.1 Purchase Price.......................................................15
4.3.2 Xxxx of Sale and Assignment Agreement................................16
4.3.3 AGE Purchase Agreement...............................................16
4.3.4 Employment Agreements................................................16
4.3.5 Guaranty Agreement. ................................................16
4.3.6 Other Documents......................................................16
ARTICLE V
OTHER AGREEMENTS........................................................................................16
5.1 Books and Records............................................................16
5.2 Cooperation after Closing....................................................16
5.3 Public Disclosure............................................................16
5.4 Mail.........................................................................17
5.5 Assumed Liabilities..........................................................17
5.6 Taxes........................................................................17
5.7 Transferee/Successor Liability...............................................17
ARTICLE VI
INDEMNIFICATION.........................................................................................17
6.1 Indemnification by Sellers...................................................17
6.2 Escrow Account...............................................................18
6.3 Indemnification by Buyer.....................................................18
6.4 Indemnification Procedure for Third Party Claims.............................18
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6.5 Direct Claims................................................................20
6.6 Right of Set-Off.............................................................21
6.7 Survival of Representations and Warranties of Sellers; Time Limits
on Indemnification Obligations...............................................21
6.8 Survival of Representations and Warranties of Buyer; Time Limits
on Indemnification Obligations...............................................21
6.9 Certain Limitations..........................................................21
6.10 Materiality..................................................................22
6.11 Appointment of Representative................................................22
ARTICLE VII
MISCELLANEOUS...........................................................................................23
7.1 Notice.......................................................................23
7.1.1 If to Buyer..........................................................23
7.1.2 If to Sellers........................................................23
7.2 Severability.................................................................24
7.3 Successors...................................................................24
7.4 Documents....................................................................24
7.5 Counterparts.................................................................24
7.6 Expenses.....................................................................24
7.7 Governing Law................................................................24
7.8 Headings.....................................................................25
7.9 Assignment...................................................................25
7.10 No Strict Construction.......................................................25
7.11 Definitions..................................................................25
7.12 Entire Agreement.............................................................27
7.13 Third Parties................................................................27
7.14 Interpretative Matters.......................................................27
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LIST OF SCHEDULES
SCHEDULE DESCRIPTION
-------- -----------
Schedule 1.1 Assets
Schedule 1.2 Excluded Assets
Schedule 2.2.2 Current Operations Contingent Payment
Schedule 2.2.3 Proposed Operations Contingent Payment
Schedule 2.3 Assumed Liabilities
Schedule 2.5 Excluded Liabilities
Schedule 2.6 Allocation of Purchase Price
Schedule 3.1.2 Condition of Assets
Schedule 3.1.3 Consents
Schedule 3.1.4 Undisclosed Liabilities
Schedule 3.1.6 Contracts
Schedule 3.1.8 Litigation
Schedule 3.1.10 Intellectual Property
Schedule 3.1.12 Conduct of Business
Schedule 3.1.14 Licenses
Schedule 3.1.16 Interest of Sellers in Customers, etc.
Schedule 3.1.17 Affiliate Transactions
Schedule 3.2.3 Buyer: Transactions Not A Breach
Schedule 6.1.5 Indemnification by Sellers
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GLOSSARY OF DEFINED TERMS
TERM SECTION REFERENCE
---- -----------------
"Affiliate".................................................................7.11
"Affiliate Transactions"..................................................3.1.17
"AGE" ..............................................................Introduction
"AGE Florida".......................................................Introduction
"AGE Purchase Agreement"............................................Introduction
"AGE Transaction"...................................................Introduction
"Agreement".........................................................Introduction
"Assets".....................................................................1.1
"Assumed Liabilities"........................................................2.3
"Base Contingent Payment"..................................................2.2.1
"Business"..........................................................Introduction
"Buyer Indemnified Party"....................................................6.1
"Buyer".............................................................Introduction
"Buyer's Agreements".......................................................3.2.2
"Calendar Day"..............................................................7.11
"Claims".................................................................3.1.8.1
"Closing"....................................................................4.1
"Closing Date"...............................................................4.1
"Code"......................................................................7.11
"Common Stock".............................................................2.2.5
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TERM SECTION REFERENCE
TERM SECTION REFERENCE
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"Company"...........................................................Introduction
"Consents".................................................................3.1.3
"Contingent Dates".........................................................2.2.1
"Contingent Payments"......................................................2.2.1
"Continuing Employee".......................................................7.11
"Contracts"................................................................3.1.6
"Current Operations".......................................................2.2.1
"Current Operations Contingent Payment"....................................2.2.1
"Defense Counsel"............................................................6.4
"Defense Notice".............................................................6.4
"Direct Claim"...............................................................6.5
"Excluded Liabilities".......................................................2.5
"Excluded Assets"............................................................1.2
"GAAP"......................................................................7.11
"Governmental Entity".......................................................7.11
"Indemnified Party"..........................................................6.4
"Indemnifying Party".........................................................6.4
"Independent Accountants"..................................................2.2.1
"Intellectual Property".....................................................7.11
"Law".......................................................................7.11
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TERM SECTION REFERENCE
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"Licenses"..................................................................7.11
"Liens".....................................................................7.11
"Losses".....................................................................6.1
"Maximum Contingent Payment"...............................................2.2.1
"Minimum Operating Income".................................................2.2.1
"Operating Income".........................................................2.2.1
"Operating Income Payment Cap".............................................2.2.1
"Operating Income Target"..................................................2.2.1
"Ordinary course of business"...............................................7.11
"Person"....................................................................7.11
"Principal Offices".................................................Introduction
"Proposed Operations"......................................................2.2.1
"Proposed Operations Contingent Payment"...................................2.2.1
"Proceeds"...................................................................6.9
"Purchase Price".............................................................2.1
"Representative"............................................................6.11
"Regulatory Matters".........................................................1.4
"Seller Indemnified Party"...................................................6.3
"Sellers"...........................................................Introduction
"Sellers' Agreements"......................................................3.1.1
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TERM SECTION REFERENCE
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"Tax".......................................................................7.11
"Term".....................................................................5.6.1
"Territory"................................................................5.6.1
"Third Party Claim"..........................................................6.4
"Threshold Contingent Payment".............................................2.2.1
"To Sellers' Knowledge".....................................................7.11
"To the Knowledge of Seller,"...............................................7.11
"Transaction Documents"......................................................2.5
"Xxxxx-Xxxxxxx".....................................................Introduction
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SHAREHOLDER PURCHASE AGREEMENT
THIS SHAREHOLDER PURCHASE AGREEMENT (this "Agreement") is made as of
this 12th day of January, 2000, by and among AMERICAN GAMING & ELECTRONICS,
INC., a Nevada corporation ("Buyer" or "Company"), and each of Xxx Xxxxxxxx,
Xxxxx Xxxxx, Xxxx Xxxxx and Xxxxx X'Xxxxxxxxx (collectively "Sellers").
Capitalized terms that are not otherwise defined in this Agreement are defined
in SECTION 7.11.
WHEREAS, Buyer is a wholly-owned subsidiary of Xxxxx-Xxxxxxx
Electronics Corporation, an Illinois corporation ("Xxxxx-Xxxxxxx").
WHEREAS, concurrent with the execution of this Agreement, Buyer,
American Gaming & Electronics, Inc., a New Jersey corporation ("AGE"), American
Gaming & Electronics of Florida, Inc., a Florida corporation ("AGE Florida"),
and Sellers are executing an Asset Purchase Agreement (the "AGE Purchase
Agreement") whereby Buyer will agree to purchase certain assets of AGE and AGE
Florida (the "AGE Transaction").
WHEREAS, Sellers are engaged in the business of the design, sale,
marketing, manufacturing, distribution and service of new and remanufactured
gaming machines and parts for gaming machines (the "Business") and have
principal offices located at: 00 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000;
0000 XxXxxx Xxxxx, Xxxxx 00, Xxx Xxxxx, Xxxxxx 00000; and 0000 XxXxxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxx 00000 (the "Principal Offices").
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase
from Sellers, certain of the assets of Sellers, which are used in or arise out
of the conduct of the Business, upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of the parties
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets. On the terms and subject to the conditions hereinafter set
forth, at the Closing, Sellers shall sell, convey, transfer, assign and deliver
to Buyer, free and clear of all Liens, and Buyer shall purchase from Sellers,
all of Sellers' right, title and interest in and to certain property and assets
which are used in or arise out of the conduct of the Business or are considered
to be assets of Sellers in connection with the Business as of the Closing Date,
wherever located (collectively, the "Assets"). The Assets shall include only the
rights and assets set forth on Schedule 1.1 attached hereto.
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1.2 Excluded Assets. Notwithstanding anything to the contrary contained
herein, the Assets do not include the rights or assets listed on Schedule 1.2
attached hereto or any other rights or assets not listed on Schedule 1.1
attached hereto (collectively, the "Excluded Assets").
1.3 Cooperation Following the Closing Date. To the extent any Excluded
Asset may be, in the opinion of Buyer, necessary or appropriate to conduct the
Business, Sellers agree to provide Buyer with access to such Excluded Assets so
long as and to the extent that such Excluded Assets are necessary or appropriate
to conduct the Business following the Closing Date.
1.4 Regulatory Matters. Buyer, Sellers and Shareholders understand that
as of the Closing Date the State of New Jersey has not granted a transactional
waiver to Buyer to conduct gaming related business with casinos in New Jersey.
Accordingly, only non-gaming related products will be sold and distributed in
New Jersey and Connecticut until such time as the transactional waiver is
granted and becomes effective in New Jersey and an exemption is granted in
Connecticut. Furthermore, this Agreement and the transactions contemplated
hereby shall only be effective to the extent permissible in New Jersey until
such time as the transactional waiver is granted by the New Jersey Casino
Control Commission.
ARTICLE II
CONSIDERATION AND MANNER OF PAYMENT
2.1 Purchase Price. The aggregate purchase price to be paid by Buyer to
Sellers for the Assets shall be one hundred dollars ($100) (the "Purchase
Price") payable by check or wire transfer on the Closing Date.
2.2 Contingent Payments. In addition to the Purchase Price, Buyer will
pay to Sellers certain contingent payments only if certain future financial
targets are achieved as set forth in this SECTION 2.2.
2.2.1 Definitions.
(a) "Base Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations.
(b) "Contingent Dates" shall refer collectively to
each of December 31, 2000, December 31, 2001, December 21,
2002 and December 31, 2003.
(c) "Contingent Payments" shall refer collectively
to each of the Current Operations Contingent Payment and the
Proposed Operations Contingent Payment as each such term is
defined below.
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(d) "Current Operations" shall refer to the
Operating Income arising from operations in connection with
the conduct of the Business at the Principal Offices.
(e) "Current Operations Contingent Payment" shall
refer to the payment based on Operating Income from Current
Operations with respect to each of the Contingent Dates, as
calculated for the applicable date under SECTION 2.2.4.
(f) "Independent Accountants" shall refer to an
independent accounting firm not regularly used, and selected
jointly, by Buyer and Sellers.
(g) "Maximum Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations
(h) "Minimum Operating Income" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to the Current
Operations and Schedule 2.2.3 hereto with regard to the
Proposed Operations.
(i) "Operating Expenses" shall be limited to those
expenses that directly relate to the operation of Current
Operations and Proposed Operations in the ordinary course of
business that are, in good faith, made by Buyer.
Notwithstanding the above, Operating Expenses shall not
include (1) any overhead allocation that is attributable to
Xxxxx-Xxxxxxx or any other subsidiary of Xxxxx- Xxxxxxx, (ii)
payments not related to Buyer's legitimate business
transactions in the ordinary course, (iii) any transaction
between Buyer and an Affiliate thereof where the terms thereof
are less favorable than would have been obtained in a
transaction with an unrelated third party and (iv) any portion
of an advance payment that is not related to the current
period.
(j) "Operating Income" shall refer to net sales less
cost of goods sold and Operating Expenses in accordance with
GAAP (as defined in SECTION 7.11), but shall exclude any
deduction for the amortization of goodwill or payment of any
Contingent Purchase Price made in connection with the AGE
Transaction or the fulfillment of this Agreement or the AGE
Purchase Agreement.
(k) "Operating Income Payment Cap" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to the Current
Operations and Schedule 2.2.3 hereto with regard to the
Proposed Operations.
(l) "Operating Income Target" shall, for each
Contingent Date, refer to the amount of Operating Income
listed on Schedule 2.2.2 hereto with regard to
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the Current Operations and Schedule 2.2.3 hereto with regard
to the Proposed Operations.
(m) "Proposed Operations" shall refer to Operating
Income arising from any operations which are not included in
or covered by the definition of Current Operations.
(n) "Proposed Operations Contingent Payment" shall
refer to the payment based on Operating Income from Proposed
Operations with respect to each of the Contingent Dates, as
calculated for the applicable date under SECTION 2.2.3.
(o) "Threshold Contingent Payment" shall, for each
Contingent Date, refer to the Contingent Payment amount listed
on Schedule 2.2.2 hereto with regard to the Current Operations
and Schedule 2.2.3 hereto with regard to the Proposed
Operations.
2.2.2 Current Operations Contingent Payment. The Company shall
pay Sellers, according to the procedure set forth in this SECTION 2,
the Current Operations Contingent Payment calculated for the applicable
Contingent Date as follows. For each fiscal year ending on each
Contingent Date, the Current Operations Contingent Payment shall be
equal to (but never less than zero dollars):
(a) zero dollars if the Current Operations are less
than the Minimum Operating Income;
(b) the Threshold Contingent Payment if the Current
Operations are equal to the Minimum Operating Income;
(c) the product of (i) the Base Contingent Payment
and (ii) the quotient of (A) the Current Operations divided by
(B) the Operating Income Target, if the Current Operations are
greater than the Minimum Operating Income but less than the
Operating Income Target;
(d) the Base Contingent Payment if the Current
Operations are equal to the Operating Income Target;
(e) the Base Contingent Payment, plus fifty percent
(50%) of the amount by which the Current Operations exceed the
Operating Income Target, if the Current Operations are greater
than the Operating Income Target but less than the Operating
Income Payment Cap; and
(f) the Maximum Contingent Payment if the Current
Operations are equal to or greater than the Operating Income
Payment Cap.
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2.2.3 Proposed Operations Contingent Payment. The Company
shall pay Sellers, according to the procedure set forth in this SECTION
2, the Proposed Operations Contingent Payment calculated for the
applicable Contingent Date as follows. For each fiscal year ending on
each Contingent Date, the Proposed Operations Contingent Payment shall
be equal to (but never less than zero dollars):
(a) zero dollars if the Proposed Operations are less
than the Minimum Operating Income;
(b) the Threshold Contingent Payment if the Proposed
Operations are equal to the Minimum Operating Income;
(c) for the year ending:
(i) December 31, 2000, the amount equal to:
the product of (A) Base Contingent Payment
and (B) one plus the quotient of (I) the
Proposed Operations divided by (II)
60,000, or
(ii) December 31, 2001, December 31, 2002 and
December 31, 2003, the amount equal to:
the product of (A) the Base Contingent
Payment and (B) the quotient of the (I)
the Proposed Operations divided by (II)
the Operating Income Target,
if the Proposed Operations are greater than the Minimum
Operating Income but less than the Operating Income Target;
(d) the Base Contingent Payment if the Proposed
Operations are equal to the Operating Income Target;
(e) the Base Contingent Payment, plus fifty percent
(50%) of the amount by which the Proposed Operations exceed
the Operating Income Target, if the Proposed Operations are
greater than the Operating Income Target but less than the
Operating Income Payment Cap; and
(f) the Maximum Contingent Payment if the Proposed
Operations are equal to or greater than the Operating Income
Payment Cap.
2.2.4 Calculation of Contingent Payments. Within ninety (90)
Calendar Days following each Contingent Date, Buyer shall cause the
Company to prepare and issue to Sellers a determination of the
Contingent Payments, if any, to be paid for such Contingent Date.
Thereafter, Sellers and their representatives shall be provided
reasonable access during regular business hours to, and afforded the
opportunity to review, the Company's determination of the Contingent
Payments, and the books and records of the Company and all workpapers
relating thereto. If Sellers shall not object to the Company's
determination
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of Contingent Payments, in a writing delivered to Buyer on or before
thirty (30) Calendar Days after delivery to Sellers of such
determination, then the Company's determination of the Contingent
Payments shall be final, conclusive and binding upon Sellers. If,
however, Sellers shall deliver such a written objection, Buyer and
Sellers shall attempt to reconcile their differences, and any
resolution by them as to any disputed amounts shall be final,
conclusive and binding on the parties hereto. If Buyer and Sellers are
unable to resolve any such dispute within fifteen (15) Calendar Days of
the delivery by Sellers of their written objection, the dispute shall
be submitted to the Independent Accountants to review the Company's
determination of the Contingent Payments, and the Sellers' objections
thereto in accordance with this SECTION 2.2.4 as soon as is reasonably
practicable thereafter but in no case later than thirty (30) Calendar
Days after the date of delivery of the written objection. Buyer,
Sellers and the Company shall provide all information, cooperation and
assistance reasonably requested by the Independent Accountants in
conducting such review and determining the Contingent Payments. The
Independent Accountants shall issue and deliver simultaneously to
Sellers and Buyer their determination of the Contingent Payments, which
shall be final, conclusive and binding upon Sellers and Buyer. The fees
and expenses of the Independent Accountants shall be borne by the
losing party or, to the extent each party prevails in part, each party
shall pay the fees and expenses to the extent it is the losing party,
as determined by the Independent Accountants.
2.2.5 Payment of Contingent Payments.
(a) Distribution to Sellers. Any Contingent Payment
to be made to Sellers shall be distributed in accordance with
Schedule 2.2.5. To the extent that any payment made to Buyer
out of the Escrow Account (as defined in the AGE Purchase
Agreement) in connection with a New Jersey Claim (as defined
in the side letter of even date herewith between Buyers,
Sellers and AGE and AGE Florida) exceeds $397,000.00, such
amount which shall be subtracted from the portion of the
Contingent Payment payable to Xxx Xxxxxxxx and paid to the
other Sellers in accordance with the following percentages:
Xxxxx Xxxxx (44.19%), Xxxx Xxxxx (33.33%) and Xxxxx
X'Xxxxxxxxx (22.48%) rather than in accordance with Schedule
2.2.5; provided however that Xxxxx-Xxxxxxx shall have a right
of set-off against such amount.
(b) Form of Payment. At the sole discretion of the
Company, up to sixty percent (60%) of the aggregate amount of
any Contingent Payments payable by the Company to Sellers can
be paid with the common stock of Xxxxx-Xxxxxxx (the "Common
Stock"), so long as the Common stock continues to be listed on
a national securities exchange (such as, but not limited to,
the American Stock Exchange) or automated quotation system and
trading of the Common Stock on such exchange has not been
suspended. For purposes of computing the portion of any
Contingent Payments to be paid with Common Stock, the Common
Stock shall be valued at ten percent (10%) below the average
market value of the Common Stock for the thirty (30) trading
days immediately prior to the issuance of the Common Stock to
Sellers. Sellers hereby agree not to sell, contract to sell,
pledge
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or otherwise dispose of, directly or indirectly, any Common
Stock received as part of any Contingent Payments for a period
of one year from the date such Common Stock is issued to
Sellers; provided that twenty five percent (25%) of the shares
issued on such dates shall become exempt from such
restrictions on each of the dates which are three, six, nine
and twelve months from the date of issuance. The Company
agrees to cause Xxxxx-Xxxxxxx to make any filings with the
Securities and Exchange Commission which are, in the
reasonable opinion of counsel to Xxxxx- Xxxxxxx, necessary so
that Sellers may dispose of any Common Stock they receive in
accordance with this SECTION 2.2.
(c) Contingent Payment Settlement. Upon the final
determination of the Contingent Payments for each Contingent
Date under the procedure set forth in SECTION 2.2.4 and in no
event later than seven (7) Calendar Days following the earlier
of: (i) the expiration of the thirty (30) Calendar Day period
during which Sellers may contest Buyer's determination of the
Contingent Payments, or (ii) the delivery of the Independent
Accountants' final determination of the Contingent Payments,
the Buyer shall pay the Contingent Payments to Sellers in cash
or a combination of cash and Common Stock as set forth in this
SECTION 2.2.5.
2.2.6 Continued Conduct of Business. The Company agrees that,
so long as it continues to own the Assets, it will operate and conduct
the Current Operations and Proposed Operations in good faith, in a
reasonable and prudent manner, and use its reasonable efforts to
achieve or exceed the income targets set forth on Schedules 2.2.2 and
2.2.3. The Company shall, in addition to other reasonable and prudent
conduct, (a) adequately staff and furnish the Company; (b) provide
adequate working capital and financing; (c) provide adequate facilities
and equipment; and (d) maintain appropriate levels of inventory and
parts.
2.3 Assumed Liabilities. From and after the Closing Date, Buyer will
assume and agree to pay, defend, discharge and perform when due only those
liabilities set forth on Schedule 2.3 (all such liabilities and obligations to
be so assumed by Buyer pursuant to this SECTION 2.3 being referred to
collectively as the "Assumed Liabilities").
2.4 No Expansion of Third Party Rights. The assumption by Buyer of the
Assumed Liabilities shall not expand the rights or remedies of any third party
against Buyer or Sellers as compared to the rights and remedies which such third
party would have had against Sellers had Buyer not assumed the Assumed
Liabilities. Without limiting the generality of the preceding sentence, the
assumption by Buyer of the Assumed Liabilities shall not create any third party
beneficiary rights.
2.5 Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, the AGE Purchase Agreement or any agreement,
document, certificate or instrument being delivered pursuant to such agreements
(collectively, the "Transaction Documents"), and regardless of whether such
liability is disclosed in this Agreement or any of the Transaction Documents or
on any Schedule or Exhibit hereto or thereto, Buyer will not assume, agree to
pay,
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perform or discharge or in any way be responsible for any Excluded Liabilities.
As used herein, the term "Excluded Liabilities" means any and all debts,
liabilities or obligations of Sellers of any kind or nature whatsoever other
than the Assumed Liabilities (whether due or to become due, fixed or unfixed,
xxxxxx or inchoate, secured or unsecured, absolute or contingent, direct or
indirect, asserted or unasserted, known or unknown, and regardless of whether
such debts, liabilities or obligations relate to Sellers' Business). The
Excluded Liabilities shall include, without limitation, (i) any liabilities or
obligations whatsoever relating, directly or indirectly, to any Excluded Assets,
including, without limitation, any trade creditors, bank debt, payroll or
payroll tax liabilities, payments due to any current or former employee of
Sellers for amounts due under any bonus plan or incentive arrangement, income
tax liabilities, severance liabilities to any current or former employee of
Sellers, or liabilities with respect to any vacation pay, profit sharing or
401(k) contribution of such employees, (ii) any environmental or product
liability claims arising out of or relating to the past, present or future
conduct of Sellers, (iii) any contractual obligations or liabilities relating to
any existing facilities used in connection with the Business, (iv) any liability
of the Sellers for taxes, costs, and expenses incurred in connection with this
Agreement, and (v) the liability of Sellers under any "bulk sales" or similar
law or statute relating to the transfer of the Assets hereunder.
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets as set forth on Schedule 2.6. The parties agree to report on
their respective tax returns the transactions which are the subject of this
Agreement in a manner consistent with the allocation set forth in Schedule 2.6.
2.7 Transferee Liability. Prior to the Closing Date, Sellers agree to
notify the appropriate state taxing authority of the transfers contemplated
hereunder and obtain a certificate from such authority showing that all tax,
penalty and interest assessed against or due from Sellers has been paid, or a
clearance certificate from such authority showing that no tax, penalty or
interest has been assessed against and is due and unpaid from Sellers.
2.8 Waiver of Resolutory Conditions. Sellers agree and acknowledge that
upon effectuation of the Closing, the sale of the Assets as described herein
will be complete and final, and the failure of Buyer to pay or perform any
obligations hereunder, other than payment of the Purchase Price in accordance
with SECTION 2.1 (subject to a right of set-off, if applicable), shall not be
cause for the resolution and/or rescission of the transfer of such Assets, and
Sellers confirm that the sale of the Assets contemplated by this Agreement shall
contain no resolutory conditions whatsoever. Sellers also waive any and all
rights to a vendor's lien and privilege or any other Liens or privileges
against, or rights in or to, the Assets purchased hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers. Sellers, jointly and
severally, hereby represent and warrant to Buyer as of the Closing Date as
follows:
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3.1.1 Authority. Each of the Sellers has full right, power and
authority to enter into and perform their obligations under this
Agreement, and all other agreements, documents, certificates and
instruments delivered in connection with the transactions contemplated
hereby and thereby, to which any of the Sellers is a party and any
other document to be delivered by such Sellers, as the case may be at
Closing (collectively, the "Sellers' Agreements"). This Agreement has
been, and the Sellers' Agreements once executed will be, duly and
validly executed and delivered by each of the Sellers and will
constitute the valid and binding obligations of each of the Sellers,
enforceable against each of them in accordance with their respective
terms.
3.1.2 Assets. Except for the Assets purchased pursuant to the
AGE Purchase Agreement, the Assets and the Excluded Assets constitute
all of the property and assets which are considered part of the
Business, or useful in operation of the Business and all of the assets
necessary or useful to conduct the Business as presently conducted.
Sellers have the right to convey, and upon the consummation of the
transactions contemplated by this Agreement, Sellers will have
conveyed, and Buyer will be vested with, good and marketable title and
interest in and to the Assets, free and clear of all Liens. Neither AGE
nor AGE Florida have any ownership interest in the Assets.
3.1.3 No Consents. Each of the Sellers has full right, power
and authority to sell the Assets to Buyer as provided in this Agreement
without obtaining the consent or approval of any Governmental Entity or
other Person. The execution and delivery by Sellers of, and the
performance by Sellers of their obligations under, the Sellers'
Agreements do not require Sellers to obtain any consent, approval or
waiver of any acceleration, termination or other right or remedy by, or
to make any filing with or give any notice to, any other Person (the
"Consents"), except as set forth in Schedule 3.1.3. No consents or
approvals are necessary for the consummation of the transactions
contemplated hereby in order to prevent a breach of, or default under,
or modification or termination of any contract to which Sellers, the
Business or any of the Assets are subject.
3.1.4 Absence of Undisclosed Liabilities. Except as set forth
in Schedule 3.1.4, Sellers have no liabilities or obligations of any
nature with respect to the Assets (whether absolute, accrued,
contingent or otherwise) other than obligations under the Contracts
that are set forth in Schedule 3.1.6 or that are required to be so set
forth and which obligations are to be performed in the ordinary course
of business, which obligations are apparent from the plain reading of
such Contracts and those liabilities which relate to the Claims
specifically disclosed in Schedule 3.1.8. None of the liabilities or
obligations described in the preceding sentence and on the related
schedules are the result of a breach of contract, breach of warranty,
tort, infringement or lawsuit.
3.1.5 Taxes. Sellers have paid all Taxes due and payable in
connection with the Assets as of the Closing. Sellers have timely filed
all federal, state, county, local and foreign tax returns which they
are required to have filed, and such returns are complete and correct.
Any deficiencies proposed as a result of any governmental audits have
been
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paid or settled, and there are no present disputes as to Taxes payable
by Sellers. There are no unexpired waivers by Sellers of any statute of
limitations with respect to any Taxes, and none of the Sellers is a
party to any action or proceedings by any Governmental Entity for the
collection or assessment of Taxes.
3.1.6 Contracts. Attached hereto as Schedule 3.1.6 is a list
of all contracts, agreements, licenses, sublicenses, understandings,
instruments, obligations, relationships and commitments, oral or
written, to which any Seller is a party or by any either Seller is
bound or subject that relate, directly or indirectly, to the Business
or the Assets (the "Contracts"), correct and complete copies of written
Contracts and summaries of all oral Contracts which have been
previously furnished to Buyer. Except as set forth on Schedule 3.1.6,
all of the Contracts are in full force and effect and may be assigned
to Buyer without the consent, approval, novation, waiver or
notification of any Person. Except as noted in Schedule 3.1.6, Sellers
are not in breach or default, and no event has occurred which the
giving of notice or the passage of time or both would constitute a
breach or default, under any Contract or any other obligation owed by
Sellers, and, to the knowledge of Sellers, no event has occurred which
with the giving of notice or the passage of time or both would
constitute a breach or default by any other party to any such Contract
or obligation.
3.1.7 Real Property. The Assets do not include any real or
leased property and no real or leased property is necessary or useful
in connection with the Assets.
3.1.8 Litigation. Except as set forth in Schedule 3.1.8 (which
discloses the parties to, nature of, and relief sought for each matter
to be disclosed):
3.1.8.1 Claims. There is no suit, action,
proceeding, investigation, arbitration, mediation, claim or
order pending or, to the knowledge of Sellers, threatened
against Sellers (or pending or, to the knowledge of Sellers,
threatened against any of the officers, directors or employees
of Sellers with respect to the Assets), or to which, any of
Sellers is otherwise a party before any court or any other
Governmental Entity which if adversely determined would
adversely affect Sellers or the Assets (collectively,
"Claims"); and, to the knowledge of Sellers, there is no basis
for any other such Claim.
3.1.8.2 Orders. Sellers are not subject to or bound
by any judgment, order or decree of any court or any other
Governmental Entity. Sellers have not received any opinion or
memorandum from legal counsel to the effect that they are
exposed to any liability or disadvantage that may be material
to the Assets, and none of the Sellers is engaged in any legal
action to recover monies due it or for damages sustained by
it.
3.1.9 Compliance with Laws. The Business, as conducted by
Sellers, and the Assets are in compliance with, and do not violate in
any respect, any applicable Law (including any statutes, ordinances or
regulations). None of the Sellers has received notice
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of any such violation or liability or any correspondence from any
Governmental Entity relating thereto.
3.1.10 Intellectual Property. Schedule 3.1.10 contains a
complete and accurate description of all Intellectual Property of
Sellers with respect to the Assets, including information regarding
Sellers' ownership of such Intellectual Property and licenses, rights
or immunities in such Intellectual Property and the registration of
such Intellectual Property. Sellers own all of the Intellectual
Property, and all of the Intellectual Property is valid and in good
standing, free and clear of any Liens, and is not being challenged in
any way. Sellers have taken reasonable security measures to protect the
secrecy, confidentiality and value of all trade secrets of Sellers used
by Sellers in connection with the Assets, including supplier and
customer lists, business and marketing plans and studies and other
technical data relating to the Assets. To the knowledge of Sellers,
Sellers have not infringed and are not now infringing on any copyright,
trademark, service xxxx or trade name of, or belonging to, any Person
and no Person has asserted any such claim.
3.1.11 Transactions Not a Breach. The execution, delivery or
performance by Sellers of this Agreement and the Sellers' Agreements
will not:
(a) violate, conflict with, or result in a breach of
any provision of any
Law binding on Sellers with respect to any of the Assets;
(b) violate or conflict with any provision of any
contract, agreement, mortgage, note, bond, license, or other
instrument or obligation of any kind or nature to which any of
Sellers is a party or by which any of Sellers or any of the
Assets may be bound or affected;
(c) constitute an event that would permit any party
to terminate any agreement, or accelerate the maturity of any
indebtedness or other obligation, to which any of Sellers is a
party or by which any of Sellers is bound, and which is
material to the ownership of the Assets;
(d) result in the creation or imposition of any
Lien, security interest, charge, or encumbrance upon the
Assets; or
(e) have a material adverse effect on the Assets.
3.1.12 Conduct of the Business. Except as set forth in
Schedule 3.1.12, since July 1, 1999, Sellers have conducted their
businesses with respect to the Assets only in the ordinary course of
business, and have incurred no liabilities in connection with the
Assets other than in the ordinary course of business, and there has
been no material adverse change in the assets, condition (financial or
otherwise), operating results, employee or customer relations, business
activities or prospects involving the Assets as of such date.
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3.1.13 Insurance Policies. There are no insurance policies
(including "self- insurance" programs and general liabilities policies)
maintained by any of Sellers with respect to the Business or the
Assets; nor have any of Sellers maintained any such insurance policies
with respect to the Business or the Assets during the past two years.
3.1.14 Licenses. Schedule 3.1.14 is a complete and accurate
list of all of the Licenses and applications for Licenses not yet
issued which are held by Sellers or submitted by Sellers to any
Governmental Entity in connection with the Assets. Sellers are in
compliance in all material respects with such Licenses all of which are
valid, binding and in full force and effect. Except as disclosed in
Schedule 3.1.14, each of the Licenses is freely transferable and will
constitute part of the Assets.
3.1.15 Employees. There are no employees, independent
contractors or sales representatives who render services to Sellers in
connection with the Business or the Assets.
3.1.16 Interest of Sellers in Customers, Etc. Except as set
forth in Schedule 3.1.16, none of Sellers have any direct or indirect
interest in any competitor, supplier or customer of the Business or in
any Person from whom or to whom Sellers lease any real or personal
property or in any other Person with whom Sellers have any business
relationship in connection with the Business.
3.1.17 Affiliate Transactions. Schedule 3.1.17 contains a
complete and accurate list of the parties to and the date, nature and
amount of each transaction involving the transfer of any cash, property
or rights to or from Sellers from, to, or for the benefit of any
Affiliate or former Affiliate of Sellers ("Affiliate Transactions")
within the two years preceding the date of this Agreement and any
existing commitments of Sellers to engage in the future in any
Affiliate Transactions. Except as noted in Schedule 3.1.17, each
Affiliate Transaction was effected on terms equivalent to those that
would have been established in an arms-length negotiation.
3.1.18 Books and Records. All the books, records and accounts
of Sellers as they relate to the Assets are in all respects accurate
and complete, and all laws, regulations and rules applicable to the
Assets, and accurately present and reflect, in all material respects,
all of the transactions described therein.
3.1.19 Brokers. Sellers have not incurred any liability to any
broker, finder, or agent, and there are no claims for any brokerage
fees, finder's fees, or commissions in connection with the transactions
contemplated hereby.
3.1.20 No Misrepresentation. None of the information contained
in the representations and warranties of Sellers set forth in this
Agreement or in any of the Sellers' Agreements contain any untrue
statement of a material fact, or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading.
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3.2 Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Sellers as of the Closing Date as follows:
3.2.1 Organization. Buyer is a corporation duly organized,
existing, and in good standing under the laws of the State of Nevada.
3.2.2 Authority. Buyer has full corporate power and authority
to enter into and perform its obligations under this Agreement, and
all other agreements, documents, certificates and instruments
delivered in connection with the transactions contemplated hereby to
which it is a party, and any other documents to be delivered by it at
Closing (collectively, the "Buyer's Agreements") and to perform its
obligations under this Agreement and the Buyer's Agreements. The
execution and performance of this Agreement and the Buyer's Agreements
will be duly authorized by all necessary corporate action on the part
of Buyer, in accordance with Law and with Buyer's articles of
incorporation and bylaws. This Agreement has been, and the Buyer's
Agreements once executed will be, duly and validly executed and
delivered by Buyer and will constitute the valid and binding
obligations of Buyer, enforceable against Buyer in accordance with
their respective terms.
3.2.3 Transactions Not a Breach. Except as listed on Schedule
3.2.3 hereto, Buyer's execution and performance of this Agreement and
the Buyer's Agreements will not materially violate, conflict with, or
result in a material breach of any provision of any Law binding on
Buyer or conflict with or result in the breach of any of the terms,
conditions or provisions of the Buyer's Articles of Incorporation or
bylaws or of any contract, agreement, mortgage, or other instrument or
obligation of any nature to which Buyer is a party or by which Buyer
is bound.
3.2.4 Brokers. With the exception of Mesirow Financial whose
fees will be paid by Buyer, Buyer has not incurred any liability to
any broker, finder or agent, and there are no claims for any brokerage
fees, finder's fees or commissions in connection with the transactions
contemplated hereby.
3.2.5 No Misrepresentation. None of the information contained
in the representations and warranties of Buyer set forth in this
Agreement or in any of the Buyer's Agreements contain any untrue
statement of a material fact, or omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
CLOSING
4.1 Time and Place. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Xxxxx, Driggs,
Walch, Santoro, Kearney, Xxxxxxx
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& Xxxxxxxx in Las Vegas, Nevada on January 11, 2000 at 10:00 a.m. Pacific Time
or at such other time, date and location as the parties may agree to in writing
(the "Closing Date").
4.2 Sellers Deliveries. Sellers shall, at their sole cost and expense,
execute and deliver or cause to be executed and delivered to Buyer:
4.2.1 AGE Purchase Agreement. The AGE Purchase Agreement, in
form and substance reasonably satisfactory to Buyer.
4.2.2 Xxxx of Sale and Assignment Agreement. A Xxxx of Sale
and Assignment Agreement duly executed by Sellers, in form and
substance reasonably satisfactory to Buyer.
4.2.3 Consents. Any required Consents and certificates of
assignment required of Sellers to transfer the Assets and otherwise
consummate the transactions contemplated hereby.
4.2.4 Tax Clearance. Tax clearance certificates or similar
documents required by any state taxing authority in order to relieve
Buyer of any obligation to withhold any portion of the Purchase Price,
if previously obtained.
4.2.5 Lien Searches. Such Uniform Commercial Code lien
searches and such other instruments showing that there were no
financing statements, judgments, taxes or other Liens outstanding
against Sellers or any of the Assets as of the Closing Date or a date
that is not more than ten (10) Calendar Days prior to the Closing Date.
4.2.6 Employment Agreements. Employment Agreements between the
Company and each of Xxx Xxxxxxxx, Xxxxx Xxxxx, Xxxx Xxxxx and Xxxx
Xxxxx, in form and substance reasonably satisfactory to Buyer.
4.2.7 Other Documents. Such other documents and instruments as
Buyer or its counsel may reasonably request.
All documents delivered to Buyer shall be in form and substance
reasonably satisfactory to Xxxxxx Xxxxxx Zavis, counsel for Buyer. In addition
to the above deliveries, Sellers shall take all steps and actions as Buyer may
reasonably request or as may otherwise be necessary to put Buyer in possession
or control of the Assets or to consummate the transactions contemplated hereby.
4.3 Buyer Deliveries. Buyer shall execute and deliver or cause to be
executed and delivered to Sellers simultaneously with delivery of the items
referred to in SECTION 4.2 above:
4.3.1 Purchase Price. A wire transfer of funds to Sellers in
an amount equal to that required under SECTION 2.1.1.
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4.3.2 Xxxx of Sale and Assignment Agreement. A counterpart of
the Xxxx of Sale and Assignment Agreement, referred to in SECTION
4.2.2, executed by Buyer.
4.3.3 AGE Purchase Agreement. A counterpart of the AGE
Purchase Agreement referred to in SECTION 4.2.1.
4.3.4 Employment Agreements. A counterpart of the Employment
Agreements referred to in SECTION 4.2.6.
4.3.5 Guaranty Agreement. A Guaranty Agreement in the form
attached to the AGE Purchase Agreement as Exhibit 4.3.9.
4.3.6 Other Documents. Such other documents and instruments as
Sellers or their counsel may reasonably request.
All documents delivered to Sellers shall be in form and substance
reasonably satisfactory to Xxxxx, Driggs, Walch, Santoro, Kearney, Xxxxxxx &
Xxxxxxxx.
ARTICLE V
OTHER AGREEMENTS
5.1 Books and Records. After the Closing, no party hereto shall destroy
(or permit the destruction of) any of the books and records pertaining to the
Assets or the Business in such party's possession that may be required by the
other party in connection with any tax audit, examination or other proceeding
without first offering them to the other party in writing at least thirty (30)
Calendar Days prior to the date of their proposed destruction. After the Closing
Date, any party may inspect and make copies from such books and records in the
possession of another party on reasonable notice and at reasonable times.
5.2 Cooperation after Closing. From time to time after the Closing, at
Buyer's request and without further consideration, Sellers will execute and
deliver such other instruments of sale, transfer, conveyance and assignment and
take such action (including assistance in the preparation of financial
statements in connection with the Business) as Buyer may reasonably deem
necessary in order more effectively to transfer, convey and assign to Buyer, and
to confirm Buyer's title to the Assets.
5.3 Public Disclosure. Buyer and Sellers shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to this Agreement or the transactions contemplated hereby and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law.
5.4 Mail. All mail relating to the Assets that is delivered to any of
Sellers after the Closing Date shall forthwith be delivered to Buyer.
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5.5 Assumed Liabilities. Buyer agrees to discharge, as and when due,
the Assumed Liabilities.
5.6 Taxes. Sellers shall be liable for paying all Taxes (whether
assessed or unassessed) applicable to the Assets and the Business, in each case
attributable to periods (or portions thereof) ending on or prior to the Closing
Date. Buyer shall be liable for paying all Taxes (whether assessed or
unassessed) applicable to the Assets and the Business attributable to periods
(or portions thereof) beginning after the Closing Date. For purposes of this
SECTION 5.6, any period beginning before and ending after the Closing Date shall
be treated as two partial periods, one ending on the Closing Date and the other
beginning after the Closing Date. Buyer and Sellers agree to timely sign and
deliver such certificates or forms as may be necessary or appropriate to
establish an exemption from (or otherwise reduce) or make a report with respect
to, such taxes, including filings required under Section 1060 of the Code or any
successor statute thereof.
5.7 Transferee/Successor Liability. The parties agree that Buyer will
not, by virtue of the transactions contemplated hereby, assume any liabilities
or obligations of Sellers other than the Assumed Liabilities and, accordingly,
Sellers agree to take all necessary actions to fully protect Buyer from and
against any and all transferee or successor liability (other than with respect
to the Assumed Liabilities) arising out of the transactions contemplated hereby.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Sellers. From and after the Closing, Sellers, on
behalf of themselves and their respective heirs, hereby agree, jointly and
severally, to indemnify, defend and save Buyer and its Affiliates, and each of
their respective officers, directors, employees, agents and shareholders (each a
"Buyer Indemnified Party"), forever harmless from and against, and to promptly
pay to a Buyer Indemnified Party or reimburse a Buyer Indemnified Party for, any
and all liabilities (whether contingent, fixed or unfixed, liquidated or
unliquidated or otherwise), obligations, deficiencies, demands, claims, suits,
actions, causes of action, assessments, losses, costs, expenses, interest,
fines, penalties, actual or punitive damages or costs or expenses of any and all
investigations, proceedings, judgments, environmental analyses, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants and other experts) (collectively, the "Losses") sustained
or incurred by any Buyer Indemnified Party relating to, resulting from, arising
out of or otherwise by virtue of any of the following:
6.1.1 any breach of any covenant, agreement, representation or
warranty of Sellers under this Agreement or any of the Sellers'
Agreements;
6.1.2 the operation of the Business prior to the Closing Date
or any liabilities, actions or omissions of Sellers, whether known or
unknown as of the Closing Date, (except for the Assumed Liabilities),
it being understood and agreed that Buyer is not to assume
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any liabilities of Sellers of any kind or character, contingent or
otherwise, except for the Assumed Liabilities;
6.1.3 any assertion against any Buyer Indemnified Party with
respect to the Excluded Liabilities;
6.1.4 any assertion or recovery against Buyer of any liability
under any "bulk sales" or similar law or statute relating to the
transfer of Assets hereunder; and
6.1.5 any of the items listed on Schedule 6.1.5 hereto.
6.2 Escrow Account. In the event that Sellers are obligated to
indemnify Buyer pursuant to this ARTICLE VI, Buyer may draw funds in the amount
equal to such obligation from the Escrow Account provided for in SECTION 2.1 of
the AGE Purchase Agreement.
6.3 Indemnification by Buyer. From and after the Closing, Buyer, on
behalf of itself and its respective successors and assigns, hereby agrees to
indemnify, defend and save Sellers and each of their respective heirs and
representatives (each a "Seller Indemnified Party") forever harmless from and
against, and to promptly pay to a Seller Indemnified Party or reimburse a Seller
Indemnified Party for, any and all Losses sustained or incurred by any Seller
Indemnified Party related to, resulting from, arising out of or otherwise by
virtue of any of the following:
6.3.1 any breach of any covenant, agreement, representation or
warranty of Buyer under this Agreement or any of the Buyer's
Agreements; and
6.3.2 breach by Buyer of any of its obligations with respect
to the Assumed Liabilities.
6.4 Indemnification Procedure for Third Party Claims. In the event that
subsequent to the Closing any Person entitled to indemnification under this
Agreement (an "Indemnified Party") asserts a claim for indemnification or
receives notice of the assertion of any claim or of the commencement of any
action or proceeding by any Person who is not a party to this Agreement or an
Affiliate of a party to this Agreement (including, but not limited to any
domestic or foreign court or Governmental Entity) (a "Third Party Claim")
against such Indemnified Party, against which a party to this Agreement is
required to provide indemnification under this Agreement (an "Indemnifying
Party"), the Indemnified Party shall give written notice together with a
statement of any available information (other than privileged information)
regarding such claim to the Indemnifying Party within thirty (30) Calendar Days
after learning of such claim (or within such shorter time as may be necessary to
give the Indemnifying Party a reasonable opportunity to respond to such claim).
The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party (the "Defense Notice") within fifteen (15) Calendar Days after
receipt from the Indemnified Party of notice of such claim, which notice by the
Indemnifying Party shall specify the counsel it will appoint to defend such
claim ("Defense Counsel"), to conduct at its expense, the defense against such
claim in its own name, or, if necessary, in the name of the Indemnified Party;
provided, however, that the Indemnified Party shall have the right to approve
the Defense
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Counsel, which approval shall not be unreasonably withheld, and in the event the
Indemnifying Party and the Indemnified Party cannot agree upon such counsel
within ten (10) Calendar Days after the Defense Notice is provided, then the
Indemnifying Party shall propose an alternate Defense Counsel, which shall be
subject again to the Indemnified Party's approval which approval shall not be
unreasonably withheld. If the parties still fail to agree on the Defense
Counsel, then, at such time, they shall mutually agree in good faith on a
procedure to determine the Defense Counsel. In the event that, in the opinion of
legal counsel to the Indemnified Party, there is a conflict of interest inherent
in the appointment of Defense Counsel by the Indemnifying Party, then the
Indemnified Party shall have the right to appoint separate Defense Counsel,
which shall be paid for by the Indemnifying Party.
(a) In the event that the Indemnifying Party shall fail to
give the Defense Notice within said 15 Calendar Day period, it shall be
deemed to have elected not to conduct the defense of the Third Party
Claim, and in such event the Indemnified Party shall have the right to
conduct the defense in good faith and to compromise and settle the
claim in good faith without prior consent of the Indemnifying Party,
and the Indemnifying Party will be liable for all reasonable costs,
expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
(b) In the event that the Indemnifying Party does deliver a
Defense Notice and thereby elects to conduct the defense of the Third
Party Claim, the Indemnifying Party shall be entitled to have the
exclusive control over said defense settlement of the subject claim and
the Indemnified Party will cooperate with and make available to the
Indemnifying Party such assistance and materials as it may reasonably
request, all at the expense of the Indemnifying Party, and the
Indemnified Party shall have the right at its expense to participate in
the defense assisted by counsel of its own choosing. In such an event,
the Indemnifying Party will not settle the subject claim without the
prior written consent of the Indemnified Party, which consent will not
be unreasonably withheld.
(c) Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim or cease to defend against such claim, if, pursuant
to or as a result of such settlement or cessation, (i) injunctive
relief or specific performance would be imposed against the Indemnified
Party, or (ii) such settlement or cessation would lead to liability or
create any financial or other obligation on the part of the Indemnified
Party for which the Indemnified Party is not entitled to
indemnification hereunder.
(d) Notwithstanding paragraph (b) above, the Indemnifying
Party shall not be entitled to control, but may participate in, and the
Indemnified Party shall be entitled to have sole control over, the
defense or settlement of any claim (i) that seeks a temporary
restraining order, a preliminary or permanent injunction or specific
performance against the Indemnified Party, (ii) to the extent such
claim involves criminal allegations against the Indemnified Party,
(iii) that if unsuccessful, would set a precedent that would materially
interfere with, or have a material adverse effect on, the business or
financial condition of the Indemnified Party, or (iv) to the extent
such claim imposes liability on the part of the
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Indemnified Party for which the Indemnified Party is not entitled to
indemnification hereunder. In such an event, the Indemnifying Party
will still have all of its obligations hereunder provided that the
Indemnified Party will not settle the subject claim without the prior
written consent of the Indemnifying Party, which consent will not be
unreasonably withheld.
(e) Any final judgment entered or settlement agreed upon in
the manner provided herein shall be binding upon the Indemnifying
Party, and shall conclusively be deemed to be an obligation with
respect to which the Indemnified Party is entitled to prompt
indemnification hereunder.
(f) A failure by an Indemnified Party to give timely, complete
or accurate notice as provided in this SECTION 6.4 will not affect the
rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party entitled to receive
such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise directly and materially
damaged as a result of such failure to give timely notice.
6.5 Direct Claims. It is the intent of the parties hereto that all
direct claims by an Indemnified Party against a party hereto not arising out of
Third Party Claims shall be subject to and benefit from the terms of this
ARTICLE VI. Any claim under this ARTICLE VI by an Indemnified Party for
indemnification other than indemnification against a Third Party Claim, (a
"Direct Claim") will be asserted by giving the Indemnifying Party reasonably
prompt written notice thereof, and the Indemnifying Party will have a period of
30 Calendar Days within which to satisfy such Direct Claim. If the Indemnifying
Party does not so respond within such 30 Calendar Day period, the Indemnifying
Party will be deemed to have rejected such claim, in which event the Indemnified
Party will be free to pursue such remedies as may be available to the
Indemnified Party under this ARTICLE VI or otherwise.
6.6 Right of Set-Off. Upon written notice to Sellers and Shareholders
specifying in reasonable detail the basis for such set-off, Buyer may set-off
from any amounts due to Sellers (with the exception of any amounts due to Xxxxx
Xxxxx, Xxxx Xxxxx or Xxxxx X'Xxxxxxxxx solely in connection with the New Jersey
Claim as defined in the Escrow Agreement) pursuant to this Agreement, including,
without limitation, any amount to which it or any Buyer Indemnified Party may be
entitled pursuant to this ARTICLE VI, the AGE Purchase Agreement or any
employment agreement entered into by Buyer and any of Sellers. The exercise of
such right of set-off by Buyer in good faith, whether or not ultimately
determined to be justified, will not constitute an event of default under this
Agreement, the AGE Purchase Agreement, or any such employment agreement. Neither
the exercise of nor the failure to exercise such right of set-off will
constitute an election of remedies or limit Buyer in any manner in the
enforcement of other remedies that might be available to it.
6.7 Survival of Representations and Warranties of Sellers; Time Limits
on Indemnification Obligations. Notwithstanding any right of Buyer to
investigate fully the affairs of Sellers with respect to the Business, and
notwithstanding any knowledge of facts determined
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or determinable by Buyer pursuant to such investigation or right of
investigation, Buyer has the right to rely fully upon the representations,
warranties, covenants and agreements of Sellers contained in this Agreement or
in any Transaction Document delivered pursuant hereto. the representations,
warranties, covenants and agreements contained in SECTIONS 3.1.1, 3.1.2, 3.1.5,
3.1.11 and 5.7 and this ARTICLE VI shall survive indefinitely. All other
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution and delivery of this Agreement and the
Closing hereunder and shall continue in full force and effect for a period of
two (2) years after the Closing Date.
6.8 Survival of Representations and Warranties of Buyer; Time Limits on
Indemnification Obligations. Sellers have the right to rely fully upon
representations, warranties, covenants and agreements of Buyer contained in this
Agreement or in any Transaction Document delivered pursuant hereto. The
covenants and agreements contained in SECTION 5.7 and this ARTICLE VI shall
survive indefinitely. All other representations, warranties, covenants and
agreements of Buyer contained in this Agreement shall survive the execution and
delivery of this Agreement and the Closing hereunder and shall continue in full
force and effect for a period of two (2) years after the Closing Date.
6.9 Certain Limitations. Notwithstanding anything to the contrary set
forth in this Agreement (but subject to the terms of this SECTION 6.9),
indemnification under this ARTICLE VI and under SECTION 6.9 of the AGE Purchase
Agreement will be limited as follows:
(a) the aggregate amount of indemnification provided to Buyer
by Sellers, AGE and AGE Florida shall not exceed the Proceeds (as
defined in this SECTION 6.9 below); and
(b) the aggregate amount of indemnification provided to
Sellers, AGE and AGE Florida by Buyer shall not exceed $100,000; and
(c) the indemnification from Xxxxx Xxxxx, Xxxx Xxxxx and Xxxxx
X'Xxxxxxxxx for any Losses arising out of or relating to the New Jersey
Claim shall be limited to the amounts in the Escrow Account.
However, this SECTION 6.9 will not apply to any fraud or intentional
breach by any party hereto of any representations or warranties and such party
shall be liable for all such Losses with respect to such breaches. "Proceeds"
means the amount equal to the Purchase Price as defined in the AGE Purchase
Agreement plus the maximum aggregate amount payable to the Sellers pursuant to
this Agreement.
6.10 Materiality. In this Article 6, for purposes of determining the
existence of any misrepresentation or breach of any representation or warranty
of the Sellers contained in this Agreement, any standard, qualification or
requirement in any of the representations or warranties that an event or fact be
material or have a material adverse effect in order for such event or fact to
constitute a misrepresentation or breach of a representation or warranty shall
be disregarded.
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6.11 Appointment of Representative. Each of the Shareholders hereby
appoints Xxxxx Xxxxx as such Shareholder's exclusive agent to act on such
Shareholder's behalf with respect to any and all claims arising under this
Agreement. In such representative capacity, Xxxxx Xxxxx or any person who shall
succeed him in such representative capacity is sometimes referred to in this
Agreement as the "Representative." The Representative shall take, and the
Shareholders agree that the Representative shall take, any and all actions which
such Representative believes are necessary or appropriate under this Agreement
for and on behalf of the Shareholders, as fully as if the Shareholders were
acting on their own behalf, including, without limitation, defending, consenting
to, compromising or settling any claims against any or all of the Shareholders
under this Agreement or otherwise, conducting negotiations with Buyer and its
representatives regarding such claims, taking any and all actions specified in
or contemplated by ARTICLE VI of this Agreement and engaging counsel,
accountants or other representatives in connection with the foregoing matters
provided however, on any matter for which a Shareholder is solely liable, such
Shareholder may elect to represent himself alone, outside this SECTION 6.11.
Buyer shall have the right to rely upon all actions taken or omitted to be taken
by the Representative pursuant to this Agreement, all of which actions or
omissions shall be legally binding upon each of the Shareholders.
ARTICLE VII
MISCELLANEOUS
7.1 Notice. Any notices, consents or other communication required to be
sent or given by any of the parties shall in every case be in writing and will
be deemed properly served if (a) delivered personally, (b) sent by Certified
U.S. mail, return receipt requested, (c) sent by a recognized overnight courier
service, or (d) sent by telecopier (with acknowledgment of complete
transmission), provided that a copy is also mailed by Certified U.S. mail,
return receipt requested, in each case, to the parties at the addresses and
telecopier numbers as set forth below or at such other addresses and facsimile
numbers as may be furnished to the other parties in writing.
7.1.1 If to Buyer:
American Gaming & Electronics, Inc.
c/o Xxxxx-Xxxxxxx Electronic Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: President
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxx Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
7.1.2 If to Sellers:
Xxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxx 00000
Xxxxx Xxxxx
000 Xxxxxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxx 00000
Xxxx Xxxxx
0000 Xxxxx Xxxxx Xxxxx, Xxx. 000
Xxxxxxxxx, Xxxxxxx 00000
Xxxxx X'Xxxxxxxxx
000 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxx, Driggs, Walch, Santoro, Kearney,
Xxxxxxx & Xxxxxxxx
0000 Xxxxxx Xxxxxx Xxxxxxx, #000X
Xxx Xxxxx, Xxxxxx 00000
Attention: J. Xxxxxxx Xxxxxx, Xx., Esq.
Facsimile No.: (000) 000-0000
Date of service of such notice will be (i) the date such notice is personally
delivered, (ii) three Calendar Days after the date of mailing if sent by
certified or registered mail, (iii) one Calendar Day after delivery to the
overnight courier, or (iv) the date such notice is sent by telecopier in
accordance with this SECTION 7.1.
7.2 Severability. The unenforceability or invalidity of any
provision of this Agreement will not affect the enforceability or validity of
any other provision.
7.3 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns, heirs
and personal representatives.
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7.4 Documents. At and after the Closing, each party will execute all
documents and take such other actions as the other parties may reasonably
request in order to consummate the purchase of Assets and to accomplish the
purposes of this Agreement.
7.5 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
7.6 Expenses. Except as otherwise specifically provided herein, each of
the parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and in consummating purchase of the
Assets.
7.7 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois, without giving effect to
principles of conflicts of law.
7.8 Headings. The subject headings of Articles and Sections of this
Agreement are included for purposes of convenience only and will not affect the
construction or interpretation of any of its provisions.
7.9 Assignment. This Agreement will not be assignable or delegable by
any party without the prior written consent of the other parties; provided,
however, that nothing in this Agreement will limit Buyer's ability to assign its
rights or delegate its responsibilities, liabilities, and obligations under this
Agreement to any Person at any time without the consent of the other parties.
7.10 No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
7.11 Definitions. As used in this Agreement,
(a) "Affiliate" means an affiliate as defined in Rule 405
under the Securities Act of 1933, as amended, and includes any past and present
Affiliate of a Person.
(b) "Calendar Day" means any calendar day; provided that any
calendar day which is the end of a time period specified in this Agreement which
is a Saturday, a Sunday or a day on which federally chartered commercial banks
are required or authorized by applicable law or executive order to close shall
be deemed to fall on the next business day.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Continuing Employee" has the meaning ascribed to
such term in the AGE Purchase Agreement.
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(e) "GAAP" means generally accepted accounting principals set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession which are applicable to the circumstances from time to
time.
(f) "Governmental Entity" means any foreign, federal, state or
local governmental or regulatory body, including any instrumentality, division,
agency or department of such a body.
(g) "Intellectual Property" means all worldwide proprietary
information of Sellers used in connection with the Business including, but not
limited to, the rights, if any, to the American Gaming & Electronics name and
assumed names wherever used, all patents, patent applications, patent
disclosures and inventions (whether or not patentable and whether or not reduced
to practice); all trademarks, service marks, trade dress, trade names and
corporate names; all registered and unregistered statutory and common law
copyrights; all registrations, applications, extensions and renewals for any of
the foregoing; all trade secrets, confidential information, ideas, formulae,
compositions, know-how, research and development information drawings,
specifications, designs, plans, improvements, proposals, technical and computer
data, documentation and software, financial, business and marketing plans, and
customer and supplier lists and related information and all other proprietary
rights relating to the sale or service of products by, and the conduct of, the
Business.
(h) "Law" means any law, ordinance or regulation of any
federal, state, local --- or foreign Government Entity.
(i) "Licenses" means all licenses, permits, franchises,
approaches and authorizations by or of any Governmental Entity or other person
required for the conduct of the Business or in connection with ownership,
occupancy or operation of the Assets.
(j) "Liens" mean any claims, liens, privileges, pledges,
collateral assignments, bonds for deed, charges, restrictions, options,
preemptive rights, mortgages, hypothecations, assessments, pledges, encumbrances
or security interests of any kind or nature whatsoever.
(k) "ordinary course of business" means an action taken by a
Person will be deemed to have been taken in the ordinary course of Sellers'
business if (i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person; (ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or special
authorization of any nature; and (iii) such action is similar in nature and
magnitude to actions customarily taken without any separate or special
authorization, in the ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as such Person.
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(l) "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated association, corporation,
entity or Government Body.
(m) "Tax" means any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, personal property, capital stock, social security,
unemployment, disability, payroll, license, employee or other withholding, or
other tax, of any kind whatsoever, including any interest, penalties or
additions to tax or additional amounts in respect of the foregoing; the
foregoing shall include any transferee or secondary liability for a Tax and any
liability assumed by agreement or arising as a result of being (or ceasing to
be) a member of any Affiliated Group, as defined in Section 1504 of the Code,
(or being included (or required to be included) in any tax return relating
thereto).
(n) "to the knowledge of Sellers," "to Sellers' knowledge" or
any similar term means knowledge possessed, or which should have been possessed
after due inquiry in connection therewith, by the officers of Sellers.
7.12 Entire Agreement. This Agreement, the Transaction Documents and
all Schedules and Exhibits attached hereto or thereto (which will be deemed
incorporated in this Agreement and made a part of this Agreement) set forth the
entire understanding of the parties and may be modified only by instruments
signed by all of the parties.
7.13 Third Parties. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give to any person, other than
the parties to this Agreement, any rights or remedies under or by reason of this
Agreement.
7.14 Interpretative Matters. Unless the context otherwise requires, (i)
all references to Articles, Sections, Schedules or Exhibits are to Articles,
Sections, Schedules or Exhibits in this Agreement, (ii) words in the singular or
plural include the singular and plural and pronouns stated in either the
masculine, feminine or neuter gender will include the masculine, feminine and
neuter and (iii) the term "including" shall mean by way of example and not by
way of limitation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement of the
date first above written.
BUYER:
AMERICAN GAMING & ELECTRONICS,
INC., a Nevada corporation
/s/ Xxxx X. Xxxxxxxxxx
------------------------------------
By: Xxxx X. Xxxxxxxxxx
------------------------------------
Its: President
------------------------------------
SELLERS:
/s/ Xxx Xxxxxxxx
------------------------------------
Xxx Xxxxxxxx
/s/ Xxxxx Xxxxx
------------------------------------
Xxxxx Xxxxx
/s/ Xxxx Xxxxx
------------------------------------
Xxxx Xxxxx
/s/ Xxxxx X'Xxxxxxxxx
------------------------------------
Xxxxx X'Xxxxxxxxx
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